Manappuram Finance Limited 10.15% NCDs – January 2019 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 shivskukreja@gmail.com
Manappuram Finance Limited (MFL) is launching its public issue of non-convertible debentures (NCDs) from today, 28th of January. The company wants to raise Rs. 737 crore from this issue, including the green-shoe option of Rs. 587 crore, and is offering interest rate in the range of 9.35% for 36 months and 10.15% for 60 months.
The issue is scheduled to close on February 27, unless the company decides to close the issue prematurely. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CARE.
Before we check how the issue looks from an investment point of view, let us take a look at some of its key features:
Size & Objective of the Issue – Base size of the issue is Rs. 150 crore, with an option to retain oversubscription of an additional Rs. 587 crore, making the total issue size to be Rs. 737 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.
Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 10.15% p.a. for a period of 60 months and 9.75% p.a. for 36 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available with these tenors, and coupon rates for these periods are 9.75% p.a. and 9.35% p.a. respectively. There is one more option of 2,617 days investment period, which doubles your money in this period.
ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, effective October 1, 2018. So, you are no longer required to issue cheques to apply for these NCD issues. In case of physical applications, you need to sign on the application form as per your bank records.
Credit Rating & Nature of NCDs – CARE and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CARE has rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, these NCDs are ‘Secured’ in nature.
NRIs Not Allowed – Non-Resident Indians (NRIs), foreign nationals and qualified foreign investors (QFIs) among others are not eligible to invest in this issue.
Categories of Investors – The company has decided to categorise investors in the following four categories:
Category I – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 73.7 crore
Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 147.4 crore
Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 221.1 crore
Category IV – Resident Indian Individuals including HUFs – 50% of the issue is reserved i.e. Rs. 368.5 crore
Allotment on First Come First Served Basis – Subject to the allocation ratio, 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.
Minimum Investment – An investor needs to invest a minimum of Rs. 10,000 in this issue i.e. 10 NCDs worth Rs. 1,000 each.
Listing, Premature Withdrawal – These NCDs are proposed to get listed only on the Bombay Stock Exchange (BSE). The listing will take place within 6 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on the stock exchange.
Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.
No TDS in Demat Form – Interest income with such NCDs is taxable in the hands of the investors and you will have to pay tax on the interest income while filing your income tax return. Moreover, as demat account is mandatory to invest in this issue, no TDS would get deducted from your interest income on NCDs held in demat form.
But, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.
Should you invest in Manappuram Finance NCDs?
Financial results announced by both the gold-financiers, Manappuram Finance and Muthoot Finance, were healthy in the previous quarter. So, from the fundamentals point of view, Manappuram Finance is doing well and it seems there is no immediate threat to its business model as of now.
Moreover, with global crude prices falling more than 30% from its peak of 2018, Indian rupee has strengthened and bond yields have corrected very sharply. Following such a sharp correction in bond yields, debt issuers are also reducing their interest rates on NCDs. Interest rates offered by Manappuram in this issue are 0.25% lower than the interest rates offered in its previous issue of October 2018.
Liquidity concerns of NBFCs have also eased somewhat, but the crisis has resulted in a slowdown in disbursements of loans and business growth. It is yet to be seen whether these companies are able to avoid this crisis completely or not. So, till the time you are confident that the crisis is over, and these NBFCs will have better time in the days to come, I think you should either avoid such NCDs or invest in a diversified manner.
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 us at +91-9811797407

Tips to Keep in Mind While Investing in an IPO

In the first half of 2018, nearly two out of five Indian companies that made their initial public offering delivered positive returns. This came with a 27% leap in the number of deals when compared to the same period in 2017. And, in the first six months of 2018, IPO deals raised a record $3.9 billion.
What is an IPO?
An Initial Public Offering (IPO) represents the sale of shares by a company to the public for the first time, i.e., an unlisted company selling a portion of its shares to the public for raising funds (referred to as a ‘public issue’) and thereby becoming a company that is listed and tradable on the stock exchanges.
When the company needs more funds or additional capital, it can raise the same through debt or equity. In the case of IPO, the firm raises money as equity and thereby a portion of the ownership is now transferred to the public.
India has seen a fair amount of IPO activity this year.But the real questions are – which IPOs are really worth investing in, and what factors should you keep in mind before investing in an IPO?
Understand the Company and the Valuations
Take a good look at the company, the nature of the business, its track record, the management, the competition, and its business outlook. A company in the growth stage may offer more potential for long-term capital appreciation. This information is usually available in the company’s ‘red herring prospectus’ which is a document that contains information about the issuer (the company offering shares for public subscription). The valuation of the company and the attractiveness of the IPO price band can be analyzed by reviewing the financials of the company, referring research reports, or by comparing with the valuation ratios of similar companies in the market. This will help in understanding if the IPO is over-priced, under-priced, or fairly-priced, and give you a holistic view of the company’s prospects.
Study the Utilization of IPO Proceeds
Firms may raise capital for several purposes, such as expanding to new markets, research, and development, for paying off debt, and many others. Usually, those that are pursuing growth strategies offer a better bet for gains from an IPO perspective.
Look for Over-Subscription in the Right Place
Valuing the company, even by comparing ratios with those of peers, is easier said than done. IPO subscription is a factor of demand and supply as well. Over and above the general market buzz or news, a more reliable way to try and understand the demand for the IPO is to look at the over/under-subscription in the other non-retail segments, i.e., in the Qualified Institutional Buyer (QIB) category and the Non-Institutional Investors (NII) segment. If there is over-subscription in these segments, it means the demand for the IPO is high.
Look at the Investment (IPO) Grading
In addition to referring to the prospectus, demand, and other aspects, it would be prudent to study the grading for IPOs that credit rating agencies have to offer. An IPO grading of ‘4’ and above may possibly be a better choice.
Understand the Allotment Process
The IPO book building process is usually run by investment banks who serve as underwriters for the issue. IPOs can be subscribed only in lots (multiple of shares). For instance,one lot of 40 shares, or one lot of 13 shares, and so on, at a particular price band, say Rs. 150 to Rs. 165, or Rs. 1,200 to Rs. 1,298, and so on (these are just representative examples and can vary widely from issue to issue).
The rules of allotment for each category are different. For RII (retail industrial investors), if there is an under-subscription in the retail segment, the investor is offered the number of lots he has subscribed. If there is an over-subscription, then the maximum allotment can be only one lot, arrived at by a draw of lots (out of the total unique retail investor accounts) that have subscribed to the issue at or above the final price that has been arrived at by a book building process.
If you think there is potential for over-subscription, the best way to increase chances of allotment is to subscribe at the upper end of the price band, or preferably at the cut-off price, and also apply from multiple legitimate demat accounts that you may hold with family members or others.
A simple tip is to invest at the cut-off price, which indicates your consent to pay whatever is the final price arrived at within the price band. The process varies for NIIs and QIBs, where the allotment is based on the proportion of shares applied for in the case of over-subscription. Some firms also offer to fund for subscribing to IPOs, also referred to as IPO funding.
Be Clear Why You are Investing in an IPO
You should be clear of your intent behind investing in IPOs – is it for quick gains on account of potential initial upside, i.e., listing premiums, or is it for the long-term? This will determine whether you sell on listing or you hold for the long-term. Another option is to hold and watch what company insiders do after the lock-in period of an IPO and plan accordingly.
Keep an Eye on the Details in Forms
It is essential to read and fill IPO forms in detail and correctly. That will ensure your forms do not get rejected, and that you are issued the right refunds and so on. It is also advisable that you go with a reliable broker.
Conclusion
We have discussed at length the key factors to keep in mind while subscribing to an IPO. That said, be aware of the key risks in this process.
You are ultimately investing in a company and all associated market risks apply. Further, there are risks where the IPO may not be fully subscribed which may entail a dip in the share price as compared to the price band. There is also the risk that the IPO maybe over-subscribed and you may not be allotted shares. There could always be other investment avenues than IPOs which may offer higher returns. Also note that these shares will always be available in the secondary market, so there may also be no need to rush to subscribe.
IPOs are yet another investment opportunity that let you participate in a company’s growth story, or help profit through capital gains in potential listing premiums. All of this comes with its own set of risks and influential factors. Happy investing!
Author Bio: Niyati Jetly is business development manager and evangelist at CIEL – Centre for Investment Education and Learning. To get grounded in IPO funding and investing, you may consider enrolling in quick online courses developed by CIEL.

India Infoline Finance Limited (IIFL) 10.50% NCDs – January 2019 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 skukreja@investitude.co.in

India Infoline Finance Limited (IIFL) is coming out with its public issue of non-convertible debentures (NCDs) from tomorrow, 22nd of January. The company wants to raise Rs. 2,000 crore from this issue, including the green-shoe option of Rs. 1,750 crore, and is offering interest rate in the range of 9.60% for 39 months and 10.50% for 120 months.

The issue is scheduled to close on February 20, unless the company decides to close the issue prematurely as it is able to raise the desired amount before the scheduled closing date. The issue is rated ‘AA+’ by Brickwork Ratings and ‘AA’ by CRISIL and ICRA.

Before we check how the issue looks from an investment point of view, let us take a look at some of its key features:

Size & Objective of the Issue – Base size of the issue is Rs. 250 crore, with an option to retain oversubscription of an additional Rs. 1,750 crore, making the total issue size to be Rs. 2,000 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.

Interest Rate on Offer, Effective Yield & Tenor of the Issue – The issue will carry coupon rate of 10.50% p.a. for a period of 120 months, 10.20% p.a. for 60 months and 9.60% p.a. for 39 months. These rates would be applicable for annual interest payment options only. Monthly interest payment option is also available with 120 months and 60 months tenors, and coupon rates for these periods will be 10% p.a. and 9.75% p.a. respectively, interest payable on a monthly basis.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for debt issues as well, effective October 1, 2018. So, you are no longer required to issue cheques to apply for these NCD issues. In case of physical applications, you need to sign on the application form as per your bank records.

Credit Rating & Nature of NCDs – CRISIL, ICRA and Brickwork Ratings have been appointed as the credit rating agencies for this issue. While CRISIL and ICRA have rated the issue as ‘AA’ with a ‘Stable’ outlook, Brickwork Ratings has rated it as ‘AA+’ with a ‘Stable’ outlook. Moreover, 39-month and 60-month NCDs are ‘Secured’ in nature, whereas 120-month NCDs are ‘Unsecured’ in nature.

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

Categories of Investors – The company has decided to categorise investors in the following four categories:

Category I – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 400 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 400 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 600 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 600 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, 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.

Minimum Investment – An investor needs to invest a minimum of Rs. 10,000 in this issue i.e. 10 NCDs worth Rs. 1,000 each.

Listing, Premature Withdrawal – These NCDs are proposed to be listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 6 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can always sell these NCDs on either of the stock exchanges.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.

No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR.

But, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.

Should you invest in India Infoline Finance Limited (IIFL) NCDs?

As there was no fresh flow of bad news from the domestic markets, as well as from the global front, market sentiment has improved somewhat in the last 15 days or so. But, is it some kind of calm before the storm? Nobody knows with certainty. But, one thing I am very confident of, like 2018, 2019 will also have high volatility in both equity, as well as the bond markets. US-China trade war, slowdown of economic growth both in China, as well as the US, India’s twin deficit problem and the crucial general elections here in India, all these are very important events to be closely monitored, and will play a very crucial role in market movement going ahead.

But, as far as the NBFCs’ liquidity crisis is concerned, I think the situation was not as bad as it was made out to be and it should improve going forward. RBI is taking all measures possible to defy the crisis, and easing global crude prices has also worked in allaying the fear among the investors.

As far as this issue is concerned, I think the interest rate for the 39-month option is low for my expectations, and 120-month investment period is too long a period to for my investments with a private company. So, if I were to invest in this issue, I would have opted for the monthly interest option of 60-month investment period, i.e. Series III. I don’t know when the NHAI is going to launch its public issue of taxable bonds, but I would advise the conservative investors to wait for it, as it makes more sense to invest in debt securities of government companies as compared to the private companies.

Application Form of India Infoline Finance Limited 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 IIFL NCDs, you can contact us at +91-9811797407

Shriram Transport Finance 9.70% NCDs – January 2019 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 shivskukreja@gmail.com

Shriram Transport Finance Company Limited (STFCL) is launching its public issue of non-convertible debentures (NCDs) from today, January 7, 2019. This will be the third public issue of NCDs by the company this financial year. The company plans to raise Rs. 700 crore from this issue, including the green shoe option of Rs. 500 crore.

These NCDs will carry coupon rates in the range of 9.12% per annum to 9.70% per annum, resulting in an effective yield of 9.39% p.a. to 9.70% p.a. for the investors. The issue is scheduled to close on January 31, unless the company decides to foreclose it.

Before we take a decision whether to invest in this issue or not, let us first check the salient features of this issue.

Size & Objective of the Issue – Base size of the issue is Rs. 200 crore, with an option to retain oversubscription of an additional Rs. 500 crore, making the total issue size to be Rs. 700 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.70% p.a. for a period of 10 years, 9.50% p.a. for 5 years and 9.40% p.a. for 3 years. These interest rates would be applicable for annual interest rate options only. Monthly interest payment option is also available for 5 years and 10 years, with coupon rates of 9.12% p.a. and 9.30% p.a. respectively. For 3 years and 5 years, cumulative interest payment option is also there, with an effective yield of 9.40% and 9.50% respectively.

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 – Qualified Institutional Bidders (QIBs) – 10% of the issue i.e. Rs. 70 crore

Category II – Non-Institutional Investors (NIIs) – 10% of the issue i.e. Rs. 70 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 40% of the issue is reserved i.e. Rs. 280 crore

Category IV – Resident Indian Individuals including HUFs – 40% of the issue is reserved i.e. Rs. 280 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, 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 India Ratings have rated this issue as ‘AA+’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature.

Listing, Premature Withdrawal – These NCDs are proposed to get listed on both the stock exchanges, Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 6 working days after the issue gets closed. The investors will not have the option to prematurely redeem these NCDs back to the company, however the investors can always sell these NCDs on any of the stock exchanges.

ASBA Mandatory – Like equity IPOs, SEBI has made ASBA mandatory to apply for these debt issues also effective October 1, 2018. So, no cheque would be required to apply for these NCDs now.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs, as the company is not providing the option to apply for these NCDs in physical or certificate form.

No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR. Moreover, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if rematerialised and held in physical form after the allotment, and if the annual interest income is more than Rs. 5,000, TDS @ 10% will be deducted.

Minimum Investment Size – The company has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.

Should you invest in Shriram Transport Finance 9.70% NCDs?

There has been a considerable volatility in the stock markets, as well as the bond markets in the past 4-5 months. Market volatility is expected to continue in 2019 as well. So, the conservative investors are advised either to avoid the equity investments at least for the next 6 months or so, or invest in equities in a phased manner.

As far as fixed income investments are concerned, I expect the interest rates to remain range bound with a downward bias for the next 6 months or so. Post that, I think it would primarily depend on two factors – one, the elections outcome in May this year, and the other, macro economic outlook for India as well as China and the US.

As mentioned above as well, this is the third public issue by Shriram Transport Finance in the current financial year. Interest rates offered by the company in this issue are exactly the same as they were in the second issue of October 2018, and slightly higher than the first issue of June 2018. Still, I find these rates to be on a lower side of my expectations from a private company. I would have liked the company to offer 10%+ coupon rate for the 3-year or 5-year investment period option. Again, as the interest rates expected to be offered by the NHAI in the range of 8.50% and 9% for a period of 5 years to 10 years, I would like to consider the NHAI issue first before committing my funds elsewhere.

Application Form of Shriram Transport 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 STFC NCDs, you can contact us at +91-9811797407

Mahindra & Mahindra Financial Services 9.50% NCDs – January 2019 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 shivskukreja@gmail.com

Mahindra & Mahindra Financial Services Limited (MMFSL) is launching its public issue of non-convertible debentures (NCDs) from Friday this week, January 4, 2019. This will be the first public issue of NCDs by the company this financial year. The company plans to raise Rs. 3,500 crore from this issue, including the green shoe option of Rs. 3,000 crore.

These NCDs will carry coupon rates in the range of 9.05% to 9.50%, resulting in an effective yield of 9.07% to 9.50% for the investors. The issue is scheduled to close on January 25, unless the company decides to foreclose it.

Before we take a decision whether to invest in this issue or not, let us first check the salient features of this issue.

Size & Objective of the Issue – Base size of the issue is Rs. 500 crore, with an option to retain oversubscription of an additional Rs. 3,000 crore, making the total issue size to be Rs. 3,500 crore. The company plans to use the issue proceeds for its lending and financing activities, to repay interest and principal of its existing borrowings and other general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.50% p.a. for a period of 120 months (10 years), 9.30% p.a. for 96 months (8 years), 9.15% p.a. for 60 months (5 years) and 9.05% p.a. for 39 months (3.25 years). Interest will be paid only on an annual basis, as the company has not provided any other interest rate payment option.

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 – Qualified Institutional Bidders (QIBs) – 20% of the issue i.e. Rs. 700 crore

Category II – Non-Institutional Investors (NIIs) – 20% of the issue i.e. Rs. 700 crore

Category III – High Net Worth Individuals (HNIs) including HUFs – 30% of the issue is reserved i.e. Rs. 1,050 crore

Category IV – Resident Indian Individuals including HUFs – 30% of the issue is reserved i.e. Rs. 1,050 crore

Allotment on First Come First Served Basis – Subject to the allocation ratio, 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 – CARE and India Ratings have rated this issue as ‘AAA’ with a ‘Stable’ outlook. Also, these NCDs are ‘Secured’ in nature, except Series IV NCDs, the 120-months investment period option. Series IV NCDs are ‘Unsecured’ in nature.

Listing, Premature Withdrawal – These NCDs are proposed to get listed only on the Bombay Stock Exchange (BSE). The listing will take place within 6 working days after the issue gets closed. The investors will not have the option to prematurely redeem these NCDs back to the company, however the investors can always sell these NCDs on the stock exchange.

Demat A/c. Mandatory – Demat account is mandatory to invest in these NCDs as the company is not providing the option to apply for these NCDs in physical or certificate form.

No TDS – As it is mandatory to have a demat account to apply and get these NCDs allotted, no tax would get deducted at source on the interest payments. However, as the interest income is taxable, you are supposed to disclose it while filing your ITR. Moreover, in case you decide to close your demat account, you can get these NCDs rematerialised. So, if held in physical form and annual interest income is more than Rs. 5,000, TDS @ 10% will get deducted.

Minimum Investment Size – The company has fixed Rs. 10,000 as the minimum amount to invest in this issue. So, if you want to invest in this issue, you need to apply for a minimum of ten NCDs worth Rs. 1,000 each.

Should you invest in Mahindra & Mahindra Financial Services 9.50% NCDs?

The ongoing trade war between the US and China has resulted in a lot of volatility in the financial markets worldwide. Investors have also turned cautious with respect to the economic growth prospects of both these countries. Considering a high probability of these two major economies getting slower in 2019, interest rates are also expected to go down following some dovish measures expected to be taken by the central banks worldwide, including India.

So, it creates a base case in favour of some of the good fixed income investments yielding high returns at present. Do these NCDs fall in that category of attractive fixed income investments? I would say ‘Yes’, if you are a relatively conservative investor, and considering these NCDs are ‘AAA’ rated. As these NCDs are carrying higher interest rates as compared to the bank fixed deposits, they seem relatively attractive to invest in.

However, considering that ECL Finance and SREI Equipment Finance are offering 10%+ returns on their respective NCDs, I would say interest rates offered by Mahindra are on a lower side for my expectations. I would rather wait for the NHAI to launch its bonds issue sometime this month and announce its interest rates, which I expect should be closer to 9% for a 10-year option.

Application Form of Mahindra & Mahindra Financial Services 9.50% 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 Mahindra & Mahindra Financial Services NCDs, you can contact us at +91-9811797407

Reliance CPSE ETF FFO 3

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 shivskukreja@gmail.com

Reliance Nippon Life Asset Management Limited has launched its third issue of CPSE ETF. Called CPSE ETF Further Fund Offer (FFO) 3, the issue opened yesterday for the Anchor investors and will open today for the Non-Anchor investors, including the retail investors. The government targets to raise between Rs. 12,000 to Rs. 14,000 crore from this issue by selling its stake in the eleven constituents of the CPSE ETF.

Nifty CPSE Index – It is one of the indices of the National Stock Exchange (NSE) carrying 11 public sector undertakings (PSUs) in which the central government has more than 53% stake and these companies have more than Rs. 1,000 crore in market capitalisation. All these companies are profitable and are either Maharatnas, Navratnas or Mini Ratnas.

CPSE Index Composition as on October 31, 2018 & February 28, 2017

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Features of CPSE ETF Further Fund Offer (FFO) 3

High Dividend Yield & Reasonable Valuations – All the constituents of CPSE ETF are profitable and have paid around 5.25% dividend to their investors on an average. As per the data compiled by equity analysts, high dividend yield stocks carry lower volatility in returns as compared to growth stocks. So, one can expect a relatively stable performance from these stocks. Moreover, CPSE ETF has a P/E ratio of 9.37 times and P/B ratio of 1.42 times, which as compared to some of the other indices is quite attractive.

4.5% Discount for Investors – As against 3.5% discount the government had offered to the investors in its issue in March 2017, the discount has been increased to 4.5% to the investors of CPSE ETF this time around, probably because the issue size is 4 times bigger than the previous one. This 4.5% discount will be calculated on the “FFO 2 Reference Market Price” of the underlying shares of the Nifty CPSE Index and will be passed on to the CPSE ETF by the government of India.

Reference Market Price/NAV – CPSE ETF is currently trading at Rs. 24.24 on the stock exchanges. This is also its reference market price or NAV. As the investors get allotment and FFO units get listed on the stock exchanges, market price of each unit of this ETF will be linked to the Nifty CPSE Index and its returns would be quite close to the returns generated by the CPSE Index.

Investment Objective – The scheme intends to generate returns that closely correspond to the total returns generated by the Nifty CPSE Index, by investing in the securities which are constituents of the Nifty CPSE Index in the same proportion as in the index. However, the performance of the scheme may differ from that of the Nifty CPSE Index due to tracking error, scheme expenses and the initial discount of 4.5%.

Target Amount to be Raised – The government has fixed the base issue size to be Rs. 8,000 crore during this 4-day offer period. In case of oversubscription, the government plans to retain oversubscription to the extent of Rs. 4,000 crore to Rs. 6,000 crore. However, the government is yet to decide the final amount it would like to retain post the issue closure.

Minimum/Maximum Investment Size – Individual investors can invest in the scheme with a minimum investment amount of Rs. 5,000 and there is no upper limit on the investment amount. However, retail investors investing upto Rs. 2 lakhs will be given preference in allotment in case there is an oversubscription.

Allotment & Listing – As per the offer document, units of this ETF will get allotted and listed on the NSE and BSE within 5 business days from the closing date of the issue.

Demat Account Mandatory – Investors need to have a demat account to apply for this FFO. Applications without relevant demat account details are liable to get rejected.

Entry & Exit Load – This scheme is not subject to any entry load or any exit load.

Categories of Investors & Allocation Ratio

Anchor Investors – Maximum 30% of Rs. 8,000 crore i.e. Rs. 2,400 crore will be allocated to the anchor investors.

Retail Individual Investors – After the anchor book closure on November 27, retail individual investors are allowed to take up all of the remaining portion of this FFO i.e. Rs. 5,600 crore.

Qualified Institutional Buyers (QIBs) & Non-Institutional Investors (NIIs) – QIBs and NIIs will have nothing reserved for them in this FFO. They will be allotted units only if the subscription numbers of the retail investors and/or anchor investors fall short of their reserved quotas.

Application Form – CPSE ETF FFO 3

For any further info or to invest in the CPSE ETF  FFO 3, you can contact us on +91-9811797407

How to Revive Your Lapsed Life Insurance Policy?

Think of the things that went well for you this year. A rocking birthday celebration, amazing Diwali or Christmas filled with lights, New Year celebration full of fun or the last picnic with friends! The holidays you took with your family & friends were memorable too! So many things happened, and you cherished these memorable moments and events time and again. Amidst all the happy things, did you pay your term insurance premium in time?

If you wish to discontinue your term insurance policy for any reason, you can easily do so, but you are keeping your family’s future at stake while doing so. To maintain coverage, you must continue to pay the premium when due. If you do not do so, the policy will lapse, and your family won’t get the required coverage. Yes, there is no other additional cost, but it is a loss for your loved ones.

What is Term Insurance Lapse?

When you purchase a term insurance policy, you have to pay a certain amount of premium throughout the policy tenure to keep it active. In the insurance terminology, a lapsed policy is that insurance policy for which all the benefits are ceased. For some reasons, if you do not pay the due premium on time, your term plan will lapse. Such situation also arises when the policyholder fails to pay the premium even during the grace period.

How Can You Revive a Lapsed Term Life Insurance Policy?

If you have missed the premium payment, your policy will enter into a grace period zone. All term insurers give some grace period to their policyholders to enable them to pay their premiums. For term insurance policies, the grace period can be as follows:

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Note, each company has its guidelines, and you should refer to your term insurance document to verify the grace period and other specific rules.

Your term life insurance policy will not lapse if the insurer receives your payment within the grace period. One important point to note is that your lifetime risk is still covered during the grace period. It means, the insurance company is always accountable for paying the sum assured if a valid claim is filed during the grace period.

Let us understand it with the help of an example. Suppose a person fails to pay the premium for a term insurance policy and unfortunately meets with an accident before the grace period ends and loses his life. Now, as the accident has happened within the grace period, the insurance company will have to pay the benefit as and when the family files the claim. However, if the accident occurs after the grace period, the insurer will not pay any benefit to the family.

What Happens After Grace Period?

If you go past the grace period without paying your premium, your term plan will lapse. It means, your beneficiaries will not get any benefit in case of any unfortunate event.

If you decide, you can still apply to revive the policy. If the insurer agrees to reinstate the policy, you will be required to pay the premium due from the end of the grace period. Again, each company has its guidelines for reinstatement.

When a term policy gets lapsed, it can be revived and brought to its full force by payment of the overdue premium (with interest) and a declaration about the current state of health or fresh medical examination. However, a lapsed policy can only be revived if the insurer agrees to do so. Following are the requirements for the reinstatement application:

  • Reinstatement Application Form: All companies will ask you to complete a reinstatement application form which is similar to the original application form you filled out at the time of buying the policy.
  • Health Statement: It is required to see if anything has changed with your health since your first application, therefore, you will have to submit a health statement.
  • New Medical Exam: Most companies won’t require this if you apply for reinstatement within a specified period. But again, it depends on the insurer.

Some Important Points to Note:

All insurance companies advise their customers to pay premiums on time as there is a multitude of premium payment options available. Here are some of the ways through which a policyholder can pay a premium:

  • Cheque/DD
  • Credit/Debit Card
  • Internet Banking
  • Wallets, like Paytm
  • Wire Transfer
  • Phone

A policyholder can issue a standing instruction to his/her bank so that premium gets deducted on a particular date. Further, a policyholder can also visit the insurer’s branch to pay the premium or place a request for a renewal cheque pickup with the insurer.

  • Customers can give the mandate to their banks to allow the premium deduction on a specified date
  • Insurers have tied up with banks so that their policyholders can pay premiums through their bank accounts. In fact, some banks are allowing people to pay their insurance premiums via ATMs

Don’t Let Your Term Insurance Policy Lapse

It is advised to continue paying the premium until the end of the term so that you can offer financial protection in the form of a sum assured to your family members in case of unexpected events. It is the most necessary backup plan for your life and the one thing that comes to your family’s rescue when life events turn sour.

Further, under Section 80C of the Income Tax Act 1961, any amount paid towards your insurance policy provides you tax deduction upto Rs 1,50,000 in a financial year. However, no tax benefit is available on a lapsed insurance policy.

Remember, term insurance is not for you, but for your family. It is your prime responsibility to take care of your loved ones which you would be able to do only if you pay your premiums on time.

PCC: What to do when police verification is not clear?

I had written about obtaining PCC (Police Clearance Certificate) about a month ago, and as a follow up to that post today I’m writing about a situation where you get a message that tells you the following:

Police verification not clear, application under review at regional passport office

My wife and I had applied for PCC and while I got mine the same day, my wife just got it last week. Unfortunately, there’s no official document that tells you what to do if you get the message about the application being under review at the regional passport office, and you have to face some uncertainty because of this.

Initially, I wanted to post this as a forum entry on India Mike which is the first search result that appears when you search for this topic, but I’m unable to sign up and post there, so I wrote this post here instead.

When we first got this message, I called up the cop who had done the verification, and asked him why the verification is not clear to which he said it is clear but the message is incorrect. He said that when you live in an address for less than 12 months, you get the message above, and you should be able to go and collect the PCC letter the very next day.

At the Passport Seva Kendra the next day, they said that the letter hasn’t come yet, and you can check after a week. The letter had still not come in a week later, but the person confirmed that the status online on his system shows that the application is approved. So, we went back a third time, and still nothing.

At this point, we realized that something is amiss and decided to go to the Regional Passport Office instead of the Passport Seva Kendra, and there we found that the application is indeed stuck.

They were waiting for clearance on the remainder of the last 12 months, while no one was actively working on doing any such thing.

My wife was able to give them address proofs of the remainder of the time there, and they gave the clearance based on that, but it was a needless wait for us because of the lack of knowledge we had about what to do next.

So, if you get a message that says verification is not clear, regardless of what anyone says, go to the Regional Passport Office immediately, find out the cause and rectify it.

Book Review: Do Androids Dream of Electric Sheep?

I’ve recently finished reading Do Androids Dream of Electric Sheep by Philip K Dick, and it is quite a good science fiction novel. If you have ever seen Battlestar Gallactica then this book will remind you of that show a lot, although the movie Blade Runner is the one that’s actually based on this book. I’ve not seen Blade Runner and that is probably why my mind kept wandering back to Battlestar Gallactica.

The novel is about an earth that has almost been destroyed by a world war called World War Terminus, and there are only a very few people who now stay there, and animals are almost extinct.

Most people have been sent to Mars by the UN, and there are androids in this world that are so similar to humans that only a certain type of test can distinguish them.

This test is an empathy test; for some reason, unlike humans, androids aren’t able to empathize with others, and while they can fake their reaction to the test, there is a slight delay in eye movement that gives them away.

The story is about a bounty hunter named Rick Deckard who is tasked with killing androids on earth, and how he begins to empathize with the androids themselves. There is an interesting passage from the book where Rick is thinking about empathy in humans, animals and androids.

For one thing, the emphatic faculty probably required an unimpaired group instinct; a solitary organism, such as a spider, would have no use for it; in fact it would tend to abort a spider’s ability to survive. It would make him conscious of the desire to live on the part of his prey. Hence all predators, even highly developed mammals such as cats, would starve. Empathy, he once had decided, must be limited to herbivores or anyhow omnivores who could depart from a meat diet. Because, ultimately, the emphatic gift blurred the boundaries between hunter and victim, between the successful and the defeated.

Empathy is one of the central themes of the book, and I feel the central question of the novel is what it means to be human, and I really liked the part of the book where Rick is wondering whether androids dream, and concludes that they do dream. The androids that escaped from Mars escaped servitude, and in that sense they did dream of a better life.

This is interesting to think about because the book starts with Rick and his wife using a device that alters their mood in the sense that you can dial it for happiness or depression and the device will give you that, so you do feel that humans have acquired some machine like features.

The thing I liked most about the story was how you see-saw from liking the androids, to disliking them, and how the thought of absence of empathy can make such a lot of difference.

Do Androids Dream of Electric Sheep is a quick read, and I think you’d enjoy reading this on a plane or a lazy weekend.

Disclosure: The link to Flipkart is an affiliate link which means I’ll get a small commission if you buy the book from this link.

How to apply for a Police Clearance Certificate for a Passport or Visa?

I had to apply for a PCC (Police Clearance Certificate) recently, and I was surprised at the lack of information about this online even though this is a very important thing without which you can’t get a passport, and some countries don’t issue you a visa.

In this post, I’m going to recount my experience and cover everything that I dealt with and learned about this process.

When do you need a PCC?

You need a PCC when applying for a passport or when applying for visas of certain countries, and while the overall process for this is similar — it is not exactly the same. As a result of this — your experience might be completely different from the experience of someone else whose situation varied only slightly.

Who issues you a PCC?

Usually, PCC is given by the Regional Passport Office of the place that you have resided in the last six months. Location is important because although the PCC is a document issued by the Ministry of External Affairs, it does mention the place it is issued at and many countries require you to get it from the place you have resided in.

This can pose challenges for people who travel for work, and don’t have an address proof in the place they currently live in.

Here is a list of all the documents that they accept as a residence proof:

If you don’t have any of these documents then getting an address proof in the form of a bank statement is your best bet.

You can change your address to your existing one at the bank which is usually a very straightforward process, and then request them to issue a bank statement for the last twelve months. You need to go to the bank to get this because the bank stamps and signs this statement, and that’s what authenticates it. The statement will not work for you if you just download it online; it needs to have the stamp of the bank.

Also, keep in mind that it should be the last twelve months, I didn’t read anywhere that this ought to be the case but they insist on it once you are at the center. The other interesting aspect about this is that the more things you have the better it is. If you have a rental agreement which is not registered, just notarize it and take it with you anyway. If your passport has a local address, but it is different from the one you’re applying for, take a copy of that as well, take a copy of all your official documents, visas that you may have for other countries, marriage certificate etc. Although these documents aren’t mentioned in the list of documents that can be given as proof, I believe they can be used as supporting documents and the staff there likes to get as many of these documents as possible.

Also, this is not written anywhere as well, you need to take your actual passport with you so they can verify that and also provide the stamp on that. This is very important. Something else that isn’t mentioned is that you have to write a letter saying why you need a PCC. This can be a simple typed letter, or even a handwritten letter.

Where do you apply for a PCC?

Go to the Passport Seva website, and take an appointment at a date and center convenient to you. I was getting appointments for the next day at Hyderabad, but I’ve heard from people that sometimes you have to wait a week or more.

When you book the appointment, there is an option to enroll into the SMS service for Rs. 35, I enrolled in that and paid the 35 rupees in cash at the center, and I think this is an important thing to keep in mind, so you keep getting updates on your status.

On the day of the appointment, take a print out of the appointment letter along with your other letters, and reach the center at the time prescribed. I’ve been there thrice now, and I don’t see any benefit of reaching there before time. At the prescribed time, they ask people who have appointments for that time to form a queue and get inside to get a token and I think this is a very simple and efficient way of managing their queue.

There were three zones – A, B and C and three officers who each do part of the process, and there is an electronic board that tells you which counter to go to based on your token number, and there are people who also escort people around counters.

At the first counter, they check the documents, and create a file for you. They ask questions about what other documents you may possibly have, and put everything relevant in that file.

At the second counter, they scan and upload these documents, as well as verify the details you filled online. I had made a mistake in entering my place of birth which they caught and corrected. You are also finger printed, and photographed at this counter.

In the third counter, the officer actually brings up your information on their computer, and it tells them whether there are issues with your case, whether there are no issues, but a physical police verification is required, or if a physical police verification isn’t required altogether.

PCC and PCC Stamp

If a physical police verification is not required altogether then they ask you to go to a counter where the individual takes the PCC letter and puts the stamps on them. He puts three stamps on them:

  1. An endorsement with your application number, and a place to hand-write the country for which the PCC is being issued.
  2. Second is a stamp of the Ministry of External Affairs.
  3. Third is the stamp of the individual authorized to give this clearance.

Not only do they stamp the PCC letter, they stamp a page on your passport as well.

After these stamps are placed, the authorized individual also signs the letter as well as passport page, and you are all set.

It is my understanding that you don’t need physical police verification if you had a verification done from the same place earlier, and it doesn’t matter how long ago that verification took place as long as there are no police records about you after that verification.

Physical Police Verification

If you do need a physical police verification then you are given a receipt number, and a document that you are supposed to take home.

They send an SMS with the name and phone number of the police officer who will come to your house to verify your details. This SMS usually comes the same or the next day, and the police officer comes the subsequent day. It is best to call the officer, and get a tentative idea of when he plans to come visit so you can be available at home when he comes there.

Here again, keep the original proof that you submitted to the passport office ready with you. If you gave a stamped bank statement, get another bank statement out, take a copy of all your documents whether they are listed or not, as well as take a copy of your passport. He will ask for all of these. He will also need signatures of two neighbors so ensure that you have two neighbors who are willing to sign as witness, any two will do, even from the same house.

How long does it take to get PCC after the verification?

This is another important thing to keep in mind — if you’ve been living in your current city for less than a year then the verification takes two to three weeks, but if you have been living in the city for more than a year then the verification is done the next week and then two or three days after that you can go to the Passport Seva Kendra and get your passport stamped and PCC letter issued.

This information is not present anywhere and it isn’t even very clear to me from which form they obtain this information, but the document that the police officer receives from the passport office contains this so make sure when filling the forms you pay attention to this.

This is everything I learned about this process, and while I truly feel the process is a lot better than the one ten years ago, there is no place where it is explained properly so you can be prepared for it. I hope this post helps people who are going to apply for a PCC and if you have any questions, or anything to add to this, please do leave a comment.