January 2017 – OneMint

Reliance Mutual Fund Link to CPSE ETF Allotment Status

Units of CPSE ETF Further Fund Offer (FFO), which received a bumper response from the Anchor Investors as well as the Retail Investors and got subscriptions to the extent of Rs. 13,800 crore, have been allotted by Reliance Mutual Fund. Most investors have received intimations regarding such allotment either through SMS or email. But, there are a few investors who have received no intimation regarding the same. If you are one of them and you applied for these units directly from Reliance Mutual Fund website, then you must have received a “Transaction Reference Number” through a mail at the time of subscription. Below is the text of the mail I received when I subscribed for this ETF on January 20.

Dear XXXX XXXXXXX,

Greetings from Reliance Mutual Fund!

Thank you for choosing to invest in the Further Fund Offer (FFO) of CPSE ETF, managed by Reliance Nippon Life Asset Management Limited.

We confirm having received your request for Purchase of units. Once your transaction is processed, you shall receive a confirmation on allotment through e-mail / SMS.

Following are the details of transaction request made by you:

Transaction reference number	COGPAXXXXXXXXX
Request date and time	20/01/201711:53PM
Transaction type	PURCHASE
Amount (Rs.)	XXXXXX.XX

For any assistance, please get in touch with your Financial Advisor / nearest Investor Service Centre or contact us on 1800 300 11111 (Monday to Saturday, 8 am to 9 pm) or write to us at customer_care@reliancemutual.com.

Thank you for choosing to invest in Reliance Mutual Fund.

Sincerely,
Reliance Nippon Life Asset Management Limited
(Formerly Reliance Capital Asset Management Limited)
(Asset Manager of Reliance Mutual Fund)

Now, as the units have been allotted, you can check the allotment status using your transaction reference number on the Reliance Mutual Fund website. Here is the link to the allotment status:

Reliance Mutual Fund CPSE ETF Allotment Status Link

However, if you applied for it through any other channel, then you need to contact the Registrar of Reliance Mutual Fund, Karvy Computershare on 1800 3454 001 or Reliance Mutual Fund itself on 1800 300 11111. Allotment status link on Karvy Computershare is not showing CPSE ETF under the company’s name, but once Karvy lists it there, you would be able to check it with your PAN number or application number or DP ID – Client ID.

I will update the post here as soon as it gets added under the company’s name.

CPSE ETF FFO Allotment Status

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Reliance Mutual Fund has made the allotment of units under its further fund offer (FFO) of CPSE Exchange Traded Fund (ETF) today and there is a good news for the retail investors. Firstly, full allotment has been made to each and every successful retail applicant applying up to Rs. 2 lakh worth of these units. Though Reliance Mutual Fund has not officially announced the retail subscription numbers for this FFO, it can be safely assumed that retail subscription was less than Rs. 4,200 crore as 100% allotment has been made to all the retail applicants.

Secondly, against an application of Rs. 2 lakh, Reliance MF has allotted 7,932 units of CPSE ETF and at today’s closing price of Rs. 27.55, your investment would be valued at Rs. 2,18,526.60 i.e. an immediate gain of 9.26%. This 9.26% return includes 5% discount offered by the government to the investors of this fund offer.

You might also get some small amount credited to your bank account as refund due to allotment of FFO units in whole numbers. Balance amount on account of fractional FFO units will be refunded to your bank account linked to your demat account.

Moreover, as these units have been allotted in less than 10 working days and well before February 1, the big day on which Budget 2017 would be presented in the parliament, it has given you an opportunity to sell your units well before this big event and completely avoid the expected budget day volatility due to which some investors were reluctant to invest in this FFO.

However, if the government decides to sell its stake in some of these companies, either partially or fully, or make the managements of these companies more accountable towards their shareholders, I think there is a great scope of capital appreciation with this ETF. So, I would advise long-term investors to hold on to their investments for at least a couple of years more and reap the benefits of a rebound in the fortunes of these companies.

If you had also applied for these CPSE ETF units in this FFO, but are yet to get any allotment intimation on your mobile or e-mail, you can contact the Registrar, Karvy Computershare on 1800 3454 001 or Reliance Mutual Fund on 1800 300 11111. If I get any link to check the allotment status by entering one’s PAN number or application number or DP ID – Client ID, I’ll paste that link here in this post itself.

If you have any more info about its allotment or any query regarding CPSE ETF or this FFO, please share it here so that more and more investors get benefit out of it.

SREI Infrastructure Finance 9.50% Non-Convertible Debentures (NCDs) – January 2017 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Falling interest rates on bank FDs has resulted in investors hunting for higher yield fixed income options, which in turn has prompted private NBFCs to launch a slew of NCD issues in the last 4-5 months. DHFL, Indiabulls Housing Finance, Reliance Home Finance, SREI Equipment Finance and Muthoot Finance, all have been successful in raising their full quota of required funds, at a much lower rate of interest and in a much shorter period of time as against how it used to happen 2-3 years back at a much higher rate of interest of 11-12%.

To join this bandwagon, SREI Infrastructure Finance Limited (SREI Infra) is launching its second issue of Secured Non-Convertible Debentures (NCDs) from today. These NCDs will carry 9.50% and 9.25% annual rate of interest for a period of 5 years and 3 years respectively. The issue will remain open for around four weeks to close on February 23.

As we analyse it further, let us take a quick look at the salient features of this issue.

Size & Objective of the Issue – Base size of this issue is Rs. 200 crore, with a green-shoe option to retain an additional Rs. 506.64 crore, thus making it a Rs. 706.64 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry a coupon rate of 9.50% p.a. payable on an annual or cumulative basis and 9.12% p.a. payable on a monthly basis for a period of 5 years (60 months) and 9.25% p.a. payable on an annual or cumulative basis and 8.88% p.a. payable on a monthly basis for a period of 3 years (36 months). The issue will have the option of 400 days also, in which the investors will get 8.50% p.a. on an annual or cumulative basis.

0.25% Additional Coupon for SREI Infra Shareholders, NCD Holders, Senior Citizens & Employees – Existing shareholders and NCD holders of SREI Infra, senior citizens aged more than 60 years of age and the employees of SREI Infra will be offered an additional coupon of 0.25% per annum. Deemed date of allotment will be considered the relevant date for these investors to be eligible for this additional rate of interest.

Minimum Investment – Investors are required to make a minimum investment of Rs. 10,000 i.e. ten NCDs of face value Rs. 1,000 each.

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

Category I – Institutional Investors – 10% of the issue i.e. Rs. 70.66 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 141.33 crore

Category III – Individual & HUF Investors – 70% of the issue i.e. Rs. 494.65 crore

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

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

Credit Rating & Nature of NCDs – Rating agency Brickwork Ratings (BWR) has rated this issue as ‘AA+’. Debt instruments with such a rating are considered to have high degree of safety regarding timely payment of interest and principal. Moreover, these NCDs are ‘Secured’ in nature i.e. in case of any default on its payment of interest or principal, the bondholders will have the right on certain secured assets of SREI Infra.

Listing, Premature Withdrawal & Put/Call Option – These NCDs will be listed on both the stock exchanges i.e. Bombay Stock Exchange (BSE) as well as National Stock Exchange (NSE). The listing will take place within 12 working days after the issue gets closed. Though there is no option of a premature redemption, the investors can sell these bonds on the stock exchanges if NCDs are held in a demat form.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors will have the option to apply for these NCDs in physical or certificate form as well.

TDS – Interest income earned is taxable with these NCDs and the investors are required to pay tax on the interest income as per their respective tax slabs. TDS @ 10% will be deducted if these NCDs are held in physical/certificate form and annual interest income is more than Rs. 5,000. NCDs held in demat mode will not attract any TDS.

Should you invest in SREI Infrastructure Finance NCDs?

Infrastructure financing sector has been facing headwinds for the past many years now. Firstly, many infra projects have been stuck at various stages due to various known and unknown reasons. Loans given for many such projects have become NPAs for infra financing companies, including SREI Infra. Secondly, as the economy is still struggling to have a healthy revival, demand for fresh loans as well has not revived. So, till the time we see this cyclical downtrend ending, we should not have high hopes from infra financing companies.

Moreover, as mentioned in my earlier reviews as well, these NCD issues by private companies offering 8.50% to 9.50% are not worth taking risk for me. Investors in the 30% tax bracket would earn 6.56% post-tax annual returns with 5-year NCDs. As you can check from the table above, already listed NCDs of SREI Infra or SREI Equipment Finance are already trading at a yield to maturity (YTM) higher than interest rates offered in this issue. So, it is better to buy their NCDs from the secondary markets.

If I am ready to bear some risk with my money, I would rather invest in equity mutual funds and hope for higher returns as against these NCDs with which though interest income is fixed, but also exists a remote risk of losing my principal as well in case the company goes bankrupt. However, risk-averse investors who are fairly confident about the operational efficiency of SREI Infra’s management and those who cannot take the volatility in returns of equity mutual funds or investors in the lower tax brackets can consider investing in these NCDs.

Application Form – SREI Infra NCDs

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

BSE IPO Review @ Rs. 805-806 – 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 skukreja@investitude.co.in

Asia’s oldest stock exchange, Bombay Stock Exchange or BSE, is coming out with its Initial Public Offer (IPO) of Rs. 1,243 crore from today. The issue comprises of an offer for sale of around 1.54 crore shares by its existing shareholders in a price band of Rs. 805-806. Like all other IPOs, this issue will also remain open for three days to close on January 25.

Before we analyse some of its fundamental attributes, let us have a take a look at some of the salient features of this IPO:

Price Band – BSE has fixed its price band in a very tight range to be between Rs. 805-806 per share and no discount or special preference will be given to the retail investors.

Size & Objective of the Issue – This issue is an Offer for Sale (OFS) by some of the BSE’s existing shareholders and thus no fresh issue of shares is involved. Singapore Exchange, Quantum (M) Limited, Atticus Mauritius Limited, GKFF Ventures, Caldwell India, Acacia Banyan Partners and Bajaj Holding and Investment are a few of the 302 shareholders selling their stakes in this offer either fully or partially.

These shareholders will sell approximately 1.54 crore shares and raise around Rs. 1,243 crore in this offer at Rs. 806 per share. These shares represent 28.26% of the total outstanding shares of BSE.

Retail Allocation – 35% of the issue size is reserved for the retail individual investors (RIIs) i.e. approximately 54 lakh shares out of 1.54 crore shares. 15% of the issue size is reserved for the non-institutional investors and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

No Discount for Retail Investors – BSE has decided not to offer any discount or any other special treatment for the retail investors in this IPO.

Anchor Investors – Out of 1.54 crore shares to be issued, BSE has already issued around 46 lakh shares to some of the big anchor investors at Rs. 806 per share. Investment form these investors would amount to Rs. 373 crore. These investors include Smallcap World Fund, ICICI Prudential Mutual Fund, Goldman Sachs India, HDFC Trustee Company, Reliance Trustee Company, FIL Investments (Mauritius) and Kuwait Investment Authority Fund, among others.

Bid Lot Size & Minimum Investment – Investors in this offer need to bid for a minimum of 18 shares and in multiples of 18 shares thereafter. So, you as a retail investor would be required to invest a minimum of Rs. 14,508 at the upper end of the price band and Rs. 14,490 at the lower end of the price band.

Maximum Investment for Retail Investors – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 18 shares @ Rs. 806 i.e. a maximum investment of Rs. 1,88,604 or @ Rs. 805 i.e. a minimum investment of Rs. 1,88,370. Investors opting for the “Cut-Off Price” option should apply for a maximum of 13 lots of 18 shares.

Listing – As BSE itself is a stock exchange, as per SEBI regulations, it cannot go ahead and list itself on its exchange. So, it will have to get itself listed on the National Stock Exchange (NSE). Allotment and listing will happen within 6 working days after the issue gets closed on January 25. These shares are expected to list on February 3 on the stock exchanges.

Here are some of the important dates for this IPO:

Issue Opens – On January 23, 2017

Issue Closes – On January 25, 2017

Finalisation of Basis of Allotment – On or about January 31, 2017

Initiation of Refunds – On or about February 1, 2017

Credit of equity shares to investors’ demat accounts – On or about February 2, 2017

Commencement of Trading on the NSE – On or about February 3, 2017

Financials of BSE Limited

BSE has four sources of revenues — Securities Services, Services to Corporates, Data Dissemination Fees and Income from Investments and Deposits. As you can check from the table below, around 39% of BSE’s total revenues in the first six months of the current financial year have come from its securities services, 29% from investment income and 21% from services to corporates. Rest of its revenues are derived as data dissemination fees.

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

BSE reported an EPS of Rs. 19.22 for the period ending September 30, 2016 and on an annualised EPS of Rs. 38.44, this issue is valued at 20.97 times at the upper end of its price band. As per the SEBI regulations, BSE is required to reduce its stake in CDSL from 50.05% to 24% and whenever that happens, it would result in a one-time healthy jump in its EPS. If you consider that, this issue would look less expensive to you.

MCX is the only other listed exchange here in India and it is currently trading at around 32 times its estimated FY 2017-18 earnings. However, MCX is a growing exchange and commands leadership in the commodities derivatives market with close to 90% market share. That is why it would be unfair to offer such a high price multiple to BSE.

While BSE’s market share in the equity derivatives segment is less than 1%, it has been declining steadily in the equity cash segment as well and currently stands at 13.37%. It has resorted to liquidity enhancement initiatives in the past in order to attract brokers to trade more on its platform, but that has not resulted in a sustained gain in market share for the exchange.

Market Share of NSE and BSE in Equity Cash Segment – Rs. 000 million

At Rs. 806 a share, I think BSE’s valuation is not greatly expensive and if the market sentiment remains positive post budget, it should ideally get listed at a premium. But, the issues with the exchange are fundamental in nature. Why is it that the exchange is losing market share to the NSE in the equity cash segment and why has it failed to retain its market share in the derivatives segment after its liquidity enhancement initiatives got discontinued?

Also, though the exchange is not going to get any cash out of this IPO, but are there any plans the management is working on to utilise the cash the exchange currently has in order to increase its revenues and profitability on a sustainable basis? If you look at the growth in its revenues and profits in the last 4-5 years, it seems every effort made by the exchange to increase its market share and add value to the shareholders has failed to do so.

I think as a risk taker you can apply to this IPO and expect some listing gains. But, in the long run, I think the exchange will have to work very hard on its strategy to gain market share on a sustainable basis. Investors can hold on to their shares till the time NSE comes out with its IPO and gets its shares listed on the BSE. But post that, they need to push BSE’s management to do it differently this time to gain a sustainable market share.

Redmi Note 4 – 4 GB RAM, 64 GB ROM Launched @ Rs. 12,999

After the grand success of its Redmi Note 3, Xiaomi has launched its much awaited Redmi Note 4 here in India today just a while back from now. It will be available in three versions – 4 GB – 64 GB for Rs. 12,999, 3 GB – 32 GB for Rs. 10,999 and 3 GB – 32 GB for Rs. 9,999 and three colours – Gold, Space Grey and Matte Black. While it has got launched today, it will be placed on sale starting January 23 at 12 pm exclusively on Flipkart and Mi.com, and it seems no pre-registration would be required to buy it.

While Redmi Note 3 was priced at Rs. 11,999 for its 3 GB RAM, 32 GB ROM version, Xiaomi has decided to offer Redmi Note 4 at an even more attractive price of Rs. 10,999 for the same 3 GB – 32 GB model. That is something to cheer about for its prospective buyers.

Xiaomi has also decided to launch its new 4 GB – 64 GB version here in India and it will be priced at Rs. 12,999, while the base model of 2 GB – 32 GB will continue to be priced at Rs. 9,999. As these new models go on for sale starting next week, it seems Xiaomi has already stopped selling Redmi Note 3 through all its existing channels. However, its smaller versions – Redmi Note 3S and Redmi Note 3S Prime continue to be available at Rs. 6,999 and Rs. 8,999 respectively.

14nm Snapdragon 625 processor – Redmi Note 4 is equipped with 2 GHz Octa-Core Qualcomm Snapdragon 625 processor, with 14nm FinFET technology. This processor is said to be more efficient than its earlier version of Snapdragon 650 processor, 28nm FinFET.

Adreno 506 GPU – The smartphone would come equipped with Adreno 506 GPU for graphics, as compared to Adreno 510 GPU Redmi Note 3 had.

5.5-Inch Full HD Display – As far as display is concerned, Redmi Note 4 has a 5.5-inch (13.9 cm) full HD display (1920×1080 pixels) with 2.5D arc glass design. This is the first time Xiaomi will have full 2.5D curved glass on the front.

4100 mAH Battery – 4050 mAH battery was one of the reasons behind the success of Redmi Note 3 and Xiaomi seems to be in no mood to disappoint its users on this front. Redmi Note 4 will carry 4,100 mAH battery and as per Xiaomi, its performance would be 25% better as compared to its predecessor.

13 MP Camera – The smartphone will have 13 megapixel primary camera and 5 megapixel front camera. The rear camera uses Sony CMOS sensor with 1.12 micron pixel size for better low-light performance. It also supports PDAF (Phase Detection Auto Focus), has a dual-tone LED flash and f/2.0 aperture.

Dual-Sim Slot – Like earlier, Redmi Note 4 will have a hybrid dual-SIM slot (micro + nano/microSD). Memory is also expandable to the extent of 128 GB with microSD slot included. But, as earlier you will be able to use either microSD card or your second sim.

Android Marshmallow and MIUI 8.0 – The smartphone will work on Android Marshmallow operating system along with the company’s own MIUI 8.0.

4G VoLTE Support – Redmi Note 4 will come with 4G LTE connectivity along with support for VoLTE (Voice over LTE). So, you will be able to use it with your Reliance Jio sim as well.

Fingerprint, Infrared Sensors – Like its predecessor, Redmi Note 4 will also have fingerprint sensor at the back and infrared sensor at the top of the handset.

Speakers at Bottom – Redmi Note 4 will carry its dual speakers at the bottom, rather than at the back its predecessor had. I think this is a good change they have made as it helps to hear your phone ringing if you are sitting in some other room.

Dimensions & Weight – Redmi Note 4 has some minor changes to its dimensions and weight as compared to Redmi Note 3. As against 150 X 76 X 8.65 mm, Redmi Note 4 will measure 151 X 76 X 8.35 mm and weigh just a gram more at 165 grams.

January 23 Launch on Flipkart & Mi.com at 12 PM

Since its July 2014 debut here in India, Xiaomi has been successful in creating a huge demand for almost all of its smartphones. As the phone is all set to go on sale on Flipkart and Mi India’s own site Mi.com from January 23, it is a given that the sale will not last even more than a few seconds before the phone gets out of stock. But, in the long run, will it be able to give Xiaomi the success it has tasted with Redmi Note 3? Let’s wait and watch.

CPSE ETF FFO – How to Apply / Invest & Other FAQs

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Further Fund Offer (FFO) of the government’s CPSE ETF is getting open for subscription for retail investors from today. But, many retail investors are still finding it difficult to apply for it as they do not have demat accounts which is a must to apply for this ETF. Though it is difficult to get a demat account opened in such a short period of time, investors can still explore the option of getting one opened.

There are some other important queries as well which I would like to address in this post so that you are able to invest in this ETF starting today. When I posted my article on this FFO on Monday, TCB had some queries which did not get addressed in that post. Here are all his queries and I’ll have some more FAQs after addressing these.

1) Allotment is on first come first serve basis or not?

Allotment will be made on a proportionate basis as it is done in case of equity IPOs and not on a first-come first-served basis. In case of oversubscription, efforts will be made to allot 5,000 units to each of the retail investors.

2) Can multiple applications be put in this issue?

Yes, you can submit multiple applications. But, to be considered a retail investor and get preference in allotment over other investors, the sum of all your applications should not exceed Rs. 2 lakhs.

3) Is it mandatory to apply only through cheque and not ASBA?

ASBA facility is not there in this offer. So, you need to submit a cheque or a DD along with the application form or invest online through your broker’s trading platform to apply for this ETF.

4) Is it necessary to issue cheque from same bank account which is linked to demat?

No, it is not mandatory to use the cheque of the same bank account which is linked to your demat and trading account. You can use any bank account to make the payment. However, third party payments are not allowed.

5) Is it necessary for applicant to be KYC compliant for mutual funds?

Yes, the applicant is required to be KYC compliant in order to invest in this scheme.

6) If an applicant is not KYC compliant, can he submit KYC form with necessary documents along with the application form of this ETF?

Yes, you can submit your KYC form along with a photograph and the required documents i.e. PAN card copy and address proof copy, along with the application form.

7) If I apply for Rs. 4 lakhs and allotted only Rs. 1.5 lakhs worth of units due to oversubscription, will I be considered as a retail investor and get 5% discount?

If you apply for more than Rs. 2 lakhs, you’ll still be entitled to a 5% discount. But, your investor category will depend on your application amount and preference will be given to the retail investors.

8) Given that high likelihood that this will get oversubscribed, and with a sort of desire / guarantee to give 5000 units to each retail investor, is it not prudent to apply for 5000 units only rather than blocking Rs. 2 lakh in FFO application?

As per the offer document, in case of oversubscription, retail investors would get at least 5000 units of CPSE ETF allotted. So, if you apply for Rs. 2 lakh worth of its units and the issue gets oversubscribed, then you will not get full allotment. So, if you expect the issue to get oversubscribed, then it is better to apply for 5,000 units only so that you get high allotment.

9) What will happen on listing day? Can it go below allotment price and how much listing gain we can expect?

Market-linked investments can move either way of the return matrix. So, the returns of this ETF could also turn negative if stock prices of its constituents fall after you get its units allotted. But, a 5% discount provides some kind of cushion in such a scenario.

Moreover, one should not invest in this ETF only for its listing gains. In the event of unfavourable listing, you might have to sell your units at a loss or keep holding it for a longer time than actually planned for.

10) I don’t have a demat account, but I want to apply for this ETF. Is it mandatory to have a demat account to apply for this FFO? Can I apply for it like I apply for any other mutual fund?

Demat account is mandatory to apply for this ETF. Without a demat account, your application won’t go through and it is liable to get rejected.

11) What will the tax treatment in case of capital gains – short term (STCG) and long term (LTCG)?

Taxation for this ETF will be like that of equity shares or equity mutual funds. LTCG will be tax exempt and STCG will be taxed at 15%.

12) Can we buy this ETF directly from the markets? If yes, what would be the difference between FFO and direct market purchase?

Yes, you can buy this CPSE ETF from the stock markets through your equity trading account. The only difference is that you will not get the 5% discount offered by the government to the investors for subscribing to this ETF in FFO.

13) What is the difference between FFO and actively managed mutual funds already available in the market and whose portfolio contains same stocks?

Actively managed funds, having the same stocks, can increase or decrease their proportion of investment in each of these stocks. They have no obligation to follow & alter their portfolio as per the Nifty CPSE Index. Whereas CPSE ETF has to follow the CPSE Index. Moreover, you will get 5% discount only with this FFO and not with other mutual funds.

14) How do I invest or where can I submit my application?

Physical Application – You can submit your physical application at the Investor Service Centers (ISCs) of Reliance Mutual Fund and Karvy Computershare branches.

Additionally, KRA compliant individual investors can use the below mentioned online modes to apply for this ETF:

(i) Reliance Mutual Fund website

(ii) Reliance Mobile App

(iii) NSE MFSS

(iv) BSE StAR MF

(v) NMF II Platform of NSE

(vi) e-ETF under web based NSE e-IPO platform

(vii) MF Utility

15) Is there any lock-in period for this investment?

There is no lock-in period applicable to those investors who do not avail any tax benefit u/s 80CCG out of this ETF. They would be free to sell their units any time they desire to do so.

However, investors who seek tax exemption u/s 80CCG, will be subject to a lock-in period of 3 years – 1 year of fixed lock-in and 2 years of flexible lock-in. The fixed lock-in period will start from the date of your investment in the current financial year and will end on March 31 next year i.e. 2018. The flexible lock-in period will be of two years, beginning immediately after the end of the fixed lock-in period i.e. beginning April 1, 2018 till March 31, 2020.

If you have any more queries regarding your investment in this ETF, please share it here, I’ll try to answer it as soon as possible.

Application Form – CPSE ETF FFO

For any further info or to invest in the CPSE ETF Further Fund Offer (FFO), you can contact us on +91-9811797407 or mail me at skukreja@investitude.co.in

Muthoot Finance 9.25% Non-Convertible Debentures (NCDs) – January 2017 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Demonetisation has resulted in a problem of plenty for the Indian banking system. Most banks are flushed with excess liquidity and have drastically reduced their deposits as well as lending rates. With such steep rate cuts, it is getting difficult for the conservative investors to park their money in safer investment options offering higher rate of interest.

In such a falling interest rate scenario, Muthoot Finance is launching its issue of non-convertible debentures (NCDs) of Rs. 1,400 crore from today. Muthoot is offering coupon rates of 8.25% to 9.25% for different maturities ranging between 400 days to 96 months having both Secured, as well as Unsecured NCDs. The issue is scheduled to remain open for a month to close on February 17.

Here are the salient features of this issue you should consider before taking a decision to invest or not:

Size of the issue – Muthoot Finance plans to raise Rs. 1,400 crore from this issue, Rs. 1,300 crore by issuing its Secured NCDs and Rs. 100 crore by issuing its Unsecured NCDs. Base size of the issue is Rs. 200 crore and the company will have the option to retain oversubscription to the tune of Rs. 1,400 crore, including the green shoe option of Rs. 1,200 crore.

Coupon Rates – As interest rates have been falling with most of the fixed income investments, like fixed deposits, company deposits, NCDs etc., Muthoot has also decided to reduce its interest rates across maturities. These NCDs will carry coupon rates in the range of 8.25% for 400 days to 9.25% for 36-60 months. Series I-X will all be Secured NCDs and Series XI will have Unsecured NCDs.

Double your Money Option – Series XI NCDs will offer cumulative interest option and will earn you a 100% return on your investment in a period of 8 years or 96 months. It would translate to an effective yield of 9.06% per annum. But, NCDs issued under this option are ‘Unsecured’ in nature, thus carry a slightly higher risk than Secured NCDs.

You can check the rates offered for different maturities and different payment options from the table below:

Coupon Rates for Institutional Investors – Institutional investors will get 0.25% lower rate of interest on their investments with Secured NCDs and 0.15% lower for Unsecured NCDs.

Categories of Investors & Allocation Ratio – The investors have been classified in the following three categories and as always, each category will have certain percentage fixed for the allotment:

Category I – Qualified Institutional Buyers (QIBs) – 20% of the issue is reserved i.e. Rs. 280 crore

Category II – Non-Institutional Investors & Corporates – 10% of the issue is reserved i.e. Rs. 140 crore

Category III – Individual Investors, including HUFs – 70% of the issue is reserved i.e. Rs. 980 crore

NCDs will be allotted on a first-come first-served basis in all these categories.

NRI/QFI Investments – Non-Resident Indians (NRIs), foreign nationals and Qualified Foreign Investors (QFIs) among others are not allowed to invest in this issue.

Ratings & Nature of NCDs – CRISIL and ICRA, the two rating agencies involved in this issue, have assigned ‘AA/Stable’ rating to the issue, indicating the issue to be safe as far as timely payments of interest and principal investments are concerned. All these NCDs are ‘Secured’ in nature, except NCDs issued under option XI which offer to double your money in 96 months.

Demat Account Mandatory – Muthoot has decided to issue these NCDs compulsorily in demat form. So, if you don’t have a demat account, you won’t be able to apply for these NCDs.

Listing on BSE – Muthoot has also decided to list its NCDs only on the Bombay Stock Exchange (BSE). Allotment as well as listing of these NCDs will happen within 12 working days from the closing date of the issue.

Taxability & TDS – Interest earned on these NCDs will be taxable as per the tax slab of the investor. However, as these NCDs will be allotted compulsorily in your demat accounts, no TDS will be deducted from your interest income.

Minimum Investment – Minimum investment in this issue has been fixed at Rs. 10,000 i.e. 10 NCDs of face value Rs. 1,000 each.

Should you invest in Muthoot Finance NCDs?

Muthoot Finance is a prominent name in the business of gold financing. But, a strong US economy, a stronger dollar against most global currencies, falling gold prices, falling interest rates here in India, competition heating up among lenders here and demonetisation, all these factors make me believe that business environment will be tougher for the gold financing companies going ahead.

Moreover, gold finance business is relatively riskier as compared to the housing finance business. NCD issues by DHFL, Indiabulls Housing Finance and Reliance Home Finance carried interest rates in a similar range as Muthoot is offering. So, if I have to invest my money with Muthoot, I would seek a higher return as compared to the rates it is offering in this issue of NCDs. I think conservative investors should give this issue a miss and wait for some better issues to invest their money.

Application Forms – Muthoot Finance NCDs

CPSE ETF Further Fund Offer (FFO) – January 2017 Issue

Reliance MF CPSE ETF Further Fund Offer (FFO) 2 – March 2017 Issue – Click Here

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

In an attempt to meet its disinvestment target for the current financial year 2016-17, the government of India has decided to launch one more tranche of the CPSE ETF to raise Rs. 6,000 crore by selling its partial stakes in some of the listed public sector undertakings (PSUs). The first tranche of the CPSE ETF got launched during the tenure of the UPA government in March 2014 and it successfully raised Rs. 3,000 crore from various investors. This second tranche is getting launched this week on January 17 and would remain open for four days only to close on January 20.

While January 17 subscription is reserved for the Anchor Investors, retail investors and other non-anchor investors would be able to submit their applications starting January 18. Once successfully allotted, its units are expected to get listed on the stock exchanges on or before February 10.

CPSE Nifty Index – It is one of the indices of the National Stock Exchange (NSE) carrying 10 public sector undertakings (PSUs) in which the central government has more than 55% stake and these companies have more than Rs. 1,000 crore in market capitalisation. All these companies are profitable and are either Maharatnas or Navratnas.

CPSE Index Composition as on December 30, 2016 & February 28, 2014

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CPSE Index Composition as on December 30, 2016 & Trade Data as on January 13, 2017

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CPSE ETF or Central Public Sector Enterprises Exchange Traded Fund – This ETF got launched in March 2014 by Goldman Sachs Asset Management Company and listed in April 2014 on the stock exchanges. While the retail investors got its units allotted at Rs. 17.45, it quickly touched a high of Rs. 29.82 in less than 2 months in May 2014 when there was a euphoria after Mr. Modi took charge to serve this big nation as the PM. However, even after more than two and a half years, this ETF has not been able to cross its previous highs made during that euphoric period and is currently trading at Rs. 26.87 a unit.

FFO Opening & Closing Dates – For Anchor Investors, this fund will open for subscription from January 17 and for non-anchor investors i.e. retail investors, QIBs and non-institutional investors, subscription will start from January 18. This FFO will remain open for four days only to close on January 20.

Features of CPSE ETF Further Fund Offer (FFO)

High Dividend Yield & Reasonable Valuations – All the constituents of the CPSE Index are profitable and pay reasonably high dividends on a regular basis. Though high dividend yield does not guarantee positive returns, but it reduces volatility in returns as downside in their market prices gets fairly limited. Moreover, I think these CPSEs are trading at reasonably fair valuations and bold reforms, if taken post elections, could result in unlocking value for their shareholders.

5% Discount for Investors – Like most public offers of government companies, this FFO will also offer a 5% discount to the retail investors as well as other categories of investors. This 5% discount will be calculated on the “FFO Reference Market Price” of the underlying shares of the Nifty CPSE Index and will be passed on to the CPSE ETF by the government of India.

Reference Market Price/NAV – As mentioned above, CPSE ETF is currently trading at Rs. 26.87 on the stock exchanges. This is also its reference market price or NAV. As the investors get allotment and FFO units get listed on the stock exchanges, market price of each unit of this ETF will be linked to the Nifty CPSE Index and its returns would be quite close to the returns generated by the CPSE Index. Investors will get their units allotted post an adjustment of 5% discount offered by the government to CPSE ETF for buying the underlying CPSE Index shares.

Investment Objective – The scheme intends to generate returns that closely correspond to the total returns generated by the Nifty CPSE Index, by investing in the securities which are constituents of the Nifty CPSE Index in the same proportion as in the index. However, the performance of the scheme may differ from that of the Nifty CPSE Index due to tracking error, scheme expenses and the initial discount of 5%.

Unlike NFO, No Loyalty Units in FFO – Retail investors in April 2015 received 1 additional unit as bonus against their investment of 15 units of CPSE ETF, as a reward for being loyal to this scheme for one full year from the date of allotment. However, the current scheme does not offer any such loyalty units this time around and that makes it slightly unattractive to me.

Minimum/Maximum Amount to be Raised – This ETF would target to raise Rs. 6,000 crore during this 4-day offer period, including the green-shoe option to retain Rs. 1,500 crore over and above the base target of Rs. 4,500 crore. However, in case of oversubscription beyond Rs. 6,000 crore, partial allotment will be made to the investors.

Minimum/Maximum Investment Size – Individual investors can invest in the scheme with a minimum investment amount of Rs. 5,000 and there is no upper limit on the investment amount. However, in order to get preference in allotment as a retail investor, you need to keep your investment amount capped at Rs. 2 lakhs.

Allotment & Listing – As per the offer document, units of this ETF will get allotted within 15 days from the closing date of the issue and listing on the NSE and BSE will happen within 5 days from the date of allotment. However, I expect the allotment and listing to happen sooner than these indicative times.

Demat Account Mandatory – As this is an exchange traded fund, the units of the scheme will be available only in the dematerialized/electronic form. So, you need to mandatorily have a demat account to apply for its units. Applications without relevant demat account details are liable to get rejected.

Tax Saving u/s. 80CCG – This FFO is in compliance with the provisions of Rajiv Gandhi Equity Savings Scheme (RGESS) and thus qualifies for a tax exemption of up to Rs. 25,000 under section 80CCG. However, most of the investors would find it difficult to fulfill its two most important conditions to avail this tax exemption. These two conditions are – one, your gross total income should not exceed Rs. 12 lakh in the current financial year and two, you must be a first time investor in equities. Though it is quite difficult to satisfy both these conditions together, people who fulfil both these conditions can avail tax exemption u/s 80CCG by making an investment of up to Rs. 50,000.

Lock-In Period with Tax Exemption – Investors, who seek tax exemption u/s. 80CCG, will be subject to a lock-in period of 3 years – 1 year of fixed lock-in and 2 years of flexible lock-in. The fixed lock-in period will start from the date of your investment in the current financial year and will end on March 31st next year i.e. 2018.

The flexible lock-in period will be of two years, beginning immediately after the end of the fixed lock-in period i.e. beginning April 1, 2018 till March 31, 2020.

No Tax Benefit Availed – No Lock-In Period – Investors who do not avail any tax benefit out of this ETF, would be free to sell their holdings any time they desire to do so. There is no lock-in period applicable to those investors. However, in order to avail long term capital gain tax exemption, it is advisable to hold on to your investments for at least one year.

Entry & Exit Load – You are not required to pay any entry load or exit load with this fund.

Categories of Investors & Allocation Ratio

Anchor Investors – Maximum 30% of Rs. 6,000 Crore i.e. Rs. 1,800 Crore will be allocated to the anchor investors.

Retail Individual Investors – After the anchor book gets over on January 17, retail individual investors are allowed to take up all of the remaining portion of this FFO whatever remains left out of Rs. 6,000 crore i.e. 70% of Rs. 6,000 Crore i.e. Rs. 4,200 Crore + under-subscribed portion of Anchor Investors.

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

Fund Manager – There has been no change in the fund manager of this ETF. As it was the case with this ETF at the time of its NFO, its 36-year old fund manager Payal Kaipunjal, who is an MBA from Wellingkar Institute of Management and also a Financial Risk Manager (FRM) from GARP University, will continue managing this ETF with further infusion of funds. She has a total experience of 12 years and worked with Benchmark Asset Management Company and then Goldman Sachs India before it got acquired by Reliance AMC in 2016.

Risks

High Exposure to Oil & Gas Sector – CPSE Index has an exposure of approximately 57% to the oil & gas sector, having ONGC, GAIL and Indian Oil as 3 of its top 4 constituents. So, any adverse event for the oil & gas sector might result in a sharp fall in the stock prices of these companies resulting in negative or low returns for the CPSE ETF.

High Exposure to Public Sector Enterprises – Public sector enterprises are often used by the governments to either bridge their fiscal deficit targets or to meet any of their political obligations. Moreover, managements of these companies are often driven by objectives other than value maximisation for shareholders. As their objective of adding value to shareholders gets diluted, it becomes a pain point for the shareholders. So, the investors need to consider this as a big risk for their future returns.

Passive Management – ETFs are passively managed funds and their performance largely depends on the index they track. As CPSE ETF tracks the CPSE Index, its performance will completely hinge on the performance of the constituents of the CPSE Index. So, there is little scope for the fund manager to show her skills in picking high growth stocks and outperform the benchmark index in a significant manner.

Should you invest in this FFO of CPSE ETF?

I covered the NFO of CPSE ETF in March 2014 and recommended investors to invest in it for a few reasons – 5% discount to the investors, loyalty units after holding it for more than a year, depressed valuations of its constituents at that time and most importantly, hope of a strong government at the centre taking bold measures to turnaround these CPSEs and make their managements run them professionally.

Compounded Annualised Returns as on December 30, 2016

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While many factors have turned in favour of these CPSEs and in a way the CPSE ETF investors and we also have a reasonably strong government at the centre with a clear majority, I think we are yet to have desirable results for our investments. I think there is still a lot of scope of making these companies truly competent and add a significant value to their stakeholders. I strongly feel that it is not the job of the government to run many of these businesses and hence most of these companies should be sold to the private players strategically.

This government has recently taken a decision to sell its 26% stake in BEML, after which the government’s stake will come down to 28%. I think it is a great move by the government and I strongly wish to see many such decisions get taken after the upcoming elections in five states. If this government succeeds in increasing the pace of reforms in the last two years, then I think it would not be difficult for these CPSEs to generate 50-100% returns for their investors in the next 2-3 years.

From investors point of view, it would have been great had the government offered issuance of loyalty units in a similar manner as done earlier, but it is still not bad to have a 5% discount. I think running these companies in a professional manner and making their managements accountable for their duty of creating value for their shareholders is much more important than offering loyalty units or any such freebies. I still have high hopes from this government and on the basis of that, I would invest some part of my money in this offer and would advise my clients also to take some exposure to this ETF.

Application Form – CPSE ETF FFO

For any further info or to invest in the CPSE ETF Further Fund Offer (FFO), you can contact us on +91-9811797407 or mail me at skukreja@investitude.co.in

SREI Equipment Finance 9.75% Non-Convertible Debentures (NCDs) – January 2017 Issue

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

India’s biggest public sector bank, State Bank of India, has given a new year gift to thousands of its borrowers on Sunday by cutting its 1-year MCLR rate by 0.90% from 8.65% to 7.75%. This move by SBI has resulted in a slew of rate cut announcements by public sector banks, which should be followed by private sector banks taking such decisions very soon. Reducing lending rates with such steep cuts is the need of the hour as banks are flushed with unprecedented liquidity and our economy needs cheaper loans to keep itself growing in these toughest of the times.

Unfortunately, lower interest rate environment results in a fall in deposit rates as well and that has been the case with most of the fixed income investments, including fixed deposits (FDs) and non-convertible debentures (NCDs). One such NCD issue is getting launched from today and the company that is launching this issue is SREI Equipment Finance Limited.

Let us take a look at the salient features of this issue.

Size & Objective of the Issue – Base size of this issue is Rs. 250 crore, with the green-shoe option to retain an additional Rs. 250 crore, thus making it a Rs. 500 crore issue. The company plans to use at least 75% of the issue proceeds for its lending activities and to repay its existing loans and up to 25% of the proceeds for general corporate purposes.

Coupon Rate & Tenor of the Issue – The issue will carry coupon rate of 9.12% p.a. payable monthly and 9.50% p.a. payable annually or cumulative for a period of 3 years (36 months) and 9.35% p.a. payable monthly and 9.75% p.a. payable annually or cumulative for a period of 5 years (60 months). There is one more option of 400 days which carries an effective annual yield of 8.81%.

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

Category I – Institutional Investors – 30% of the issue i.e. Rs. 150 crore

Category II – Non-Institutional Investors – 20% of the issue i.e. Rs. 100 crore

Category III – Individual & HUF Investors – 50% of the issue i.e. Rs. 250 crore

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

Credit Rating & Nature of NCDs – Brickwork Ratings has rated this issue as ‘AA+’ and SMERA has rated it as ‘AA’, with ‘Stable’ outlook by both the rating agencies. Debt instruments with such a rating are considered to have high degree of safety regarding timely payment of interest and principal. Moreover, these NCDs are ‘Secured’ in nature i.e. in case of any default on its payment of interest or principal, the bondholders will have the right on certain secured assets of the company.

Demat Not Mandatory – Demat account is not mandatory to invest in these NCDs as the investors have the option to apply for these NCDs in physical or certificate form as well.

Should you invest in SREI Equipment Finance NCDs?

SREI Equipment Finance Limited (SEFL) is a wholly-owned subsidiary of SREI Infrastructure Finance Limited (SIFL) which is a listed company on the BSE and NSE and came up with its own issue of NCDs in September this year. Below pasted is the table having issue details, NSE scrip codes and last traded prices of those NCDs.

As on March 31, 2016, the parent company SREI Infra carried net worth of Rs. 3,539 crore, while SEFL had a net worth of Rs. 2,322 crore. SIFL reported Gross NPAs of 4.02% and Net NPAs of 3.09%, while SEFL’s asset quality was relatively better at 2.95% of Gross NPAs and 1.99% of Net NPAs.

SREI Infra reported a profit of Rs. 61.53 crore on a turnover of Rs. 2,862 crore, while SEFL earned profits of Rs. 115.26 crore with revenues from operations of Rs. 2,614 crore. So, the operational performance of these companies favour SREI Equipment Finance over its parent company SREI Infra and probably that is why Brickwork Ratings has assigned it ‘AA+’ rating to the issue.

However, I think retail investors would do well to either avoid this issue or invest a maximum of 10% of their investible surplus in order to have a high interest rate investment in their portfolio in a falling interest rate scenario. Investors can also consider investing in already listed NCDs of SREI Infra or some other company from the markets at a better yield. Investors in the 30% or 20% tax bracket should avoid such taxable NCDs.

Application Form – SREI Equipment Finance NCDs