stocksbaazigar, Author at Stocksbaazigar - Page 6 of 8
Stocksbaazigar - The Ultimate Wealth Creator

stocksbaazigar

Stocksbaazigar Mr. Deepak Doddamani is a Founder of Ratneya Group and Ashwamedh Foundation. He is an entrepreneur since age of 21 and have worked in various sectors like Education, Media, Personal Finance and Social work. More about Mr. Deepak Doddamani MBA (Marketing), B.Tech (Oils), NET qualified in Management, NSE's Certified Investment Analysis Professional, NSE's Certified Marketing Professional Level -4. 15+ years of experience Founder of Ratneya Group Founder of Ashwamedh Foundation Founder of Stocksbaazigar Entrepreneur and Educator Shortfilms Maker Social Entrepreneur Blogger

Advantages and disadvantages of going public

by

The first public offering of equity shares of a company, which is followed by a listing of its shares on the stock market, is called the Initial Public Offering (IPO). Often going public is the best choice of growing business. The decision to go public is a very important business financing strategy of a company. Therefore we must discuss the Advantages and Disadvantages of going public. Advantages of going public Lets first discuss some advantages of going public: 1) Access to Capital: The principal motivation for going public is to have access to larger capital. A company that does not tap the public financial market may find it difficult to grow beyond a certain point for want of capital. The biggest advantage of going public is the capital raised. 2) Respectability A company which goes public commands respectability. Pubic companies offer more growth potential compared to non-public companies. Hence they can attract superior talent. 3) Exploit the opportunity Many companies are usually started privately by their promoter(s). When a non-public company recognizes that other companies in the industry are overpriced. It has an incentive to go public and exploit that opportunity 4) Scope for diversification When a company goes public, original owners, investors, managers etc. can cash out of the firm and build a diversified portfolio. 5) Reality Check from Market Market forces decides stocks prices of the companies which are publicly listed. Managers can use this information as a feedback for the improvement of the company. 6) Reduces the Marketing cost Going public attracts media attention. Business Newspapers, TV Channels, Websites, Magazines etc. focus on public companies for providing information to the Investors. This increases the exposure of the public listed companies and their products. 7) Helps Business growth Going public gives companies an increased availability of capital which can be used for building a competitive edge and increasing the market share by increasing the market penetration. 8) Increases Network Public companies can build a great network of suppliers, distributors, and partners due to their reputation as a Publicly listed company. 9) Ability to take advantage of market price fluctuations: Once public, a company can take advantage of market price fluctuations to sell stock when the markets are hot, buy back the stock when the market is cold. This can often be an effective and low cost way to raise significant capital. Disadvantages of going public A public company (or, more precisely, a listed company) is not an unmixed blessing. There are several disadvantages to going public 1) Adverse Selection Investors, in general, know less than the issuers about the value of companies that go public. Hence to stimulate interest and participation of Investors, companies has to under price its securities. 2) Loss of Flexibility The affairs of a public company are subject to fairly comprehensive regulations. Hence when a non-public company is transformed into a public company there is some loss of flexibility 3) Disclosures Public companies must make extensive disclosures and submit to stringent regulations. They are required to disclose a lot of information to investors and regulator. They can not keep secrecy of their expansion plans and product marketing strategies. 4) Accountability Understandably, the degree of accountability of a public company is higher. It has to explain a lot to its investors. Investors who want to see the rise in their share prices often scrutinize every action of management 5) Public Pressure Because of its greater visibility a public company may be pressurized to do things that it may not otherwise do. It really upsets the Entrepreneurs who started those businesses. Market pressure can compel Management to focus on short-term results instead of long term growth. 6) Expenses The cost of complying with SEBI rules and regulations is high and it is getting higher. The cost of going public is substantial both initially and on an ongoing basis. Fees of financial reporting documents and investors relations, stock holding meetings, and other expenses are significant. These are some of the disadvantages of going public.

Primary Market

by

Capital Market can be broadly divided in Primary Market and Secondary Market. What is a Primary Market? The Primary Market is the part of Capital Market that deals with the issuance of new securities and then sold to investor directly by the issuer. It is also known as a New Issue Market. In this Market, Investors buy securities that were never traded before. New Issue Markets are facilitated by underwriting groups, consisting of investment banks that set a beginning price range for a given security and oversee its sale to investors. Once the initial sale is complete, further trading is conducted on the secondary market. Investors typically pay less for securities on the primary market than secondary market. What is the role of the ‘Primary Market’? It issues new securities on an exchange for companies, Government and other groups to obtain financing through debt-based or equity-based securities. It provides the channel for sale of new securities. It create long term instruments through which corporate entities raise funds from the capital market. It provides the issuers the opportunity to raise resources to meet their requirements of investment and/or discharge of some obligation. They may issue the securities at face value, or at a discount/premium and these securities may take a variety of forms such as equity, debt etc. They may issue the securities in domestic market and/or international market. Ways of raising funds through Primary markets Corporate entities raise funds from New Issue Market in three ways. Public Issue: A stock exchange lists the securities and corporate raises funds through Initial Public Offering (IPO). Rights Issue: Existing shareholders are offered more shares at a discounted price and or a pro-rata basis. Private Allotment: A corporate issues shares at a price which may or may not be related to the current market price of the same security. Major Players of Primary Market There are several major players in the New Issue market. These include the merchant bankers, mutual funds, financial institutions, foreign institutional investors (FIIs) and individual investors.

Money Market

by

Features of Money Market Money market deals with all the transactions in short term instruments with a period of maturity of 0-364 days. It is based on the Management of liquidity It is largely regulated by RBI and to an extent by SEBI It is a market where low risk, unsecured and short term debt instruments that are highly liquid are issued and actively traded every day. One of the important functions of a well-developed money market is to channel savings into short term productive investments like working capital. Call money market, treasury bills market, and markets for commercial paper and certificate of deposits are some of the examples of a money market. MONEY MARKET INSTRUMENTS: Treasury Bills (T-Bills) An Instrument of short-term borrowing by the Government of India maturing less than one year. These are also known as Zero Coupon Bonds. These are issued by RBI on behalf of Government of India to meet its short term requirement of funds They are issued in the form of Promissory notes. T-Bills are highly liquid and have assured yield with negligible risk of default. They are issued in discount but then paid at par. T-Bills are available for a Minimum amount of Rs. 25,000/- and in the multiple thereof. Call Money Market The call Money market forms a part of the national money market, where day-to-day surplus funds, mostly that of the banks are traded. The call money loans are of very short term in nature and the maturity period of these loans vary from 1 to 15 days. In this market, any amount could be lent or borrowed at a convenient interest rate, which is acceptable to both borrower and lender. The loans are considered as highly liquid, as they are repayable on demand at the option of either the lender or the borrower. Commercial Banks maintain CRR as per the directives of RBI. By using Call Money, banks borrow from each other to be able to maintain the CRR. A rise in Call Money rates makes other sources of finances like CoDs and CPs cheaper. Commercial Papers Commercial Papers are short term, unsecured promissory notes issued at a discount to face value by well-known companies that are financially strong and carry high credit rating. They have the maturity of 15 days to 1 year They are sold directly by the issuers to the investor or else placed by borrowers through agents like merchant banks and security houses. They are sold at discount and redeemed at par. The flexible maturities at which they can be issued are one of the main attractions for borrowers and investors since issues can be adapted to the needs of both. CPs are negotiable instrument transferable by endorsement and delivery. The commercial paper market has the advantage of giving highly rated corporate borrowers cheaper funds than they obtain from the banks while still providing the institutional investor with higher interest earnings that they could obtain from the banking system. They can be used as an alternative to bank borrowings. Funds raised through Commercial Paper are used to meet the floatation costs. The issue of Commercial Paper imparts a degree of financial stability to the system as the issuing company has an incentive to remain financially strong. Certificates of Deposits Certificate of deposits is defined as short term deposit by way of usance promissory notes having a short maturity of not less than three months and not more than one year. They are bank deposits which are transferable to one party to the other. They are different from conventional time deposits due to their free negotiability. Due to this negotiable nature, they are also known as negotiable certificates of deposits. They are issued in the period of tight liquidity when the deposits by individuals and households in less but demand for credit is high. They help to mobilize large amounts of money in short time period. Money Market Mutual Funds Money Market Mutual Funds that invest primarily in money market instruments of very high quality and of very short maturity. Commercial banks, RBI and public financial institutions can set it either directly or through their existing mutual funds subsidiaries. The scheme offered by MMMF can either be open-ended or closed-ended. In case of open-ended schemes, the units are available on continuous basis and the MMMF would be willing to repurchase the units, while a close ended scheme is available for subscription for a limited period and is redeemed at maturity. Commercial Bills Commercial Bill is a short-term, self-liquidating,negotiable instrument used for financing credit sales of a firm. When Goods are sold on credit, the buyer becomes liable to make a payment on a specified date in future. The seller could wait till the specified date or make a use of a bill of exchange. If the seller draws a Bill of Exchange on Buyer who accepts it then it becomes marketable instrument known as trade bills. When a seller presents this to a bank and accepts it and gives funds against it to the seller, it becomes a commercial bill.

Indian Financial System

by

Overview of Indian Capital Markets Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions. The financial market is to facilitate the transfer of funds from surplus sectors (lenders) to deficit sectors (borrowers). It consists of investors or buyer of securities, borrowers or sellers of securities, intermediaries and regulatory bodies. Financial Market does not refer to the physical location. Formal trading rules, relationships and communication networks for originating and trading financial securities link the participants of the market. Indian Financial System The phenomenon of imbalance in the distribution of capital or funds exist in every economic system.  There are areas or people with surplus funds and there are those with the deficit. A financial system functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A financial system is a composition of various institutions, market, regulations, laws, practices, money managers, analysts, transactions and claims and liabilities. The functions performed by Financial Systems: The functions performed by Financial Systems: The Saving function Liquidity Function Payment Function Risk Function Policy Function Financial Markets The Financial Market is a broad term describing any marketplace where trading of securities including equities, bonds, currencies and derivatives occur. Financial markets can be defined as the market in which financial assets are created or transferred. Financial assets represent a claim to the payment of a sum of money sometime in the future and/or periodic payments in the form of interest or dividend. Financial Markets are sometimes classified as Primary and Secondary Markets. But more often they are classified as Money Markets and Capital markets.  The term financial market is often used to refer just to markets that are used to raise finance; for long term capital markets and for short term finance, the money markets. Functions of Financial Markets Borrowing and lending Price discovery Information collection and distribution Risk sharing Liquidity Efficiency

12 important steps to investing

by

Investing is an art. We have seen ‘Why Investing is important?’ Now let’s see what care should be taken while investing? Authorized intermediary: There are many investment avenues and different investment products. There are hundreds of Financial Services firms in India. It is important to approach SEBI registered Financial Advisers only. They will recommend products which are managed by authorized intermediaries only. Don’t fall for online Advertisements. Research is very important: It is important to do enough research about Authorized Intermediary through which you are doing the investment. Read about reviews on them, visit their websites, if possible talk to their existing clients etc. Same is applicable for the Investment products. You are investing your hard-earned money. Do proper research before investing in any product. Explore the options available: It is important to explore all the options available to you. It will help you make an informed decision. In Financial Services, client servicing is frequently needed. See if your Service Provider gives you customized services and proper attention or not. If anything goes wrong, it is difficult to switch in some products/services. A comparative study is important before investing. Obtain Written Documents: Don’t do any financial transactions based only on verbal communications. It is important to have written communication wiz. application letters, emails, acknowledgement of forms, fees receipts etc when you do any transaction. Go through all the documents related to the investment. Obtain copies of the all those written documents of your investment. Brochure of the products, Rules and Regulations, company profile etc. should be obtained before investing. Read and Understand such documents: We have developed a habit of scrolling down terms and conditions of installed software. We just tick on ‘I agree’ and submit it without reading single word from it. This shouldn’t be done while investing. It is very important to read and understand such documents to avoid future disputes. Verify the legitimacy of the investment: We have seen many cases of chit-funds and money-rolling businesses where the company management eloped by duping investors money. If such things happen, we hardly get any justice in time which leads to regret and frustration. The only way to avoid such fraudsters is to invest only in the products run by well-known companies or Government etc. It is important to verify the legitimacy of the investment before investing. Find out the costs and benefits associated with the Investment: Financial Products sellers have a Sales target to achieve. Sometimes they really don’t bother about the needs of the customer and sell them products on which they get good commission. It is the responsibility of Investors to find out costs and benefits associated with the investment first. Investors should find of whether there is any hidden cost which seller isn’t revealing to you. Fortunately, we have various websites where you can easily get details about these products. No harm in cross-verifying the facts before investing. Assess the Risk-Return profile of the investment: More the risk more is the return. is the basic principle of Investment. It is important to first know your own risk profile. Then accordingly you can see which products suit you more. Assess the risk-return profile of the financial products before investing. If someone promises you Double returns in short-time, run away from that person. Even a 10% CAGR returns are considered to be a good return which beats the inflation. More than 16% return on the portfolio is an excellent return on equities. Know the liquidity and safety aspects of the investment: In case of emergency, you should be able to sell your assets and raise funds from the same. Assets should be liquid enough. The safety aspect of Investment is one of the most important aspects of investing. We have seen people who have lost their down-payment in properties which didn’t have all the clearances certificates. Invest in safe investment avenues where the only risk involved in about ‘investing related risk’. Ascertain if it is appropriate for your specific goals?: The success of financial planning depends on how you choose an accurate product for achieving some specific financial goal. Goals can be divided based on time duration. Less risky products are good for long-term goals while you can take some amount of risk for your short term goals. Compare with other Investment Opportunities available: Suppose, you are willing to buy a financial product for Investment. You can have your Pension Fund with a company with which you are working, you could take Atal Pension Yojna or National Pension Scheme by Government or you can choose some Hybrid Mutual fund which can give 10-12% annual returns. The choice is completely yours. Based on your risk appetite, income, and requirements you should choose the right option. Right Fit in the Portfolio: Never keep all eggs in one basket. Proper diversified portfolios allow you to sleep peacefully in nights without worrying much about your investments. Your every Investment should be complementary to each other. Avoid Repetition and over-diversification. Examine if the product you are investing in fits in with other investments you have already done or considering to make. These are the most important steps to Investing. Next time when you will buy any financial product or invest in any investment avenues, please consider these points. Will you follow these points properly? Do let me know in the comments. Basics of Investing by Stocksbaazigar Part – 1 (Youtube Live video) (Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is not a SEBI registered Financial Adviser. He is NSE’s Certified Investment Analysis Professional and NSE’s Certified Marketing Professional Level – 4).

Magic of compounding

by

When we hear success stories in Share Market, we normally appreciate only the Stock-picking skills of that Investor. We don’t give them enough credit for their discipline and patience. Those who don’t believe in the power of Share market rubbish it calling gambling. If you will tell them about an Investor who has a portfolio worth more than Market capital of Small Cap companies, they will argue that either that Investor is born with a silver spoon or simply he might have started with huge Investment Capital. We can’t actually blame them. They don’t know about the most important concept of Financial Market ‘compounding’ and the most widely known phenomena of creating wealth – the Magic of compounding. To know the importance of the power of compound interest one should first learn the concept of ‘time value of money’. Time value of money is the greater benefit of receiving money now rather than later. It is founded on time preference. When I was in school I bought bus Ticket from my home to School in 50 Paise. Now to travel the same distance, I have to take the BEST bus ticket of Rs. 10. Even a layman knows a term for it – ‘Mehengai’ or ‘inflation’. But it is not only about ‘inflation rate’ alone. It is also because of ‘time value of money’. Time value explains why interest is earned or paid. FV = PV (1+r) I am sure you have come across this formula several times in life. Yes, it is the easiest formula to calculate the future value of money from its present value. here ‘r’ is obviously the rate of interest. This formula explains to us why one should Invest in avenues which can give returns with higher interest rates than the inflation rate. We also pay taxes on our Income, brokerages on our buying and selling of Equities. We must obviously consider them as our cost on Investment too. If your returns on investments are more than the factors discussed, then only we will call them ‘real return’. You don’t have to lose your heart after reading about how hard it is to earn from Share Market. Yes, for short term investors it is very difficult to earn good sizable and respectable returns from the share market. But it is very easy for long term Investors to do so thanks to the Magic of Compounding. “Compound Interest is the eighth wonder of the world. He who understands it earns it and who doesn’t pay it.” – Albert Einstein The phenomena of making returns on returns is called as power of compounding. In long term we see exponential growth in our wealth due to magic of compounding. The amount you invest today, Regular monthly investment, Investment period, Rate of interest on savings and compounding intervals etc. are the key parameters using which we can easily find what corpus we can generate in long term by systematic investments. By systematic investment, you have to invest good capital in the Portfolio of stocks you selected and then let the Compound interest play its role. We all know the simplest formula of compound interest that we all learned at school. Aren’t we? A = P (1 + r/n)^nt Where, A = Final Amount that will be received P = Principal Amount (i.e. initial investment) r = annual interest rate n= frequency of interest rate (e.g. quarterly,half-yearly, monthly etc) t = number of years. Compounding means that the initial returns that you earned on your investment shouldn’t be removed as profit. It should be re-invested as ‘added capital’. Over a longer duration, compounding creates enormous wealth. Only those investors who not only understand this secret behind the magic of compounding but also implement it with lots of discipline and patients have become super-rich investors. The early you start more returns you can generate. Now, as you too have learned the ‘Magic of compounding’, when are you stopping your short term trading to focus on becoming Long Term investor? Do let me know in the comment below.

Bandhan bank acquires Gruh Finance

by

What is the Bandhan-Gruh deal? In an all-shares swap deal, Bandhan bank acquires Gruh Finance, a subsidiary of HDFC Ltd. Shareholders of Gruh Finance will receive 568 shares of Bandhan Bank for every 1000 shares of Gruh Finance. The deal valued Gruh Finance at 7% discount and on the Market Price of 4th January 2019. The share of Gruh Finance closed at 305 on 7th January 2019. Though in a long-term deal is really good for Bandhan Bank, in short-term it seems to be a very expensive one. Hence the Share price of Bandhan Bank also fell and closed at 495.55 on 7th January. Reaction of Brokerage Firms on Bandhan-Gruh merger: As per Anil Singhvi of Zee Business, both Bandhan Bank and Gruh Finance can correct by more 10-15% in coming days. Macquarie has reduced target of Bandhan Bank to 540 and JP Morgan reduced it to 525. On the face value, this merger looks Win-WIn deal for both the Bandhan Bank and Gruh Finance but the real winner of this deal is HDFC Ltd who has traded off Gruh Finance which was overlapping with their own customer base for getting 14.96% in the merged entity. Credit Suisse increased target of HDFC Ltd to 2150 after this deal. The effective date of this merger will be 1st January 2019 (retrospectively) subject to approvals from regulators, shareholders etc. After signing the merger co-operation agreement they took joint press conference in which they tried to explain synergies between Bandhan Bank and Gruh Finance and how they can complement each other in making the merged entity a diversified one. Let’s try to understand the deal for the perspective of all the three entities involved in it How Bandhan Bank will get benefited by this deal? Bandhan Bank Ltd is the youngest bank in India which started its banking business in 2015. Bandhan which started its business as a micro-finance company in 2001, received a banking licence from RBI in 2014. It is headquartered in Kolkata in West Bengal and has total 974 branches. Founded by Chandra Shekhar Ghosh this bank has managed to command a market value of around Rs. 63000 Crore currently. RBI’s banking licence ownership norm required Promoters of Bandhan Bank to reduce their stake from 82.3% to 40% within three years of starting the business. The deadline to do this was 23rd August 2018. On Bandhan Bank’s failure to meet the rule, RBI froze the bank expansion and remuneration of CEO and MD Chandra Shekhar Ghosh. This deal will reduce the Promoter’s stake to 61% now. It will have to take more steps to further cut it down and bring it to 40% soon. From Bandhan Bank’s perspective the swap ratio of the deal is 2.84: 5 which is actually better than what market speculated. Ghosh seized this opportunity to diversify the business portfolio by reducing the concentration risk. Acquisition of Gruh Finance will help Bandhan Bank acquire a low-ticket housing finance portfolio. It will also help them grow inorganically. Bank has a great presence in Eastern and Northeastern India. 80% of the business of Bandhan comes from 37% of rural customers and 35% of semi-urban customers. It completely makes sense to them to acquire Gruh Finance which serves the same segment of income groups wiz ESW and LIG. 46% of outstanding loans of Gruh comes from centres which have a population less than 50000. The acquisition of Gruh will add a huge portfolio of secured loans to Bandhan Bank’s book reducing its heavy unsecured loans portfolio. Bandhan typically gives loans of short terms while Gruh gives loans of Long-term too. This will give a good combination to the merged entity. Gruh Finance has a good presence in Western India. 83% of its business comes from Gujarat and Maharashtra. This merger will give the merged entity presence and penetration from East to West. It is good from the point of view of Financial Inclusion as well as serving well to the bottom of the pyramid. HDFC Ltd in clear winner in the deal Gruh Finance is a subsidiary of HDFC Ltd. Gruh has a good presence in rural areas of Western India. HDFC owns 57.8% in the company. After the merger, HDFC will own 14.96% in the merged entity. As per the rule HDFC Ltd. needs to bring down it’s holding in merged entity below 10% soon. HDFC will sell its stake at Premium valuations either in the secondary market or to Public Institutional Investors. HDFC Ltd will now get the best of both the worlds affordable housing finance as well as Microfinance businesses by the entry in the merged entity. Earlier it was overlapping the market of its own subsidiary Gruh in affordable housing segment. Gruh has a network of 195 branches spread across 11 states. This merger will give them access to the distribution network in Eastern part of the country where it has low to no penetration. Bandhan Bank is growing faster and HDFC Ltd. sees great opportunity in it. With this merger, HDFC Ltd has traded off Gruh Finance in exchange of pie in the fast-growing Bandhan bank which has great experience and expertise in Bottom of Pyramid markets of India. This way HDFC Ltd has emerged as a clear winner in Bandhan-Gruh merger. (Disclaimer: This is an Educational post. Stocksbaazigar Deepak Doddamani is not a SEBI registered Advisor. He is NSE’s certified investment analysis professional and NSE’s certified Marketing profession level- 4. Stocksbaazigar is not responsible for any of your profit or losses. Please consult your financial advisor before taking any Investment decision. Thank you.)

Why Investing is important?

by

Future uncertainty: India is the second most populated country in the world with nearly a fifth of the world’s population. Its population growth rate is 1.13%. The average age of Indian is 29 years. As of September 2018, India had 31 million jobless people. Despite being one of the fastest growing economies of the world India has a significant problem of poverty. As a nation, we have completely failed to even fulfill the basic needs of Roti-Kapda-Makaan to every citizen. Most of the employed people are underpaid. They barely save anything in the month end. Competition is so high that one who has Job today can be replaced tomorrow by someone more competent. There is no ‘social security’ available in India. The government no more gives pension to employees in Government Jobs. Future is very uncertain. Financial planning has become so very important in today’s time. Every wise person will tell you that. Provision for future: Whether you are a Salaried Individual or a Businessmen, we all earn for our families. Most of us have only one Source of Income. Part of our Income goes into paying bills, buying groceries, paying un-avoidable expenses etc. We also have other liabilities like paying Wi-Fi Bills, Premium of Insurance policies, EMIs of Bank Loans and so on. So once all these expenses are taken care off, we spend the rest of the money for luxuries like watching movies in multiplexes, Pizza party with family, fine dining with loved one, holiday trips and so on. After spending money on everything mentioned above, we are hardly left with some money which we save regularly for meeting future expenses. That money is called Savings. Let Money Make work for you To increase our savings we have only two options available, either increase our Income or reduce the Expenses. Income can be increased by either working overtime, finding some additional source of income, shifting to high-paying jobs or moving to another country for currency difference. Expenses can be reduced by cost-cutting, adopting the simple lifestyle, buying only those things which are really very necessary. For normal people, Income minus expenditure is saving. Smart people save first and then spend the rest. It is important to make your hard-earned money earn you some more instead of lying idle. That is where Investing comes into Picture. A cash flow statement is essential to understand how much you should invest. It is important to make regular saving your habit and systematic investment your priority. The investment will generate us much needed alternate source of income. It not only earns a return on our idle resources but also helps us generate a specific sum of money for a specific goal in life. Above all it helps us make a provision for an uncertain future. For beating the Inflation: The day you earn your first salary, start your Systematic Investment Plan in a good Mutual Fund. It is important to start investing early. SIP helps you Invest regularly. Choose a long-term Investment plan as it will help you create good corpus in the future. .It is important to allow your investment more time to grow. In long term, it will give handsome returns. Little drops do make an ocean. When we talk about Money, we also talk about Time Value of Money. Inflation reduces our purchasing power. Whenever we Invest we must consider only those avenues of Investment which can beat the Inflation. If we need real returns from our Investment, we should invest in avenues such as mutual funds and equities which have a higher rate of return than the inflation rate. Re-investing your profits and dividends again will increase our capital invested. Compounding and High frequency of compounding of our Investment can create huge wealth for us in long term. So take your first step today. There is no point in investing in the financial instruments/products which our previous generation invested. Without sufficient risk, we can’t achieve our financial goals. Don’t let the noise of conservative people stop from entering in Market. Gain adequate knowledge and start investing today. (Disclaimer: Stocksbaazigar Mr. Deepak Doddamani is NSE’s Certified Investment Analysis Professional and NSE’s Marketing Professional Level – 4. This post is for Educational purpose.Thank you)

Analysis of Ashok Leyland Dec 2018 Sales numbers

by

Ashok Leyland  Founded: 7th Sept 1948 Founder: Raghunandan Saran Parent: Hinduja Group (51% stake) HeadQuarters: Chennai, TamilNadu India Key Financials of Ashok Leyland Financials of Ashok Leyland Ltd: December 2018 Auto Numbers of Ashok Leyland December 2018 Auto Numbers of Ashok Leyland YoY Comparision: PEERS of Ashok Leyland: December 2018 Auto Sales Numbers are given in the table below The stock of Ashok Leyland Ltd performed really well in the last decade. It is one of the best portfolio stock in recent times which rose from Rs 14 to Rs 168 in just four years. The share traded in 75 to 100 range for an almost very long time before it jumped above 100 level in July 2017. Since then we saw further buying in Ashok Leyland as brokerages firms started giving targets like 140, 180 and so on. This stock has given more than 1100+ % returns in a 10-yr period, so it was obvious to see some profit booking after the bad December Auto Sales Number. When the stock corrected from 168 to 140, no one could predict further fall as there was always a buying interest in this stock. But the changing fundamental of the company has brought it below 100 today. The stock has corrected by almost 22% in the last 6 months. Before we discuss why the stock is falling so fast, let’s discuss why it was in so much demand in last few years. Positives about Investments in Ashok Leyland Ltd. shares Ashok Leyland is the second largest commercial vehicle manufacturer in India. It is the fourth largest manufacturers of buses in the world and 12th largest truck manufacturer in India. The commercial vehicles business in India is growing with 18% growth rate Defense Foray: In August 2017 Ashok Leyland Defence Systems (ALDS), Russia’s Rosoboronexports and ELCOM group have signed a cooperation agreement in defense business to provide tracked vehicles to Indian Armed Forces. Ashok Leyland holds 26% stake in ALDS. ALDS has supplied over 60000 of its Stallion vehicles to Indian Army so far. Competitive Advantage in Technology Ashok Leyland is a pioneer in Technology and Services in Commercial Vehicles segment in India. It was the first to introduce multi-axles trucks, full air brakes and innovations like rear engines and articulated buses. His patented fuel injection system and iEGR technology were the decent technologies which made it Transporters favorite vehicle. It is estimated that due to iGER (intelligent Exhaust Gas Recirculation) technology the number of electronic items and sensors in trucks has decreased so much that it is possible for Mechanics to easily maintain it. Also, this engine doesn’t need AdBlue or Urea which saves a lot of costs (almost 20000 Rs per truck in fuel per 5000 km journey). It has power trasnmission of 400 Hp ServiceMandi App Ashok Leyland has a Mobile Application called Service Mandi. It helps customer maintain data of all the Maintainance services of all their vehicles in one place. If a truck breakdown and truck driver contacts Customer Care of Ashok Leyland through this app, Ashok Leyland Mechanic/ Automobile Engineers reach that spot within 4 hrs and solve that problem within 48 hrs maximum. Innovation: The Driver cabin is spacious, Gears work so good that Drivers can take longer roads without feeling much fatigue. Transporters don’t have to pay penalties to RTOs thanks to low emission BS 4 Standard engines. Ashok Leyland was the first to introduce India’s first indigenous made Electric Bus called Circuit in 2016. The bus is Zero-Emission bus which can run 120 Km distance in the single charge. Under the National Electric Mobility Plan of India, it was decided to add 20% hybrid vehicles by 2020. Ashok Leyland has good scope in this segment. But Now Analysts are saying that Ashok Leyland will face many challenges ahead. One year target has been reduced to 115-125 from earlier 140-160. Let’s see what are the various reasons for this shift in perception: Negatives of Investment in Ashok Leyland Ltd. shares In July, Government increased the permissible capacity of load carrying by 25% for heavy commercial vehicles which can reduce the demand of the additional trucks On 13th November 2018 CEO and MD of Ashok Leyland Vinod Dasari announced that he will retire on 31st March 2019. Till the new Leadership gets announced stock will not perform now. On 17th December, NCLT ordered Ashok Leyland amalgamation of its three arms wiz Developing, Manufacturing and Selling of LCVs up to 7.5 tonnes, Power Trains for LCVs, and their Spare parts in foreign countries. Due to implementation of BS – VI emission standard on commercial vehicles, prices will rise upto 8% demand of new Trucks will increase which will affect current operating performance. Transformation needs some time. Management fear of bad 2021 and already started to avoid that possibility of tepid growth. What to do in the Ashok Leyland Share now? Recommended Action in Ashok Leyland Ltd Share Ashok Leyland is trading below 100 level now. After the bad December Auto Sales number, some more downside in share price can not be ruled out. Stock has first major Support at 84 levels and second best support at 75. On upper side Stock can go up to 115 where we can see high selling emerging as many investors are stuck in this stock. One year target in this stock can be as low as 135 now. (Disclaimer: Please note this post is for an Educational purpose. Consult your Financial Adviser before taking any investment decision. Stocksbaazigar is not responsible for any gain/loss of an Investor. Thank You.)

Stocksbaazigar Footer