March 2018 – OneMint

Financial Mistakes We Should Avoid To Secure Our Lives

Life without mistakes is a myth. All of us tend to make mistakes at every stage of life – from childhood to adulthood. But, with every mistake we make, we get to learn a new lesson and become wiser and more experienced. While childhood mistakes do not matter, mistakes we make in adulthood matter and sometimes lead to hamper our quality lives, especially if they are financial in nature. Let us go through some of our financial mistakes and try to learn from them.

Not Living in the Present

Often, we regret our past mistakes and worry too much about repeating them going forward. In the process, we tend to ignore the fruits of the present. In short, we do not enjoy what we have or make any meaningful life derivative from our today. For example, our worry about the financial uncertainties, or the fear of probable financial concerns in the future. It may or may not happen. Hence, we continue saving money from our limited sources of income.

Future is uncertain – we all know that. However, by restricting access to our own income in the present, through savings, is not such a smart thing to do if we do not approach it wisely and prudently. We ought to invest, not save. It is important to ask yourself how much savings and investment we should do in the present to safeguard our future income or other monetary requirements. In that sense, you must let your money grow. The only compounded growth of your income must give you the satisfaction of savings/investment in the present. It is not only our income which is uncertain, but also our future which is not in our hands. We can only do as much to safeguard our future expenses and real-time requirements.

Blaming the Past for Your Present

Learning from the past mistakes holds the key to a practical future. There is no point in ruining your present because of the mistakes you made in the past. If you have still not saved and invested money, there is no point cribbing or blaming yourself for it. A better approach is to start planning for today.

Moreover, it is better late than never. Fortunately, there are many financial instruments, including a mutual fund SIP or a life insurance policy, which you can buy for a fixed tenure at an early stage of life, say age of 18 years or so. Though there is no age limit as far as mutual fund investments are concerned, insurance companies however do set an upper age limit to buy an insurance policy. So, if you have not invested so far, there is no point delaying it further to secure a financially stable future.

Not Building Your Future

While budgeting for your family expenses, you should consider the depreciating value of money. If you are just living by the present standards of living, and not considering the money needed to secure your future, you are making a grave mistake of not having a sound and viable living in the future. There is a need to invest, and there is a need to do that smartly. By choosing to spend your time and money only on the present, is like turning a blind eye to the road of life ahead. It can be full of minor bumps and more significant uncertainties. A life insurance plan, for example, is a prudent investment to have monetary access in the future as well. You need to evolve financially for a safe and secure future.

Not planning for the Worst

The proverb, hope for the best and prepare for the worst, has a different connotation when you are planning to budget or invest in the future. It should be hope for the best and plan for the worst. One should be optimistic in life, agreed, but that should not deter you from planning for the future especially when it concerns the matters of finance. It needs more time and effort for you to prepare for the life ahead. Life is full of uncertainties and to cover up financially, you may need the assistance of an insurance policy to help you overcome any real obstacle in the needy times.

So, an insurance policy can provide you financial assistance and protection against life uncertainties like death of the bread winner (giving money equivalent to the value of your income at ‘that’ given point of time), simple savings plans, retirement plans, health plans, thus, ensuring the fact that you have money when you need it the most.

ICICI Securities IPO Review – Should You Invest or Not @ Rs. 519-520?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

ICICI Securities IPO Details – March 2018 Issue

Finalisation of Basis of Allotment – On or about April 2, 2018

Initiation of Refunds – On or about April 3, 2018

Credit of equity shares to investors’ demat accounts – On or about April 4, 2018

Commencement of Trading on the NSE/BSE – On or about April 5, 2018

Financials of ICICI Securities

Note: Figures are in Rs. Crore, except per share data & percentage figures

Peer Comparison

Note: Market Caps and Market Prices are dated March 20, 2018. EPS have been annualised taking 9-month EPS as on December 31, 2017.

Should You Invest in ICICI Securities IPO @ Rs. 520?

Suppose, you buy 100 shares of Infosys at Rs. 1,100 with a price target of Rs. 1,150 in say a month or so. But, within a week, without any positive news or development, its stock price zooms to Rs. 1,150 odd levels. You book your profits in this trade and start expecting the stock price to come down the very next moment you sell it. It doesn’t come down and moves to Rs. 1,200 within a fortnight. You don’t buy it, but decide to buy it again at Rs. 1,150, the same price level you sold it at. It comes down to Rs. 1,150, you buy it again at Rs. 1,150 and decide to sell it at Rs. 1,220.

It goes down till Rs. 1,100, but you don’t sell it as you had decided to sell it only when it touches Rs. 1,220 or more. It goes up again to touch Rs. 1,220 levels, you sell it at Rs. 1,220 and again start expecting it to come down as you had just sold it in the expectation of its price to come down. This way, you buy and sell Infosys five times as it reaches Rs. 1,350. This is just a hypothetical example, but I think something similar happens with many of us in a bull market.

But, when the markets start correcting or a bear market takes over, we don’t square-off the same Infosys position at Rs. 1,050 (bought at Rs. 1,100 in the anticipation of Rs. 1,150). Not even at Rs. 1,000. Not even at Rs. 950. Not even at Rs. 900. Not even if goes down to Rs. 600. Then we stop logging on to our trading platforms, become investors (from traders) and decide to sell our holdings only when they bounce back to our cost price. Though something of this sort does not happen with every trader or investor, but something similar is common with most of us. I think you would agree.

So, in a bear market, we trade less frequently, and in turn, our broking firms get less brokerage from us. Similarly, in a bull market, we make money and in turn, generate good brokerage for our broking firms. Something similar happened in the first three quarters of the current financial year and like most other broking firms, ICICI Securities too raked the moolah out of it and its 9-month revenues and profits in FY 2017-18 exceeded its full year revenues and profits of FY 2016-17.

Even with best of its financial performance, the price/earnings multiple ICICI Securities is seeking in this IPO is at 31.48 times its 9-month annualised EPS for the current financial year. I think it is on a higher side, as I don’t expect stock markets to have such similar uninterrupted upswings on a consistent basis. Like stock markets, financial performances of broking companies too are volatile. The company had an EPS of Rs. 7.41 during FY 2015-16. Imagine a similar year in which the company earns an EPS of say Rs. 8. At Rs. 520 a share or above, it would be valued at 65 times or more.

So, if you are a bull right now and have a view that the Indian stock markets will have a healthy upward movement in the next 3-5 years, and most importantly, ICICI Securities will be able to cash it one way or the other, then you should definitely subscribe to it. Conservative or risk-averse investors should avoid it.

ICICI Securities IPO Details @ Rs. 519-520

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

ICICI Securities IPO Review – Should You Invest or Not @ Rs. 519-520?

ICICI Securities Limited, a wholly-owned subsidiary of ICICI Bank, is entering the primary markets with its initial public offer (IPO) of 7.72 crore shares worth Rs. 4,017 crore. The offer would constitute 23.98% of the company’s post-offer paid-up equity share capital. Price band of the IPO is in a very narrow range of Rs. 519-520 a share and no discount has been offered by the company to the retail investors.

The issue is getting opened for subscription from Thursday, March 22 and will remain open for three business days to close on March 26. This IPO is a 100% offer for sale (OFS) by its promoter ICICI Bank and hence ICICI Securities will not get any money out of this IPO for its further expansion.

Here are some other salient features of this IPO:

Only 10% Issue is for Retail Investors – Only 10% of the issue size, excluding the portion reserved for the ICICI Bank shareholders, is reserved for the retail individual investors (RIIs) i.e. approximately 73.38 lakh shares out of total 7.72 crore shares on offer. 15% of the issue is reserved for the non-institutional investors (NIIs) and the remaining 75% shares will be allocated to the qualified institutional buyers (QIBs).

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 28 shares and in multiples of 28 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,560 at the upper end of the price band and Rs. 14,532 at the lower end of the price band.

Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 28 shares in this IPO i.e. a maximum investment of Rs. 1,89,280.

Objective of the Issue – As the entire issue proceeds will go to ICICI Bank, being the promoter of the company, the primary objective of the offer for ICICI Securities is to enhance its visibility and brand image by getting listed on the stock exchanges.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on 26th March. Here are the important dates after the issue gets closed:

Finalisation of Basis of Allotment – On or about April 2, 2018

Initiation of Refunds – On or about April 3, 2018

Credit of equity shares to investors’ demat accounts – On or about April 4, 2018

Commencement of Trading on the NSE/BSE – On or about April 5, 2018

Financials of ICICI Securities

Note: Figures are in Rs. Crore, except per share data & percentage figures

Peer Comparison

Note: Market Caps and Market Prices are dated March 20, 2018. EPS have been annualised taking 9-month EPS as on December 31, 2017.

ICICI Securities IPO Review – Should You Invest or Not @ Rs. 519-520?

Bandhan Bank IPO Review – Should You Invest or Not @ Rs. 370-375?

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

Bandhan Bank IPO Details

Finalisation of Basis of Allotment – On or about March 22, 2018

Initiation of Refunds – On or about March 23, 2018

Credit of equity shares to investors’ demat accounts – On or about March 26, 2018

Commencement of Trading on the NSE/BSE – On or about March 27, 2018

Financials of Bandhan Bank

Note: Figures are in Rs. Crore, except per share data & percentage figures.

For the financial year ended March 31, 2017, Bandhan Bank reported a total income of Rs. 4320 crore as compared to Rs. 1,731 crore it reported during financial year 2015-16, registering a growth of 149.57% in the last one year. The bank reported profit after tax (PAT) of Rs. 1,112 crore for the financial year ended March 31, 2017 as against Rs. 275 crore for the financial year ended March 31, 2016, posting a growth of 304% CAGR.

Bank’s net interest margins (NIMs) are the most impressive at 10.44% in FY 2016-17, which have fallen marginally to 9.86% during 9-months ended December 31, 2017. However, its asset quality has also deteriorated somewhat, but given the market scenario, it is still well within investors’ comfort zone.

Should you subscribe to Bandhan Bank IPO @ Rs. 370-375?

Having commenced its banking operations in August 2015, Bandhan Bank is a relatively new bank, with 887 bank branches, 430 ATMs and 2,633 doorstep service centres (DSCs). Bandhan Bank’s distribution network is particularly strong in east and northeast India, with West Bengal, Assam and Bihar together accounting for 56.37% and 57.58% of its branches and DSCs respectively, as of December 31, 2017.

Though its net interest margins (NIMs) stand healthy at 9.86% as on December 31, 2017, I don’t think the bank will be able to maintain such NIMs going forward. As the bank expands its base and reaches out to other areas where it does not currently have exposure to, its margins are bound to go down. As far as its asset quality is concerned, the bank has so far been able to maintain it at a remarkably low levels. But, there too, the NPAs are bound to go up as the bank diversifies its operations and expands its loan book.

As the issue gets closed on Monday at Rs. 375 a share, Bandhan Bank will have a market cap of Rs. 44,730 crore, price to book value of 4.53 times and price to earnings ratio of 32.19 times its FY18 earnings. As compared to Bandhan, RBL’s market cap is Rs. 19,962 crore, P/BV ratio is 4.12 times and P/E ratio is 32.49 times, Yes Bank’s market cap is Rs. 71,934 crore, P/BV ratio is 3.23 times and P/E ratio is 17.96 times, and IndusInd Bank’s market cap is Rs. 1,04,579 crore, P/BV ratio is 5.05 times and P/E ratio is 29.78 times. So, at these relative valuations, Bandhan Bank looks grossly expensive to me.

Note: Market Caps and Market Prices are dated March 15, 2018. Book Values are of March 31, 2017. EPS have been annualised taking 9-month EPS as on December 31, 2017.

IFC bought its stake in Bandhan Bank 2 years back in February 2016 at Rs. 42.93 a share for a total investment of Rs. 232 crore. I have no doubt that the bank has done remarkably well to grow itself multifold in the last 2 years. But, even then, does the bank really deserve a 9-times jump in its asking value within a span of just 2 years?

More recently, in December 2017, Bandhan’s MD & CEO, Chandra Shekhar Ghosh, exercised his right to acquire the bank’s shares at Rs. 180 a share through equity stock options (ESOPs). Though it has been done in a fair manner and he has all the right to do so as he has worked hard for the bank, I think it would have been better had the bank left something on the table for the investors too.

Given the bank is growing at a speed no other bank is growing, I think it has the potential of giving listing gains to its investors. But, the big question is – should you invest in this IPO just for its expected listing gains? I don’t think so. You need to ask yourself whether I am investing in stock markets just for having listing gains in an IPO or to create long term wealth for myself. I think the valuations are stretched for this IPO and it could have a big fall if the market sentiment takes a U-turn from here, or there is some kind of a red flag for the company.

Bandhan Bank IPO Details – March 2018 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

Bandhan Bank IPO Review – Should You Invest or Not @ Rs. 370-375?

Post Budget 2018, Indian stock markets have turned volatile. It is not just the re-introduction of the LTCG tax, but also the global jitters which have sent our markets into a tailspin. But, as the money is still chasing a few good quality stocks and there is a dearth of investment options in other asset classes as well, the companies have resumed knocking our doors to raise money for their future expansions.

In this week alone, three companies have launched their initial public offers (IPOs) and one such company is Bandhan Bank, whose IPO opened for subscription yesterday and will get closed on Monday, 19th of March.

What’s on Offer?

This initial public offer (IPO) of Bandhan Bank comprises of a sale of approximately 11.93 crore shares to the investors. It is a mix of fresh issue of approximately 9.77 crore shares by the bank and an offer for sale of 2.16 crore shares by International Finance Corporation (IFC).

35% of the issue size is reserved for the retail individual investors (RIIs) i.e. approximately 4.17 crore shares out of 11.93 crore shares on offer, 15% is reserved for the non-institutional investors and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

Bandhan Bank has fixed its price band to be between Rs. 370-375 per share. There is no discount for the retail investors though. Here are other salient features of this IPO:

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 40 shares and in multiples of 40 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 15,000 at the upper end of the price band and Rs. 14,800 at the lower end of the price band.

Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 40 shares in this IPO i.e. a maximum investment of Rs. 1,95,000.

Objective of the Issue – As per the new bank licensing guidelines issued by the RBI, Bandhan Bank was required to get itself listed on the stock exchanges within 3 years from the date it commences its business operations. So, in order to comply with such guidelines, the bank has undertaken this issue. Moreover, Bandhan will raise Rs. 4,473 crore from this issue and the company plans to use the proceeds to augment its Tier-I capital base.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on 19th March. Here are the important dates after the issue gets closed:

Finalisation of Basis of Allotment – On or about March 22, 2018

Initiation of Refunds – On or about March 23, 2018

Credit of equity shares to investors’ demat accounts – On or about March 26, 2018

Commencement of Trading on the NSE/BSE – On or about March 27, 2018

Financials of Bandhan Bank

Note: Figures are in Rs. Crore, except per share data & percentage figures.

Should you subscribe or not?

Note: Market Caps and Market Prices are dated March 15, 2018. Book Values are of March 31, 2017. EPS have been annualised taking 9-month EPS as on December 31, 2017.

Bandhan Bank IPO Review – Should You Invest or Not @ Rs. 370-375?

How to Secure Future Income Sources for Your Family?

In a world where things are altering every minute and every second, and our surroundings are not as safe as they are desired to be, the most important thing we need is undoubtedly our security. Not only our personal security, but our family’s security as well. Our search for complete and trusted security is so high that we do not consider the overall future events and falsely anticipate our future needs.

So, in order to ensure financial security for our families, it becomes very important to consider all possible future events and carefully assess our future needs, especially in our absence. As far as financial security is concerned, there is nothing better than a term insurance to ensure that your family does not suffer in case of any unfortunate event.

So, what are the significant events or phases of life in which we need security or as they call it, term insurance benefits?

* Generally, we begin to think about various term insurance plans after finding a steady source of income

* Then comes marriage and the need for the security of our life partner and the next big event is having children

* From there on everything revolves around them until they are capable enough of standing on their own feet. Schooling, college and higher education are becoming expensive with each day, and your income may not be able to keep up

* We might suffer from illnesses as we age and rounds to the hospital, let’s hope it does not come to that. However, if it does, we need to be prepared

All of us have different needs, and according to those needs, we want to invest in an insurance plan that offers maximum benefits. Few insurers, like PNB Metlife, offer term insurance benefits which allow insured’s family to receive regular income along with the lump sum payment.

While taking a term plan, there are a few things to look for such as premium, insurance cover, claim settlement ratio and age restriction, mainly. However, the payout option is also an important factor to account for these days. You can select the payout option to make the after-claim life far more convenient for your loved ones. There are primarily four modes of benefit payouts offered by the insurance companies:

* Full Payout as Lump Sum: This option is for those who are looking to get the total payout at the end of the term plan or in case of any unfortunate event. This will enable you or your family to receive a lumpsum amount at the end of the plan, possibly in your old age to support and maintain your financial independence.

* Payout as Lump Sum + Regular Monthly Income: This option is best for those who want a certain fixed monthly income after a certain period and a final lump sum payment at the end of the tenure. This will ensure a steady income for you and your family and still cover old age for both or anyone alive. Ignoring death is not the right thing to do while selecting insurance plans and hence let’s be practical to secure either or both the spouses along with fixed security during the lifetime.

* Payout as Lump Sum + Increasing Monthly Income: This payout option is for all those millennials who have a hectic and an unhealthy lifestyle. It is no news that the common illnesses/diseases per person is on a constant rise. Diseases like diabetes, high blood pressure, polycystic ovary syndrome (PCOS), mental disorders like anxiety, depression have become common. As the list grows, so does the medical bill. Hence, this plan ensures that an increasing monthly income will cover the increase in the bill. To top it up, you will also get a lump sum payment for added security.

* Payout as Lump Sum + Regular Monthly Income till child turns 21: This payout is for all those parents who want to secure their future as well as be able to afford their child’s education. Regular payments till the child turns 21 will provide security and increase your ability to pay for their education or any other emergencies that come in between. In case of unfortunate events, like death of both the parents, the child can still be covered and be able to sustain till he/she becomes financially independent. Along with that, the lump sum will give you an added security.

Be it your old age, need of a steady income after retirement, tackling increasing medical costs or any other costs or even securing your child’s future, the regular payout option offers a dependable solution for all such needs. With a secure regular income, your family members can focus on meeting their life goals instead of worrying about the sources to fund them. These lump sum or regular payout options can provide us a big relief as we move ahead in life.

Edelweiss Retail Finance 9.25% Non-Convertible Debentures (NCDs) – March 2018 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at [email protected]

Edelweiss Retail Finance Limited, a company acquired by Edelcap Securities in 2012, is launching its public issue of secured and redeemable non-convertible debentures (NCDs) from the coming Wednesday, March 7. The issue will offer an effective yield of 9.25% for 10 years, 9% for 5 years and 8.75% for a period of 3 years from deemed date of allotment with monthly and annual interest payment options. The issue is scheduled to remain open till March 22, unless the company decides to close it prematurely due to oversubscription or due to any other reason mentioned in its offer document.

Size & Objective of the Issue – Edelweiss Retail plans to raise Rs. 500 crore from this issue, including the green shoe option of Rs. 250 crore. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The company has decided to issue its NCDs for a duration of 3 years, 5 years and 10 years. For 3 years, the company is offering 8.75% p.a. payable annually and 8.42% p.a. payable monthly. For 5 years, the coupon rates are 8.65% p.a. and 9% p.a. and for 10 years, these rates are 8.88% p.a. and 9.25% p.a. respectively.

Minimum Investment – Investors need to apply for a minimum of ten bonds of Rs. 1,000 face value in this issue i.e. an investment of Rs. 10,000 at least.

Categories of Investors & Allocation Ratio – The investors have been classified in the following four categories and each category will have the below mentioned percentage fixed in the allotment:

Category I – Institutional Investors – 20% of the issue i.e. Rs. 100 crore

Category II – Non-Institutional Investors – 10% of the issue i.e. Rs. 50 crore

Category III – High Networth Individuals (HNIs) – 20% of the issue i.e. Rs. 100 crore

Category IV – Retail Individual Investors & HUFs – 50% of the issue i.e. Rs. 250 crore

Allotment will be made on a first-come first-served basis, as well as on a date priority basis i.e. on the date of oversubscription, the allotment will be made on a proportionate basis to all the applicants of that day on which it gets oversubscribed.

NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.

Credit Rating & Nature of NCDs – CRISIL and ICRA have rated this issue as ‘AA’ with a ‘Stable’ outlook. As mentioned above, these NCDs will be ‘Secured’ in nature.

Listing, Premature Withdrawal & Put/Call Option – These NCDs will get listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 12 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these bonds on the exchanges. The company too does not have the option to ‘Call’ these NCDs during the tenure of these NCDs for which they are issued.

Demat & TDS – Demat account is not mandatory to invest in these bonds as the investors have the option to apply these NCDs in physical form as well. Also, though the interest income would be taxable with these bonds, NCDs taken in demat form will not attract any TDS.

Financials of Edelweiss Retail Finance Limited

(Note: Figures are in Rs. Crore, except percentage figures & Debt to Equity Ratio)

Should you invest in Edelweiss Retail Finance NCDs?

Like I expressed my views about SREI Infrastructure Finance NCDs last week, for this issue too, I think the interest rates on offer fall at least 50 basis points (or 0.50% p.a.) short of my expectations. Despite of the fact that the interest rates this issue is carrying are still higher than almost all of the bank fixed deposits, these rates are not attractive enough for me to put my money in these NCDs. In a rising interest rate scenario, these companies should have offered higher rates in order to compensate higher risk they carry and also to make up for higher expected rates in future.

But, in the absence of a better alternate investment option, where should we invest our money? If you think that the worst of demonetisation and GST implementation is behind us and our macroeconomic numbers will improve from hereon, then probably it is time that we should move our money to either medium-term debt funds or long-term gilt funds. However, if you have a view that our economic recovery is still somewhat far from the desired levels, then it would be better to stay invested in short term funds, liquid funds or bank FDs.

However, investors, with an appetite to absorb somewhat higher risk and who have a view that the bond yields have peaked in the short term, can consider investing in this issue, but only for 3 years or 5 years. Investing for 10 years with a private issuer should be best avoided.

Application Form – Edelweiss Retail Finance NCDs

Note: As per SEBI guidelines, ‘Bidding’ is mandatory before banking the application form, else the application is liable to get rejected. For bidding of your application, any further info or to invest in Edelweiss Retail Finance NCDs, you can reach us at +91-9811797407