Muthoot Finance Limited (MFL), the flagship company of the Kerala-based business house The Muthoot Group, is in the market to raise upto Rs 1000 crore through a public issue of secured Non-Convertible Debentures (NCDs). Muthoot Finance is India’s largest gold loan focussed NBFC and its equity shares are listed on stock exchanges. The NCDs being offered can deliver annual interest of 7.15% to 7.75% to HNIs and retail investors. Read on to know more.
NCD issue details
The base issue size is Rs 100 crore, with an option to retain oversubscription of Rs 900 crore. Total funds that can be raised from the issue is Rs 1000 crore. Each NCD costs Rs 1000. Muthoot Finance’s NCD issue is open till January 5, 2021. There may be early closure. Minimum application amount would be Rs 10,000. The NCDs will be listed on BSE within 6 working days from the issue closing date.
Interest and options
There are 6 options. 1. Monthly – 38 months tenure – 7.15% per annum (base rate of 6.75% + 0.40% incentive) 2. Annual – 38 months – 7.40% per annum (including incentive) 3. Monthly – 60 months – 7.50% per annum (including incentive) 4. Annual – 60 months – 7.75% per annum (including incentive) 5. Maturity payment – 38 months – Rs 1 lakh investment can become Rs 1.25 lakh 6. Maturity payment – 60 months – Rs 1 lakh investment can become Rs 1.45 lakh.
NCD safety, ratings
The NCDs proposed to be issued under this offering have been rated [ICRA] AA (Stable) by ICRA, and have been rated CRISIL AA/Positive by CRISIL. The rating of the NCDs by ICRA and CRISIL indicates high degree of safety regarding timely servicing of financial obligations. Do remember the rating provided by ICRA and CRISIL may be suspended, withdrawn or revised at any time by the assigning rating agency and should be evaluated independently of any other rating.
Security of NCDs
The claims of the secured NCD holders are superior to the claims of any unsecured creditors, subject to applicable statutory and/or regulatory requirements). The secured NCDs will be secured by way of first pari passu charge on current assets, book debts, loans and advances, and receivables including gold loan receivables, both present and future, of Muthoot Finance company, by way of hypothecation.
Taxation
Interest income on NCDs is taxable at your slab rate whether on pay-out or under the cumulative option. If you sell the bond in the exchanges in less than a year, short-term capital gains, at your tax slab, will be applicable. If you sell after a year of holding, then long-term capital gains tax without indexation will apply.
How to apply
An eligible investor desirous of applying in the NCD issue can make applications only through the Applications Supported by Blocked Amount (ASBA) process.
Category III or High Net-worth Individual Investors (“HNIs”) can apply for an amount aggregating to above Rs 10 lakh across all options of NCDs in the issue. Category IV or Retail Individual Investors can apply for an amount aggregating up to and including Rs 10 lakh across all options of NCDs in the issue.
Please note that there is a single application form for all applicants.
If you would like to subscribe to Muthoot Finance NCDs, contact Wealthzi team at service@wealthzi.com or open an account at www.wealthzi.com.
Founded in January 2001, Antony Waste Handling Cell (AWHC) is one of the top five players in the Indian municipal solid waste (MSW) management industry with an established track record of more than 19 years. The company is tapping the primary market to raise Rs 300 crore via an Initial Public Offer (IPO). The issue is closing today (Dec. 23). The IPO shares are being offered in a price band of Rs 313 to 315. So far i.e. close of Dec. 22 business hours, the IPO has been subscribed 1.77 times, as per NSE data. Read on to know more about the IPO.
IPO details
The IPO issue size is Rs 300 crore for about 95.22 lakh shares. Out of this, the company will get Rs 85 crore (a fresh share issue of 26.98 lakh). The rest will go to an investment fund that is directly selling 68.24 lakh shares.
The market lot for Antony Waste Handling Cell IPO application is 47 shares. This means your minimum investment has to be about Rs 14,800. Each share has a face value of Rs 5.
Post-IPO, AWHC’s promoters, including Jose Jacob and Shiju Jacob, will hold a 46.2% stake. The general public will hold 53.8%.
Listing is likely in the first week of January 2021 in BSE & NSE.
The IPO book running lead manager is Equirus Capital Private Limited, IIFL Securities Limited.
Registrar to issue is Link Intime India Private Limited.
IPO proceeds purpose
The company will use the Rs 85 crore (pre-expenses) to part-finance Pthe impri-Chinchwad Municipal Corporation (PCMC) waste-to-energy project (WTE) through investment in the subsidiaries of the company, AG Enviro and/or ALESPL.
Also, the company will use money to reduce consolidated borrowings by infusing debt in the subsidiary – AG Enviro (for repayment / prepayment of portion of their outstanding indebtedness).
Do remember Antony Waste Handling Cell had tried to do an IPO in March 2020 but the market response was bad amid Covid-19 fears.
Company business
Antony Waste Handling Cell earns two-third revenue from collecting urban municipal waste. The rest comes from sweeping and processing works.
The company primarily undertakes specialised MSW collection & transportation (C&T) projects, MSW processing projects and mechanised sweeping projects for municipalities and private players. It has undertaken more than 25 projects as of November 15, 2020, of which 18 are ongoing. Of the 18 ongoing projects, 17 have been awarded by municipal corporations.
Potential
With increasing energy demand and government initiatives, the waste to energy (WTE) market is anticipated to see more public private partnership (PPP) based projects, says ICICIdirect. AWHC believes that with assured raw material and a power offtake agreement, the business offers limited risks and will help in improving predictability of its cash flows. The company, through its stepdown subsidiary ALREPL, has been awarded a contract for setting up and operating a WTE plant having a capacity of up to 1,000 TPD by Pimpri Chinchwad Municipal Corporation (PCMC).
The Municipal waste management industry in India is pegged at Rs 5,000 crore and is expected to grow at a CAGR of 14.4% till FY25 reaching Rs 9800 crore.
Competitors
Antony Waste Handling Cell competes with various players like Ramky Enviro Engineers, Metro Waste Handling, BVG, A2Z, SPML Infra, Terra Firma etc.
Positives and negatives
According to Angel Broking, the positives are (a) Presence in the fast-growing MSW management industry with end-to-end capabilities, (b) Strong track record of project execution, (c) Long term contracts with municipalities, and (d) Experienced promoters and management team with strong domain expertise
Key risk & concerns are: 1. High dependence on municipal corporations (involves receivables risk) 2. Working capital intensive business (large numbers of workers, deployment of heavy transport vehicles etc.) 3. High customer concentration (top 5 clients contributed 81.8% of the revenue of the FY2020)
Financials
In FY20, the company made net sales of Rs 450 crore and a net profit of Rs 62.1 crore. There was a substantial jump in topline as well as bottom-line compared to FY19 numbers. AWHC reported revenue, EBIDTA & PAT growth CAGR of 27.7%, 34.2% & 27.9%, respectively, in FY18-20. The company has maintained healthy return ratios that were upwards of 20%+ in the last three years. One can expect future growth to be lumpy in some sense. The company at the end of first half of FY21 had over Rs 160 crore in terms of total loans.
Valuation
If you buy the IPO stock at an upper price band of Rs 315/share, you will be paying Rs 12 for every rupee profit made by the company in FY20 (reported earnings per share is Rs 27.48). We believe AWHC’s pricing has left some scope for upside in the long term and recommend subscribing to the issue, says Nirmal Bang.
Mutual fund schemes have become one of the most prevalent investment avenues. In the last few years, mutual funds have assisted investors in achieving their financial goals.
Besides this, it has also offered better tax-adjusted returns than other traditional vehicles of investments.
However, did you know you can also use mutual funds to get a monthly income? Monthly income is important for retirees who no longer have a regular source of income.
Individuals can invest in mutual funds during their working years and redeem their investments and gains after retirement.
Options for monthly income
We know that different types of mutual funds have different investment objectives. And the investment objectives of debt and debt-oriented funds are income generation and capital protection. It also aims to give returns that beat inflation.
However, it is to be noted that mutual funds are linked to the market and cannot provide a stable monthly return like other traditional savings options.
Systematic Withdrawal Plan (SWP) is a facility that offers mutual fund investors the option to withdraw a specific sum of money over a timeframe. While this option is available for both equity and debt funds, setting up an SWP in debt funds is better, as debt funds are less volatile than equity funds.
Do mutual funds pay a dividend?
If you opt for the dividend option, your mutual fund will pay a dividend. Besides SWP, the dividend option
is also a way to get income from mutual funds. In the case of the dividend option, the fund houses distribute the gains to the investor. However, dividends are not distributed regularly and are under the fund house’s jurisdiction.
Unlike dividends received on direct equity investment, mutual fund houses can also distribute the dividends from the invested capital. After the dividend is announced, the unit price of the dividend plan reduces as per the distributed dividend. Dividends are not tax-free. It is added to the investor’s income and taxed as per its tax slab. The mutual fund house will also deduct a 10% TDS on the dividends amounting to more than Rs. 5,000.
Mutual funds growth vs dividend
You can choose the growth or dividend option when you invest in any fund. The dividend option is now renamed as Pay-out of Income Distribution cum capital withdrawal. In the case of a growth option, the fund manager reinvests the returns generated by the fund. Moreover, the dividend distributed will only be a small portion of the invested capital.
So, if we compare the dividend option and SWP, we will see that SWP is a better option than the dividend option.
This article will look at the best way to get income from mutual funds through SWP.
What is Systematic Withdrawal Plan (SWP)?
By choosing to go with the SWP system, you can effortlessly create a regular income through mutual funds. An SWP is the opposite of the Systematic Investment Plan (SIP). Here, you get to withdraw from your mutual funds in instalments. In simple words, the SWP lets you withdraw a certain amount of money from the mutual fund scheme at regular intervals.
Let’s understand it better with an example. Suppose you wish to withdraw Rs.20,000 on the 1st of every month. Thus, you can do so through SWP. You can also choose varying intervals through this facility, such as monthly, quarterly, half-yearly, and yearly depending on your preference.
In the same manner, the amount you would wish to withdraw can vary according to your need. For instance, some mutual fund houses offer you the option to take out only the gains while keeping the invested money intact in the mutual fund scheme.
Once you have selected the sum and the withdrawal frequency, the fund manager will sell units from the scheme on the pre-decided date. And then, the transaction to transfer the selected amount to your bank will get initiated.
Let’s take another example here. Using the AdvisorKhoj SWP calculator, let’s understand the working of SWP. Imagine you have invested a lump sum amount of Rs. 72,000 in SBI Magnum Income scheme – Regular Plan.
Let’s say you need Rs. 3,000 per month through SWP.
AMC
SBI Mutual Fund
Scheme
SBI Magnum Income Reg Gr
Lumpsum Amount
Rs. 72,000
Lumpsum Amount Investment Date
01-04-2019
Withdrawal Amount
Rs. 3,000
SWP Date
10
Period
Monthly
SWP Start Date
06-04-2020
SWP End Date
06-04-2022
Here’s how the monthly SWP will take place:
Now, throughout the entire period of your investment, there will be 24 monthly instalments. Also, you will get to withdraw Rs. 72,000 in these instalments. At 8.28% of the return rate, the fund will have Rs. 6219 on 10th March 2022 after the invested capital of Rs.72,000 is redeemed.
Here, you must remember that if the scheme NAV is appreciating at such a percentage that is higher than the withdrawal rate, the investment value will also get appreciated.
However, despite the fall in NAVs, you will still get the regular income until the end of the SWP period or until there is money in the investment scheme.
So, we have seen that the SWP amount remains fixed and doesn’t vary as per the market movement.
Benefits of SWP
SWP is the best option available for investors to receive a monthly income.
Flexibility
In such a plan, you get the utmost flexibility to select the frequency, amount and date according to your need. Also, you can even stop the SWP at any given moment. If you want, you can withdraw an extra amount above and over the fixed SWP withdrawals or invest additionally.
Capital Appreciation
If the withdrawal rate of SWP is lower than the fund return, your invested amount will appreciate, and you may be able to withdraw more money.
No Tax Deduction at Source (TDS)
One of the significant benefits of investing in an SWP is that if you are a resident of India, you will not have to pay any TDS on your gains.
Mutual Funds to Invest to Get Monthly Income
Mutual funds with low volatility and are capable of beating inflation are considered the best candidates for monthly income. You can put your money in Conservative Hybrid Funds that invest a minimum of 75% of the amount in debt instruments to create a monthly cash flow. Also, the remaining 25% goes into stocks that add better growth to your portfolio.
Furthermore, you can consider other debt fund categories, like Banking and PSU Debt Funds, corporate bond funds, or short-duration debt funds. These funds have the potential to beat inflation.
If not, you can also go with Equity Savings Funds that put a minimum of 65% of your amount in equity instruments such as derivatives. Derivatives are equity-related securities that take advantage of mispricings in several markets to earn risk-free gains by simultaneously purchasing and selling equities.
How to Select the Fund for Monthly Income?
In the previous paragraph, we have seen that debt and debt-oriented funds are best to set up SWP to get monthly income. Now, we will see some of the factors to consider when choosing the right fund:
Past Performance
When selecting a fund for monthly income, we need to look for funds that are not volatile and don’t take unnecessary risks.
As we are parking lumpsum money in a debt-oriented fund, we need to check the fund’s performance when the market is down. If the fund has consistently performed better than its peers during difficult periods, the fund can be a better option.
Expense Ratio
The expense ratio is referred to as the fee charged by the fund house for managing the fund. It includes fund management fee, marketing fee and commission to distributors. The expense ratio is subtracted from the returns generated by the fund.
While the percentage may seem low, it will considerably impact the total investment portfolio. So, it is better to look for a fund with a low expense ratio.
Exit Load
Exit load is the fee charged when exiting a mutual fund scheme. Depending on the fund, you will have to pay an exit load if you withdraw within a shorter period.
This fee is levied to avert quick exit and instant cash outflow from fund houses. Thus, as an investor, make sure you are going with mutual funds with zero or minimal exit loads.
Maturity Profile
The maturity period of the underlying debt instruments varies from one type of debt fund to another. Every debt funds have a different maturity profile. So, depending on your investment period, you can select the debt fund that matches your horizon.
Tax Implications of SWP
The redemption through an SWP is subject to taxation. If you have debt funds and your holding period is less than 36 months, the capital gains realised will be added to your overall income. Also, it will be taxed as per your income tax slab rate. However, if the holding period goes beyond 36 months, the capital gains will be regarded as long-term and taxed at 20% after the indexation.
Regarding equity funds, if the holding period is less than a year, the capital gains will be taxed at 15%. On the contrary, if the holding period goes beyond a year, it will be long-term capital gains and taxed at 10% without any indexation.
Who should look at getting monthly income or using SWP from mutual funds?
Generally, experts recommend SWP for ultra-conservative investors and retirees who wish to get a fixed sum of money.
Apart from this, freelancers and those with varying income can also withdraw money through SWP to cater to their regular requirements.
Key Takeaways
In the end, here are some key takeaways to keep in mind:
Mutual funds could be useful if you look forward to a regular cash flow to meet basic expenditures.
You can earn income from mutual funds by going with an SWP or dividend option.
SWP is a much-recommended option to earn a regular income, considering it is tax-efficient and can guarantee a specific amount at the end of every month.
With an SWP plan, you can select the amount, date and frequency according to your convenience.
FAQs on Monthly Income from mutual funds
Can I get monthly income from mutual funds?
Yes, it is possible to get monthly income from mutual funds. One of the best ways is to set up a Systematic Withdrawal Plan in a debt-oriented mutual fund scheme.
Which mutual fund is best for monthly income?
While trying to generate regular income from mutual fund investments, you must stay away from something that gets severely impacted by volatility. Thus, it is best to invest in conservative hybrid mutual funds or debt mutual funds that are less volatile than equity funds and beat inflation.
Which mutual fund gives the highest monthly dividend?
Dividends are generally distributed based on the surplus that the scheme has gained. Thus, there is no mutual fund that can guarantee a monthly dividend. However, if you still wish to get dividends, you can go with the Equity Saving Funds, Conservative Hybrid Mutual Funds or the Dividend Plan of Short Duration Debt Mutual Funds.
What are the safest fixed-income funds?
Among the fixed-income funds category, the overnight fund is the safest choice. It invests in securities that mature in one day. Thus, it doesn’t have any interest or credit risk. The risk of incurring a loss with overnight funds is almost zero. Additionally, you can also go with liquid funds as they only invest in money market securities that mature within 91 days.
Need help investing in mutual funds for monthly income? Get in touch with your consultant at www.wealthzi.com.
The Indian market on Monday suffered their worst day in seven months. The NSE Nifty 50 index ended 3.14% lower at 13,328.40, wiping out six straight sessions of gains. The other benchmark, S&P BSE Sensex fell 3% to 45,553.96. Here are the 5 factors why markets tanked in this manner.
1) Mutated Covid strain
British health secretary Matt Hancock said Sunday that the government has imposed a strict Christmas lockdown in London and southeast England because a new strain of the coronavirus was “out of control”. Countries around the world have begun banning flights and travellers from Britain.
Says Naveen Kulkarni, Chief Investment Officer, Axis Securities “The market fall today can be attributed to the surge in cases in the UK and the new strain of coronavirus which transmits even faster.”
2) Valuations not cheap
Markets are ripe for a fall due to valuations.
Before the fall, the Nifty trades at a 12-month forward P/E of over 21 times, a premium to its long-period average. The Nifty P/B of nearly 2.9 times, a premium to its historical average.
The index’s 12-month trailing P/E of nearly 27 times, over 30% premium to its long-period average. At 3.2 times, its 12-month trailing P/B is also above its historical average. These valuations are before market fall.
Many in market feel that the valuations appear to be in dangerous territory, unlike what is widely perceived. Optically, values appear high. The valuations will make sense only when earnings play catch-up, in two out of the next four years.
“…. concerns around the fiscal deficit can’t be overlooked. Sustenance of small businesses, jobs and the like are indeed in question. Having said that, no market rally ever expects to have all ticks marked in its favour. The market gains strength from a host of factors lending credible support: a benign crude and commodity environment that would benefit equities, a government-backed mega manufacturing push in India, lowered taxation, and global players aggressively eyeing an alternative to China,” says Amar Ambani, Senior President and Head of Research – Institutional Equities, YES SECURITIES.
3) Profit-booking after highs
Markets have been enjoying a strong Bull Run over the past two months now. Last week, the benchmark index hit a fresh record high above 13700. “… today too despite having some sluggish start, Nifty managed to post a new high of 13777.50 in the initial hours. The initial profit booking then turned into a massive sell off in the latter half to shed more than 600 points at one point,” says Sameet Chavan (Chief Analyst-Technical and Derivatives, Angel Broking).
Today’s correction is a classic example of how the market generally traps market participants. Despite the market hitting new record highs in the last couple of weeks, the brakes have been applied to the recent euphoria.
4) Put writers cover
Another factor behind market plummeting was in the derivatives market activity.
Nifty has formed a large bearish candle which has engulfed the high low range of the previous 9 sessions. In the process two upgaps formed in this period have been filled nullifying the bullishness.
Many put writers today covered their positions by shorting in the futures market. This lead to the fast decline in the market.
Selling pressure accelerated after a high of 13778 was touched. Broad market indices like the BSE Mid Cap and Small Cap indices lost more, thereby under performing the Sensex/Nifty. Market breadth was negative on the BSE/NSE.
All the sectoral indices ended in the red. The top losers were the BSE Metal, Oil and Gas, Realty and Auto indices.
“Technically, with the Nifty correcting sharply and closing below the crucial supports of 13447, the index is now in a short term downtrend. Immediate supports are now at 13131. Any pullback rallies could find resistance at 13447-13500,” says Subash Gangadharan, Technical and Derivative Analyst, HDFC Securities.
5) Global bear hug
Resurgent fears have emerged over the new strain of Covid-19 virus and this has spread like panic across the globe.
Global markets behave when participants lightened positions across nations. Basket selling by FPIs likely triggered the sharp fall in Indian markets. Indian markets performed the worst among the Asia pack. Marketcap of BSE listed companies fell Rs 6.64 lakh crores or 3.6% between Dec 18 and Dec 21.
Plus, rising US-China tension is not helping. Asian stocks ended mostly lower on Monday after a new strain of Sars-CoV-2 virus has been found in the U.K. that is 70 percent more infectious. Wavering trade negotiations between Britain and the European Union and rising U.S.-China tensions overshadowed positive news of U.S. lawmakers reaching a deal for a nearly $900 billion Covid-19 financial package.
Edelweiss Financial Services Ltd, a category I Merchant Banker and the parent company of the Edelweiss Group, is offering Non-Convertible Debentures (NCDs) to the public. The money so raised will primarily be used for pre/repayment of debt, and the rest can be used for other corporate purposes. The offer opens on 23 Dec, 2020 and closes on 15 Jan, 2021. The NCDs carry a face value of Rs 1,000 with a minimum application size of Rs 10,000.
Interest rate offerings
Investors have 7 options to choose from this debentures/bonds offer. There are 3 tenures – 36 months (3 years), 60 months (5 years) and 120 months (10 years). There are annual and cumulative interest payment under 36 months and 60 months options. There is a monthly interest payment under 60 months and 120 months options. You get monthly, annual and cumulative interest payment only under 60 months option. Cumulative means if you hold till maturity.
Let’s look at some options. The 3-year cumulative NCDs can fetch you 9.35% per annum. The 5-year cumulative NCDs can fetch you 9.8%. The 10-year annual option gives 9.95%.
Attractive yields
The rates offered by the Edelweiss Financial Services NCDs are attractive relative to yields prevailing in the market. Currently, market yields on corporate bonds with the same credit rating as Edelweiss Financial Services’ debentures (CARE has given A+ rating) hover at 8.7% for 3 years, 10.3% for 5 years and 11.4% for 10 years. Brickwork Ratings has given a AA- (Double A minus) rating to Edelweiss Financial Services’ debentures. The market yields on corporate bonds with same credit rating hover at 8.52% for 3 years, 9.72% for 5 years and 10.82% for 10 years.
Hence, the interest rates offered by Edelweiss Financial Services are attractive relative to corporate bonds yields prevailing in the market in the three-year and five-year option if you take Brickwork’s AA minus rating given to the Edelweiss parent company. From a spread perspective, the 3 year option makes sense if you have adequate risk appetite.
Fully secured NCDs
The NCDs being offered are proposed to be fully secured by way of first pari-passu/ specified charge in favour of the Debenture Trustee (Beacon Trusteeship) on an identified immovable property and/or future receivables of Edelweiss Financial Services, created in favour of the Debenture Trustee. This will be as specifically set out in and fully described in the Debenture Trust Deed, except those receivables specifically and exclusively charged in favour of certain existing charge holders. All this will be done in a way that a security cover of at least 100% of the outstanding principal amounts of the NCDs and interest thereon is maintained at all time until the Maturity Date.
Do note the Edelweiss debentures/bonds do not carry any Put or Call options. The debentures will be listed on the exchange where investors can exit before maturity. Remember that such a exit will be subject to actual trading volumes and the market price may vary from face value.
Taxation
Interest income on NCDs is taxable at your slab rate whether on pay-out or under the cumulative option. If you sell the bond in the exchanges in less than a year, short-term capital gains, at your tax slab, will be applicable. If you sell after a year of holding, then long-term capital gains tax without indexation will apply.
If you would like to subscribe to Edelweiss NCDs, contact Wealthzi team at service@wealthzi.com or open an account at www.wealthzi.com
The Rs 400-crore Girik Multicap Growth Equity Strategy PMS is giving established category peers a run for their money. Steered by the CANSLIM philosophy of investing, the strategy since inception has given one of the best returns in the multicap space and also comprehensively beat the Nifty. Here is a review.
About Girik Capital
Founded in 2009, Girik Capital is a Mumbai based SEBI registered portfolio manager providing discretionary asset management services. Its focus is Indian listed equities and caters to corporates, institutions, family offices and individuals from India and globally. The investment management team at Girik brings more than 20 years of cumulative experience in investment management.
The PMS provider is led by Charandeep Singh and Varun Daga. Charandeep currently jointly leads the investment decision making process at Girik. Varun is co-founder of Girik and jointly leads the investment decision-making process.
Investment philosophy
Girik employs a disciplined and process-driven approach to investing in industry leaders with strong fundamentals while building in a sufficient margin of safety. Its investment strategy has been influenced by William O Niel’s CANSLIM style of investment management.
CANSLIM stands for C – Current Earnings, A – Annual Earnings, N – Newness, S – Supply & demand, L – Leader or laggard, I – Institutional Ownership, and M – Market direction.
Performance
The strategy was launched in December 2009, after the Global Financial Crisis (GFC). The strategy size is Rs 400 crore. The investment horizon is 3+ years.
The multicap strategy is benchmarked to Nifty 50 performance. Rs 100 invested with Girik Multicap Growth Equity Strategy since its inception in December 2009 is worth nearly Rs 700 where as Nifty has grown to Rs 253 during the same period.
The short and long-term performance of the Girik Multicap porttfolio is enthusing. In the last 1-year period ended Nov-20, the PMS strategy has grown 20.51% compared to 7.57% for Nifty, 14.48% for Nifty Midcap 100 and 13.04% for Nifty Smallcap. In the 5-year period, Girik Multicap Growth Equity Strategy has delivered 16.81% CAGR compared to 10.32% for Nifty 50, 8.27% for Nifty Midcap 100 and 3.46% for Nifty Smallcap. In the 10-year period, the PMS fund has given 17.58% CAGR compared to 5-8.3% for the benchmarks. Since inception the strategy has given over 19% CAGR, more than double that of Nifty 50.
The performance of Girik Multicap Growth Equity Strategy is also better compared to established peers. The PMS strategy has given 20.51% in 1 year period compared to ASK IEP’s 14.3%, Motilal Oswal NTDOP’s 5.22%, Karma Capital Long Only India Public Equity’s 11.38%, Alchemy Select Stock’s -5.3%, and Axis Brand Equity’s 13.3%. The Girik PMS edge over established rivals, such as ASK IEP, Motilal Oswal NTDOP etc., remains even in the 5-year period.
Portfolio
The multicap portfolio has 43% exposure to largecaps, 20% to midcaps, 26% to smallcaps. About 11% is in cash. There are 23 stocks in the portfolio.
The portfolio at present is heavily titled towards Pharmaceuticals & Drugs (15.52%), IT – Software (11.78%), Financial Services – Investment & Insurance (10.99%) and Consumer Food (8.92%). Financial Services – NBFC (8.03%), e-Commerce (6.21%), Refineries (6.10%), Financial Services – Banks (5.61%) also occupy important slots.
In terms of stocks, the multicap PMS strategy has bet big on Infosys, Indiamart Intermesh, Reliance Industries, Jubilant FoodWorks, HDFC Bank and Larsen & Toubro Infotech.
Skin in the game
There is strong sponsorship of Rs 57 crore investment by Girik fund managers in Girik funds. Girik Capital is owned and operated by its investment managers.
Wealthzi is organising a digital conclave with the founders of Girik Capital on Friday, December 18, at 4 pm. The top of discussion is, “Markets at all time high: What should be your equity strategy in 2021”. For registration, click here (Seats are limited, so hurry!)
We are pleased to announce Wealthzi Digital Conclave with leading portfolio management services (PMS) company Girik Capital on Friday, 18th December, at 4 pm.Â
The topic of the discussion is: “Markets at all-time high – what should be your equity strategy for 2021”.
The discussion between the founders of Girik Capital, Charandeep Singh and Varun Daga, will touch upon what is in store for the equity markets in the coming year, and what investors should do currently with the markets touching all time high of 13,600 levels, and poised to make even higher highs.
Girik Capital, a Mumbai-based PMS provider, launched its multi cap growth equity strategy in December 2009 and manages Rs 400 crore. It has recorded returns of 19.31% CAGR since inception, and 20.51% in the last one year beating the benchmark Nifty 50 in both instances.
Speaker details:
CHARANDEEP SINGH
Co-founder of Girik and leads the investment decision making process
Formidable experience of over two decades in capital markets
More than 10 years of experience of investing in Indian equities
With Lehman Brothers till 2007 as a Director of Investment Banking Division, Global Leveraged Finance group, based in New York and London
Holds a Diploma in Accounting and Finance from London School of Economics and Political Science (1999) and MSc in Finance from London Business School (2002
VARUN DAGA
Co-founder of Girik and jointly leads the investment decision making process
Self-taught successful investor and has a remarkable experience of over a decade in capital markets
Developed proprietary systems and screeners in order to identify leading growing companies well in advance of their biggest gains
Initially identified Girik’s investment framework inspired by the CANSLIM style of money management
Ran an equity investment division at his family office from 2006 to 2009
The buoyant Indian IPO market is reaching frenzy levels. Burger King India’s stock closed 130% over its issue price on Monday, and from Tuesday onwards one of its suppliers, Mrs Bectors Food Specialty is tapping the market to raise Rs 540.5 crore in what promises to be another exciting investment opportunity. A play on consumption, Mrs Bectors Food is in the business of manufacturing and marketing a range of biscuits (including cookies, creams, crackers, digestives, and glucose) and bakery products in savory and sweet categories (including breads, buns, pizza bases & cakes) to its retail & institutional clients. All eyes are on this IPO. Read on to know more.Â
Mrs Bectors Food Specialty IPO facts
The initial public offer of Mrs Bectors Food Specialty opens on 15th December and closes on 17th December. The total issue size is Rs 540.5 crore, comprising fresh Issue of Rs 40.5 crore and offer for sale of Rs 500 crore. The company will receive gross Rs 40.5 crore only.
There are a total 1.87 crore shares on offer. The IPO price band is Rs 286-288 per share. The minimum lot size is 50 and so the minimum investment based on the upper price band is Rs 14,400.
What is the business
Mrs Bectors Food Specialty (MBFS) is one of the leading companies in the premium, mid-premium biscuits segment and the premium bakery segment in North India. The company manufactures and markets a range of biscuits like cookies, creams, crackers, digestives and glucose under the flagship brand ‘Mrs Bector’s Cremica’. Bakery products are made in savoury & sweet categories and cakes are sold under the brand ‘English Oven’. The company is promoted by Anoop Bector (one of the sons of the iconic Mrs Rajni Bector). Promoter group will hold 51.1% stake post-IPO.
Who does it supply to?
Yes, the company is the largest supplier of buns in India to reputed QSR chains like Burger King India, Connaught Plaza Restaurants (McDonald’s), Hardcastle Restaurants and Yum! Restaurants (Pizza Hut). Do note the supplier company does not have any long term supply agreements with any of the QSR customers.
However, Mrs. Bectors is the sole supplier of burger buns and pan muffins (frozen) to Connaught Plaza Restaurants Pvt. Ltd. (associated since 1995) and it is a preferred supplier to leading players such as Hardcastle Restaurants, Yum! Restaurants, Rebel Foods and PVR. Â
What is unique about the business?
Apart from the company’s brands, there is something different. Do note that leading branded biscuit industry players like Britannia and Parle use a combination of in-house manufacturing and outsourced models to fulfil their demand. Mrs Bectors operates with 100% in-house manufacturing for its product to command higher margins. In-house manufacturing provides better visibility and control on quality assurance and food safety standards and faster product development cycles.
The Indian biscuits & bakery retail market is valued at Rs 45,000 crore and is expected to grow at ~9% CAGR in the next five years. Biscuits & other snacking bakery products like rusks, wafers and tea cakes contribute almost Rs 40,000 crore to the total market. The balance 11% is contributed by breads including loaves, buns, pizza bases that together account for Rs 5,000 crore.
Mrs Bectors’ rivals are Parle, Britannia, ITC, Anmol, Surya and Bonn.
What about operations?
Mrs Bectors Food Specialty’s operations are divided into:
Biscuits – domestic (37% of FY20 revenue)
Biscuits – exports (22% of FY20 revenue)
Branded breads & bakery products (17% of FY20 revenue)
Institutional Bakery (17% of FY20 revenue)
Others – Contract Manufacturing (6% of FY20 revenue). It manufactures ‘Oreo’ biscuits and ‘Chocobakes’ cookies for Mondelez India Foods Pvt. Ltd.Â
What kind of growth has happened
Mrs Bectors Food supplies its products to retail consumers in 26 states in India, besides institutional customers pan-India and to 64 countries across six continents.
The Domestic Biscuit business has grown at a CAGR of 7.5% over FY18-FY20 despite capacity constraints in FY18 and a part of FY19. The company has a strong presence in North India (4.5% of the premium and mid-premium biscuits market in North India in FY20).
It is present at 458k retail outlets across India, which are serviced through an in-house sales team of 250+ personnel. It is also one of the largest suppliers of biscuits to the CSDs, supplying in 33 locations across India.
As per Technopak, MBFS’s market share in the Indian biscuit export market is nearly 12%. Collection period for export business ranges between 50 days and 60 days.
The Branded Breads business has grown at a CAGR of 29% over FY18-20 with realization improving from Rs 18.50/pack in FY18 to Rs 22.10/pack in 1HFY21. It is the largest selling brand in Delhi NCR, Mumbai and Bengaluru.
Within the Institutional business, the company has the capacity to produce nearly 1.2 million burger buns/day. It has also started producing value-added products, including garlic breads, calzones etc. Despite a 61% YoY decline in 1HFY21 (sales to QSRs were affected due to Covid-19), the management is very confident about its institutional business given the fact that the QSR market is likely to grow by 22.7% over FY20-FY25.
What about the company’s financial results?
In FY18, Mrs Bectors Food clocked net revenue of Rs 690 crore and in FY20 the number was Rs 762 crore. In the first half of FY21, the 6-month topline was Rs 431 crore, which indicates an annualized figure of Rs 862 crore for entire FY21.
EBITDA margins have improved from 12.4% in FY18 to 16.7% in first half of FY21. Due to focus on high margin/premium products, overall gross margins have increased from 44% in FY18 to 47% in FY20. If not for lost sales in the domestic business, exports business and provision made for exports receivables, the operating margin in FY20 would have been higher than the reported 12%.
Profit after tax of the company has grown from Rs 36 crore in FY18, Rs 39 crore in first half of FY21.
Yes, a quick look at the company’s P&L and revenues shows unsteady growth.
The company’s long-term and short-term borrowings total Rs 101 crore (end of first half of FY21). Cash and bank balances were Rs 47 crore.
Dividend payout ratio has ranged about 15-18% in the last 3 years. Return ratios have fallen over FY18-FY20 due to capex investments.
What will the company do with IPO proceeds?
The company will be able to use IPO funds of Rs 40.5 crore (before expenses). In 2020, the company has proposed expansion of the Rajpura manufacturing facility (utilizing the proceeds of the IPO), which is likely to get commercialized by the end of 2022 and will add 14,000 tons of additional capacity for biscuits.
Do note the company has already invested Rs 260 crore between FY18 and Sept’2020 to build capacities with superior capabilities.
Does the IPO price offer value?
Mrs Bectors Food stock is valued at 55.5 times FY20 price to earnings & 2.3 times FY20 EV/sales. On a price to earnings metrics, Nestle trades at 86 times FY20 earnings, Britannia trades at 62 times its FY20 earnings and DFM Foods trades at 74 times its FY20 earnings. P/E figures for the peers are computed based on closing market price as on November 27, 2020.
So, on the P/E basis, Mrs Bectors Food IPO is priced lower than its peers.
Investors considering the IPO have to weigh the positives such as a leading brand of biscuits & bakery products in North India, a leading exporter of biscuits, a strong distribution network with the negatives such as concern that export benefits may end, that there may be an inability to expand manufacturing, that QSR contracts may get terminated and plausible supply/transportation disruptions.
As the size of individual wealth portfolio increases, a slice of property always finds its way in. But the old concept of directly buying, holding, and managing real estate is fraught with various problems. This is why Real Estate Investment Trusts (REITs) provide an easy way in terms of gaining exposure to real estate to investors without physically dealing with them.
The first real estate investment trust (REIT) listing in India was from Embassy Office Parks in 2019. Then, came the 2nd REIT in the form of Mindspace Business Parks. But, that’s a very limited basket if you want to invest only in Indian REITs. Investors want choice and for those who want to gain from a wider universe such as Asia-Pacific real investment trusts (REITs), Kotak Asset Management Company has launched ‘Kotak International REIT FoF (Fund of Fund)’.
This new product, which is open for subscription till Dec. 21, is India’s first global REIT FoF. To be clear, the money you invest in Kotak International REIT FoF will get invested in units of SMAM ASIA REIT Sub Trust Fund and/or other similar overseas REIT funds. In this article, we will tell you more about the Kotak International REIT FoF so that you can take an informed decision about investing.
Q: What is REIT
A: REITs, or real estate investment trusts, are companies that own or finance income-producing real estate across a range of property sectors. Most REITs trade on major stock exchanges, and they offer a number of benefits to investors.
Typically, REITs invest in real estate property including offices, apartment buildings, warehouses, retail centres, medical facilities, data centres, cell towers, infrastructure and hotels.
Q: How REITs make money
A: Most REITs lease space and collect rent on its real estate. In this way, the company generates income which is then paid out to shareholders in the form of dividends.
There are some REITs who don’t own real estate directly, but they finance real estate and earn income from the interest on these investments.
Q: Why invest in REITs
A: Historically, REITs have delivered competitive total returns. This is on the basis of steady dividend income and long-term capital appreciation.
Also, REITs are said to have a comparatively low correlation with other assets, which makes them an excellent portfolio diversifier.
Q: Why invest in REITs outside India
A: SMAM ASIA REIT Sub Trust Fund is the Largest Asia Pacific (ex Japan) REIT Fund. At this moment if you invest in the two listed REITs in India, you will get exposure to majorly the Office sector in 5-6 cities.
In comparison, Kotak International REIT FoF through SMAM ASIA REIT Sub Trust Fund offers exposure to varied REITs across geographies through the underlying fund. Your money gets you exposure to properties including offices, residential, data centres, logistics, warehouses. Also, you get multi-country exposure viz. properties in Singapore, Australia, Hong Kong, New Zealand, Thailand, India etc.
Q: How will Kotak International REIT FoF invest
A: The Kotak International REIT FoF can invest 95-100% in units of SMAM ASIA REIT Sub Trust Fund and/or other similar overseas REIT funds.
Also, it can invest 0-5% in debt and money market instruments and/or units of debt/liquid schemes of domestic mutual funds.
Q: Why SMAM ASIA REIT Sub Trust Fund
A: As mentioned previously, this the largest Asia Pacific (excluding Japan) REIT fund. We think this is one of the main reasons Kotak International REIT FoF has chosen it to be the underlying fund. Because this is a Fund of Fund, the Indian fund manager hardly has any role in terms of investments. So, some attention is required to be given on the underlying fund.
Secondly, this underlying fund offers a gateway to capturing attractive dividend yields, which are higher than government bonds, normal stocks, and REITs in other regions.
Thirdly, the SMAM ASIA REIT Sub Trust Fund offers a decent combination of Asian REITs (mostly in Singapore and Hong Kong) to take advantage of relatively higher dividend yield, and Pacific REITs (mostly Australian REITs) to form a portfolio that produces stable dividend yields from well-established markets.
Fourthly, in the Post-Covid world, the world of real estate investments could operate very differently. The SMAM ASIA REIT Sub Trust Fund has zero exposure to hotels (the highest impacted area due to Covid). The underlying fund is underweight on the Retail sector as well. Instead, it has chosen to bet big on the least impacted by Covid disruption (Industrial 34%, Diversified 23% and speciality 11%).
Q: Why not other region REITs
A: Dividend yield levels of Singapore and Australia are higher than those of UK, US and Japan.
Also, at this point in time, Indian MF investors have no pure-play way to get exposure to US, UK, Japan REITs.
Additionally, Asia Pacific REITs offer exposure to the highly organized real estate sector, strong growth potential, and an expanding market.
Q: What returns can be expected from Kotak International REIT FoF
A: The Kotak International REIT FoF is a new product, and has no history of returns. It however will invest in an underlying fund which has been around for about 10 years.
The average dividend yield of SMAM ASIA REIT Sub Trust Fund is 4.3% (as of the end of October 2020).
According to Freefincal, the returns of the underlying fund have swung from -4% to 14% over three-year rolling windows and from 2% to 10% over five-year rolling windows.
In short, the returns of Kotak International REIT FoF can be more debt like than equity.
Q: Is this a high-risk product?
A: The risk-o-meter given along with the product indicates ‘high risk’.
Q: What will be the cost to an investor in Kotak International REIT FoF
A: The underlying scheme will have a total expense ratio of around 0.77% per annum of daily net assets. Any other costs will be added to this. Do note that the 0.77% amount is not fixed and could change in the future.
Q: What is the exit load in Kotak International REIT FoF
A: There will be 1% exit load charged for redemptions / switch outs (including IP/STP) within 1 year from the date of allotment of units, irrespective of the amount of investment.
Q: How will your returns in Kotak International REIT FoF be taxed
A: Short-term capital gain tax will be levied according to the income tax slab of the investor if units are sold before 36 months.
If the units are sold after 36 months, a long-term capital gain tax of 20% with indexation will be levied.
Portfolio Management Services (PMS) are investment services offered to people having a large amount of surplus money. These are often preferred by High Networth Individuals (HNI) because they don’t have the time to manage their stock portfolio on their own and need professional management for their investments. So, PMS is where the portfolio of the investor is managed by a fund manager by their behalf. PMS consists of investments in stocks, fixed income products and structured products. Structured products are those that invest in derivatives (futures and options).
The portfolio manager is answerable to the investors as the investors’ money is managed for a fee. As per the latest Securities Exchange Board of India (SEBI) guidelines, the minimum investment for availing PMS services should not be lower than Rs. 50 lakhs. Here are the reasons why HNIs can opt for PMS.
Choose the one you need
There are many different kinds of PMS. One is discretionary where the portfolio manager will decide when and what investments should be made. Other is the non-discretionary PMS where the portfolio manager will provide the investor with investment suggestions. The investor needs to decide on making the investments. After the investor provides the consent, the portfolio manager will make the investments.
There is advisory PMS where only investment advice is provided by the portfolio manager and the investor will decide if and when he wants to make the investments. You can choose any of these PMS based on your financial needs.
Get a quality portfolio
Investors typically focus on price rather than the value of the investments. This means that most often they might choose low quality stocks that provide lower returns to the investors in the long run. Investors tend to sell stocks for profits and hold on to duds thinking their prices will rise. This isn’t the right strategy. This is the reason why PMS helps.
Investment firms that offer PMS have model portfolios that have withstood the test of time. The model portfolio will have different styles of investing and asset classes. Based on your risk profile and requirements, the portfolio manager will help you choose the right PMS. You can make an analysis of the past performance of the model portfolios using XIRR. Read this article to understand XIRR. So, you will get the opportunity to invest in quality stocks that are recommended by stock market experts.
Independent portfolio
While mutual funds gather money from thousands and thousands of investors, PMS products have lesser number of investors. For mutual funds, the redemptions of these investors have an impact on your portfolio. Since PMS products offer individual portfolio management and this doesn’t impact other investors.
Every investor will have their own way of investing and selling their investments in the PMS. You needn’t be bothered about what other investors do and their redemptions or investments have no impact on your PMS.
Transparency
PMS products are more transparent than mutual funds. As an investor, you get to know how many calls went right and at what price each investment was bought and sold. Every trade call that the portfolio manager makes is known to the investor. This is not possible for mutual funds. Most PMS firms provide online information on the PMS portfolio and give monthly statements to clients. There are even firms that provide audited reports to clients at the end of every financial year. Even the expenses made by the PMS are transparent. Most firms provide details of charges for your portfolio and can be customised based on your requirements.
Participation in the investment
When you invest in PMS, you can get the opportunity to make investment calls and you can interact with the portfolio manager. You will be updated on important events such as bonus shares, take overs, share split, etc. You actually understand the investment calls that the portfolio manager makes because you get the information on the investments.
HNIs who have a huge investible surplus and strong risk appetite should consider PMS rather than mutual funds. You can choose PMS if it is different from the standard mutual fund products that are available. Interested? Wealthzi.com offers a host of PMS products just for you. You can explore them right here.
