IPO/NFO – OneMint

Reliance CPSE ETF FFO 3

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

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

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

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

Features of CPSE ETF Further Fund Offer (FFO) 3

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

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

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

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

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

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

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

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

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

Categories of Investors & Allocation Ratio

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

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

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

Application Form – CPSE ETF FFO 3

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

HDFC AMC IPO Review – Should You Invest or Not @ Rs. 1,095-1,100?

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

HDFC AMC IPO Details

Here are some other important dates as the issue gets closed on July 27:

Finalisation of Basis of Allotment – On or about August 1, 2018

Initiation of Refunds – On or about August 2, 2018

Credit of equity shares to investors’ demat accounts – On or about August 3, 2018

Commencement of Trading on the NSE/BSE – On or about August 6, 2018

Financials of HDFC AMC

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

Should you invest in HDFC AMC IPO or Not @ Rs. 1,100?

Reliance Nippon Asset Management Ltd. (RNAM) is currently the only asset management company listed on the stock exchanges. Its IPO came in the last week of October 2017 at a price of Rs. 252 a share. It touched a high of Rs. 335 on January 16, 2018, a low of Rs. 205.35 on June 1, 2018 and is currently trading at Rs. 235.75. At Rs. 235.75 a share, the company has a market cap of Rs. 14,394 crore and its price/earnings (P/E) ratio currently stands at 26.3 times. The company generates an RoE of 22% for its shareholders.

In comparison, HDFC AMC IPO is priced at Rs. 1,100 a share. At this price, the company will have a market cap of Rs. 23,319 crore and P/E ratio of 31.46 times based on its trailing twelve months EPS. The company generates an RoE of 33.41% for its shareholders. Also, HDFC AMC is the industry leader in equity-oriented funds, having 51% of its AUM in equities as against 42% industry average. Having 51% of its AUM in equities helps HDFC AMC earn higher management fee for managing these funds. Such high profitability and focus on garnering investors’ money for its high margin schemes justify its rich valuations vis-a-vis Reliance AMC, based solely on the fundamentals attributes of both the companies.

However, the biggest factor, that makes investors avoid investing in ADAG group companies, is the quality of their management and the legacy of their actions that have led to the downfall of many of their group companies and the resulting destruction in shareholders wealth.

On the other hand, the biggest factor, that differentiates HDFC group companies from their respective industry peers and command a premium in valuations, is the quality of their management and the legacy of their actions that have resulted in a phenomenal growth of all its group companies and the resulting healthy growth in shareholders wealth.

Despite of a poor performance of many of its schemes in the last 2-3 years, I expect HDFC AMC to keep growing its business at a healthy pace and maintain its leadership in equity oriented schemes for a long period of time. At Rs. 1,100 a share, I have a view that HDFC AMC is fairly valued, but still leaves a scope of money to be made on listing, and also due to long term sustainable growth in business and profitability.

For many of us, HDFC’s year on year consistent growth of 20%+ has been a matter of a case study. So, if 20% is a magical number for the HDFC group companies, then I would expect a 20% listing gain here too with this HDFC group company.

HDFC AMC IPO Details – Price Band Rs. 1095-1100

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

The initial public offer (IPO) of India’s second largest asset management company, HDFC Asset Management Company Ltd (HDFC AMC), is getting opened for subscription from today, July 25. HDFC AMC is the 56.97% subsidiary of HDFC Limited, while HDFC’s JV partner Standard Life owns around 37.98% in the company. This IPO is a 100% offer for sale (OFS) of around 2.55 crore equity shares by these promoters.

The company has fixed its price band in the range of Rs. 1,095-1,100 a share and no discount has been offered to the retail investors. The offer would constitute 12.01% of the company’s post-offer paid-up equity share capital. The issue will remain open for the next three days to close on July 27.

Here are some of the salient features of this issue:

Size of the Issue – This IPO is a 100% offer for sale (OFS) of 2,54,57,555 shares by the JV partners, HDFC Limited and Standard Life. This makes it a Rs. 2,800 crore IPO at the upper end of the price band i.e. Rs. 1,100. HDFC Limited and Standard Life are selling 85,92,970 and 1,68,64,585 of their shares respectively in this IPO. Post this IPO, HDFC will hold 52.92% stake and Standard Life will have 30.03% stake in the company.

Price Band – HDFC AMC has fixed its IPO price band to be between Rs. 1,095-1,100 a share and the company has decided not to offer any discount to the retail investors.

Retail Allocation – 35% of the issue has been reserved for the retail individual investors (RIIs), 15% for the non-institutional investors (NIIs) and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

No discount for Retail Investors or Employees – The company has decided not to offer any discount to any of its investors or to its employees either.

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 13 shares in this offer and in multiples of 13 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,300 at the upper end of the price band and Rs. 14,235 at the lower end of the price band.

Maximum Investment – 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 13 shares each @ Rs. 1,100 a share i.e. a maximum investment of Rs. 1,85,900. At Rs. 1,095 per share, you can apply for a maximum of 14 lots of 13 shares, thus making it Rs. 1,99,290.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on July 27. Thus, these shares are expected to get listed on the stock exchanges by August 6.

Here are some other important dates as the issue gets closed on July 27:

Finalisation of Basis of Allotment – On or about August 1, 2018

Initiation of Refunds – On or about August 2, 2018

Credit of equity shares to investors’ demat accounts – On or about August 3, 2018

Commencement of Trading on the NSE/BSE – On or about August 6, 2018

Financials of HDFC AMC

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

Should you invest in HDFC AMC IPO or Not @ Rs. 1,100?

I will update this post soon with HDFC AMC IPO Review.

ICICI Securities IPO Review – Should You Invest or Not @ Rs. 519-520?

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

ICICI Securities IPO Details – March 2018 Issue

Finalisation of Basis of Allotment – On or about April 2, 2018

Initiation of Refunds – On or about April 3, 2018

Credit of equity shares to investors’ demat accounts – On or about April 4, 2018

Commencement of Trading on the NSE/BSE – On or about April 5, 2018

Financials of ICICI Securities

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

Peer Comparison

Note: Market Caps and Market Prices are dated March 20, 2018. EPS have been annualised taking 9-month EPS as on December 31, 2017.

Should You Invest in ICICI Securities IPO @ Rs. 520?

Suppose, you buy 100 shares of Infosys at Rs. 1,100 with a price target of Rs. 1,150 in say a month or so. But, within a week, without any positive news or development, its stock price zooms to Rs. 1,150 odd levels. You book your profits in this trade and start expecting the stock price to come down the very next moment you sell it. It doesn’t come down and moves to Rs. 1,200 within a fortnight. You don’t buy it, but decide to buy it again at Rs. 1,150, the same price level you sold it at. It comes down to Rs. 1,150, you buy it again at Rs. 1,150 and decide to sell it at Rs. 1,220.

It goes down till Rs. 1,100, but you don’t sell it as you had decided to sell it only when it touches Rs. 1,220 or more. It goes up again to touch Rs. 1,220 levels, you sell it at Rs. 1,220 and again start expecting it to come down as you had just sold it in the expectation of its price to come down. This way, you buy and sell Infosys five times as it reaches Rs. 1,350. This is just a hypothetical example, but I think something similar happens with many of us in a bull market.

But, when the markets start correcting or a bear market takes over, we don’t square-off the same Infosys position at Rs. 1,050 (bought at Rs. 1,100 in the anticipation of Rs. 1,150). Not even at Rs. 1,000. Not even at Rs. 950. Not even at Rs. 900. Not even if goes down to Rs. 600. Then we stop logging on to our trading platforms, become investors (from traders) and decide to sell our holdings only when they bounce back to our cost price. Though something of this sort does not happen with every trader or investor, but something similar is common with most of us. I think you would agree.

So, in a bear market, we trade less frequently, and in turn, our broking firms get less brokerage from us. Similarly, in a bull market, we make money and in turn, generate good brokerage for our broking firms. Something similar happened in the first three quarters of the current financial year and like most other broking firms, ICICI Securities too raked the moolah out of it and its 9-month revenues and profits in FY 2017-18 exceeded its full year revenues and profits of FY 2016-17.

Even with best of its financial performance, the price/earnings multiple ICICI Securities is seeking in this IPO is at 31.48 times its 9-month annualised EPS for the current financial year. I think it is on a higher side, as I don’t expect stock markets to have such similar uninterrupted upswings on a consistent basis. Like stock markets, financial performances of broking companies too are volatile. The company had an EPS of Rs. 7.41 during FY 2015-16. Imagine a similar year in which the company earns an EPS of say Rs. 8. At Rs. 520 a share or above, it would be valued at 65 times or more.

So, if you are a bull right now and have a view that the Indian stock markets will have a healthy upward movement in the next 3-5 years, and most importantly, ICICI Securities will be able to cash it one way or the other, then you should definitely subscribe to it. Conservative or risk-averse investors should avoid it.

ICICI Securities IPO Details @ Rs. 519-520

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

ICICI Securities IPO Review – Should You Invest or Not @ Rs. 519-520?

ICICI Securities Limited, a wholly-owned subsidiary of ICICI Bank, is entering the primary markets with its initial public offer (IPO) of 7.72 crore shares worth Rs. 4,017 crore. The offer would constitute 23.98% of the company’s post-offer paid-up equity share capital. Price band of the IPO is in a very narrow range of Rs. 519-520 a share and no discount has been offered by the company to the retail investors.

The issue is getting opened for subscription from Thursday, March 22 and will remain open for three business days to close on March 26. This IPO is a 100% offer for sale (OFS) by its promoter ICICI Bank and hence ICICI Securities will not get any money out of this IPO for its further expansion.

Here are some other salient features of this IPO:

Only 10% Issue is for Retail Investors – Only 10% of the issue size, excluding the portion reserved for the ICICI Bank shareholders, is reserved for the retail individual investors (RIIs) i.e. approximately 73.38 lakh shares out of total 7.72 crore shares on offer. 15% of the issue is reserved for the non-institutional investors (NIIs) and the remaining 75% shares will be allocated to the qualified institutional buyers (QIBs).

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 28 shares and in multiples of 28 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,560 at the upper end of the price band and Rs. 14,532 at the lower end of the price band.

Objective of the Issue – As the entire issue proceeds will go to ICICI Bank, being the promoter of the company, the primary objective of the offer for ICICI Securities is to enhance its visibility and brand image by getting listed on the stock exchanges.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on 26th March. Here are the important dates after the issue gets closed:

Finalisation of Basis of Allotment – On or about April 2, 2018

Initiation of Refunds – On or about April 3, 2018

Credit of equity shares to investors’ demat accounts – On or about April 4, 2018

Commencement of Trading on the NSE/BSE – On or about April 5, 2018

Financials of ICICI Securities

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

Peer Comparison

Note: Market Caps and Market Prices are dated March 20, 2018. EPS have been annualised taking 9-month EPS as on December 31, 2017.

ICICI Securities IPO Review – Should You Invest or Not @ Rs. 519-520?

Bandhan Bank IPO Review – Should You Invest or Not @ Rs. 370-375?

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

Bandhan Bank IPO Details

Finalisation of Basis of Allotment – On or about March 22, 2018

Initiation of Refunds – On or about March 23, 2018

Credit of equity shares to investors’ demat accounts – On or about March 26, 2018

Commencement of Trading on the NSE/BSE – On or about March 27, 2018

Financials of Bandhan Bank

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

For the financial year ended March 31, 2017, Bandhan Bank reported a total income of Rs. 4320 crore as compared to Rs. 1,731 crore it reported during financial year 2015-16, registering a growth of 149.57% in the last one year. The bank reported profit after tax (PAT) of Rs. 1,112 crore for the financial year ended March 31, 2017 as against Rs. 275 crore for the financial year ended March 31, 2016, posting a growth of 304% CAGR.

Bank’s net interest margins (NIMs) are the most impressive at 10.44% in FY 2016-17, which have fallen marginally to 9.86% during 9-months ended December 31, 2017. However, its asset quality has also deteriorated somewhat, but given the market scenario, it is still well within investors’ comfort zone.

Should you subscribe to Bandhan Bank IPO @ Rs. 370-375?

Having commenced its banking operations in August 2015, Bandhan Bank is a relatively new bank, with 887 bank branches, 430 ATMs and 2,633 doorstep service centres (DSCs). Bandhan Bank’s distribution network is particularly strong in east and northeast India, with West Bengal, Assam and Bihar together accounting for 56.37% and 57.58% of its branches and DSCs respectively, as of December 31, 2017.

Though its net interest margins (NIMs) stand healthy at 9.86% as on December 31, 2017, I don’t think the bank will be able to maintain such NIMs going forward. As the bank expands its base and reaches out to other areas where it does not currently have exposure to, its margins are bound to go down. As far as its asset quality is concerned, the bank has so far been able to maintain it at a remarkably low levels. But, there too, the NPAs are bound to go up as the bank diversifies its operations and expands its loan book.

As the issue gets closed on Monday at Rs. 375 a share, Bandhan Bank will have a market cap of Rs. 44,730 crore, price to book value of 4.53 times and price to earnings ratio of 32.19 times its FY18 earnings. As compared to Bandhan, RBL’s market cap is Rs. 19,962 crore, P/BV ratio is 4.12 times and P/E ratio is 32.49 times, Yes Bank’s market cap is Rs. 71,934 crore, P/BV ratio is 3.23 times and P/E ratio is 17.96 times, and IndusInd Bank’s market cap is Rs. 1,04,579 crore, P/BV ratio is 5.05 times and P/E ratio is 29.78 times. So, at these relative valuations, Bandhan Bank looks grossly expensive to me.

Note: Market Caps and Market Prices are dated March 15, 2018. Book Values are of March 31, 2017. EPS have been annualised taking 9-month EPS as on December 31, 2017.

IFC bought its stake in Bandhan Bank 2 years back in February 2016 at Rs. 42.93 a share for a total investment of Rs. 232 crore. I have no doubt that the bank has done remarkably well to grow itself multifold in the last 2 years. But, even then, does the bank really deserve a 9-times jump in its asking value within a span of just 2 years?

More recently, in December 2017, Bandhan’s MD & CEO, Chandra Shekhar Ghosh, exercised his right to acquire the bank’s shares at Rs. 180 a share through equity stock options (ESOPs). Though it has been done in a fair manner and he has all the right to do so as he has worked hard for the bank, I think it would have been better had the bank left something on the table for the investors too.

Given the bank is growing at a speed no other bank is growing, I think it has the potential of giving listing gains to its investors. But, the big question is – should you invest in this IPO just for its expected listing gains? I don’t think so. You need to ask yourself whether I am investing in stock markets just for having listing gains in an IPO or to create long term wealth for myself. I think the valuations are stretched for this IPO and it could have a big fall if the market sentiment takes a U-turn from here, or there is some kind of a red flag for the company.

Bandhan Bank IPO Details – March 2018 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

Bandhan Bank IPO Review – Should You Invest or Not @ Rs. 370-375?

Post Budget 2018, Indian stock markets have turned volatile. It is not just the re-introduction of the LTCG tax, but also the global jitters which have sent our markets into a tailspin. But, as the money is still chasing a few good quality stocks and there is a dearth of investment options in other asset classes as well, the companies have resumed knocking our doors to raise money for their future expansions.

In this week alone, three companies have launched their initial public offers (IPOs) and one such company is Bandhan Bank, whose IPO opened for subscription yesterday and will get closed on Monday, 19th of March.

What’s on Offer?

This initial public offer (IPO) of Bandhan Bank comprises of a sale of approximately 11.93 crore shares to the investors. It is a mix of fresh issue of approximately 9.77 crore shares by the bank and an offer for sale of 2.16 crore shares by International Finance Corporation (IFC).

35% of the issue size is reserved for the retail individual investors (RIIs) i.e. approximately 4.17 crore shares out of 11.93 crore shares on offer, 15% is reserved for the non-institutional investors and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).

Bandhan Bank has fixed its price band to be between Rs. 370-375 per share. There is no discount for the retail investors though. Here are other salient features of this IPO:

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 40 shares and in multiples of 40 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. 14,800 at the lower end of the price band.

Objective of the Issue – As per the new bank licensing guidelines issued by the RBI, Bandhan Bank was required to get itself listed on the stock exchanges within 3 years from the date it commences its business operations. So, in order to comply with such guidelines, the bank has undertaken this issue. Moreover, Bandhan will raise Rs. 4,473 crore from this issue and the company plans to use the proceeds to augment its Tier-I capital base.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on 19th March. Here are the important dates after the issue gets closed:

Finalisation of Basis of Allotment – On or about March 22, 2018

Initiation of Refunds – On or about March 23, 2018

Credit of equity shares to investors’ demat accounts – On or about March 26, 2018

Commencement of Trading on the NSE/BSE – On or about March 27, 2018

Financials of Bandhan Bank

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

Should you subscribe or not?

Note: Market Caps and Market Prices are dated March 15, 2018. Book Values are of March 31, 2017. EPS have been annualised taking 9-month EPS as on December 31, 2017.

Bandhan Bank IPO Review – Should You Invest or Not @ Rs. 370-375?

ICICI Prudential Bharat 22 ETF NFO – November 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

Bharat 22 ETF – Allotment Status

Finance Minister in his budget speech had set Rs. 72,500 as the disinvestment target for the current fiscal year 2017-18. In order to meet this steep target, the government has decided to sell its stake in 22 of its holdings, by forming an altogether new index called “S&P BSE Bharat 22 Index”. As its name suggests, this index has been designed by the Bombay Stock Exchange (BSE) in consultation with the government. Unlike Nifty CPSE Index, which has all its constituents to be the CPSEs, Bharat 22 Index has CPSEs, PSUs and 3 private companies (L&T, ITC and Axis Bank) as its constituents.

Here is the list of all its 22 constituents and their weightage in the index:

ICICI Prudential Bharat 22 ETF is an open-ended index scheme, to be listed on the stock exchanges in the form of an Exchange Traded Fund (ETF) tracking the S&P BSE Bharat 22 Index. This ETF has been launched by ICICI Prudential Asset Management Company and is named as Bharat 22 ETF.

Investment Objective – Bharat 22 ETF intends to generate returns that closely correspond to the total returns earned by the securities as represented by the Bharat 22 Index. However, the performance of the scheme may differ from that of Bharat 22 Index due to tracking error and also due to the scheme expenses.

NFO Opening & Closing Dates – This scheme will remain open for four days, only one day for the anchor investors i.e. November 14 and then three days for the non-anchor investors, including retail investors. For the non-anchor investors, it will open for subscription on November 15 and run for three days to close on November 17.

Reference Market Price/NAV – New Fund Offers, or popularly known as NFOs, normally get launched at Rs. 10 per unit as their NAV. This will not be the case with this scheme. During the NFO, each unit of this scheme will have a face value of Rs. 10 and will be issued at a premium, equal to the difference between the face value and the allotment price.

NAV of this scheme will be based on the Bharat 22 Index, and the allotment price would be approximately equal to 1/100th of Bharat 22 Index and calculated post adjusting the 3% discount offered by the government to Bharat 22 ETF for buying the underlying Bharat 22 Index shares.

3% Discount for All Investors – Investors making an investment during the offer period will be given a 3% discount on their investment. This 3% discount on the “Reference Market Price” of the underlying Bharat 22 Index shares will be offered to Bharat 22 ETF by the government of India.

Categories of Investors & Allocation Ratio

Anchor Investors – 25% of the total amount raised or 25% of Rs. 8,000 crore, whichever is higher, has been reserved for the anchor investors.

Retail Individual Investors (RIIs) – 25% of the total amount raised or 25% of Rs. 8,000 crore, whichever is higher, has been reserved for the retail individual investors also.

Qualified Institutional Buyers (QIBs) & Non-Institutional Investors (NIIs) – QIBs and NIIs too will have 25% of the issue reserved for each of their categories. In case of undersubscription in any or both of these categories of investors, unsubscribed portion will be allocated to the retail investors.

Target Amount to be Raised – The government has decided to raise Rs. 8,000 crore from this scheme. However, in case of oversubscription, the government would like to retain the whole of oversubscription in order to bridge its disinvestment target gap. So, it is highly likely that full allotment will be made to the retail individual investors.

Minimum/Maximum Investment Size – Retail individual investors can invest in the scheme with a minimum investment amount of Rs. 5,000. To remain a retail investor, the investment limit has been set at Rs. 2 lakhs.

Allotment & Listing – As per the offer document, investors will get the units allotted within 15 days from the closing date of the issue and listing on the stock exchanges will happen within 5 days from the date of allotment. However, like earlier CPSE ETF issues, I expect the allotment and listing to happen within 7-10 working days from the date the issue gets closed.

Demat Account Mandatory – As you cannot hold and trade ETFs in physical form, it is mandatory to have a demat account for you to invest in this scheme. Applications without relevant demat account details are liable to be rejected.

No Lock-In Period – As this ETF do not provide any tax benefit, there is no lock-in period for the non-anchor investors. Investors can sell their units whenever they want to do so.

Entry & Exit Load – There is no entry load to invest in this scheme and there is no exit load either as and when you decide to sell its units on the stock exchanges. You will be required to pay just your normal brokerage and other government taxes when you sell these units.

2.21% Dividend Yield – As per the BSE website, constituents of Bharat 22 Index are generating 2.21% dividend yield for its investors based on the dividends paid in the last one year. Though dividend yield is not a significant factor for me to invest in stocks or mutual funds/ETFs, I think this dividend yield of 2.21% is not too great for me to reconsider it for my portfolio.

20.28X PE Ratio – Price to earnings ratio (P/E Ratio) of Bharat 22 Index at present is ruling at around 20.28 times. If you consider Nifty to be trading at a P/E multiple of 26-27 times its trailing EPS, I think Bharat 22 Index is not too attractively valued considering most of its constituents are CPSEs or PSUs. You can only bank on their earnings recovery in order to expect a gradual rise in their share prices.

Should you invest in ICICI Prudential Bharat 22 ETF NFO?

Except 3% discount, there is nothing extraordinary in this ETF which attracts me to apply for it in this NFO. As most of its constituents are already trading close to their 52-week highs, you can consider this ETF to be trading close to its 52-week high. However, this should not be considered as anything negative for this ETF. If a stock is trading at or close to its all-time or 52-week highs, it doesn’t mean that it cannot go higher from those levels. Similarly, this ETF too has the potential to scale newer highs if its constituents continue rising as they have been in the last few months.

However, as most of these companies are CPSEs and PSUs, I think it is the government policies which are going to drive the share prices of these companies and thereby this ETF. Let us consider the decision taken by the government to recapitalise the public sector banks (PSBs) with Rs. 2.11 lakh crore worth of infusion over the next 2 years. Though it is a very positive measure announced by the government, but after all it is just an announcement and nothing concrete has taken place to actually strengthen these banks’ balance sheets and most importantly, this bank recap has done nothing to resolve the basic problems of PSBs – 1) extraordinary high levels of NPAs, and 2) poor level of accountability the managements of these public sector banks have shown over the past many years in which many of the private sector banks and NBFCs have flourished to higher levels over the opportunities lost by these PSBs.

Still, this announcement of bank recap has resulted in 36% returns in Nifty PSU Bank Index since Muhurat Trading on Diwali, from 2942.7 on October 19 to 4001.45 on November 10. What I want to say here is that if just an announcement of doing something good for the health of the public sector enterprises or overall economy can deliver such high returns in such a short period of time, then I think nobody has truly imagined the actual potential of these CPSEs and PSUs if the government honestly gets serious with its duty to run these companies professionally. If you trust the intentions and policy execution capabilities of the Modi government, then only this ETF is worth investing your money at these levels, or otherwise, go for the diversified equity mutual funds.

ICICI Prudential Bharat 22 ETF Application Form

HDFC Life IPO Review – Should You Invest or Not @ Rs. 275-290?

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

HDFC Life Insurance IPO Details

Finalisation of Basis of Allotment – On or about November 14, 2017

Initiation of Refunds – On or about November 15, 2017

Credit of equity shares to investors’ demat accounts – On or about November 16, 2017

Commencement of Trading on the NSE/BSE – On or about November 17, 2017

Peer Comparison

Financials of HDFC Standard Life Insurance Company Limited

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

As far as insurance business is concerned, HDFC has never been an aggressive player and probably that is why it is not the market leader. With HDFC Life, there are certain things which are positive and there are certain things in which it lags other players in the industry. It recorded highest growth in AUM among top five private players listed in the table above in the last 5-year period. Also, the company reported the highest claim settlement ratio among these players at 99.16%. However, as far as operating cost and persistency ratios are concerned, it lags both its listed peers, SBI Life and ICICI Prudential. The company has operating cost ratio of 12.6% as compared to SBI Life’s 8% and ICICI Pru’s 10.7%. But, Max Life has it at 15.7% and Bajaj Allianz even higher at 18%.

During FY 2016-17, HDFC Life reported total income of Rs. 30,554 crore as against Rs. 18,210.23 crore in FY 2015-16, profit after tax (PAT) of Rs. 886.92 crore vs. 816.79 crore and diluted EPS of Rs. 4.42 vs. Rs. 4.09. During the half year ended September 30, 2017, the company managed to generate total income of Rs. 14,415 crore, PAT of Rs. 554 crore and diluted EPS of Rs. 2.76. As on September 30, 2017, the company has a net worth of Rs. 4,464 crore and book value of Rs. 22.3 per share. At Rs. 290 a share, the company will be valued at a PE of 65.61 times based on its FY 2016-17 earnings, 52.54 times its annualised EPS of Rs. 5.52 for FY 2017-18 and 13 times its latest book value. To me, these are again stretched valuations by any standards.

As per the latest report issued by Milliman Advisors LLP, HDFC Life has an embedded value of Rs. 14,011 crore as on September 30, 2017. At Rs. 290 a share, the company will have a market capitalisation of Rs. 57,994 crore, and will be valued at 4.14 times its embedded value. As compared to HDFC Life, ICICI Pru and SBI Life are currently valued at 3.25 times and 3.63 times their embedded values respectively. So, as far as valuation based on embedded value is concerned, HDFC Life is seeking a premium over SBI Life and ICICI Pru.

These are not cheap valuations and therefore I think leave nothing great for the investors to make on the listing day. However, it is the HDFC brand which is going to support these high valuations and therefore I think it should list within a close price band of +/- 5%. This IPO is for the long term investors and therefore I think it should move in tandem with other HDFC group companies. Only investors with a long term view should apply and others should avoid this IPO.

HDFC Life IPO Details

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

HDFC Life IPO Review – Should You Invest or Not @ Rs. 275-290?

After tepid listings of SBI Life and GIC Re, it is now the turn of HDFC Life to get itself listed on the stock exchanges with its initial public offer (IPO) of Rs. 8,695 crore. The issue is getting opened for subscription from tuesday, November 7 and will remain open for three days to close on November 9.

Like most of the IPOs in bull markets, this IPO too involves sale of stake by its existing promoters. HDFC is selling its 9.52% stake and Standard Life (Mauritius Holdings) is selling its 5.4% stake in this IPO. Post this issue, HDFC’s stake in the company will fall from 61.21% to 51.69% and Standard Life’s stake will fall from 34.75% to 29.35%.

The company has fixed its price band in the range of Rs. 275-290 a share and no discount has been offered to the retail investors. The offer would constitute 14.92% of HDFC Life’s post-offer paid-up equity share capital.

Here are some of the salient features of this issue:

Size & Objective of the Issue – HDFC and Standard Life (Mauritius Holdings) are collectively selling their 14.92% stake in HDFC Life in this IPO to raise Rs. 8,695 crore. HDFC Life will not get any proceeds from this offering.

Price Band & Retail Discount– HDFC Life has fixed its price band to be between Rs. 275-290 a share and the company has decided not to offer any discount to the retail investors.

Reservation for HDFC Shareholders & HDFC Life Employees – HDFC Life has reserved 2.998 crore shares for the existing shareholders of its parent company HDFC, 21.45 lakh shares for the HDFC Life employees and 8.05 lakh shares for the employees of HDFC.

Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 50 shares and in multiples of 50 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,500 at the upper end of the price band and Rs. 13,750 at the lower end of the price band.

Maximum Investment – 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 50 shares each @ Rs. 290 a share i.e. a maximum investment of Rs. 1,88,500. At Rs. 275 per share, you can apply for 14 lots only of 50 shares, thus making it Rs. 1,92,500.

Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on November 9. Its shares are expected to get listed on November 17.

Here are some other important dates as the issue gets closed on November 9:

Finalisation of Basis of Allotment – On or about November 14, 2017

Initiation of Refunds – On or about November 15, 2017

Credit of equity shares to investors’ demat accounts – On or about November 16, 2017

Commencement of Trading on the NSE/BSE – On or about November 17, 2017

Peer Comparison

Financials of HDFC Standard Life Insurance Company Limited