India Infoline Finance Limited NCD Review

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

India Infoline Finance Limited (formerly known as India Infoline Investment Services Ltd.) will be launching its second issue of non-convertible debentures (NCDs) from September 5, 2012. To keep things absolutely clear right from the beginning, I’ll use IIFFL as the short name for this company as I want to distinguish this company from its well known listed parent company, India Infoline Limited (IIFL), and advise the readers not to confuse this issue as the issue launched by the parent company IIFL.

About India Infoline Finance Limited

India Infoline Finance Limited is a credit and finance arm of the IIFL group and provides loans against property, housing loans, gold loans, loans against securities/margin financing and medical equipment financing to the corporates, high networth individuals (HNIs) and retail clients. One of its subsidiaries, India Infoline Distribution Company Limited, is also engaged in the business of distribution of financial products like mutual funds, insurance products, company fixed deposits, NCDs, National Pension System (NPS), IPOs etc.

The company was originally incorporated on July 7, 2004 as a private limited company which leaves this company with a very short operating history and unproven business track record.

Financials of the company

During the year ended March 31, 2012, the loan book of the company stood at Rs. 6,746 crore as against Rs. 3,288 crore, an increase of approximately 105%. This jump has been achieved mainly on account of mortgage loans and gold loans which constitute approximately 45% and 41% of the total loan book respectively. The mortgage loan book is contributed by loan against property (LAP) at 89% and home loans at 11%. These figures suggest that the company is primarily focusing on gold loans as the new business segment and LAP in the housing loan segment.

IIFFL reported revenues of Rs. 953 crore in FY12 as against Rs. 520 crore in FY11, a jump of almost 83%. It also reported 76% increase in its net interest income (NII) to Rs. 412 crore in FY12 from Rs. 234 crore in FY11 mainly on account of a 105% increase in its lending book. Gross NPAs and Net NPAs of the company stood at 0.61% and 0.44% respectively as on March 31, 2012 as against 0.37% and 0.30% respectively as on March 31, 2011.

The company has made a significant branch expansion in the gold loan business last year which resulted in 79% increase in its operating costs to Rs. 297 crore in FY12 as compared to Rs. 166 crore in FY11. This resulted in a very tepid improvement of 14% in company’s net profit after taxes (PAT) which stood at Rs. 105 crore in FY12 as compared to Rs. 92 crore in FY11.

Here is the link to check the latest audited financial results of the company ending March 31, 2012.

About the NCD Issue

The size of this NCD issue is Rs. 500 crore including a green-shoe option of Rs. 250 crore. The company plans to use the proceeds for various financing activities including lending and investments, to repay existing loans, for capital expenditures and other working capital requirements.

The bonds offer a coupon rate of 12.75% per annum in three different options – payable monthly, payable annually and cumulative annually payable on maturity. Unlike Shriram Transport Finance NCD, this issue will not offer any additional incentive to the retail investors and the same rate of interest will be offered to all the categories of investors. This uniform rate of interest should make it attractive for the Category I – institutional investors and Category II – non-institutional investors. Under the cumulative interest option, the investors will get Rs. 2054.50 at the time of maturity. The maturity period in all the three options will remain 72 months only.

Option I II III
Rate of Interest 12.75% 12.75% 12.75%
Interest Payment Monthly Annual Cumulative
Effective Yield 13.52% 12.75% 12.75%
Tenure 72M 72M 72M
Redemption Amount Rs. 1000 Rs. 1000 Rs. 2054.50

The interest earned will be taxable as per the tax slab of the investor but the company will not deduct any TDS on it as is the case with all of the listed NCDs taken in a demat form. The company has decided to keep the minimum investment requirement of Rs. 5,000 (or 5 bonds of face value Rs. 1,000) which has made it easily investable from the small retail investors’ point of view.

Like most of the NCDs, these bonds are going to list on both the stock exchanges – NSE and BSE. Investors will have the option to apply these bonds in physical form also.
25% of the issue is reserved for the “Reserved Individual Portion” i.e. for the individual investors investing up to Rs. 5 lakhs and another 25% of the issue is reserved for the “Unreserved Individual Portion” i.e. for the individual investors investing above Rs. 5 lakhs. 40% of the issue is reserved for the institutional investors and the remaining 10% is for the non-institutional investors. NRIs and foreign nationals among others are not eligible to invest in this issue. The allotment will be made on a “first-come-first-served” basis.

IIFFL is a relatively new company with a limited operational track record. The issue has been rated ‘AA-/Stable’ by CRISIL and ‘AA- (Stable)’ by ICRA. One notable point I want to emphasise here is that unlike last year and unlike all NCD issues of the past, these NCDs qualify as “Unsecured Redeemable Subordinated Debt” in nature or in other words, in the event of default, no charge upon the assets of the company would be created in connection with these NCDs.

I’ve picked this text from the DRHP

“The NCDs will be in the nature of subordinated debt and hence the claims of the holders thereof will be subordinated to the claims of other secured and other unsecured creditors of our Company. Further, since no charge upon the assets of our Company would be created in connection with the NCDs, in the event of default in connection therewith, the holders of NCDs may not be able to recover their principal amount and/or the interest accrued therein in a timely manner, for the entire value of the NCDs held by them or at all. Accordingly, in such a case the holders of NCDs may lose all or a part of their investment therein. Further, the payment of interest and the repayment of the principal amount in connection with the NCDs would be subject to the requirements of RBI, which may also require our Company to obtain a prior approval from the RBI in certain circumstances.”

Though this feature should not make this issue an untouchable one to invest in but the investors should exercise extreme caution while investing in such issues as extreme adverse business conditions related to gold loan business or housing loan business might put IIFFL’s fortunes in trouble and it would become difficult for the investors to recover their hard earned money in the form of investment.

The issue closes on September 18, 2012.

Performance of the bonds issued last year

As I mentioned in the Shriram Transport Finance NCD post also, as many as ten such NCD issues had hit the markets last year issued by companies like Shriram Transport Finance, Shriram City Union Finance, Muthoot Finance, Manappuram Finance, Religare Finvest and India Infoline Investment Services Ltd. All the issues, except Shriram Transport Finance NCDs, listed at a discount and that too at a very deep discount of 5-8% in some cases. Many of them have still not been able to recover from those losses. They are yielding higher than 13% even now.

NCDs issued last year by IIFFL offering 11.90% coupon were secured in nature and are currently yielding 13.75% under the 60 months reserved individual option with the price quoting at Rs. 1001.10. It is the most traded option among all the options offered last year.

Next 20-30 days will witness three more such NCD issues seeking your investment offered by Shriram City Union Finance, Muthoot Finance and Religare Finvest. These companies have already filed their respective draft red herring prospectus (DRHP) with SEBI and almost all the regulatory formalities have been completed. Let us see how these NCDs perform once they get listed and if they are able to give any kind of much needed relief from the sinking stock prices or escalate our pain by listing at a discount again.

Why are we obsessed with saving taxes?

A common type of comment that I’ve seen over the years starts with describing a situation like planning for retirement, children’s eduction, wedding etc. and ends with asking about ways to save tax.

What is this obsession with saving taxes?

For a lot of people, specially if you are starting out and don’t have a lot of tax liability or savings, it may just be better to pay off your taxes instead of lock the money in an instrument that you can’t access for very long.

For a lot of other people who are earning so much that the 1 lakh 80C deduction doesn’t cover all of their tax liability, once you are done with it then what? Why fixate on other instruments that save tax? Why not broaden your search to include everything?

I don’t know when (if at all) Direct Tax Code will be implemented but I’m fairly certain that if you compared the first draft of DTC with whatever is going to get implemented it will be a lot different in terms of simplicity.

DTC was meant to bring in simplicity because all these weird clauses about perquisites and transportation allowance and tax saving schemes were just so hard to decipher and were creating perverse incentives so they removed all of those initially, and lowered the tax rate. But then they gradually increased the tax rates in each draft so now you may have a situation where the tax savings are gone but the rates are pretty much the same.

The reason I bring up DTC is because the environment has a lot to contribute to this mentality of not looking beyond saving taxes as the government comes up with something new that saves tax every year or two and that in turn creates an anticipation that something else is on the horizon that will aid in saving taxes, and then it permeates through other investing thought process as well.

I think a lot of people need to be reminded that saving tax is not an end in itself, maximizing returns is the end, and saving tax may assist in that, but all your energy shouldn’t be focused on it.


Mutual Fund Capital Gains Statement and Consolidated Account Statement Online

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

Not many mutual fund investors know that they don’t require services of their distributors or any other agent/advisor to check the status of their investments or realised/unrealised profit/loss they have made in mutual funds. Surprisingly, even many of the distributors don’t know that it is very easy to get various kinds of consolidated mutual fund statements online and that too in a very short span of time.

Actually writing about it struck me when I was surfing Suggest a Topic here and also while I was filing I-T returns for my clients during the last fortnight of July. I used this tool for a few clients of mine while calculating their “Capital Gains” and “Exempt Income”.

Are you surprised, curious and happy at the same time that such a service exists? Just read on how to go about getting these statements in your mailbox. I’m sure you would like to use this service as soon as you finish reading this article.

All what is required to get the necessary information related to your mutual fund investment is that your email id(s) must have been registered with the mutual fund company with whom you’ve made the investment and the same email id should still be active or you can make it active if required.

Here is the process to follow on CAMS Online:

  • Visit CAMS Online website –
  • Click on “Online Services for Investors”
  • Click on Check it Out! under Mailback Services
  • Here you have the option to choose the statement(s) you require for your purposes
  • For Capital Gain purposes – Click on “Consolidated Realised Gains Statement”. It is also called Investment Performance Statement. It calculates realised gains/losses on FIFO a basis and segregates them as long term and short term. The statement also contains a summary of the dividends paid out in respect of the account
  • To check your entire holdings across CAMS, Karvy and Franklin serviced mutual funds – Click on “Consolidated Account Statement – CAMS+Karvy+FTAMIL”
  • For other purposes, click on the other respective tabs available there
  • Once you select the statement you require, you need to provide your email id(s) which you or your distributor/advisor/agent must have filled when you did your investment(s). If you want to have all your investments across different email ids, you need to repeat this process
  • Select the Delivery Option – a download link or an encrypted attachment
  • Enter a password of your choice twice just to protect the statement from misuse

CAMS Online accepts only 2 such requests per day and 10 requests per month per registered email id as a precautionary measure in order to prevent spamming. This is an email-only service i.e. if your email address is not registered with the mutual fund company, then you’ll not be able to have your statement online through this process, not even with your PAN or Folio No. In that case, you’ll have to contact the mutual fund company and they’ll send it to your address registered with them or the address registered with CVL while undergoing KYC process.

Here is the process to follow on Karvy Mutual Fund Services (Karvy MFS):

  • Visit Karvy MFS website –
  • Click on “Investor Services”
  • Under Mailback Services, you have the options to check your portfolio by email id or PAN, get your Account Statement by email id or folio no. and Capital Gains Report by folio no.
  • Click on the tab as per your requirement and feed the necessary input to get your statement(s)
    • “Portfolio By Email ID” – This tool mails your latest Portfolio Valuation
    • “Portfolio By PAN” – This tool mails your latest Portfolio Valuation
    • “Account Statement By Email ID” – This tool mails your latest Account Statement
    • “Account Statement By Folio” – This tool mails your latest Account Statement
    • “Capital Gains By Folio” – This tool mails your Capital Gain Report
  • To check your entire holdings across CAMS, Karvy and Franklin serviced mutual funds – Click on “Consolidated Account Statement – CAMS+Karvy+FTAMIL” under Online Services

With Karvy, you need to have the Folio No. of your mutual fund investment to get the Capital Gain Report. If you don’t have the folio number. readily available with you, then you can first get the account statement in your mailbox and then get this report by taking folio number from the account statement.

I hope this article helped you in getting to know about the whole process of getting these statements in your mailboxes. If you have any query or feel that I’ve missed something here please leave a comment and I’ll definitely respond to it.

Part 3: Futures and Options – How do Options work?

There are two types of Options that you can trade in – Call Options and Put Options. You buy Call Options when you think a share is going to go up in value and you buy Put options when you think a share is going to go down in value. This means that the value of your Calls go up as the stock rises, while the value of your Puts go up when your share falls.

For a retail investor, there are three common reasons for owning an Option.

Why own an Option?

1. Speculation: Options are a way to take a short term speculative position given that they can’t be held for very long.

2. Going Short: You can’t borrow and short sell shares in India, so along with selling Futures, buying a Put Option or selling a Call Option (without owning it first) is a way to go short a share or index.

3. Leverage your position: Buying a Call Option is the same as buying a share in the sense that you profit from both the trades when the share price rises then why buy a Call Option at all? Options can leverage your positions which means that you can gain or lose a lot more with the same amount of money using Options than you can by taking cash positions. This is akin to trading on the margin, and has the same effect.

Hedging is a popular reason given for owning Options but I don’t think it is all that applicable when talking about small investors, especially with a product that expires in a short time. But theoretically, hedging is also one reason to own Options.

Popular Definition and Key Terms of a Call Option

Let’s get to the popular definition of Call Options now which I will use to give an example and explain them in detail.

Call Option: A Call is a right, not an obligation to buy an underlying asset at a predetermined date at a predetermined price by paying a certain amount upfront.

Now, look at this picture below and let’s take that example to understand Call Options a little better.

Nifty Call Options
Nifty Call Options

I took this screenshot from the Options chain section of the NSE website, and this shows the Call Option details for NIFTY which expires on 25th October 2012. Every Option has an expiry date and the Option becomes worthless on that expiry date. The expiry date is the predetermined date in the definition.

This is a Call option to buy components of the Nifty, so the Nifty is the underlying asset from the definition.

The Strike Price which is the right most column in this image shows at what price you will be buying Nifty. If you look at the first row that’s a price of Rs. 3,800 and then it increases by Rs. 100 at every row, and this is the predetermined price from the earlier definition.

Now, if you look at the sixth column from the left of this picture – that’s “LTP” which stands for “Last Traded Price” and this shows you at what cost per unit the last transaction happened for this contract. A Nifty Call Option is made of 50 units, so you pay 50 times whatever is listed in the LTP column.

The Nifty closed at 5,392 this week, and let’s look at the last highlighted row in this picture which is for the strike price of 5,300 and see how that fits our definition.

This Call is a right, not an obligation to buy Nifty at a predetermined date of October 25th 2012 at a predetermined price of Rs. 5,300 by paying Rs. 232 per unit upfront.

So if you bought this contract today, you will have to pay Rs. 232 and in return you will have the right to buy a Nifty contract at Rs. 5,300 on October 25th 2012. If Nifty is at say 6,000 on that date, then your Call option will be worth a lot more than Rs. 232 because you can buy it at 5,300 and then sell it at 6,000. That’s also why in the image above you see that the price of the Options keep increasing as the Strike Price keeps going down.

If the Nifty closes below 5,300, the Option will expire worthless because why would you buy Nifty at 5,300 when you can buy it for lower in the market. The part of the definition where it says that the Option is a “right but not an obligation” comes into play here because if Nifty closes below what you paid for it then you don’t have to do anything at all as it is your right to buy, but you aren’t obligated to buy.

This means that when you buy a Call Option your loss is defined to what you paid for it. You can’t lose more than that on the transaction.

The seller of the Call however who is known as the person who writes the option doesn’t have a cap on how much he loses and can lose an unlimited amount (theoretically) in the transaction. This is because the person who writes the option has an obligation to sell you the underlying asset at the price decided in the contract.

As far as Options trading in real life is concerned you don’t actually buy and sell the underlying asset but pocket the difference between the price you paid for the Option and the price at which you sold the Option.

One last thing about this is that Call Options that are lower in value than the underlying asset or are profitable are called “In the Money” and in the image above these are highlighted in yellow. Other Options are called “Out of the Money”

Now, let’s move on to the Put option.

Popular Definition and Key Terms of a Put Option

Let’s look at how a Put option is defined now.

Put Option: A Put is a right, not an obligation to sell an underlying asset at a predetermined date at a predetermined price by paying a certain price upfront.

Now, look at this picture below and let’s take that example to understand Put Options a little better.


Nifty Put Options
Nifty Put Options

This screenshot is also from the Options chain section of the NSE website, and this shows the Put Option details for NIFTY which expires on 25th October 2012.

Since this is similar to Call Option but in a Put you have the right to sell instead of the right to buy, let’s look at the first highlighted row and see if we can define it the way we defined the Call Option.

This Put is a right, not an obligation to sell Nifty at a predetermined date of October 25th 2012 at a predetermined price of Rs. 5,300 by paying Rs. 81.10 per unit upfront.

So if you bought this contract today, you will have to pay Rs. 81.10 and in return you will have the right to sell a Nifty contract at Rs. 5,300 on October 25th 2012.

If Nifty is at say 4,800 on that date, then your Put option will be worth a lot more than Rs. 81.10 because you can buy it at 4,800 from the market and sell it at 5,300.

So, in the case of a Put option, you benefit from the contract when the price of the underlying goes down because you have the right to sell it at a much higher price.

Like Calls, you benefit from Puts by pocketing the difference between the price you paid and the price the Put is currently trading at – you don’t have to actually own the underlying asset and then sell it to profit.

And like Calls, Puts also limit your maximum loss to what you paid when you bought the contract. You can’t lose more money than that and this makes it a good way to go bearish on something because the other alternative is by selling a Futures contract and you can stand to lose a lot of money very quickly there if the market turns against you.


Options are a fascinating subject and I’ve spent many hours researching and looking at different Options strategies and trades because of this. For someone who is coming across them for the first time, they can seem a bit intimidating but once you get the hang of it they are fairly easy to understand and build positions with.

If you have any questions about this post, or any other observations, please leave a comment and I’ll answer them.

Edit: Lot size corrected. 

Don’t anonymously criticize the power couple who is reinventing the toilet

Let’s start this week with a post at AVC that was written almost a year ago about Sustainability. This is a great post and there’s nothing I can add to it except perhaps saying that I’ve felt that many times you do things only because that’s the way it is done or was taught in school, even when it doesn’t make any sense to you.

Recently, I read an article where they were talking about an analyst who adjusted Facebook’s earnings estimate for 2022! Who really believes that you can even remotely predict how FB’s revenues will look like 10 years from now and yet that’s how it’s taught in school so that’s how people continue to do it and model for price.

HBR has a very interesting article on how distribution plays a huge role in the success of any product in India.

Seth Godin writes about how you won’t benefit from anonymous criticism. I think that even well meaning people leave rude and nasty comments when they can hide behind anonymity, and if you are someone who exposes yourself to this kind of criticism because of what you do – you have to learn to let it go and not engage with such people.

I’ve started doing that more and more while responding to comments over the years, and felt that I’m vastly better off because of it. It’s much better for my peace of mind and doesn’t hurt what I’m doing in anyway if I don’t engage with such people.

Another good article from HBR on reinventing the toilet.

Ranjan writes about a topic that I’ve never contemplated on, and I found his post on insuring yourself before you go out for education abroad a good introduction to the topic.

I was fascinated to read about the latest power couple in town.

Finally, I loved this message, and it’s going on my wall shortly.

Enjoy your weekend!

Best Company Fixed Deposits – Returns-Wise & Safety-Wise – Be Wise

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

Continuous volatility in the stock markets coupled with bad macro-economic data, high inflation numbers and unclear government policies have forced many investors to shift their investments from equity to fixed income instruments like tax-free bonds, non-convertible debentures (NCDs), bank fixed deposits and company fixed deposits. Whereas bank fixed deposits barely manage to beat inflation, some investors always remain on the lookout for higher returns from company fixed deposits.
A few days ago, one of the readers, Vimal Raj, put up a query regarding fixed deposit offering from Hawkins. Here is the quote Vimal Raj left under Suggest a Topic:

“In today’s ET, I read that Hawkins is open for Fixed deposit. Is it worth to invest in? And why they are offering fixed deposit rather than bonds?”

Here is my effort to make the readers know some of the details about company fixed deposits and what you should be looking for before making an investment.

Not all companies can accept public deposits. Government companies, manufacturing companies, housing finance companies (HFCs), financial institutions and non-banking financial companies (NBFCs) registered under the Companies Act 1956, have been authorized to offer fixed deposits. Whereas bank fixed deposits are covered by a guarantee from the Deposit Insurance and Credit Guarantee Corporation of India, which assures repayment of Rs. 1 lakh in case of any default by a bank, but there is no such guarantee for company deposits.

However, if any company including an NBFC or HFC defaults in repayment of deposit, the investor can approach Company Law Board (CLB) or consumer forum or file a civil suit in a court of law to recover the deposits.

Who regulates company fixed deposits?

Category Regulator Website
Government Companies MCA
Manufacturing Companies MCA
Housing Finance Companies NHB
Financial Institutions MoF

Factors that investors should be looking for before investing in company fixed deposits:

Credit Rating: It goes without saying that safety of the principal amount is the most important factor that any investor would consider before seeking a higher return. It will take you 10 years to recover your principal amount if you risk your investment with a company likely to default but offering 12.5% return vis-a-vis a financially sound company offering 10% return.

Reserve Bank of India (RBI) and National Housing Bank (NHB) have made it mandatory for NBFCs and HFCs such as HDFC, Shriram Transport Finance etc. to have at least ‘A’ rating to be eligible to accept public deposits. Whereas HDFC deposits have been rated ‘FAAA’ by CRISIL and ‘MAAA’ by ICRA, ICRA has granted a rating of ‘MAA’ to Canfin Homes for securing these deposits. As per CRISIL, ‘AAA’ rating implies that the company has the highest credit quality and the lowest credit risk. All the companies which get their fixed deposits rated by the rating agencies are required to clearly display the given rating on their application forms.

Credit risk is the biggest risk for fixed deposit investors. Investors should not get too greedy for high interest rates while looking to invest in fixed income instruments rather they should focus on 4 C’s of credit analysis – capacity, collateral, covenants and character of the issuer.

Capacity is the ability of a borrower to repay its obligations. Investors should primarily focus on the financial condition and past track record of the company before committing their hard earned money into these deposits.

Collateral represents assets that the company pledges as an alternate repayment source against the deposits. I have no idea which companies in India offer collateral while accepting public deposits for the safety of investors’ money. If any reader has an idea about any such company then please let me know.

Covenants are the terms and conditions of the lending agreements. Covenants are essentially restrictions on the company to ensure its financial position remains under check and help minimise the risk to the depositors.

Character refers to the credit history of the borrower. It is very important to check how efficient the management of the company is and how prompt the company is towards the payment of periodic interest, maturity proceeds and issuing investment certificates. You must ask your financial advisor or the servicing agent all these things before deciding the company to invest. My personal experience with HDFC was quite satisfactory whereas it was not very good with Jaiprakash Associates and Unitech.

Financials: Securing a rating is not mandatory for non-finance companies. So, in their case, the investors need to check their balance sheets, profit & loss accounts and cash-flow statements in order to understand how the company would generate the money to make the interest payments and principal repayments.

Rate of Return: Presently, the maximum rate of interest any company can offer is 12.5%. Observing the returns these companies are offering at present suggests that in most of the cases the safer the deposits are, the lower the returns will be but it is not always the case. It is natural to consider the term deposits offered by the government organizations to be the safest, probably that is why their returns are also lower. The investors need to make a balance between the risks and the returns.

Here is a list of the major company fixed deposits that are open to investors right now.

Companies Ratings 12M 24M 36M 60M Senior Citizens
Government Organisations
EXIM Bank CRISIL FAAA/ ICRA MAAA 9.25% 9.25% 9.25% 9% +0.50%
HUDCO FITCH TAA+/CARE AA+ 9.40% 9.40% 9.40% 9% +0.25%
Kerala Transport Development Finance Kerala Govt Undertaking 10.25% 10.25% 10.25% 10% +0.25%
SIDBI CARE AAA 9.25% 9.10% 9.10% 9.10% +0.50%
Housing Finance Companies (HFCs)
NHB CRISIL FAAA/ FITCH TAAA 9.50% 9.50% 9.25% 9.25% +0.60%
Canfin Homes Ltd. ICRA MAA 9.75% 9.75% 9.50% 8.50% +0.50%
DHFL CARE  AA+/ BWR FAAA 11% 10.50% 10.50% 10.50% +0.50%
HDFC CRISIL FAAA/ ICRA MAAA 9.25% 9.40% 9.50% 9.25% +0.25%
PNB Housing Finance CRISIL FAA+ 9.50% 9.50% 9.75% 9.75% +0.50%
LIC Housing Finance CRISIL FAAA 9% 9.25% 9.50% 9.50% +0.25%
Gruh Finance CRISIL FAA+/ ICRA MAA+ 9.25% 9.75% 9.50% 9.50% +0.25%
Sundaram BNPP Home Finance ICRA MAA+ 9.25% 9.50% 9.50% 9.50% +0.50%
Non-Banking Financial Institutions (NBFCs)
Sundaram Finance ICRA MAAA 9.75% 9.50% 9.50% N.A. +0.50%
Mahindra Finance Samruddhi CRISIL FAAA 9.25% 10% 10.25% 9.75% +0.25%
Shriram Transport Unnati CRISIL FAA+/ ICRA MAA+ 9.25% 9.75% 10.75% 10.75% +0.25%
Manufacturing Companies 6M 12M 24M 36M Senior Citizens
Ansal API( 11.50% 12% 12.25% 12.50% N.A.
Ansal Housing( 10% 11% 11% 11.50% N.A
Apollo Hospitals( N.A. 9% 9.25% 9.50% N.A.
Bombay Dyeing( N.A. N.A. N.A. 10.50% +0.50%
CEAT Ltd.( N.A. 9.50% 10% 10.50% +0.25%
Elder Pharma( N.A. 10% 11% 12% +0.50%
Force Motors( N.A. 9% 10% 11% N.A.
Gati Ltd.( N.A. 10% 10.50% 11% +0.25%
Ind-Swift Labs( N.A. 11% 11.50% 12% +0.50%
Jaiprakash Associates( 11.50% 11.75% 12.25% 12.50% N.A.
Jaypee Infratech( 11.50% 11.75% 12.25% 12.50% N.A.
J K Tyre & Industries( N.A. 9% 9.25% 9.50% +0.50%
Unitech  11.50% 11.50% 12% 12.50% N.A.
Valecha Engineering( N.A. 10% 10.50% 11% +0.50%
* Special Tenure FD Rates – HUDCO – 8.50% (84M), DHFL – 10.75% (400 Days), HDFC – 9.75% (15M & 33M), PNB Housing Finance – 9.50% (84M), LIC Housing Finance – 9% (18M), Gruh Finance – 9.50% (84M), Sundaram Finance – 9.75% (18M), Mahindra Finance Samruddhi – 9.75% (18M)

Liquidity: As per deposit regulations, companies in India cannot accept demand deposits. A deposit which is immediately withdrawable on the depositor’s demand is called a demand deposit. There is a lock-in period of 3 months during which the investors cannot ask for a withdrawal of their investment except in the event of the death of the depositor. If you go for a withdrawal between 3 months and 6 months of making the investment, no interest is paid. Thereafter there is a penalty of 1% if you go for a premature withdrawal.

As per the RBI and NHB regulations, minimum period of deposit cannot be shorter than 12 months and maximum period of deposit cannot be greater than 60 months in case of NBFCs and 84 months in case of HFCs. For manufacturing companies, the minimum period cannot be shorter than 6 months and the maximum period cannot be greater than 36 months.

Tax Implications: The interest income earned on a company deposit is taxable at the same tax slab as the investor is in and is added to the income under the head “Income from Other Sources”. Tax will be deducted at source @ 10.30% whenever the interest income exceeds Rs. 5000 in a financial year, in accordance with section 194 A of the Income Tax Act, 1961.

Floating Rate Option: Suppose you take a floating rate home loan at 10.25% and after 6 months, the housing finance company announces an increase in its lending rate by 0.75%, the applicable rate on your home loan automatically becomes 11%. Have you ever heard of any bank or a company offering a similar benefit on your fixed deposit? I did not till the time I visited the website of EXIM Bank of India. This is a unique feature of the term deposit scheme offered by this bank. Suppose you do a fixed deposit of 36 months with the EXIM Bank at 9.25% and after 12 months the bank decides to increase the rate to 10% for the same maturity, the applicable rate on your deposit will automatically become 10% for the residual period of investment.

Moreover, if the existing rate on a deposit, say 9.25% (contracted based on original maturity at the time of placing deposit), is higher than the revised rate applicable for the residual tenor, say 8.50%, then the original higher rate of 9.25% would continue to apply.

Coming back to Vimal Raj’s query, I could not find any details of the fixed deposit scheme offered by Hawkins Cookers Ltd. anywhere, not even on the company’s website and annual report. So, I’ll not be able to comment on that.

RBI may not be in a mood to cut the interest rates and concede against the spiraling inflation, but if we observe the recent actions taken by some of the big banks including SBI etc., returns on some of the fixed income instruments should soon begin their journey downwards. So, if you find these rates attractive enough to park your money from risk-return perspective then you should lock into these deposits soon before they start falling.

To be posted soon: “Company Fixed Deposits – Should You Invest?”

How did CAG reach the figure of 1.86 lakh crores?

CAG’s report on coal allocation was the big news last week, and the figure of Rs. 1.86 lakhs got a lot of attention as you would have expected it to.

It has now become a regular feature of CAG reports to have a massive number which represents the loss to exchequer and I was curious to see how they arrived at the number for this report.

The full report is available at this link, and the calculation that leads to the notional loss is present in chapter 4 of the report which can be downloaded separately from that page.

I think the report does a good job in explaining how it reaches the number, and even someone like me who doesn’t know anything about coal allocation can get a fair idea of what they have done to arrive at the number.

First some history, before 1993 there was no specific criteria for allocation of coal blocks, and coal blocks were allocated based on the recommendation of the State Governments.

After 1993, an inter – ministerial screening committee was formed that gave inputs to the Ministry of Coal on coal block allocation. The CAG report states that there are certain parameters that the screening committee should follow while evaluating bids, and then give a decision. The CAG gives the example of Fatehpur coal block and Rampia coal block and states that while the screening committee recommended the coal block to a particular allottee, there is nothing in the minutes that has reference to a comparative evaluation to show how this decision has been reached.

In 2004, the government came up with the concept of competitive bidding that was supposed to replace the screening committee and was a method that could be “not only objective but demonstrably transparent”.

The CAG report then has a detailed timeline which shows what transpired between June 28, 2004 and February 2, 2012 and how adopting the competitive bidding process kept getting delayed in these 7 years.

According to CAG, the competitive bidding process could have been adopted in 2004, and had they adopted it in 2004 in place of the screening committee process, the government would have got higher bids for coal blocks and that’s how the loss in revenue is calculated.

So, that’s the first part of the loss in revenue calculation. There were 142 coal blocks that were auctioned since June 2004, and CAG has used these to calculate the loss in notional revenue.

Here is a table from the report that shows the break – up of these coal blocks.

Coal Blocks Auctioned Since 2004
Coal Blocks Auctioned Since 2004

They have broken down the number of coal blocks into Opencast / Mixed Mines and Under Ground mines, and further they have broken it down to whether it was allocated to a private party or a government party.

For calculation of loss to the government, they have considered only the coal blocks allotted to the private parties so out of 142 coal blocks out of the 67 coal blocks get excluded there.

Further, the report says that underground mines are mostly loss making, so they have excluded underground mines from this calculation. That leaves 57 mines and within those 57 mines, only the Opencast part of the mines is considered in the CAG report.

That leaves us with 57 coal blocks – and the next thing that the CAG has done is to see how much Geological Reserve each coal block contains based on the Mine Plan or other official sources.

It seems that the Mine Plan also has the Extractable Resource and wherever available, CAG has used that number, and when it was not available they have assumed that extractable reserves are 73% of geological reserve which they say is a conservative norm.

Based on this, they calculated the extractable reserves in each of these coal blocks.

Next question is cost, and they have used Coal India Limited and its subsidiaries’ average per ton cost of production for their open cast mines for all grades of coal for 2010 – 11 as the cost of production.

Next, they have added financing charge of Rs. 150 per ton on the cost, and this is from a number by the MOC.

So, you have the total reserves, and the cost. The last piece of the calculation is the sale price, and again, they took the average basis of all grades of coal produced in open cast mines of Coal India Limited for the year 2010 – 11 per their final cost sheet.

They have tabulated these results in the report as follows.

CAG Report Tabulating Coal Block Losses
CAG Report Tabulating Coal Block Losses

I learned more about this issue by reading these few pages of the CAG report along with the executive summary than I did reading most news reports and it gave me a good understanding of how the CAG has reported losses and you may or may not agree with their methodology, but you have to give them full marks for transparency.

How much can you lose with this decision?

Since I linked to Rodinhood’s post on the weekend, I wanted to write my own post with a very good lesson that a Marwari friend taught me while we were in college.

He told me that his father used to complain that there is a lot of stress, and tension because of a land dispute with a neighbor and that it was taking a toll on his health.

My friend asked his dad – what’s the value of this land to which his dad replied it’s worth Rs. 50,000, and my friend said then that should be the limit to your worries.

You think about this land day and night, and talk to me about it every time I call as if this is the most important thing in your life, but it’s not, it’s a problem that can cause you a damage of Rs. 50,000 at the most, and you can’t ruin your health for a problem that’s not even worth a lakh.

I don’t know whether his father took the advice to heart, but to me, that was a very valuable lesson, and one that has helped me deal with small little things that bother some of my friends disproportionately.

One of my favorite examples of this is trying out a new restaurant. Some of my friends will research the menu, read reviews, call up people and still be undecided before trying out a new place to eat!

This is ridiculous because the most you stand to risk is a bad lunch that you will probably forget in a few hours, and a little money which you have decided to spend anyway. Is it wise to spend hours thinking about this?

I see many of these same people making big money mistakes like keeping a lot of cash in savings account, just owning one or two shares in the name of investments, or having no emergency funds at all. It seems to me that some people spend as much time thinking about a 100 rupee decision that they do on thinking about a 5000 rupee decision.

I think taking the time to think about how much you can lose because of a decision greatly helps in putting things into perspective and reduce anxiety as well as the tendency to become penny wise and pound foolish.

CIBIL Credit Score – Negative Factors and Ways to Improve your Score

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

Many of you must have checked your CIBIL credit score sometime in the past and for some of you it must have got a surprise either positively or negatively. Some of you might have been caught unaware of a credit card account running in your name with annual charges being levied year after year. Some of you might have undergone for a loan settlement with the lender which could have impacted your score quite negatively.

But to your surprise, some of you could have found your credit score to be quite high, despite defaulting a couple of times. This is due to some unique but scientific methodologies being adopted by CIBIL to calculate your score.

Factors that negatively affect Credit Score:

1. Late payments or defaults in the past: Your payment history has a significant impact on your credit score. So, if you have missed payments on any of the existing loans over the past couple of years, then the credit score would get negatively affected as it indicates you are facing difficulties in servicing the existing obligations.

2. High utilization of credit limits: You must remain quite careful while using the credit limits available on your credit cards. A higher and higher utilization pattern against the available credit limits is an indication of an increased repayment burden and may negatively affect your credit score. Lower outstanding balances getting reflected in your credit card statements improve this score.

3. Higher percentage of Credit Cards or Personal Loans (i.e. Unsecured Loans): A higher number of unsecured loans coupled with a high utilization would also affect the score in a negative way because of the fact that these unsecured loans carry a very high rate of interest as compared to secured loans like home loans or car loans and result in larger payments and higher defaults.

4. Behaving Credit Hungry: If you are behaving “Credit Hungry” (i.e. in an urgent need of money) and have applied for new credit facilities with a large number of lenders, then it is going to affect your score negatively and make the lenders more cautious while evaluating your application for a fresh loan.

Can your CIBIL Credit Score be improved? If yes, how?

As I mentioned in my earlier post, it is like a CAT examination. Like you can always improve your CAT score by appearing for the exam again, your CIBIL credit score can also be improved, but not overnight. If you have taken a 20-year home loan which is just a couple of years old and you’ve defaulted on your EMIs 3-4 times since the beginning, then it will probably take you at least 2-3 years or probably more than that with regular EMI payments to improve your score. You will have to maintain the greatest of financial discipline in order to secure a better credit treatment in the future. Here is how it can be done.

Measures to improve your Credit Score:

1. Pay your loan EMIs regularly in a timely manner to maintain a clean credit history: Try to keep a diligent track of your EMIs in case you are running more than one loan.

2. It is highly advisable to make full payments on your credit card instead of just the minimum payment. In case it becomes very difficult to pay the bill in full, at least make the minimum payment without fail.

It takes you a longer time to build your credit history with a loan as compared to a credit card as these loans are usually for a longer tenure whereas a regular payment of your credit card bills can help you start building a good credit score as you keep on making the regular payments. A credit card debt is categorized as a revolving credit and it helps in building a good credit score faster if the payments are regular.

3. Do not apply for an extra credit card unnecessarily when your bank’s relationship manager approaches you to get one and actually you do not require it. Applying for an extra card or a loan without any requirement would mean more credit exposure and reaching near the card’s credit limit would result in a lower credit score.

4. If you have been issued a credit card but you have not used it very frequently or the utilize credit limit has been very low, then this would affect your credit score in a positive way as unused credit cards actually imply that you are financially secure.

5. You should use special incomes like bonus or a monetary gift or some other source of savings for the prepayment of some of your existing debt. Early repayment of debt also helps in improving your score.

6. Avoid becoming a joint account holder or a guarantor in a loan or a credit card facility as any default would lower the quality of your credit score.

7. Avoid going in for a settlement or “write-off” of your loan accounts as it implies that you have not been able to pay the past dues. Keeping the credit history clean improves your credit score.

8. You should keep reviewing your credit history on a regular basis to ensure that the credit report accurately reflects your current financial status.

At the end of the day, common sense should dictate what you do with your financial life and good financial habits along with awareness of credit scores will help you build a good credit history and a good credit score.

Bolt goes to Marwari Business School after making money mistakes

The best thing I read this week was The Seven Subjects I learnt at Marwari Business School (MBS) by Alok ‘Rodinhood’ Kejriwal. This is a great post from the entrepreneur who shares things that he has learned during his career, and I highly recommend it to anyone who has ever thought of starting their own business.

Shabbir Bhimani writes a very detailed and thorough post about how you could go about deciding whether you should rent or buy a house.

Bemoneyaware writes about some money mistakes young people make, and how to quantify those. The big lesson here is to start saving early.

Forbes tells us how Usain Bolt earns $20 million a year, a figure that will likely go much higher after yesterday’s result.

It seems that Sun Yang’s two golds cost the Chinese $1.57 million in his training for the last two years, and there is a small debate in China if this is the best way to spend their resources. I’m fairly certain India won’t mind spending this much money if it guaranteed just one gold.

Amazed to learn that Google’s self driving car has driven 300,000 miles without an accident! I think the day is not far when you could 3D print your car that runs on water, and drives itself.

Speaking of 3D printing, a Tokyo clinic allows you to get a resin cast 3D model of your live fetus. I’m sure some people find it cool, but I find it a bit creepy.

Finally, my apologies for not answering any comments this week, I’m here, just a bit low on energy.

Enjoy your weekend!