Syngene International Limited IPO Review – Subscribe or Not?

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

Pharma sector stocks have been rising on the bourses for the last one year or so. Some stocks have given more than 50% returns in the last 9-12 months. Boosted by a recovery in the US and the European markets, these companies have reported good sales and profit growth. Investors have also given a big thumbs up to these companies resulting in huge gains.

But, the last 10-15 days have been troublesome for these stocks. A few days back, Sun Pharma issued a profit warning resulting in a selloff in its own stocks as well as other pharma stocks as well, followed by a disappointing quarterly performance by Lupin Limited. These two events have shaken the investors’ confidence in the sector.

Just when the sentiment has turned negative for the sector and for the markets as well, Syngene International, a 83.6% subsidiary of Biocon Limited, has come out with its initial public offer (IPO). The issue consists of an offer for sale by the company’s promoter Biocon Limited. Biocon plans to sell its 11% stake in this IPO selling 2.2 crore shares in the price band of Rs. 240-250, thus raising Rs. 550 crore from the primary markets. The issue got opened yesterday and will get closed tomorrow.

About Syngene Limited

Incorporated in 1993 and headquartered in Bengaluru, India, Syngene is a 83.6% subsidiary of Biocon Limited. The company is one of the leading contract research organisations (CRO), offering a suite of integrated, end-to-end discovery and development services for novel molecular entities (NMEs) across industrial sectors, including pharmaceutical, biotechnology, agrochemicals, consumer health, animal health, cosmetic and nutrition companies.

Syngene’s service offerings in discovery and development cover multiple domains across small molecules, large molecules, antibody-drug conjugates (ADC) and oligonucleotides. Its integrated discovery and development platforms help organisations conduct discovery, development and pilot manufacturing under one roof with a distinctive economic advantage. The company intends to forward integrate into commercial-scale manufacturing of NMEs.

The company has several long-term relationships and multi-year contracts with its clients, including three long-duration multi-disciplinary partnerships, each with a dedicated research centre, with three of the world’s leading global healthcare organisations Bristol-Myers Squibb, Abbott Laboratories (Singapore) Pte. Ltd. and Baxter International, Inc.

What’s on Offer?

Syngene has fixed its price band to be between Rs. 240-250 per share. There is no discount for the retail investors. The issue is a complete offer for sale of shares by its promoter, Biocon Limited. Syngene will not receive any proceeds in this offer.

The offer comprises of a sale of approximately 2.2 crore shares to the investors. 35% of the issue size is reserved for the retail individual investors. At Rs. 250 per share, Biocon is expected to raise approximately Rs. 550 crore.

Anchor Investors – Syngene issued approximately 60 lakh shares to the Anchor Investors, namely GIC, Goldman Sachs, Morgan Stanley, Deutsche Bank etc., at Rs. 250 per share, thereby raising Rs. 150 crore.

Bid Lot Size – Investors need to bid for a minimum of 60 shares and in multiples of 60 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 15,000 at the upper end of the price band and Rs. 14,400 at the lower end of the price band.

Objective of the Issue – There is no fresh issue of equity shares by Syngene in this IPO. The funds raised by the sale of shares in this offer will not go to the company. The primary objectives of the offer are to achieve the benefits of listing and carry out the share sale by the promoter Biocon. Funds mobilized will be utilized for the capex planned by Biocon for developing its biosimilars and enhancing the manufacturing capacities.

Listing – The shares of the company will get listed on both the exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Financials of the CompanyPicture 3

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

For the financial year ended March 31, 2015, Syngene reported total revenue of Rs.  871.6 crore as against Rs. 707.7 crore for the year ended March 31, 2014. The company reported profit after tax (PAT) of Rs. 175 crore for the financial year ended March 31, 2015 as against Rs. 134.8 crore for the financial year ended March 31, 2014.

The company reported EBITDA margin of 33.59% for the period ended December 31, 2015, 31.45% for the year ended March 31, 2014 and 31.16% for the year ended March 31, 2013.

Should You Subscribe or Not?

Syngene has been performing consistently well in an uncertain business environment and contributing significantly to its parent Biocon. The company is seeking a valuation of 28.6 times its FY15 earnings, which seems to me on a slightly higher side. I think for a consistently growing company with strong fundamentals, a strong promoter group, efficient management and a talented team of qualified scientists, these valuations are reasonably justified. I expect its stock price to list at a premium of 20-30% and to double from its expected allotment price of Rs. 250 in the next 2-3 years time.

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.

Cut-Off Price Option – IPO/FPO vs. Offer for Sale (OFS)

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

Power Finance Corporation (PFC) Offer for Sale (OFS) will take place today on the stock exchanges. The government has set its floor price as Rs. 254 per share and would likely raise around Rs. 1,700 crore in this OFS. Retail investors, investing Rs. 2 lakh or less in this OFS, will get 5% discount on the allotment price. Yesterday, I had posted the details of today’s OFS. In order to understand the OFS process, you can check this link – Offer for Sale Process.

OFS is like an auction in which the bidders are usually required to revise their bid prices in order to emerge as the successful bidders at the highest bid prices. But, unlike an auction, OFS process is still very complicated for the retail investors to understand and it is very difficult for them to track the indicative price on a real-time basis and revise their bid prices accordingly in order to successfully get the share allotted in these OFS.

Cut-Off Price Option Introduced – To overcome this problem, SEBI last month made it mandatory for companies to provide the option to retail investors to place their bids at the “CUT-OFF” price in addition to placing their price bids. PFC OFS would be the first OFS after such a change has been implemented by SEBI.

So, for the first time in an OFS, you’ll find the option to bid at the Cut-Off price and need not continuously follow the indicative price and revise your bid price. Whatever price is fixed by the government as the cut-off price, the successful retail bidders will get the shares allotted at that price. But, there is still a catch here for the retail investors and the catch is how the cut-off price will be determined by the government.

In an IPO or FPO, there is a price band – an upper price and a lower price. At or between these two prices, the cut-off price is set by the promoters or the selling shareholders. So, the investors know in advance the upper limit & the lower limit of the allotment price.

But, here in an OFS, there is only one price which gets disclosed by the promoters or the selling shareholders and that is the floor price i.e. Rs. 254 per share in the PFC OFS. There is no upper price limit at which the retail bidders would get a confirmed allotment and there is no method by which they could guesstimate it. In today’s PFC OFS, the government will fix the cut-off price for the retail investors only after the OFS gets over and in case of huge oversubscription, the price could go higher even beyond one’s comfort levels.

Taking the example of the REC OFS, the issue got oversubscribed to the tune of 5.5 times in the retail investors’ category and the allotment price got fixed at Rs. 331.75 and beyond. So, all those bidders who placed their bids at Rs. 331.75 or higher got the REC shares allotted. Now, in case of PFC OFS, suppose the Cut-Off price gets fixed at an exceptionally higher price of Rs. 261.25 i.e. Rs. 275 less 5% discount, which is higher than your estimated cut-off price, in that case you’ll have no option but to have the shares allotted at Rs. 261.25.

Allotment Method with “Cut-Off” Price Option

As per the information available on the NSE website“Sellers may provide retail investors option to bid at “cut-off”, where the allocation to retail investors shall be made based on the cut-off price determined in the non-retail category.”

“Bidding at “cut-off” ensures that the retail investor will get allotment where the allotted quantity will depend upon the demand at various price points.”

So, unlike an IPO/FPO, there is a risk of an unexpectedly higher cut-off price in an OFS and the retail investors should remain mentally prepared for a higher allotment price before they decide to bid in PFC OFS.

There is one more method of share allotment which the government could adopt and that is by fixing the indicative price as the cut-off price, giving 5% discount to the retail investors on this cut-off price and allotting at least one lot to every successful retail bidder. I think this would be a good method of allotment so that every retail investor gets a confirmed allotment and the cut-off price gets fixed very close to the indicative price.

As it is for the first time that cut-off price option has been introduced, it is very difficult to know how exactly the government is going to calculate the cut-off price and do the allotment. Let’s wait & watch how it pans out.

Power Finance Corporation Offer for Sale (PFC OFS) – July 2015

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

What seemed to be an easy task for the Finance Minister Arun Jaitley at the start of the current financial year is getting more and more difficult now and if the government is not able to get the land bill passed and the GST introduced with effect from its much anticipated date of April 1, 2016, the task will become next to impossible to achieve. I am talking about the government’s target of raising Rs. 41,000 crore through disinvestment of minority stakes in Central Public Sector Enterprises (CPSEs) and Rs. 28,500 crore by selling its controlling stakes.

Investors were carrying high hopes that one way or the other, the Modi government will be able to do something to get the land bill passed and the GST bill introduced in the Monsoon session of parliament. But, with the first four consecutive days of the current session getting washed out, it doesn’t seem that the Modi government wants to use its muscle power to overcome the current logjam created by the opposition.

But, the government is still trying to do whatever little it could to bridge the gap of where it stands right now and where it wants to reach. This time the idea is to sell its 5% stake in Power Finance Corporation (PFC) and the method of selling this stake will be the same which was used to sell the 5% stake in REC i.e. Offer for Sale (OFS) on the stock exchanges.

Power Finance Corporation (PFC) is also one of its Navratnas, like Rural Electrification Corporation (REC) and both the companies are in the similar lines of businesses i.e. power financing business.

The government will be selling its 5% stake in the company i.e. 6,60,02,035 shares at Rs. 254 a share as the floor price. With 5% discount for the retail investors, the government will be able to raise a minimum of Rs. 1,660 crore from this share sale. Currently, the government holds about 72.8% stake in the company, which will come down to 67.8% post this OFS.

Before we check out the factors affecting our decision to invest in this OFS, let us first check the basic details of this offer.

Shares on Sale – The government has decided to reduce its 72.8% stake in PFC to 67.8%, thus cutting its holding in the company by 5%. A total of 6,60,02,035 shares will be sold by the government in this offer for sale, out of which 20% shares i.e. 1,32,00,407 shares will be reserved for the retail investors investing up to Rs. 2 lakh.

Offer Price – Yesterday, when the markets got closed for trading, the share price of PFC closed at Rs. 259.55 on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). The government has set Rs. 254 as the floor price for this OFS, a discount of 2.14% to its closing market price.

5% Discount for the Retail Investors – The government has once again decided to offer a discount of 5% to the retail investors. This discount will be offered on the price at which the retail investors successfully bid in the OFS or the cut-off price set by the government, whichever is higher.

Brokerage – Unlike IPOs, stock brokers levy brokerage charges on these OFS transactions. These charges are normally higher than the rate of brokerage investors pay on their routine transactions. So, if the allotment price is fixed at say Rs. 255, the retail investors will get it at Rs. 242.25 a share plus applicable brokerage charges and statutory taxes thereon. So, the retail investors should consider these charges in their overall cost of acquisition.

Cut-Off Option Introduced – This would be the biggest highlight of this OFS. Long demanded by the retail investors, SEBI recently made it mandatory for the companies to provide the option to place their bids at the “CUT-OFF” price.

As observed during the OFS of Rural Electrification Corporation (REC), OFS process is still very complicated for the retail investors. They just cannot keep changing their bid prices in order to increase their chances of successfully getting these shares allotted. They still require either proper guidance or the option to bid at the cut-off price. So, this time around, their demand has been fulfilled. Now, they will not be required to change their bids as the indicative price goes up or down. But, it would be interesting to observe how the shares would get allotted among the successful retail bidders.

Only a Single Day OFS – As always happen in an OFS, PFC OFS will remain open for a single day only and that too, during the trading hours of the stock exchanges i.e. between 9:15 a.m. and 3:30 p.m. You’ll get to know the status of your bids by Monday evening itself and if successful, you’ll get the shares allotted by the designated stock exchange on T+1 basis.

As the bidding gets started on the stock exchanges at 9:15 a.m. on July 27, you can check the LIVE bidding status here on the National Stock Exchange (NSE) as well as on the Bombay Stock Exchange (BSE).

How does an OFS process work? – Offer for Sale Process

If you are investing in an OFS for the first time and want to know more about the process, here is the link to check the details about it. If you have any query regarding the process, please share it here, I’ll try to respond to it as soon as possible.

How to invest?

You need to contact your broker to know how it is facilitating the bidding process. I think most of the broking firms must be providing the investment facility through their online platforms. If you don’t have access to the online platform, you should contact the customer care department of your broker and get your bid placed through telephonic confirmation.

Should you invest in this OFS?

This is what I had to say during the REC OFS – “Power sector is one of the key drivers for a country’s rapid economic growth and poverty alleviation. Approximately 30% of India’s population do not have access to this basic amenity called electricity. For the past many many years, India’s power sector has been paralyzed with one issue or the other.

Poor financial condition of the state electricity boards (SEBs), unreasonable poll promises made by our politicians during elections, coal shortages due to scams/litigations or high import prices, poorly drafted laws of land acquisition, policy paralysis, shortage of funds or equipments for new capacities are some of the reasons due to which India’s power sector has shown an extremely poor growth.

However, the government is committed to provide electricity to all households over the next few years. Keeping that in mind, the government has recently taken many initiatives, including transparent & competitive auctions of coal mines, implementing gas price pooling policy, encouraging Coal India to meet its production targets etc. It makes me feel that the government is doing an excellent job at the ground level and it should start reflecting in growth numbers very soon.

With the government moving in the right direction, an efficient minister heading the power ministry and the interest rates heading downwards, I think India’s power sector should do extremely well in the next 3-5 years. The need of the hour is not to mix politics with economics. Unnecessarily giving subsidies to people who can comfortably afford power makes no sense to me. I think the state governments should focus on making their electricity boards (SEBs) and power generation & distribution companies more efficient rather than subsidizing our electricity bills.”

What I mentioned in my REC OFS review, I stick to it and feel there is a huge potential in India’s power sector. However, there are a couple of macroeconomic concerns. Firstly, China is slowing down considerably and secondly, India’s corporate profitability is also not showing any sign of a turnaround with some key reforms pending due to parliamentary hiccups.

Though I feel the Indian economy and stock markets would do extremely good from a medium to long-term perspective, stock prices would be very volatile in the next couple of months. If the markets go down further from here, I think PFC stock would also fall equally sharply.

Assuming the government to fix its allotment price for the retail investors at Rs. 241.30 per share, the stock is available at approximately 5X its estimated earnings per share (EPS) and 1X its estimated book value (BV) for the current financial year. The company has also managed to generate return on equity (RoE) of 21%. I think this offer for sale is attractively available at Rs. 254 a share and a 5% discount to this price makes it more attractive.

Weekend Links: July 24 2015

The Greek crisis has subdued a little, and I think I’ve not seen anything more ludicrous recently. The Greek government seemed to have ruined their case terribly, and this article does a good job in providing a brief summary of how this played out.

Germany played a leading role in working through the Greece situation, and this article shows the powerful personality of the German finance minister and his role in the proceedings.

A very unusual and cutting edge piece of research where scientists were able to connect monkey’s brains, and boost their thinking power.

A $100 million dollar grant boosts the search for aliens. 

Donald Trump has been in the news lately, and I think he is easily one of the most despicable people that I’ve seen run for a major office. An article on him, and if he has a real chance.

This is a little hard to believe but perhaps the day isn’t very far away when a drone could fly by you and hack your system through your WiFi.

Finally, it makes me very sad to read about people hunting lions in Africa. It is legal of course, you can get a permit, and most of the cases that get publicity are all legal. There is no question on the legality of it, just on the morality of it.

A practical way of generating strong and unique passwords

A few days ago OneMint was attacked, and embarrassingly enough someone or some machine had simply guessed my password. I now know that this wouldn’t be too hard as it would have taken a desktop PC just 3 days to figure out my password.

I have been on a mission to change my passwords since then but there are two challenges in this. You can come up and remember one strong and unique password, but it is very hard to come up and remember 20 unique ones. I say twenty because that’s the number of passwords I need for my accounts that have some financial aspect to it. If you include all of my passwords, I’m sure it would go over a 150.

The other method is to have some sort of a formula in your head to generate a unique password but my struggle so far had been that it wasn’t unique enough, or strong enough or universally acceptable enough.

I’ve overcome all of these and I have been using my current way quite successfully for the past two or three weeks, and if you currently have passwords that can be guessed within days by a desktop PC, I strongly recommend going through this post, and seeing if this method or a variation works for you.

Step 1: Setup a base formula, which means that there should be some combination of special characters, words and numbers that will always be in your passwords. For instance, you can say that all your passwords will start with “%” and end with “ghoda9873*”

Step 2: Use the name of the website in your password but with some replacements. For instance, you could say that if the website is two words like SBI India, you will only consider the first word, so SBI would be part of your password. Then you could say that “I” would always be “1” in your passwords. In this way you can make certain replacements, and come up with a unique password. In our example, a password for would be “%SB1ghoda9873*” which would take a desktop PC 2 billion years to crack!

If you use this formula a few times, and customize it to the way you’re used to thinking then you will be able to setup new passwords quite easily for all your accounts. This has the obvious drawback where if a person comes to know a couple of your passwords, they can guess the rest quite easily but it still beats having a simple one anyway.

Tax-Free Bonds Notification – FY 2015-16

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

After a gap of one year, tax free bonds would be making a comeback this year. Central Board of Direct Taxes (CBDT) on July 6 issued a notification in this regards and allowed seven CPSEs to mop up Rs. 40,000 in the remaining nine months of the current financial year.

These CPSEs include NHAI, IRFC, HUDCO, IREDA, REC, PFC and NTPC. Out of total Rs. 40,000, NHAI alone would be mopping up 60% chunk of the total allowed amount to be raised i.e. Rs. 24,000 crore worth of bonds. IRFC would raise Rs. 6,000 crore, HUDCO Rs. 5,000 crore, IREDA Rs. 2,000 crore and REC, PFC & NTPC Rs. 1,000 crore each.


Here is the link to the Notification No. 59/2015 – Tax-Free Bonds Notification – FY 2015-16

Before we check the advantages of tax-free bonds vis-a-vis fixed deposits, let us first focus on the main points of the notification:

Tenure of Bonds – These bonds will be issued for a period of 10, 15 or 20 years.

Interest Rate Ceiling – Interest rates offered by these companies will be subject to a ceiling on the coupon rates based on the reference Government Security (G-Sec) rate. The ceiling coupon rates would be as under:

AAA Rated Issuer – Reference G-Sec Rate minus 55 Basis Points (or 0.55%) for RIIs

AAA Rated Issuer – Reference G-Sec Rate minus 80 Basis Points (or 0.80%) for Other Investors

AA+ Rated Issuer – Reference G-Sec Rate minus 45 basis Points (or 0.45%) for RIIs

AA+ Rated Issuer – Reference G-Sec Rate minus 70 basis Points (or 0.70%) for Other Investors

AA or AA- Rated Issuer – Reference G-Sec Rate minus 35 basis Points (or 0.35%) for RIIs

AA or AA- Rated Issuer – Reference G-Sec Rate minus 60 basis Points (or 0.60%) for Other Investors


Here, the reference G-Sec rate will be the average of the base yield of G-Sec for equivalent maturity period, reported by FIMMDA on a daily basis prevailing for two weeks ending on the Friday immediately preceding the filing of the final prospectus with the Exchange or Registrar of Companies (RoC).

These ceiling rates will be applicable for annual payment of interest. In case the payment of interest is made on a semi-annual basis, the interest rates will have to be reduced by 15 basis points (or 0.15% per annum). Moreover, in case the bonds are sold or transferred by a retail individual investor (RII) to a non-retail individual investor, the interest rate applicable will be reduced accordingly by 0.25%.

Eligibility – As per the notification, the following investors will be eligible to subscribe to the bonds:

(i) Retail Individual Investors (RIIs)

(ii) Qualified Institutional Investors (QIBs)

(iii) Corporates (including statutory corporations), trusts, partnership firms, limited liability partnerships (LLPs), co-operative banks and other legal entities, subject to compliance with their respective Acts

(iv) High Networth Individuals (HNIs)

Retail Investment Limit – Individual investors, including HUFs through Karta, investing upto Rs. 10 lakhs in a single issue will be considered Retail Individual Investors (RIIs). Above Rs. 10 lakhs of investment, these individual investors will be categorised as high networth individuals (HNIs) and will earn a lower rate of interest.

NRI Investment – Non-Resident Indians (NRIs) will be allowed to invest in these bonds, on repatriation basis as well as non-repatriation basis.

Public Issues – At least 70% of the money to be raised by each individual company will be raised through public issues and rest of the money they can raise through private placements.

Credit Rating – These issues will be rated by a credit rating agency which is approved by the Securities and Exchange Board of India (SEBI) as well as the Reserve Bank of India. In case the issuer is rated by more than one rating agency, the lower of the two ratings will be considered.

Expected Rate of Interest – Power Finance Corporation (PFC) on July 14 raised Rs. 300 crore through a private placement at 7.16% for a 10-year maturity period. The Company had also fixed 7.39% coupon for 15-year bonds and 7.45% coupon for 20-year bonds. Had it been a public issue, the retail individual investor would have got these bonds offered at 7.41% for 10 years, 7.64% for 15 years and 7.70% for 20 years.

What makes Tax-Free Bonds Popular?

Tax-Free Interest – Unlike fixed deposits (FDs), interest earned on these bonds is exempt from income tax for the investors. This is what makes these bonds highly popular among the tax paying retail investors and high net worth individuals (HNIs).

Scope of Capital Appreciation – There is no scope of capital appreciation with bank fixed deposits or company deposits as such investments are not directly linked to interest rate movement in the bond markets. Unlike bank/company deposits, tax free bonds get listed on the stock exchanges and their market value goes up when there is a fall in the interest rates.

Tax Free Bonds issued during FY 2013-14 with coupon rate of 8.75% to 9% have been trading at a premium of 15-25% apart from their regular interest payments.

Easy Liquidity – With tax-free bonds, you can sell your bond holdings whenever you want to. These bonds get listed on the stock exchanges and due to big issue sizes, these bonds can easily be sold whenever required.

Highest Credit Rating – These bonds get issued by the public sector enterprises most of which are AAA rated. So, from the safety point of view, these bonds are highly secured and attract a big number of risk-averse investors. To me, it makes perfect sense to invest in these bonds as against riskier company deposits.

Tax-Free Bonds to be issued this year would not carry as attractive interest rate as they did in 2013-14. The 10-year G-Sec yield has come down by more than 100 basis points or 1% since then. I do not expect these bonds to carry coupon rates above 7.75-8%.

With crude prices coming down once again, Monsoon rains being above expectations and inflation remaining under control, I think the interest rates would remain under pressure going forward as well. So, it is in the interest of the investors and these companies also if these bond issues get launched as soon as possible. Are these companies already working on that?

Application Form for Tax Free Bonds

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 tax-free bonds, you can contact me at +919811797407

Weekend Links: 17th July 2015

Images of Pluto’s surface were all the rage this week, and I must have gone through several links, and still wanted to see more.

Perhaps, what was more surprising about this was the cost of the expedition, at less than the cost of an American football stadium, this project costs much less than what I would have guessed.

In world news, the nuclear deal with Iran was quite significant and this NYT article does a great job of explaining it in less than 200 words.

Saudi Arabia has had to to hit the bond markets because of lowering oil prices, which I also found rather unexpected.

I’m regularly surprised at how good Facebook is at recognizing faces, and it is heart warming to see that facial recognition software is being used in lion conservation. 

Northern Ireland makes millions of dollars in tourism due to Game of Thrones.

Finally, it is amazing to see that Sweden is so good at recycling that they need to import garbage from their neighbors in order to feed their special ovens that are used to heat homes.

Eight reasons why July could be an extraordinary month for Bajaj Auto

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

Last quarter of FY 2015 was a nightmarish quarter for Bajaj Auto. It faced all kind of problems related to its product sales in India as well as exports outside India to countries like Nigeria, Egypt and Sri Lanka. The Company witnessed a double-digit decline in motorcycle sales in all three months of Q4, 12.24% decline in January, 20.94% in February and 22.41% in March.

While domestic motorcycle sales were down due to rural slowdown and in anticipation of new launches, commercial vehicle sales were down due to a subdued economic growth. Exports were badly hit due to an extremely violent situation in Nigeria due to elections, an order cancellation by the new Sri Lankan government and inadequate availability of dollars with Egypt & Nigeria due to a sharp fall in oil prices.

Subsequent to this extremely poor quarter, several brokerages downgraded the stock to ‘Sell’ or ‘Reduce’ or ‘Hold’ at the best. Research analysts were expecting another bad month for its sales in April and its stock price hit a 52-week low of Rs. 1912.50 on the NSE on April 30.

But, when everyone was questioning its product & sales strategy, Bajaj Auto management worked harder to improve the sales volume by reintroducing its phased out model CT100 and repackaging its popular brand Platina. This strategy worked wonderfully well for Bajaj Auto as the company started posting decent sales numbers March onwards. Since then its stock price recovered to move beyond Rs. 2600 before it became ex-dividend on July 9, a gain of around 35% in less than 50 trading days.

I think such returns are great from a large cap company like Bajaj Auto and if all goes well, there is a room for further upside in its stock price from hereon. Here I try to list some reasons which have helped and should continue to do so in moving its stock price up this month.

  1. Higher June Sales Numbers – After a negative growth for eight months in a row, the company registered a growth of 9.68% in its motorcycle sales in June. Though it was still below some analysts’ expectations, the numbers looked decent given a series of poor sales numbers by the company in the first three month of the current calendar year.
  1. Higher Expected July Sales Numbers – The Company expects its sales momentum to continue in July as well with exports & domestic sales number to be higher than June.
  1. Dividend of Rs. 50 – Though I personally never buy a stock to get its dividend, I have observed many investors do so, not only individual investors, but even institutional investors. The Company announced a dividend of Rs. 50 in May and its stock price went ex-dividend on 9th of July. The dividend will get credited into shareholders’ accounts on July 27th or 28th after the company’s AGM on July 23rd.
  1. Supreme Court Verdict on Quadricycle RE 60 – Legal tussles take very long to get resolved here in India. Such a matter involving Bajaj’s unique product, Quadricycle – RE 60, is pending with the Supreme Court and is now posted again for hearing before the court today i.e. July 15. Bajaj has high expectations that the court will clear its hurdles today and the product would soon hit the Indian roads giving the commuters a long overdue alternate to auto rickshaws. A favourable verdict would provide a very big boost to Bajaj Auto’s stock price in the short term and its financials in the long term.
  1. Rupee Fall & Highest Ever Quarterly Profit on July 23 – On the back of a recovery in its exports & domestic sales in the April-June quarter, Bajaj Auto is expected to announce its highest ever quarterly profit in excess of Rs. 1,000 crore on July 23. To give further strength to its already strong sales, US dollar appreciated considerably against the Rupee in the last quarter. Bajaj expects a higher realisation and forex gain due to such a weakness in INR.
  1. Bonus Expectations – Bajaj Auto last announced a bonus of 1:1 on July 22, 2010. With a strong quarterly show and brighter times ahead, some analysts are speculating that the Bajaj management might announce a surprise bonus issue on July 23rd as well, after a gap of 5 years. This move will provide more liquidity to the stock and the investors would definitely consider it to be a strong signal about management’s confidence in the company’s future profitability & growth.
  1. Repackaged Discover 150 – One factor, which has been hurting Bajaj’s motorcycles sales badly for quite a long period now, is the poor show by its Discover brand. The management of the company was very confident about its revival when they launched Discover 150 last year. But, it again failed to impress a large number of prospective buyers.

The management of Bajaj Auto recently announced that they have already taken some corrective measures regarding the product and they will soon launch a repackaged Discover 150, which they hope to do well this time around.

  1. Initiating Pulsar Exports – In the past 6-8 months, Bajaj has launched many variants of its most popular & profitable brand Pulsar. All its variants are getting a very good response from the customers and there is a waiting period of 1-2 months for a couple of its variants. Bajaj would also initiate the exports of its Pulsar variants this month, which could again boost its monthly exports and hence its realisations & profitability.

Though stock prices move well ahead in anticipation of an event and probably Bajaj Auto’s stock price has also moved up well in advance in anticipation of a good quarter, I think the company is standing on a very strong footing now and the factors mentioned above should further aid its stock price touch all time highs in the coming weeks and months.

Book Review – A Bed of Red Flowers: In Search of My Afghanistan

I recently finished reading A Bed of Red Flowers : In Search of My Afghanistan, and I was deeply moved by this book.

This book is written by Nelofer Pazira who lived for ten years under the Soviet occupation in Afghanistan, escaped to Pakistan and emigrated to Canada from there.

The book is her story about growing up in Afghanistan, and I can’t recall reading anything sadder or more powerful in recent times. What strikes me most about her story is the drastic change that has come about in Afghanistan in just thirty or forty years, and how some parts of the story are so relatable because we have all experienced 9/11 and its after effects, but other parts of the story shock you, and surprise you.


For instance, at one point in the story Nelofer Pazira speaks about how her father saw her mother the very first time, and how she was wearing a mini skirt at the time. I was frankly quite surprised at that because I never knew Afghan society was like that at any point in history. I think a lot of us assume that Afghanistan was always the way we are used to seeing it now, but that is far from the truth. The book does a great job of presenting this contrast and giving you a good history lesson about Afghanistan written in a beautiful manner.

I will quote a couple of passages from the book to show what I mean. The first one is the passage I referred to earlier.

My father still fondly recounts their first meeting as if it were yesterday, his story like a script from a romantic movie. A young woman with long blonde hair, dressed in a miniskirt with a stylish sweater over her shoulders, smiled at him, and Habibullah’s heart was bound up with the ringlets of her hair—as he made clear in a verse he composed to mark the occasion.

The second is a passage from the time of the Taliban occupation, and reading that just leaves you aghast.

Hygiene is a problem in Niatack. None of the mud houses I’ve been to has a bathtub. Women complain that they don’t have enough water to wash their children, let alone themselves. “Could we build a couple of public bathhouses?” I ask. The Iranian authorities show us a public bathhouse. It’s for men only. “Our women don’t go to public baths,” says a man, fixing his square hat over his curly hair. “It is a question of our honour.” But no one can see them inside a closed bathhouse, I say. “No, they can’t, but knowing that women are inside the bath, other men—men who are not their husbands—can imagine that they are naked. It’s a dishonour.”

What happened in Afghanistan is a tragedy, and one that is usually viewed from the events of 9/11 and after. This book is a great story about the Afghanistan that existed before Taliban, and also of a young girl and her family that suffered through all of this.

The other thing that strikes me about the book is the author’s love for her country, and her childhood friend who she has to leave behind in Afghanistan. The stories of individual atrocities fill you with horror, but there is a sadness in the words that don’t describe an atrocity but just the passage of time and change in the course of lives of the characters. It is hard for me to describe this but you develop such an empathy with the characters in the book knowing that they are all real and have suffered through this that it has the powerful effect of making you stop and think about how those people must have felt like how the author would have felt when she didn’t receive a letter back from her friend, what were her fears, what did she do to overcome them, what was her friend thinking, was she saddened by the fact that someone was waiting to hear from her and could not. It is all very powerful.

Nelofer Pazira also actually travels back to Afghanistan in search of her childhood friend, and there is a movie called Kandahar which is inspired by this. The move is quite popular apparently, but I didn’t know about it, and have still not seen it.

All in all, A Bed of Red Flowers is a great book, and I would definitely recommend it to all of you except the ones who think they may not be able to handle the sadness that the book will fill you with.

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.