PMS Products & their strategies in the Indian Market
Portfolio Management Services (PMS), is investment management services offered by the Portfolio Manager. The investment portfolio can be diversified into stocks, fixed income, and other structured products. These services can potentially be structured and tailored to meet specific investment objectives based on the risks, rewards, and investor goals as reflected in the Investment Policy Statement. PMS offers customized equity options, but you should have a large sum of money to invest to avail service of a Portfolio manager. A portfolio manager has a thorough understanding of the businesses and uses it to improve investor’s gains. The PMS provides you with experts who are well-versed with the market happenings and they can better guide you on important investment decisions. They track the market and invest your money keeping your requirements in their mind. They advise you on whatever you are going to do in the share market.
Features of PMS
- You get higher returns with the help of a well-knowledgeable portfolio manager.
- You can transfer the headache of monitoring your shares and taking decisions on those shares to the experts.
- The primary job of the portfolio manager is reducing the risk of the investor’s investment by selecting the right stocks according to the analysis and thereby increasing the returns or the earning on the investment.
- CA has to certify the minimum specified net worth of portfolio managers of Rs 5 crores.
- A maximum exit load of 3 percent can be charged in the first year, 2 percent in the second year, and 1 percent in the third year. No exit load applicable after three years.
- PMS investment suits only those who have a large affording power or who is a wealthy person as the minimum ticket size is 50 Lakhs as per SEBI norms. The PMS charges a large percentage of money from its users which are not within the capacity of a normal or average class investor.
- The service providers have different models portfolios for the investors which the investors can choose as per their financial goals and requirements. They can even customize them if they want some additional or want little adjustment.
- You get a piece of expert advice across instruments from debt to equity to gold and mutual funds.
PMS Charges in India
There are different types of fees charged by these service providers out of your total invested part.
- Entry Load– Whenever you take an entry into the PMS, you are charged an entry fee which is generally termed as the Entry Load. It is 3% or it may vary.
- Management Charges– This is a service charge for managing your portfolio. It may vary from 1-3%, depending upon the service provider. It is charged on a quarterly basis.
- Profit Sharing Fees– If a PMS has profit-sharing agreements between the client and provider, in addition to other fixed fees, then this charge is based on such terms of an agreement. It is charged above as hurdle rate is the minimum amount of profit that a PMS needs to earn before it can charge a profit-sharing fee.
- Apart from the charges mentioned above, the PMS also charges some other fees like Custodian Fee, Demat Account opening charges, Audit charges, Transaction brokerage etc.
The experts do not follow or cram the usual investing activities like what people usually do as they invest when the market is rising or vice versa. This is not so with the PMS experts. They take wise decisions and they deeply understand or analyze the market phenomenon. They keep your requirements in their minds and accordingly invest in the segment preferred.
There are three types of Portfolios in PMS:
Discretionary PMS– Discretionary Portfolio provides the service provider a right to make decisions on behalf of the client, whether he wants to sell or buy the shares.
Non-Discretionary PMS- This is the just reverse of the above. Here, the service provider consults with his clients on investment decisions or buying and selling of shares before transacting any event. The decision making power lies in the hands of the client only.
Advisory: Only advice is given to the client. No execution on behalf of the client is done by the portfolio manager.
As per the current market scenario, There are a variety of PMS in the market which focus on different sectors & further are customised according to investor’s needs.There are many PMS available according to individuals needs. We have listed two PMS for analysis purpose:
The Marcellus PMS company is one of the highly renowned broking companies available in India. The portfolio is actively managed by Mr Saurabh Mukherjee. He is also the Founder & Chief Investment Officer of Marcellus Investments. The company is registered under the Securities Exchange Board of India and its headquarters are in Mumbai, Maharashtra.
The portfolio management service model is the leading model of the broking company.The filters followed by the company to choose a stock are very stringent which makes the process tough for a stock to be in their portfolio.
They follow coffee-can investing which states the company buys and forgets the stock as they take high bet on fundamentals of a stock. The promotion and marketing is also on the aggressive side.
The portfolio is agnostic to parameters like market cap, sectors etc. Their core investment strategy is to invest in a concentrated portfolio of heavily moated companies that can drive healthy earnings compounding over long periods with very little volatility. Companies which are chosen for investment are taken into account on grounds of corporate governance and capital allocation track record.
The three tenets for selecting stocks Consistent Compounders strategy:
1. Clean accounting and good corporate governance
2. Historical evidence of prudent capital allocation
3. A major filter for stock to be in a portfolio is those chosen industries which have high barriers to entry. Which helps companies generate returns which is higher than the cost of capital.
The upper hand of investment goes to companies with strong sustainable competitive advantage, on account of brand built, business verticals and strategic assets.Marcellus’ Consistent Compounders portfolio has five stocks enjoying a cumulative 48.80% weightage – Asian Paints, HDFC Bank, Bajaj Finance, Page Industries and Pidilite. Their highly flexible commission models, as well as investment plans, provide good convenience and satisfaction to all of its clients. –
This Portfolio Management Services follows growth investing as its core philosophy. They started with beginnings as a Research Analyst company and have become a portfolio management company due to consistent performance on their research analyst services which helps their clients successfully & consistently beat the Market. They are specialists in buying high quality midcap companies that are often ignored by the analyst community. Their unique investment philosophy of catching the trend and managing the risk has been back tested and they are aiming to create 25% plus CAGR returns for their clients.
The objective of this service is to provide the client with a structure that can achieve preservation and growth of its capital, the portfolio manager shall endeavour to apply its professional expertise in order to help clients to achieve goals as per the PMS scheme opted.
Risk Management: If given a choice between High risk, High return ans Low risk decent returns stallion prefers to choose low risk decent returns. The Core Stocks in their Portfolio gives them a lot of time to exit if there is a change in the expected growth rate of stocks. They focus on Incremental Return of Capital Employed,Competitive Advantage Period and Cost of Capital.
Part A: Core Stocks – In core stocks focus is on Market Leadership, Management, Market Opportunity, Margin of Safety.
Part B: Trends – They believe There is no bull market without earnings growth and they always buy sectors with high expected sustainable growth of more than 20% for next 3-5 years.
Part C: Special Situation Growth Rate, Business Quality & Management Quality play the role here.
This above photo shows Stallion Assets core fund performance over the years.
While a core only portfolio will work well in a Bear market but typically underperforms in a Bull Market. A special situation only Portfolio might have opportunities in sometime & be on cash in others. Their Portfolio of Core, Trend and Special Situation will not only lower the Portfolio Volatility but will deliver decent returns. Focused Sectors: Stallion Asset focuses on 4 major sectors i.e. Consumer, Financials, Consumer Tech and Pharma. Their Financials & Consumer Tech Part of the Portfolio should Ideally create alpha in a Bull Market whereas our Consumer & Pharma basket will protect us during the bear Market.
Market regulator SEBI has made it mandatory for portfolio managers to provide investors with regular performance reports. The reports are not verified or authenticated by SEBI. When you compare PMS expenses with different avenues, then PMS expenses are really heavy. For an investor with limited time and knowledge and high capital base, PMS is a suitable option given the investment management institution is reputed and offers transparency of operations. PMS also helps in better realization of diversification benefits than aimlessly investing in any number of securities. The performance of the portfolio is solely dependent on the manager’s ability to outperform the market. The portfolio manager’s returns and performance are highly dependant on the accuracy of the security analysis done by the portfolio manager and hence are highly dependant on the competency of the fund manager and the investment management company.
Cryptocurrency V/S Traditional Assets (Stocks, Mutual Funds and other Debt products)
What is Cryptocurrency? How does it work? And why are they so popular?
- A cryptocurrency is a form of payment that can be exchanged online for goods and services.
- Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions.
- As an asset class, its underlying asset is not a business, currency, building, or commodity. Instead, it is a multi-dimensional digital value container powered by a public blockchain.
- People in support of cryptocurrencies as the currency of the future and are racing to buy them now, presumably before they become more valuable
- Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, as historically these banks tend to reduce the value of money via inflation.
- Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems.
- Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money.
Should you look at Cryptocurrencies as an investment?
Price volatility and lack of inherent value
For those who see cryptocurrencies such as Bitcoin as the currency of the future, it should be noted that a currency needs stability so that merchants and consumers can determine what a fair price is for goods. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. For example, while Bitcoin traded at close to $20,000 in December 2017, its value then dropped to as low as about $3,200 a year later. By December 2020, it was trading at record levels of $48,000.
This price volatility creates a conundrum. If bitcoins might be worth a lot more in the future, people are less likely to spend and circulate them today, making them less viable as a currency. Why spend bitcoin when it could be worth three times the value next year?
Not an asset backed investment
Since cryptocurrencies are not backed by any asset, the underlying value of the asset is 0. So if an individual is looking at cryptocurrencies from an investment perspective and wants to link any goal with it, it becomes very risky as he doesn’t know what the future value of the investment will be.
No Regulatory Body
Cryptocurrency is not centrally regulated by any government, so every government is taking different approaches to regulate cryptocurrencies. There are several areas of regulation like reporting for tax purposes and regulating initial coin offerings the way that securities are regulated.
As a digital technology, cryptocurrencies will be subject to cybersecurity breaches and may fall into the hands of hackers. Mitigating this will require continuous upkeep of security infrastructure.
Influence by bigger players
The crypto market is dominated mainly by ten big whales or privates. They are massive in the market and take up a lot of space and volume. It is too easy to manipulate the market so far. They make it very difficult to put any price target on the cryptocurrency.
Cryptocurrency v/s Traditional Investments
|Presence of Underlying Asset||No||Yes|
|Availability of Data||Limited||High|
|Regulatory Body||Not present||Different for every asset class and present in every country|
|Fundamental research possible||No||Yes|
|Technical research possible||Yes||Yes|
|Global acceptance||Banned in a few countries||Yes|
Cryptocurrencies appear to be a lucrative form of investments today because of the historical return it has delivered compared to other asset classes. But in the case of cryptocurrencies, its pros like it is seen as a futuristic currency, it has low transaction costs for global transaction, elimination of banking charges are outweighed by its flaws like that it has like it has no underlying asset, no regulator, prices easily influenced by a few players, limited data, etc. So at this point in time, it won’t be wise enough to diversify your portfolio by purchasing cryptocurrency.
Cement Sector and opportunities in India
- India is the 2nd largest cement producer in the world after China.
- The production of cement was 502 Million tonnes in 2018 and expected to grow 550 tonnes by 2020. The demand of the cement industry is expected to reach 550-600 MT per annum (MTPA) by 2025 because of the expanding demand of different sectors, i.e., housing, commercial construction, and industrial construction.
- A total of 210 large cement plants account for a combined installed capacity of 410 MT in India, whereas, 350 mini cement plants make up for the rest. Of the total 210 large cement plants in India, 77 are in the states of Andhra Pradesh, Rajasthan, and Tamil Nadu. The sale of cement in India stood at Rs 63,771 crore (US$ 9.05 billion) in FY20.
- According to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT), cement and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.28 billion between April 2000 and March 2020.
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Opportunities Available for the Cement sector
The eastern states of India are likely to be the newer and untapped markets for cement companies and could contribute to their bottom line in the future. In the next 10 years, India could become the main exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of the world. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well armed to face stiff competition from cement plants in the interior of the country. India’s cement production capacity is expected to reach 550 MT by 2025.
Due to the increasing demand in various sectors such as housing, commercial construction and industrial construction, the cement sector is expected to reach 550-600 million tonnes per annum (MTPA) by the year 2025.
The Union Budget has allocated Rs.139 billion (US$ 1.93 billion) for Urban Rejuvenation Mission: AMRUT and Smart Cities Mission. The government’s infrastructure push combined with housing for all, Smart Cities Mission, and Swachh Bharat Abhiyan is going to boost cement demand in India.
The Government of India extended an additional outlay of Rs. 18,000 crore (US$ 2.43 billion) for the PM Awaas Yojana – Urban over the already allocated Rs. 8,000 crore (US$ 1.08 billion); this is expected to be used for the development of ~30 lakh houses (ground support for 12 lakh houses and completion of 18 lakh houses) and will likely create an additional 78 lakh jobs and boost production and sale in the steel and cement sectors.
Challenges faced by cement Industries
The future of cement industries in India is looking positive but cement industries are facing a situation on Over capacity. Some challenges are indicated below:-
- Lack of price determination due to interventions by the Competition Commission of India & the populist State Governments
- Shortage of domestic coal & increasing cost of imported coal is also adding to the overall increase in production cost
- The logistics cost for cement is high since a lot of the cement is still transported through road transport.
- The current Railways capacity is not adequate enough for transportation
Steel Industry & Its Impact on Indian Economy
Overview of the sector:
- India was the world’s second-largest steel producer in 2019. India surpassed Japan to become the world’s second-largest steel producer in 2019 with crude steel production of 111.2 million tonnes (MT).
- The country is ending FY21 with a total steel consumption of around 95-97 million tonnes of steel which is nearly 5 percent lower than the previous year.
- Apart from construction and infra sectors (68 percent share), engineering goods and fabrication comprises around 20 percent share of steel use, while automobile and packaging have shares of 9 and 3 percent respectively of total steel demand.
- In FY20, crude steel production and finished steel production in India were 108.5 MT and 101.03 MT, respectively.
- Between April–September 2020, India’s cumulative production of crude steel was 52.37 MT, and finished steel was 47 MT. In the month of October 2020, India produced 9.06 MT of crude steel.
- Export and import of finished steel stood at 8.42 MT and 6.69 MT, respectively, in FY20.
- India’s per capita consumption of steel grew at a CAGR of 4.43% from 46 kgs in FY08 to 74.10 kg in FY19.
Government Initiative towards the sector:
- The government has taken various steps to boost the sector including the introduction of National Steel Policy 2017 and allowing 100% Foreign Direct Investment (FDI) in the steel sector under the automatic route.
- The Government’s National Steel Policy 2017 aims to increase the per capita steel consumption to 160 kg by 2030-31.
- The Government has also promoted a policy that provides a minimum value addition of 15% in notified steel products covered under preferential procurement.
- In 2019, the Government introduced Steel Scrap Recycling Policy with an aim to reduce imports.
Steel Industry under the pandemic scenario:
- Steelmakers have supplied about 1.43 metric tonne (MT) liquid medical oxygen to various parts of the country for the treatment of coronavirus patients.
- From September 2020 to April 22, 2021, the total LMO supplied by the steel industry — including public and private sectors — was 1,43,876.283 MT, of which the contribution of steel CPSEs stood at 39, 805.73 MT, as per data provided by the Steel Ministry.
- Private steel companies supplying oxygen are Tata Steel, ArcelorMittal Nippon Steel India (AMNS India), JSW Steel, Jindal Steel and Power Ltd (JSPL), and Vedanta ESL, while state-owned firms are Steel Authority of India NSE 8.00 % Ltd (SAIL) and Rashtriya Ispat Nigam Ltd (RINL).
- Steel prices rose to historical highs in the week ended 16 April 2021, in response to the global rise in steel prices. Prices have gone up by ~59% y-o-y in the month (until April 16).
- An increase in prices of steel to record levels will impact automobile manufacturers in the coming months as most of them will have to increase the prices of their products, twice in the last four months, to protect their operating margins.
Growth Prospect & Future Outlook:
- India is ending FY21 with a total steel consumption of around 95-97 million tonnes of steel which is nearly 5 percent lower than the previous year.
- In FY22 the budget has announced a capital investment target of Rs 5.4 lakh crores that is more than a 34 percent increase compared to BE FY21.
- After a slight dip in February, 2021 domestic steel prices recovered in March 2021 and are expected to remain elevated over the coming months on the back of higher international steel and iron ore prices.
S&P 500 Index down 1% on 22nd April. The Dow Jones Industrial Average and NASDAQ Composite both moved backwards –
- Joe Biden is seeking to raise taxes on millionaire investors to fund education and another spending on welfare to recover the U.S. economy.
- Biden is proposing to increase the capital gains tax to 39.6% for those Americans earning more than $1 million. The current capital gains tax rate and the top individual tax rate is 37%
Indian Cellular and Electronics Association (ICEA) seeks to include mobile phones, laptops and other information and communications technology (ICT) products in essential services list –
- Since the sale of these devices is happening via e-commerce platforms, the industry body has sought permission to include the above products in the list of essential services.
- ICEA has also asked for the service and maintenance of these products to be included in the government’s essential services list during the lockdown period.
- The government has included telecom, internet services, broadcasting, and cable services under essential services right now.
- The major reason behind seeking permission to include these products in essential services is only because the electronics industry in India has come to a standstill. Manufacturing has come to a halt because of shut down of factories.
Ola Electric to set up 100,000 strong network of EV chargers (Hypercharger Network)
- The company said it will install 5,000 chargers in the current financial year, including a few hundred chargers ahead of the launch of its first electric two-wheeler – due in July this year.
- The estimated cost of this is $2 billion will consist of two formats – Vertical tower-based chargers as well as standalone chargers installed at public spaces such as malls, IT parks, and cafes.
Glenmark Life Sciences – IPO
- The wholly-owned subsidiary of Glenmark Pharmaceuticals, Glenmark Life Sciences has filed a draft red herring prospectus with the SEBI for an initial public offer.
- The offer comprises a fresh issue of up to Rs 1,1160 crore and an offer for sale of up to 73.05 Lakhs shares of Rs. 2 each.
Indiabulls Housing Finance partners with HDFC Limited to offer home loans
- Indiabulls no longer wants to be a lender, instead, it will now be an originator of loans for the industry.
- The company has taken a decision to no longer expand its balance sheet but instead earn income by originating loans for HDFC.
- The reason behind taking this move is only because Indiabulls think that this business is a liability management business. The company made two attempts to get a deposit-taking license and got hit badly when both did not happen.
- The two firms will frame a common credit policy with Indiabulls Housing Finance originating retail housing loans. HDFC will retain 80% of any such credit on its book, the rest 20% will go to Indiabulls’s loan book.
Mirae Asset has launched two passive funds
- Investment Managers has launched two passive funds that will track the NYSE FANG+ ETF index, which consists of the most innovative technology and consumer companies.
- The Mirae Asset NYSE FANG+ ETF is an open-ended scheme tracking the FANG+ Total Return Index while the NYSE FANG + ETF Fund of Funds (FoF) will predominantly invest in Mirae Asset NYSE FANG+ ETF.
- The NYSE FANG+ Index is an equal-weighted index designed to represent the technology and consumer discretionary sectors consisting of highly traded growth stocks. Its constituents include Facebook, Amazon, Apple, Netflix, Alphabet (Google), Tesla, and Twitter, among others.
Discretionary consumers goods have taken a bad hit in terms of sales
- Weekly sales of discretionary consumer goods including ice cream, beverages, packaged snacks, refrigerators and ACs have dipped sequentially by up to 50% due to localized lockdowns, weekend and night curfews.
- The out-of-home consumption category has also taken a bad hit.
- Dairy products used by hotels and restaurants have declined by almost 30-40%.
- Sales of home appliances such as refrigerators, ACs, and washing machines have dipped up to 50% because of cuts in production due to a drop in demand.
RBI puts curbs on dividend payouts by banks
- The RBI had curbed banks’ dividend-paying ability in the FY 2020-21 because of the second wave of covid.
- Banks may pay dividends on equity shares from the profits for the FY 2021-21 provided the amount of dividend should not be more than 50% of the amount determined as per the dividend payout ratio.
- The dividend payout ratio shall not exceed 40%.
- This step has been taken in view of the continuing uncertainty caused by the ongoing second wave of COVID-19 as it is very crucial for banks to proactively raise and protect capital against unexpected losses.
- RBI did not permit any banks to pay dividends in 2019-20.
Auto Industry & Its Impact On Indian Economy – India became the fourth largest auto market in 2019 displacing Germany with about 3.99 million units sold in passenger & commercial vehicles categories. India is expected to displace Japan as the third-largest auto market by 2021. Our country is also a prominent auto exporter and has strong export growth expectations for the near future.
- Domestic automobile production increased at 2.36% CAGR between FY16-20 with 26.36 million vehicles being manufactured in the country in FY20. Overall, domestic automobile sales increased at 1.29% CAGR between FY16-FY20 with 21.55 million vehicles being sold in FY20.
- Passenger vehicle (PV) sales stood at 3,10,294 units in October 2020, compared with 2,71,737 units in October 2019, registering a 14.19% growth. As per the Federation of Automobile Dealers Associations (FADA), PV sales in November 2020 stood at 2,91,001 units, compared with 2,79,365 units in November 2019, registering a 4.17% growth.
- EV sales, excluding E-rickshaws, in India witnessed a growth of 20% and reached 1.56 lakh units in FY20 driven by two-wheelers.
- The industry has attracted Foreign Direct Investment (FDI) worth US$ 24.53 billion between April 2000 and June 2020, according to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT).
- In November 2020, Mercedes Benz partnered with the State Bank of India to provide attractive interest rates, while expanding the customer base by reaching out to potential HNI customers of the bank.
- Hyundai Motor India invested ~Rs. 3,500 crore (US$ 500 million) in FY20, with an eye to gain the market share. This investment is a part of Rs. 7,000 crore (US$ 993 million) commitment made by the company to the Tamil Nadu government in 2019
- In October 2020, Kinetic Green, an electric vehicles manufacturer, announced plan to set up a manufacturing facility for electric golf carts besides a battery swapping unit in Andhra Pradesh. The two projects involving setting up a manufacturing facility for electric golf carts and a battery swapping unit will entail an investment of Rs. 1,750 crore (US$ 236.27 million).
- In October 2020, Japan Bank for International Cooperation (JBIC) agreed to provide US$ 1 billion (Rs. 7,400 crore) to SBI (State Bank of India) for funding the manufacturing and sales business of suppliers and dealers of Japanese automobile manufacturers and providing auto loans for the purchase of Japanese automobiles in India.
- MG Motor India planned to launch MG ZS EV electric SUV in early 2020 and have plans to launch affordable EV in the next 3-4 years.
- The coronavirus pandemic has hit the Indian auto industry hard.
- Commercial & Passenger Vehicle Sales, Commercial Vehicle sales have plummeted around 90% for all manufacturers. Therefore, the segment was under tremendous pressure due to the economic slowdown, Liquidity crunch.
|Company||March Sales Growth|
|TATA Motors||90% ( YoY)|
|Ashok Leyland||90% (YoY)|
|Volvo Eicher||82.7% (YoY)|
- Two Wheelers & Three Wheels Sales- 42% of down fall in sales, companies like Hero Moto & Eicher Motors. M&M Posted a decline of 93.9% & TVS motor with 25.5% fall.
- Tractor Sales & Exports- Again Fall in the tractor sale company like M&M posted 31% fall & Escorts with 54.3%.
- Recovery will be challenging for the auto industry. BS VI implementation is a challenge as the cost of ownership is expected to rise.
- The Government of India encourages foreign investment in the automobile sector and has allowed 100% foreign direct investment (FDI) under the automatic route.
- Under Union Budget 2019-20, the Government announced to provide additional income tax deduction of Rs. 1.5 lakh (US$ 2,146) on the interest paid on the loans taken to purchase EVs.
- Vehicle Scrappage Policy Announced- Old cars to be removed.
- Atma Nirbhar Bharat -Special economic & Comprehensive package of INR 20 Lakh Cr towards promoting manufacturing in India.
- Production – Linked Incentive (PLI)- Automobile sector have a financial outlay of INR 51,000 Cr under the Atma Nirbhar Bharat Package.
Future of Automobile Industry in India
- Incentive-Based Scrappage policy will support sales growth in the long run & more importantly reduce the age of vehicles on India’s road, thereby reducing fuel import and air pollution.
- In 2025, the India Electric Vehicle market will be 50,000 Cr approx. $7 billion, therefore generating a number of jobs.
Foreign Trade Policy:
The government on Wednesday extended the existing foreign trade policy (FTP) for six more months amid the coronavirus outbreak. The current policy will now be valid up to September 30, 2021.
The foreign trade policy is essentially a set of guidelines for the import and export of goods and services.
Covid-19 was catastrophic for international trade. Exports during April-February this fiscal dipped by 12.23% to $256 billion. Imports during the period too declined by 23.11% to $340.8 billion, leaving a trade deficit of $84.62 billion. The country mainly exports petroleum oils (13.2%), diamonds (6.8%), medicaments (4.5%), articles of jewelry (4.2%), and motor vehicles (2.2%), while it imports petroleum oils (21.3%), gold (6.5%), coal and similar solid fuels (4.7%), diamonds (4.6%), petroleum gas and other gaseous hydrocarbons (3.6%).
Gold imports rose by 22.58% to USD 34.6 billion (about Rs 2.54 lakh crore) during 2020-21 due to increased domestic demand. The demand for gold would further increase on account of forthcoming auspicious Akshaya Tritiya and marriage season
The government is likely to waive a 10% customs duty levied on imported vaccines in a bid to keep low the cost of overseas vaccines that are being eyed to supplement domestically made shots ahead of opening COVID-19 vaccination to all citizens over 18 years of age. The government presently levies 10% customs or import duty plus a 16.5% IGST and social welfare surcharge on vaccines coming from overseas.
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Expectations from FTP 2021-2026
- A long-standing demand of exporters, especially MSMEs, is credit access. Formal financial institutions such as banks are reluctant to lend to MSMEs due to their lack of adequate collateral. The policy can help open up alternate credit avenues, such as financial technology start-ups.
- The advisory group suggests raising borrowing limits at the Export-Import Bank of India.
- If India were to do away with subsidies, exporters would still need some form of government support. Easier and lower taxes are a way of filling this gap. The reduction of corporate tax rates and simplification of duty structures are long-standing demand
- The existing FTP focuses on the Merchandise Exports from India Scheme (MEIS), an incentive scheme, where exporters receive duty credit scrips for a percentage of the value of the goods exported.India has decided to withdraw the MEIS and replace it with a Remission of Duties or Taxes on Export Products (RoDTEP) scheme.
Market Analysis on Banking Sector
India’s largest private sector lender HDFC Bank today reported an 18.2 percent year-on-year rise in net profit to Rs 8,186.51 crore for the quarter ended March. The lender reported a net interest income of Rs 17,120.2 crore, up 12.6 percent from a year-ago quarter.
Analysts had expected the bank to report a 23 percent year-on-year rise in net profit to Rs. 8,550.3 crore and a near 12 percent rise in net interest income to Rs 17,000 crore.
For the quarter, the lender’s gross non-performing loans ratio stood at 1.32 percent as against 1.38 percent on a proforma basis in the previous quarter.
Loan Book grew 14% YOY riding the domestic corporate book growth. While the Mid corporate and SME sector saw improved demand, large corporates showed deleveraging tendencies. Cash flows into SME accounts have been improving from December 2020.
Cheque bounce rates have deteriorated in April compared to March, however, there has been some pressure from Maharashtra, MP, Telangana and Punjab.
HDFC expects to build on its card portfolio from newly acquired liability relationships (2mn customers added during the quarter) once forbearance is lifted.
It has partnered with tech companies for faster migration, as well as the independent audit by RBI is in its final stages which looks like good news for the bank.
Uncertain times put a premium on resilience, a strong balance sheet and likely higher residual capital than most keeps HDFC in a good position and makes it one of the best bets in the current markets.
IDFC First Bank has raised Rs 3,000 crore through QIP in which global marquee investors like BNP Paribas and Baillie Gifford participated alongside domestic players such as Bajaj Allianz Life and HDFC Life.
The qualified institutional placement (QIP) closed on Tuesday and the lender issued 52.31 crore fresh equity shares at Rs 57.35 per share. Out of this, 68.33 percent of the allotment was made to foreign investors and 31.67 percent to domestic investors.
The private sector bank also witnessed over 10 per cent yearly growth in its total funded assets at Rs 1,17,803 crore as of March 31, 2021 from Rs 1,07,004 crore a year ago.
Total consumer deposits grew by 43.15 per cent year-on-year to Rs 82,628 crore from Rs 57,719 crore for the period.
Bank’s CASA deposits (current account and savings account) jumped by 122.74 percent to Rs 46,022 crore from Rs 20,661 crore by March 2020. The CASA ratio stood at 51.95 percent by the end of March 2021, up from 31.87 percent by a year ago.
However, the top 20 depositors’ concentration witnessed a decline at 7.76 per cent against 20.26 per cent.
Market Analysis – Indian renewable energy sector is ranked fourth attractive market in the world. India has ranked fifth in wind power, fifth in solar power, and fourth in renewable power installation.
Installed renewable power generation capacity has gained pace over the past few years, posting a CAGR of 17.33% between FY16-20. With the increased support of the Government and improved economics, the sector has become attractive from an investor’s perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role. The government is aiming to achieve 227 GW of renewable energy capacity (including 114 GW of solar capacity addition and 67 GW of wind power capacity) by 2022, more than its 175 GW target as per the Paris Agreement. The government plans to establish a renewable energy capacity of 500 GW by 2030.
As of November 30, 2020, the installed renewable energy capacity stood at 90.39 GW, of which solar and wind comprised 36.91 GW and 38.43 GW, respectively. Biomass and small hydro power constituted 10.14 GW and 4.74 GW, respectively. By December 2019, 15,100 megawatts (MW) of wind power projects were issued, of which, projects of 12,162.50 MW capacities have already been awarded. Power generation from renewable energy sources in India reached 127.01 billion units (BU) in FY20.
With a potential capacity of 363 GW and with policies focused on the renewable energy sector, Northern India is expected to become the hub for renewable energy in India.
Indian Railways is taking increased efforts through sustained energy efficient measures and maximum use of clean fuel to cut down emission level by 33% by 2030.
The Ministry of New and Renewable Energy (MNRE) has decided to provide custom and excise duty benefits to the solar rooftop sector, which will lower the cost of setting up as well as generate power, thus boosting growth.
India plans to add 30 GW of renewable energy capacity along a desert on its western border such as Gujarat and Rajasthan.
In November 2020, the government announced a production-linked incentive (PLI) scheme worth Rs. 4,500 crore (US$ 610.23 million) for high-efficiency solar PV modules manufacturing over a five-year period.
In November 2020, Ladakh got the largest solar power project set-up under the central government’s ‘Make In India’ initiative at Leh Indian Air Force Station with a capacity of 1.5 MW.
It is expected that by 2040, around 49% of the total electricity will be generated by renewable energy as more efficient batteries will be used to store electricity, which will further cut the solar energy cost by 66% as compared to the current cost. * Use of renewables in place of coal will save India Rs. 54,000 crore (US$ 8.43 billion) annually3. Renewable energy will account for 55% of the total installed power capacity by 2030.
The Government is committed to increased use of clean energy sources and is already undertaking various large-scale sustainable power projects and promoting green energy heavily. In addition, renewable energy has the potential to create many employment opportunities at all levels, especially in rural areas. The Ministry of New and Renewable Energy (MNRE) has set an ambitious target to set up renewable energy capacities to the tune of 227 GW by 2022, of which about 114 GW is planned for solar, 67 GW for wind and other for hydro and bio among other. India’s renewable energy sector is expected to attract investment worth US$ 80 billion in the next four years. About 5,000 Compressed Biogas plants will be set up across India by 2023.
As per the Central Electricity Authority (CEA) estimates, by 2029-30, the share of renewable energy generation would increase from 18% to 44%, while that of thermal is expected to reduce from 78% to 52%.
Overview of Chennai Super Kings: The Chennai Super Kings CSK is a franchise cricket team based in Chennai, Tamil Nadu which plays in the Indian Premier League (IPL) since its inception. The team is captained by Mahendra Singh Dhoni. CSK has won the IPL Tournament thrice and won the Champions League T20 Tournament twice.
The franchise has served a two-year suspension from the IPL starting July 2015 for the alleged involvement of their owners in the 2013 IPL betting case.
The brand value of the Chennai Super Kings in 2020 was estimated at Rs 611 Crores, making them the second most valuable franchise in the IPL as per the Brand Finance Report.
The overview & outlook of IPL:
- According to Duff & Phelps, global valuation and corporate finance advisors, IPL’s brand value was pegged at $6.8 billion or Rs 47,500 crore at the end of its 12th season last September. This is more than twice the $3.2 billion it was worth at the end of its seventh season in 2014.
- IPL witnessed a major milestone on September 4th, 2017, with Star TV winning the media rights for (2018-2022) five-year period, for a staggering Rs 16,347.50 crore. By virtue of these rights, the revenue share of franchises over the next 5-year period will be 50% of the above amount after deducting the production expenses incurred during the season.
- The league also signed a major title deal with VIVO for Rs, 2199 crore for the same period. ( 2018-2022)
- A combination of sponsorship and media rights ensures, your franchise will receive over Rs 1000 crore in the form of central revenue over the next five years from the BCCI-IPL.
- However, the Franchisees have to share 20% of the income with BCCI.
- The much-anticipated women’s Indian Premier League (IPL) has also been approved by the IPL’s governing council earlier this month. So Women’s IPL will most likely include the same teams as in the men’s tournament, providing a strong brand extension opportunity for the existing IPL franchisees.
|Shareholder’s Name||% of Total Shares of the Company|
|Trustees, India Cements||30.86%|
|Life Insurance Corporation||6.04%|
|Sri Saradha Logistics Private Limited||5.69%|
|Reliance Capital Trustee||2.51%|
|Radhakishan S Damani||2.39%|
|The Boston Company||1.68%|
N Srinivasan-owned India Cements, India’s leading cement maker, bought the CSK franchise rights for Rs 346 crore, to be paid in ten equal instalments over as many years until 2017-18.
It was initially run as a strategic business unit of India Cements, but was later demerged to become a wholly-owned subsidiary—Chennai Super Kings Cricket Ltd—in early 2015. In 2018, India Cements transferred its entire holding in CSK to a shareholders’ trust
Even as the pandemic led to a decline in the IPL ecosystem value, it led to an increase in IPL television viewership. As per the data, the 2020 IPL edition turned out to be a great success for broadcasters; it broke viewership and advertising revenue records.
As the economy opens up, there is an expectation that sponsorship deals may go back to their pre-Covid levels. Having been around for 13 seasons, the IPL franchise is seen to be entering a more stable phase in terms of the overall ecosystem’s value.
But according to a recently launched IPL Brand Valuation Report 2020 by Duff & Phelps, the value of the IPL media ecosystem dropped by 3.6% in 2020.
Financials of Chennai Super Kings: (Figures in Crores)
|Year||Revenue||EBITDA||PAT||EBITDA Margins||Profit Margins||EPS|
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Revenue Break up: (Figures in Crores)
|Income from Grant of Central Rights||294||240|
|Revenue from Operations||410||350|
This year the revenue has reduced from 417 Crores to 356 Crores mainly on account of reduction of income from grant of central rights from Board of Control for Cricket in India (BCCI). Accordingly, the PAT has also gone down from 110 Crores to 50 Crores.
How to value such a Franchise?
Valuations for such companies tend to be governed by private transactions instead of business nitty-gritty. Largely considered as “trophy assets” for billionaires, the valuation of such teams is additionally determined by who the potential future buyer might be , rather than being a function of the topline or bottom line. This is often further accentuated by the very fact that there can only be a limited number of teams and that they remain largely static, whilst the magnates eager to own such an asset changes.
As a consequence, a sports team’s reputation is extremely important. CSK has performed well thereon account, considering its sponsorship revenue was up 24 per cent to Rs 68 crore. “Increase in sponsorship income may be a very positive sign because it is directly linked to the brand image of the franchise,” said N Santosh, Director at Duff & Phelps.
Things forward for CSK
The much-anticipated women’s Indian Premier League (IPL) has also been approved by the IPL’s governing council earlier this month. So Women’s IPL will most likely include the same teams as in the men’s tournament, providing a strong brand extension opportunity for the existing IPL franchisees.
2 new teams will be included in the Tournament, as a result a new rule pertaining to player retention will be floated. It will be very important to see which players are retained by CSK.
Chennai Super Kings is the only squad in IPL 2021 with an average age of more than 30. So they will be looking out for young players who can come in and help the franchise not just on the field but also off the field by starring in various commercials and advertisements.
MS Dhoni (39 years old) has retired from International Cricket and will soon retire from playing the domestic tournament, so it will be very important for the franchise to search for a new leader who can carry forward the legacy’s franchise.