Deccan Chronicle : 2019-02-11
Money : 12 : 12
MONEY 12 | | MONDAY 11 FEBRUARY 2019 HYDERABAD Brokers Tax matters ■ BYTES Kamal Rathi UPL gets buy rating from Anandrathi RETURNS FROM INVESTMENTS ARE COUNTED AS INCOME AND THUS ARE TAXABLE. HOWEVER, EACH SCHEME IS TAXED DIFFERENTLY. THUS, HERE’S A LOOK AT THEIR EFFECTIVENESS IN SAVING TAXES. UPL posted stable volume growth of six per cent yearon-year for Q3FY19, driven by robust performance across Latin America, North America, Europe and Rest of World. Better realisation and favourable currency movement resulted in 17.3 per cent YoY growth in net revenue to `4,921 crore. On profitability front, EBITDA grew 31 per cent YoY to `938 crore with margins improving 1.99 per cent YoY to 19.1 per cent. Improvement on EBITDA margin was on account of better product and price mix. Consolidated PAT has registered a de-growth of 19.7 per cent at `4,61 crore with margins declining 4.32 per cent to 9.4 per cent. Lower other income coupled with Arysta related one-offs resulted in decline in net margin. Positive acceptance of newly launched brands like Sweep power, Shagun, and bio-stimulants like Genexia, Macarena and Copiocontinues to grow at a healthy pace. Money talk ■ Adhil Shetty GLOSSARY Broking firm: Anandrathi Rating: Buy Closing price: `812.40 SHORT TERM & LONG TERM ASSETS: Assets classified as short term or long term depending on how long it has been since their purchase. Tata Elxsi gets buy rating from Motilal Oswal CAPITAL GAINS: Profits resulting from the sale of assets such as equity, mutual fund, property, gold etc. INDEXATION BENEFIT: Allows you to calculate an inflation-adjusted asset purchase price, thus lowering your tax outgo significantly. Tata Elxsi clocked two per cent growth QoQ on constant currency (CC) basis and 10 per cent YoY CC growth during the quarter. Growth was impacted by extended furloughs, which affected the work both at onsite and offshore locations, and was broad-based across business units. Shortterm anomalies on margins were a function of currency movements, but the company remains confident that margins will continue to be 25 per cent. Automotive is the highest contributing vertical for the company but it has managed to re-risk the business significantly from its dependency on JLR. However, the recent trend in growth raises concerns about the growth potential for the near term. The broking house remains positive on the long-term positioning, while client uncertainties will continue weighing on growth in the foreseeable future. SENIOR CITIZENS: Those above the age of 60. EMI ON LOAN AMOUNT OF `30 LAKH FOR A TENURE OF 20 YEARS INTEREST RATES ON HOME LOAN LENDER’S NAME FLOATING RATE(%)
8.8 - 9.2
8.85 - 9.1
8.75 - 9.35
8.7 - 8.95
8.65 EMI (IN `) LENDER’S NAME FLOATING RATE(%)
8.95 - 9.35
8.9 - 9.15
8.7 - 9.6
8.75 - 8.95
8.75 - 8.95
8.65 - 9.3
8.9 - 9.65
9.1 - 9.3
8.8 - 9.2 EMI (IN `) Allahabad Bank Axis Bank
Bank of India Bank of Maharashtra Canara Bank Central Bank Corporation Bank HDFC
J&K Bank 26,895 - 27,671
26,799 - 27,282
26,416 - 28,160
26,511 - 26,895
26,511 - 26,895
26,320 - 27,573
26,799 - 28,258
27,185 - 27,573
26,607 - 2,7379 Karnataka Bank Punjab National Bank Punjab & Sind Bank State Bank of India UCO Bank United Bank of India 26,607 - 27,379
26,511 - 26,703
26,703 - 27,185
26,511 - 27,671
26,416 - 26,895
26,320 Broking firm: Motilal Oswal Rating: Buy
Closing price: `902.30 VIP Inds. gets accumulate from Angel Note: Interest rates are for initial period only. These rates are based on the floating rates system and may change for the subsequent period. Actual interest rate may vary based on the credit profile of the loan applicant. Data compiled by BankBazaar.com via bank websites on Feb. 6, 2019 VIP Industries (VIP) posted a strong revenue growth of 27 per cent on year-on-year basis to `430 crore during Q3
FY2019 mainly led by 30-35 per cent volume growth. This growth was above our expectation of 21 per cent. The company is garnering market share from the unorganised market specially from backpacks and new categories which is driving such strong growth in its top line. Operating profit margins were down at 8.8 per cent on yearly basis which has come down from the peak level of
18.6 per cent reported in Q1
FY2019. Margin pressure was seen mainly due to 10 per cent rupee depreciation against dollar and rise in import duty on finished goods. The stock is trading at
33.1x our FY2020 earnings, post recent correction. Looking at the near term margin pressure, the broking house now recommended accumulate with a target price of `542 (35x rolled over on average of FY2020E and
FY2021E EPS). SIP is best way to avoid perils of direct equities names. This clearly shows that most are having to slow down their fresh disbursements and use that to repay debt. Thus, earnings disappointments will probably send the prices of the shares lower.
I still hold that equities as an asset class get the best returns, over a long period. Understanding price behaviour, business cycles, commodity cycles etc takes a lot of attention span.
In every investing journey, there are ups and downs. It never progresses as the excel sheet design. Staying put in a SIP of an ETF (or an index fund as second choice) is probably the safest way to preserve and create wealth without the stomach churn that accompanies direct equity investments.
One important thing to understand is that in direct equities, things are dynamic. For instance, our auto sector has been valued almost like FMCG companies. One day, maybe there will be no fossil fuel vehicles and all would be driven by alternative energy. Will all the old companies survive? We do not have answers yet. Every auto maker is ‘talking’ about his preparedness. The day of reckoning will throw up new winners and losers. Blue chips of yesteryears may fall by the wayside and new heroes emerge. Technology companies seem to have very short life cycles. Last mile delivery platforms are constantly evolving and what is exciting today will be outdated tomorrow.
To sum up, learn your own tolerance for risk, before you choose the path in equity investing. that even if three or four stocks tank badly, the impact on the overall NAV would not be much. For instance, if 30 per cent of the holdings crack by 50 per cent, the overall impact is only 15 per cent. Of course, when the bull is roaring, the MF will lag your exhilarating climb.
For those who cannot stomach these steep changes, the mutual fund route is better. Diversification may moderate the returns, but it will also fall less.
Most commodity stocks you bought would have been bought on the basis of the P&L account (earnings, earnings growth, P/E multiples etc). I have generally used the balance sheet measures to buy commodity stocks. Just because China has shut some capacities does not mean that commodity prices will keep going up forever or that additional supplies will not come. Sooner or later, supply overtakes demand and all players go into the red. Then some players go out and the balance of demand supply shifts. And in this business there is not much differentiation. So best is to buy or sell shares on the basis of the ‘replacement’ value of the business. Thus, I use the trend in “Price to Book Value” to buy or sell in this sector. I do not know my wait time, buy when I buy close to the lower end (as evidenced by past trend) my downside risks are lower and upside risks are higher.
Similarly, most NBFC stocks went in to valuations that were driven by growth rather than value or ROE. The best in this sector cannot even earn an ROE that is one fourth of the best in the manufacturing sector. There are no entry barriers and growth is predicated on an endless availability of funding. And the ability of this industry to keep bad debts low. Scandals in one lead to fear in others. And we can see that mutual funds and insurance companies seem to be the biggest provider of funds to this sector. And every company seems to be comfortable with a large short term funding source (commercial papers, one year papers etc) in the hope that it will always be rolled over. When a DHFL scares the market players, every one (except possibly the big and old established names) will not find money even at a price. This will lead to a chain reaction, call for government intervention and rescue operations. One glance at the secondary trades happening in the debt papers of these finance companies show indicative yields as high as 18 per cent for some lesser known Invest talk ■ R. Balakrishnan T he last few months have brought home the risks of investing into direct equities. There are many stocks which have fallen from favour due to some governance issues or some controversies. Even the mutual fund managers have been caught in this mess. Whether it is DHFL or GRUH or Yes Bank or the many commodity stocks that have seen their best behind, there are many casualties that have eroded wealth.
The Big Indexes do not seem to indicate any panic. The markets seem to be holding their own However, we go to the next levels, the scene is like a battlefield. There are so many casualties and a few fatalities also. Many people would have been tempted by the noise of the market and got in to the market in 2017 or 2018. From there, most commodity sector and NBFC stocks have not gone anywhere and most have cracked hard. So if you bought just two shares and both lost 40 per cent, you are sitting with 60 per cent and unsure of what to do. Most likely, you will sit on it in the hope that price will come back.
On the other hand, a mutual fund would have a large enough breadth such Broking firm: Angel Broking Rating: Accumulate Closing price: `490 (The writer is a veteran investment adviser. He can be contacted at [email protected]) if
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