Category: Investments

As the Sensex sailed past 30,000 today I was amazed to note the absence of volatility in the market in the last few years.

The market has marched steadily upwards in the last five years or so and these days are quite reminiscent of the pre 2008 crash market days where you used to meet a lot of people who had never experienced the pain of a market crash in their life, and believed in the inevitability of the market always going up.

I was reminded of this because I read Warren Buffett’s letter to shareholders last Sunday, and although nothing new, he did emphasize the same important things he has been saying for a very long time now.

Here’s a small snippet from the report:

Stock prices will always be far more volatile than cash-equivalent holdings. Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely-diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions. That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk. Though this pedagogic assumption makes for easy teaching, it is dead wrong: Volatility is far from synonymous with risk. Popular formulas that equate the two terms lead students, investors and CEOs astray.

No one is talking about volatility or risk these days because we have not experienced that in the recent past. Whether or not we experience it in the near future is anybody’s guess but the main thing is to have a plan of action when you do experience that volatility, specially with the Nifty P/E around 24 which is at the higher end of the scale.

The important thing is not to mistake the volatility for risk when you are faced with it. If you plan to hold stocks for very long periods of time like a decade or till your retirement then they are very safe options as we have seen over the past 25 years or so since India’s liberalization. We have had a lot of ups and downs, pretty severe recessions, busts, terrible governance, and still the market has been smiling to people who have been patient with it.

That’s the key lesson to remember and although you may not need to put it to use right away, you will need to put it to use sooner or later.

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]

It has been over a month now since the government launched the “Sukanya Samriddhi Yojana” on January 22nd. But, no authorised public sector bank has the details or the application form of this scheme till date to help investors open an account. Even the post offices are not providing the application form or the details of the scheme easily.

On behalf of the general public, I would like to ask the government why do we announce such schemes when we do not have the basic infrastructure to help those for whom these schemes are being launched? I know I’ll not get any reply, but I really want to know when will our governments or public sector offices start working in an efficient manner?

Why don’t we privatise our post offices, banks or such other public sector organisations which have been operating highly inefficiently for years and years now? If we cannot privatise these organisations due to political compulsions, why don’t we make them improve their efficiency levels?

Yesterday I posted various salient features of this scheme and today I received a few emails asking for the list of banks where this account can be opened. I also got queries asking for the application form to open an account. Here is the extract of one such mail.

Hello Mr. Kukreja,

I just read your article and your views over Pradhanmantri Sukanya Samriddhi Yojana. It was fabulous to read. Very clear and understanding information.

Actually i need a help or say favour from you. Am trying to get the Account Opening Form of above said scheme, but i didnt find any. Could you pls mail me the form of the same, so that without wasting any time i can proceed with the investment.

If you say that, collect from the post at nearby my residence, well sir i have inquired but they have none.

So its a kind request to you.

Overall thanks once again for your information and guidance.

Application Form for opening a Sukanya Samriddhi Account in a Post Office

To open an account under this scheme, the application form is still not available on the website of India Post. However, you can use this application form for getting your account opened with any of the post offices. I have downloaded this form from the website of India Post itself. Though this application form is still not updated, with ‘SSA’ missing on the top of this form, I have been told that the post offices will not refuse to accept this form.

However, here is one more link to the application form with which you can download the updated application form.

You can also print the application form from this circular of the Department of Posts, Ministry of Communications & IT, dated January 21, 2015. This circular also has the Notification No. G.S.R. 863(E) dated December 2, 2014, having all the rules & regulations of Sukanya Samriddhi Yojana. This circular has the application form on the 9th page.

List of Banks which have been authorised to open Sukanya Samriddhi Account

Here is the list of scheduled commercial banks which have been authorised to open accounts under Sukanya Samriddhi Yojana:

* State Bank of India (SBI)

* Bank of Baroda (BoB)

* Punjab National Bank (PNB) – Website Link – Contact No. – 011-25744370

* Bank of India (BoI)

* Canara Bank

* UCO Bank

* United Bank of India

* Andhra Bank

* Allahabad Bank

* Indian Bank

* Corporation Bank

* Central Bank of India

* IDBI Bank

* Dena Bank 

Once these banks upload the application form on their respective websites, I’ll share the links to their forms in front of their names.

I am sure many of you must be facing difficulties in getting the required information about this scheme and also you would be in a hurry to open this account before the financial year ends. I would advise you to approach post offices as of now because some of the banks will take their own sweet time to get their branch personnel updated. I am sure you will get the option to migrate to the bank of your choice at a later date.

If you get any useful info/link regarding this scheme or have any of your good/bad experiences or any query, please share it all here.

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]

“Beti Bachao, Beti Padhao” is the mantra with which Prime Minister Narendra Modi launched Sukanya Samriddhi Yojana on January 22nd this year. Later on, the government issued a notification to allow 80C exemption equal to the amount invested in the scheme up to Rs. 1,50,000, which is also the maximum amount one can invest in this scheme in a financial year.

Now, the Finance Minister in his budget speech has proposed to make the interest component as well as the maturity proceeds as tax-free. I think this proposal has made this scheme to be the best small savings scheme available to the Indian investors. Yes, even better than our golden scheme of Public Provident Fund (PPF). So, what is this scheme all about? Let’s check.

Sukanya Samriddhi Yojana is a small savings scheme which can be opened by the parents or a legal guardian of a girl child in any post office or authorised branches of some of the commercial banks. The girl child is called the “Account Holder” and the guardian is called the “Depositor” in this scheme.

Before I compare this scheme with PPF, let us first check the important features of this scheme.

Salient Features of Sukanya Samriddhi Yojana

Who can open this account? – Parents or a legal guardian of a girl child who is 10 years of age or younger than that, can open this account in the name of the child. For initial operations of the scheme, one year grace period has been provided to make it 11 years of age. With this one year grace period in age, which is valid up to December 1, 2015, you can get this account opened for a girl child who is born between December 2, 2003 and December 1, 2004.

9.1% Tax-Free Rate of Interest – This scheme has been flagged off with a 9.1% rate of interest, higher than that of PPF which stands at 8.7%. But, this rate is not fixed at 9.1% for the whole tenure and is subject to a revision every financial year like all other small savings schemes, including PPF.

Prior to the budget announcement, 9.1% annual return seemed unattractive, but not anymore, as it has been made tax exempt now. Interest amount gets added to your balance amount in the account and compounded either monthly or annually, as per your choice. Monthly interest compounding will be done only on your balance amount on completed thousands.

Duration of the Scheme – The scheme will mature on completion of 21 years from the date of opening of the account. If the account is not closed on maturity after 21 years, the balance amount will continue to earn interest as specified for the scheme every year. In case the marriage of your daughter takes place before the maturity date i.e. completion of 21 years, the operation of this account will not be permitted beyond the date of her marriage and no interest will be payable beyond the date of marriage.

Deposit for 14 years only – Though the scheme has a duration of 21 years, you are required to make contributions only for the first 14 years, after which you need not deposit any further amount and your account will keep earning the interest rate applicable for the remaining 7 years.  

Premature Closure – The account can also be closed prematurely as your daughter completes 18 years of age provided she gets married before the withdrawal. As the maximum permissible age of the girl child is set as 10 years, the scheme effectively carries a minimum duration of 8 years i.e. 18 years of exit age – 10 years of entry age.

Partial Withdrawal – It is also allowed to withdraw 50% of the balance standing at the end of the preceding financial year, but only after your daughter attains the age of 18 years. So, effectively it has a complete lock-in period of at least 8 years, before which you cannot take out any money for any purposes.

Minimum/Maximum Investment – You need to deposit a minimum of Rs. 1,000 in a financial year to keep your account active. Failure to do so will make your account inactive and it could be revived only after paying a penalty of Rs. 50 along with the minimum amount required to be deposited for that year, which currently stands at Rs. 1,000.

Also, you can invest a maximum of up to Rs. 1,50,000 in a financial year. You can make your contribution to this account in as many number of times as you like.

How many accounts can be opened? – You can open only one account in the name of one girl child and a maximum of two accounts in the name of two different children. However, you can open three accounts if you are blessed with twin girls on the second occasion or if the first birth itself results into three girl children.

Nomination Facility – Nomination facility is not available in this scheme. In an unfortunate event of the death of the girl child, the account will be closed immediately and the balance will be paid to the guardian of the account holder.

Documents Required – Birth Certificate of the girl child, along with the identity proof and residence proof of the guardian, are the mandatory documents required to open an account under this scheme. You can approach any post office or authorised branches of some of the commercial banks to get this account opened.

Sukanya Samriddhi Yojana vs. Public Provident Fund (PPF)

Budget 2015 has made this scheme quite attractive for the investors. If you’ve already exhausted your PPF deposit limit, want to save for your girl child’s marriage or higher education and have spare money to invest in this scheme, then this scheme provides you one more excellent avenue of safe investment with high returns. You can wait for the next financial year’s rate of interest to get announced anytime this month, if it remains higher than PPF, just go for it.

Application Form to open a Sukanya Samriddhi Account

List of authorised commercial banks where you can get this account opened

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]

ECL Finance Limited, a subsidiary of Rashesh Shah’s Edelweiss Group, is launching its third public issue of secured, redeemable non-convertible debentures (NCDs) from the coming Thursday, February 26th. The issue will carry a maximum of 10.60% coupon rate with monthly, annual and cumulative interest payment options and will remain open till March 16th.

Size & Objective of the Issue – The company plans to raise Rs. 800 crore from this issue, including the green shoe option of Rs. 400 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 – Last time, the company offered its NCDs with 12% coupon rate and 70 months maturity period. This time the company has decided to issue its NCDs for a duration of 36 months and 60 months. The company has cut its offered rate of interest sharply to 10.45% and 10.60% for 36 months and 60 months respectively.

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

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

Category I – Institutional Investors – 30% of the issue is reserved

Category II – Non-Institutional Investors – 20% of the issue is reserved

Category III – Individual & HUF Investors – 50% of the issue is reserved

NCDs will be allotted on a first come first served basis.

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 – CARE 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 national 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.

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 ECL Finance

Loan Book of ECL Finance

Should you invest in these NCDs?

Though the interest rates have fallen in the past one year and it is widely expected that there will be more rate cuts by the RBI and the commercial banks in the next 6-12 months, I think the rates offered by ECL Finance are on a slightly lower side for me to call it an attractive issue. I think these NCDs are suitable for those investors who have no taxable income or who seek regular monthly income. The investors would do well to invest in Gilt funds or bond funds as I think they should fetch higher returns in the next 3-5 years.

Application Form of ECL 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 ECL Finance NCDs, an investor can reach us at +919811797407

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]

Launched today, Muthoot Finance has once again decided to raise money from its public issue of non-convertible debentures (NCDs). The issue offering interest rates between 10.75% to 11.25% will raise Rs. 400 crore for the company, including the green shoe option of Rs. 200 crore. The issue will run for a month to close on December 18th.

Like its previous issue in September 2014, the company is offering eleven interest payment options with maturity periods ranging from 400 days to 78 months. Highest effective yield it will carry is 11.25% per annum and that comes with the 36 months holding period. Unlike other companies, Muthoot is not offering any additional coupon rate for the existing shareholders or bondholders. 

“Double Your Money” Option – Like its previous offering, Muthoot is offering to double your investment amount in 78 months. Kisan Vikas Patra (KVP), which the government relaunched yesterday, offers to double your investment amount in 100 months. But, as the KVPs are issued by the post offices, they are considered to be risk-free. So, it would be unwise to compare these NCDs with KVPs.

Coupon Rates for Non-Individual Investors – Like always, Muthoot will offer a lower rate of interest to its non-individual investors to the tune of 0.75% per annum.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and 90% of the issue size has been reserved for the retail investors:

Category I – Institutional Investors – 5% of the issue is reserved

Category II – Non-Institutional Investors, Corporates – 5% of the issue is reserved

Category III – Retail Individual Investors including HUFs – 90% of the issue is reserved

NRI Investment – Like its previous issue, non-resident Indians (NRIs) are not eligible to invest in this issue.

Ratings & Nature of NCDs – ICRA has rated this issue as ‘AA-’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature, except those which promise to double your money in 78 months. In case of any default, investors of the secured NCDs could have a claim against certain assets of the company.

Minimum Investment – To invest in these NCDs, the investors need to invest a minimum amount of Rs. 10,000 i.e. 10 NCDs of Rs. 1,000 face value.

Listing – Muthoot will get these NCDs listed on the Bombay Stock Exchange (BSE) within 12 days from the date the issue gets closed.

Demat/Physical Option – Though the investors have the option to apply for these NCDs in physical form as well as demat form, this option is limited to NCDs under options I to VI. Applicants will not be able to apply for allotment of these NCDs in physical form under options VII to XI i.e. these NCDs will be allotted only in dematerialised form under options VII to XI.

As the US economy is improving steadily, dollar has strengthened against all major currencies of the world and with dollar getting stronger, gold prices are on a decline in the international market. Also, there are no signs of a reversal either.

With gold prices coming down, gold financing firms are struggling to keep their revenues and profitability in good shape. So, with the business environment getting tougher for these companies and interest rate getting unattractive, it is better not to invest in such an issue.

Application Form of Muthoot 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 Muthoot NCDs, the investors can reach us at +919811797407

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]

IFCI Limited, in which the Government of India owns 55.53% stake, is coming out with an issue of secured redeemable non-convertible debentures (NCDs) from October 20th i.e. the coming Monday. IFCI plans to raise Rs. 250 crore in this issue with an option to retain oversubscription to the tune of Rs. 2,000 crore.

IFCI has decided to issue these NCDs for a period of 5 years, 7 years and 10 years and it is going to offer interest rate of 9.90% per annum for 5 years and 10% per annum for 7 and 10 years. The only exception is the 5-year monthly interest option, in which the coupon rate has been fixed as 9.50%. There is no monthly interest payment option with 7-year and 10-year investment periods.

Though the issue is scheduled to remain open for just over a month to close on November 21, I expect the issue to receive a good response from all categories of investors and get closed this month itself.

Categories of Investors & Allocation Ratio – The investors would be classified in the following three categories and each category will have the following percentage fixed during the allotment process:

Category I – Institutional Investors – 20% of the issue size is reserved

Category II – Domestic Corporates – 20% of the issue size is reserved

Category III – High Networth Individuals including HUFs – 20% of the issue size is reserved

Category IV – Retail Individual Investors including HUFs – 40% of the issue size is reserved

Allotment will be made on a first-come first-served (FCFS) basis.

Coupon Rates for Category I & II Investors – As shown in the table above, IFCI has kept the differential between the coupon rates offered to the individual investors and non-individual investors as 0.10% only. Though such an insignificant difference leaves me surprised somewhat, I think this move would make these NCDs quite attractive to the non-individual investors and one can expect a relatively quicker subscription in these categories.

NRI Investment Not Allowed – Foreign investors, including foreign nationals and non-resident Indians (NRIs), are not allowed to invest in this issue.

Credit Rating & Nature of NCDs – While Brickwork Ratings has assigned a credit rating of ‘AA-’ to the issue with a ‘Stable’ outlook, ICRA has given it a credit rating of ‘A’ again with a ‘Stable’ outlook. Moreover, these NCDs are ‘Secured’ in nature and in case of any default in payment, the investors will have the right to claim their money against certain receivables of IFCI.

Minimum Investment – These NCDs carry a face value of Rs. 1,000 and one needs to apply for a minimum of 10 NCDs, thus making Rs. 10,000 as the minimum investment to be made.

Maximum Investment – Anticipating a good demand from the retail investors, IFCI has kept Rs. 2 lakhs as the maximum amount one can invest in the retail investors category. Individuals investing more than Rs. 2 lakhs will be categorised as high networth individuals and there is no such cap on the investment amount for such investors.

Allotment in Demat/Physical Form – Investors will have the option to get these NCDs allotted either in demat form or physical form as per their choice, except for Series III NCDs. As Series III NCDs pay interest on a monthly basis, IFCI will allot these NCDs compulsorily in demat form.

Listing – These NCDs will get listed on both the stock exchanges, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), within 12 working days from the closing date of the issue.

Taxation & TDS – Interest earned on these NCDs will be taxable as per the tax slab of the investor and tax will be deducted at source if NCDs are taken in physical form and the interest amount exceeds Rs. 5,000 in any of the financial years. However, there will be no TDS on NCDs taken in a demat form.

Moreover, if these NCDs are sold after holding for more than 12 months, the investor is liable to pay long term capital gain (LTCG) tax at a flat rate of 10%. However, if sold prior to the completion of 12 months, short term capital gain (STCG) tax is applicable at the slab rate of the investor.

Interest Payment Date – IFCI has not fixed any date in advance for the purpose of its annual interest payment and that is why its first due interest will be paid exactly one year after the deemed date of allotment.

For monthly interest option as well, first interest payment will be made exactly one month from the deemed date of allotment and subsequently on the same date every month, subject to bank holidays.

Interest on Application Money & Refund – IFCI will pay interest to the successful allottees on their application money, from the date of realization of application money up to one day prior to the deemed date of allotment, at the applicable coupon rates. However, unsuccessful allottees will be paid interest @ 4% per annum on their money liable to be refunded.

Premature Withdrawal & Put/Call Option – Neither IFCI has the call option to redeem these NCDs nor will the investors have the put option to liquidate their investments. Once allotted, IFCI will not entertain any request for redemption of these NCDs. Investors will have to have a demat account in order to sell these NCDs on the stock exchanges.

IFCI NCDs vs. SBI & HDFC FDs vs. SREI Infra NCDs

Should you subscribe to IFCI NCDs?

With CPI as well as WPI inflation falling sharply, Brent crude prices declining from $114 per barrel to $84-85 per barrel, commodity prices also correcting substantially and 10-year Indian G-Sec yield falling from 9%+ to 8.39%, I think the interest rates should still head lower going forward. In the present macroeconomic scenario, it makes sense to subscribe to these NCDs. Long term investors in the 30% tax bracket will do well to invest either in debt mutual funds or explore tax-free bonds from the secondary markets.

Application Form of IFCI 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 IFCI NCDs, you can contact me at +919811797407

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]

SREI Infrastructure Finance Limited has launched its public issue of Non-Convertible Debentures (NCDs) from today, September 29. The company has set Rs. 250 crore as the base size of the issue, but it has the green shoe option to retain oversubscription to the tune of Rs. 1,500 crore. The issue is scheduled to get closed on October 31.

The company is offering interest rates in the range of 10.95% to 11.75% per annum for a period of 2 years to 5 years, which works out to be 11.25% to 11.75% effectively.

Additional 0.25% to Existing Shareholders/Bondholders/Senior Citizens – Like Manappuram Finance, SREI Infra will also reward its existing shareholders and bond investors by offering an additional interest rate of 0.25% per annum. Senior citizens aged 60 years or above will also get this additional coupon. To be eligible for this additional 0.25%, the investors will be required to hold their investments on the record date for the purpose of interest payment.

Coupon Rates for Non-Retail Investors – Unlike Manappuram Finance, which has kept its interest rate same for all categories of investors, SREI Infra is offering coupon rates which are 0.45% to 0.50% higher than the rates it is offering to its non-retail investors.

Categories of Investors & Allocation Ratio – The investors would be classified in the following three categories and each category will have the following percentage fixed during the allotment process:

Category I – Institutional Investors – 20% of the issue size is reserved

Category II – Non-Institutional Investors including corporates – 20% of the issue size is reserved

Category III – Retail Individual Investors including HUFs – 60% of the issue size is reserved

NRI Investment – Foreign investors including foreign nationals and non-resident Indians (NRIs) are not allowed to invest in this issue.

Ratings & Nature of NCDs – Credit rating agencies CARE and Brickwork Ratings have rated this issue as ‘AA-’ and ‘AA’ respectively, a rating which is a notch higher than the Manappuram issue of ‘A+’ in relative terms. Also, as mentioned above also, these NCDs are ‘Secured’ in nature and the claims of its investors will be superior to the claims of any unsecured creditors of the company.

Listing, Demat & TDS – These NCDs will get listed only on the Bombay Stock Exchange (BSE) within 12 working days from the closing date of the issue. Investors have the option to apply these NCDs in physical form as well as demat form, except Series III and Series VI NCDs which will be allotted compulsorily in the demat form.

As always, TDS will be applicable on the NCDs taken in the physical form if the interest amount exceeds Rs. 5,000. However, there will be no TDS on NCDs taken in a demat form.

Minimum Investment – Like Manappuram issue, the investors will have to put in at least Rs. 10,000 in this issue as well i.e. at least 10 bonds of face value Rs. 1,000 each.

Should you invest in these NCDs?

Concerns which I have with SREI Infra include its ineffective management, average financials and lousy debt management. These are the most important factors for me to consider while investing in any company whether I am investing in its equity or debt.

However, it seems like the Modi government is committed to resolve issues which are hindering the growth of India’s infrastructure sector. So, if one is hopeful that India will have a speedy recovery with its stalled infrastructure projects, then I think one should definitely invest with companies like SREI Infra.

Moreover, as the interest rates are headed lower, interest rates of 11.25% to 11.75% are definitely higher and quite attractive. Any improvement in SREI’s financials going forward will result in a reduced risk for its investors.

Application Form of SREI Infra 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 SREI Infra NCDs, you can contact me at +919811797407

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]

Gold finance company, Manappuram Finance Limited (MFL), has decided to launch one more issue of its non-convertible debentures (NCDs) from tomorrow i.e. September 15th. The company plans to raise Rs. 300 crore in this issue, including the green-shoe option to retain oversubscription to the tune of Rs. 150 crore. The issue is scheduled to get closed on October 8, 2014.

The company is offering XI different options of interest payments with investment periods ranging from 400 days to 75 months and coupon rates falling between 10.50% p.a. to 11.75% p.a. Due to the compounding effect, these coupon rates will result in an effective yield of 10.50% p.a. to 12.13% p.a.

Interest rates offered by Manappuram Finance are 0.75% higher than the rates offered by Muthoot Finance in its NCD issue which is getting closed on September 18. Though both these issues are ‘Secured’ in nature, with this 0.75%, the company is trying to compensate the investors for the extra risk they will have to bear with its NCDs.

Additional 0.25% to Existing Shareholders/Bondholders – The company has decided to reward its existing shareholders and bond investors by offering an additional 0.25% p.a. in respect of Series VI or Series VII bonds. To be eligible for this additional 0.25%, the investors should hold their investments on the record date of interest payment.

“Double Your Money” Option – Like its previous offerings and also with the Muthoot issue, Manappuram is offering to double your investment amount in 75 months. Muthoot is doing it in 78 months and the last time Manappuram came out with its NCDs in December 2013, this duration was 70 months.

Coupon Rates for Non-Retail Investors – Like the last time, Manappuram has kept its interest rate as the same for all categories of investors, retail as well as non-retail investors.

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

Category I – Institutional Investors – 10% of the issue size is reserved

Category II – Non-Institutional Investors including corporates – 20% of the issue size is reserved

Category III – High Networth Individuals including HUFs – 20% of the issue size is reserved

Category IV – Retail Individual Investors including HUFs – 50% of the issue size is reserved

Note: Investors investing Rs. 5 lakh or less will be considered as the retail investors.

NRI Investment – Unlike its previous issue, non-resident Indians (NRIs) are not eligible to invest in this issue.

Ratings & Nature of NCDs – CRISIL has assigned “A+/Stable” rating to this issue which is a notch lower than ‘AA-/Stable’ rating ICRA has assigned to the Muthoot issue and reflects its stable outlook for the issue. However, as mentioned above also, these NCDs are ‘Secured’ in nature and the claims of its investors will be superior to the claims of any unsecured creditors of the company.

Listing, Demat & TDS – Investors have the option to apply these NCDs in physical form as well as demat form and post allotment, these NCDs will get listed on the Bombay Stock Exchange (BSE).

Taken in the physical form, the interest earned will be taxable as per the tax slab of the investor and TDS will be applicable if the interest amount exceeds Rs. 5,000. However, NCDs taken in the demat form will not attract any TDS.

Minimum Investment – The investors will have to put in at least Rs. 10,000 in this issue i.e. at least 10 bonds of face value Rs. 1,000 each.

Should you invest in these NCDs?

Interest rates have already started their move to the southward direction as there is enough liquidity in the system. Banks and deposit-taking NBFCs have also reduced interest rates on their deposits and some of their loans.

With markets going up steadily, the government is trying hard to bridge its fiscal deficit target by selling its stake in some of the bigger PSUs like SAIL, ONGC, Coal India, NHPC etc. Successful stake sale in these companies will help the government control its market borrowings, which in turn will put some more pressure on the interest rates to go down.

Though the market sentiment towards the gold financing business as well as the financial standing of the company has improved slightly as compared to the last time it came out with its NCDs issue, I am not very comfortable making such an investment or advising my clients to invest their money with Manappuram. However, investors with a high risk appetite and in the lower tax brackets may consider investing in this issue as an alternate to company deposits or bank FDs.

Application Form of Manappuram 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 Manappuram NCDs, you can contact me at +919811797407

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]

Starting today, I would like to remind my clients or those investors, who have the habit of depositing their hard earned money in their respective Public Provident Fund (PPF) accounts in the first week of April every year, that now onwards they can use the opportunity of topping up their PPF investments by an additional Rs. 50,000.

Announced in Budget 2014 by the Finance Minister Arun Jaitley, increase in the investment limit of PPF from Rs. 1 lakh to Rs. 1.50 lakh got notified by the Government of India on August 13 and the Reserve Bank of India (RBI) on August 22. Here are the links to their respective notifications:

Ministry of Finance Notification

RBI Notification

The same has now been brought to the notice of all the post offices as well as some of the nationalised/commercial banks which are authorised by the Government and the RBI to open PPF accounts and accept deposits in these accounts.

Nationalised or commercial banks, which have been notified and have started accepting the increased limit of deposits, include State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BoB), ICICI Bank, Axis Bank, Canara Bank, Andhra Bank, Allahabad Bank, Bank of India (BoI), Oriental Bank of Commerce (OBC), Bank of Maharashtra (BoM), Central Bank of India, Corporation Bank, Dena Bank, Indian Bank, Indian Overseas Bank, Syndicate Bank, UCO Bank, Punjab & Sind Bank (PSB), Union Bank of India, United Bank of India, Vijaya Bank, IDBI Bank, State Bank of Patiala, State Bank of Bikaner & Jaipur (SBBJ), State Bank of Travancore (SBT), State Bank of Hyderabad and State Bank of Mysore.

Make PPF deposit between 1st & 5th of a month to earn maximum out of it

As most of the investors know, interest on our PPF deposits gets calculated on the minimum balance lying in the account between 5th day and the last day of a month, it is advisable for an investor to deposit cash in the account between 1st and 5th day of that month or if a cheque is deposited, then it gets cleared on or before 5th day of that month.

Features of Public Provident Fund (PPF)

For those investors, who are yet to open a PPF account, I would like to quickly highlight some important features of this most loved investment:

* A PPF account can be opened by a resident individual in his/her own name or on behalf of a minor of whom he/she is the guardian.

* A PPF account can be opened at a post office or some of the nationalised or commercial banks mentioned above.

* The minimum tenure of a PPF account is 15 years which can be further extended in blocks of 5 years each.

* Though the tenure is 15 years, investors are allowed to have premature withdrawals or avail the loan facility subject to certain terms and conditions.

* Interest Rate on PPF deposits is notified by the Government of India every year and the rate remains fixed for the whole of that financial year. For FY 2014-15, the rate stands at 8.70% per annum compounded annually.

* Investments made in a PPF account qualify for deduction under section 80C of the Income Tax Act, 1961.

* It is one of the only three investment schemes in India which still qualify as Exempt-Exempt-Exempt (EEE) from taxation point of view. The other two being the Employees’ Provident Fund (EPF) and Equity-Linked Savings Schemes (ELSS).

* Non-Resident Indians (NRIs) are not allowed to open a PPF account. Even Hindu Undivided Families (HUFs) are no longer allowed to open it.

With economic growth finally gaining some strength to touch 5.7% in the first quarter of the current financial year, inflation showing early signs of slowing down, global economies consolidating on their recovery path, the Modi government showing some early signs of taking action on its strategies laid down in the first 100 days and the Indian stock markets gaining strength steadily, would you still be investing in PPF or rather invest in ELSS this year to take part in the growth of Indian economy? Please share your views.