image courtesy: worldwithoutus
If you are going to buy your first  house property whose value is not more than Rs.40 lakh and for this if you desire to avail a home loan up to Rs. 25 lakh, then wait deferring your home loan by just 1 month could give you an additional income tax deduction up to Rs. 1 lakh.

How this became possible? 

Thanks to today's budget, Mr. FM introduced a new section 80EE and according to it, home loan up to Rs. 25 lakh shall give you additional tax deduction up to Rs. 1 lakh (in addition to earlier Rs. 1.5 lakh {under section 24} thus making it Rs. 2.5 lakh).

So deferring your home loan just by a month make sense but the question is-Is there any property  below Rs. 40 lakh in in decent areas of metros like Mumbai, Delhi and Bangalore?




Mr. Chidambaram started narrating the budget on the note of falling global economy and its languishing impact on our domestic economy,  then profusely started doling money for the social sector.
Social-sector allocations (for Scheduled and backward classes, old people, minorities etc ) were expected in perspective of the oncoming 2014 general election.
To fare well in the elections sops were necessary but sinking economy was another concern. Rising inflation and twin deficits along with the fear of the downgrade by rating agencies constrained the FM from delivering a populist budget and as a result a insipid budget got delivered which is supposed to boost the economy in coming future.

Economy

FM expects India has got a potential to become a $ 5 trillion economy by 2025.Fiscal deficit and revenue deficit target for FY 14 has been set up at 4.8 % and 3.3% respectively. An amount of Rs. 14,000 crore shall be infused in PSU banks.

Taxation
·         There has been no change in the tax slab  for FY 2014. However, a tax credit (rebate) of Rs. 2000 shall be given for the tax payers falling in the Rs. 2-5 lakh income range.
·         For those who earn more than Rs. 1 crore shall be levied a surcharge of 10 %. This attempt was attributed as a step towards enhancing the Tax-to-GDP Ratio.
·         Inflation indexed bonds have been introduced in this budget to desist the people who have been investing in gold as a hedge against the inflation.
·         First time home loan buyers shall now avail an additional deduction for a housing loan up to Rs. 25 lakh. So now for the qualified home loan buyers total deduction will be Rs. 2.5 lakh.
·         TDS @ 1% on the property transactions above Rs. 50 lakh has been introduced

Capital markets

·         STT (Security Transaction Tax)on equity futures reduced to .01 % (earlier .017 %). Reducing STT was a long term demand from the capital market players.
·         CTT (Commodity Transaction Tax) has been introduced on on non-agro futures introduced at .01 %
·         FII can now trade in ETFs.
·         FII-FDI distinction shall bring more money into the markets

Rajeev Gandhi Equity Saving Schemehas been liberalized, Now  people with up to Rs. 12 lakh gross income can invest in this scheme earlier this was capped at Rs.10 lakh.
Now, first time investors shall be allowed to invest in this scheme for successive 3 years- i.e. 2 more years. Under RGESS, qualified investors can invest up to Rs. 50,000 in designated shares and MF schemes to become entitled for a deduction of Rs. 25,000.

 Entertainment
·         Set top boxes shall cost u more as custom duty has been increased. DTH experience becomes expensive

For our youth

·         Mobile above Rs. 2,000 shall become more expensive due to hike in the import duty from 1% to 6% ,
·         Dining out in AC restaurants shall now cost more as the same shall now attract the service tax. So be prepared to shell out more money at Domino’s and McDonald’s.
·         Custom duty on imported luxury bike has been increased to 75 % from earlier 60 %.
·         Excise duty on non-taxi SUVs hiked to 30 % from 27 %.
·         SED (special excise duty) on cigarettes hiked to 18 %

Foreign Travelers
·         Duty free gold import limit hiked  – Rs. 50,000 for male and Rs. 1,00,000 for females

As expected, V-mart shares were listed a tad above its issue price and ended 3% down.This IPO was reviewed here.
This blog had categorically warned its readers to stay away from this issue and advised no to get tempted even in the case of any price rise which may be operator driven.
On the last day,this issue saw over-subscription in FII and DII category while retail portion was subscribed around 80 %.
By the end of the day only 5.5 lakh shars were traded. 



In the last budget a new provision was introduced in the union budget (under section 80 TTA) which exempts interest earned up to Rs. 10,000 Rs. from saving bank accounts for individuals and HUFs.
A few banks like Yes bank, Kotak Mahindra bank and Indusind bank are giving interest on saving accounts in a range of 6-7 % on saving accounts for an account balance above Rs. 1 lakh.

Let’s see how one can be benefitted from this provision?

Mr. Verma and Mr. Sharma both worked for the same firm where both of them got a performance reward of Rs. 1.4 lakh. 
Mr. Verma opened a saving account with a private bank which offered a coupon rate of 7% to deposit the amount while Mr. Sharma opened an FD account with the reward-amount which offered him a coupon rate of 9 %.
Mr. Sharma jeered Mr. Verma boasting how his is earning 2 % higher return.

What do you think, who played smart?

Prima-facie, it appears Mr. Sharma played it smart as he is getting a higher return.
But wait, post-tax things changed dramatically.
Mr. Verma did not have any significant amount in his previous saving bank account and hence his interest earned on saving accounts was below Rs. 10,000 and thus became completely tax-exempt.
As interest on FDs is fully taxable, post-tax Mr. Sharma’s return was reduced to just 6.3 %( after 30 % IT deduction).
Post-tax, Mr. Verma got .7 % higher return than Mr. Sharma.

What is the significance of section 80 TTA?

We have seen how Mr. Verma availed the benefits of section 80 TTA by depositing Rs. 1.4 lakh in a saving account which offered a coupon rate of 7%.
What is intriguing to see how much return a Fixed Deposit should offer so that post-tax return should be same as what Mr. Verma got; and the answer is whopping 10 % and at present no bank is offering that much return on FDs.
Morale of this story is- for smaller amounts one should avail 80 TTA efficiently so that post-tax returns from saving account could beat the FD returns.


Sai Silks (Kalamandir) IPO Review


Sai Silks (Kalamandir) IPO  Subscription Status as on 13/2/2013

Overall 87 % Issue Subscription

QIB (Qualified Institutional Investors ): 0 Subscription 
NII (Non Institutional Investors): 43 % Subscription
RII (Retail Institutional Investors):1.31 times Subscription


Sai Silks (Kalamandir) IPO  Subscription Status as on 12/2/2013

Overall 60% Issue Subscription

QIB (Qualified Institutional Investors ):0 Subscription 
NII (Non Institutional Investors): 1% Subscription
RII (Retail Institutional Investors):1.08 times Subscription



Sai Silks (Kalamandir) IPO  Subscription Status as on 11/2/2013

Overall 32 % Issue Subscription

QIB (Qualified Institutional Investors ):0 Subscription 
NII (Non Institutional Investors): 0 Subscription
RII (Retail Institutional Investors):91 % Subscription



Issue Highlights
:
Price band
Rs. 70-75
Lot Size
200 equity shares
Maximum Retail Subscription
Rs. 1,95,000 or 13 lots
Issue Period
11/2/2013-13/2/2013
Issue Type
100 % Book Building
Face Value
Rs. 10
Issue Size
89 crore
Registrar
Bigshare services Pvt. Ltd.

Company Profile

‘Sai silks’ was originally started as a partnership firm and was later converted into a public limited company. The company is involved in the retailing of sarees  (under the brand names- Kalamandir, Mandir and Varmahalakshmi),women’s dress material, men’s wear, kid’s wear and gold jewellery.
The company is also involved in electricity generation using wind power project with a capacity of 2 MW in Kurnool district of Andhra Pradesh.

Safety Net Feature of this issue:  Simply put, if  market value of Kalamandir shares fall below the issue price within six months of the allotment, promoters shall buy originally allotted shares from  the resident retail investors with a cap of 1,000 shares.

Concerns

·         This business requires high working capital and this is the sole purpose of the issue
·         Corporate governance issues like FEMA violation charges, IT & gratuity liabilities are worrysome
·         Negative cash flow from operations was seen in the past

Objects of the Issue

·         Setting up of retail outlets: Rs. 12.73 crore
·         Brand promotion expenses: Rs. 8.5 crore
·         Pre-payment of term loan: Rs.: Rs. 90 lakh
·         Working capital requirement: Rs. 60 crore
·         Issue expenses: NA


·          
Financial Profile #

# Post-issue equity considered for the calculation of EPS and BV

Parameter
FY 13 Annualized
EPS
Rs.6.5
P/E
11.5
P/B
2.9
ROE
25.7 %
NPM
4%
Profit CAGR (5 years)
66%
Debt-equity ratio(pre-equity)
4.5

Inference

Though profit CAGR and ROE may seem tempting but this issue leaves no stone unaltered to spook investors. The pre-equity Debt-equity ratio of 4.5 emphasizes the need for floating this issue besides working-capital requirement. But what is interesting to see is only Rs. 90 lakh out of this Rs. 89-crore issue shall be allocated for the debt repayment!
And the reason for the aforesaid is-A company with a network of just Rs. 54.65 crore is raising Rs. 89 crore shall easily bring its debt-equity ratio in a safer territory without any substantial debt repayment.
Sai Silks is trading company with a net profit margin of just 4% and the finance cost of Sai Silks for the fiscal 13 will be as high as Rs. 16 crore (annualized) and still this company overlooking its debt burden that too in this high-interest regime which is quite puzzling.
In short, risk-averse value investors better stay away from this temptation irrespective of the safety net.

Nifty Total Returns Index
 Nifty above 7,700 ! Surprised ?
The Total Returns Index, not known to many, is nothing but Nifty plus the total dividends announced by Nifty companies, which are assumed to be reinvested. Though not many are interested in dividends and are concerned about only in the rise in share prices, this is a surprise for them.
The Total Returns Index is currently above 7,700 (7,713 to be precise as on 1st Feb 2013), while the Nifty is below 6357, the all time high which it achieved in Jan 2008.

There is also Total Returns Index for Sensex which is currently at 26,230 and last time when we wrote about this index it was around 22,000. So what does this mean for a retail investor?  Index investing better and that too investing in index ETFs like Nifty Bees, for a longer period of time, generates good returns along with the dividends announced.
Dividends play an important role in calculating your returns and hence before calculating your stock returns, check out how much dividends you have received to get the exact returns.
Dividends do matter !


V-Mart Retail IPO review


V-Mart reatil IPO Subscription Status as on 5/2/2013

Overall 1.2 times Issue Subscription

QIB (Qualified Institutional Investors ):1.52 times Subscription 
NII (Non Institutional Investors): 1.39 times Subscription
RII (Retail Institutional Investors):79 % Subscription



V-Mart reatil IPO Subscription Status as on 4/2/2013

Overall 7 % Issue Subscription

QIB (Qualified Institutional Investors ):0 Subscription 
NII (Non Institutional Investors): 8 % Subscription
RII (Retail Institutional Investors):13 % Subscription


V-Mart reatil IPO Subscription Status as on 1/2/2013

Overall 2% Issue Subscription

QIB (Qualified Institutional Investors ):0 Subscription 
NII (Non Institutional Investors): 8 % Subscription
RII (Retail Institutional Investors): 2 % Subscription



Issue Highlights

Issue Period
1/2/2013-5/2/2013
Price Band
Rs 195-215
Issue Type
100% Book Building Issue
Issue Size
44,96,000 shares/96  crore
Face Value
Rs. 10
Market Lot
66
Listing
BSE,NSE
Industry
Retail
Maximum Retail Subscription
14 lots/Rs. 1,98,660
Registrar
Karvy Computershare

Issue details:

·         Offer for sale by shareholders: 17,35,000 shares
·         Fresh issue : 27,61,000 shares

Industry Profile:
The structure of Indian retail industry

The rising apparel segment
Indian apparel industry is growing at a CAGR of 9.7 % and  FY 12  figure is supposed to touch Rs. 2,000 billion mark. Factors like rising per capita disposable income, urbanization and rising consumer awareness have contributed to this growth.

Indian apparel industry comprises of two segments- 

     (1)    RTS (ready to stitch) : 30 %
     (2)     RTW(ready to wear): 70 %

The continuous decline seen in RTS segment augurs well for the RTW segment.









Company profile:


V-Mart retail is a New Delhi based retail player offering apparel, general merchandise and Kirana items with a predominant focus on Tier-2 and Tier-3 cities in Northern, western and eastern parts of India. V-Mart currently owns and operates 59 stores spread across 51 cities in 10 states & union territories.
V-mart boasts a total store space of 4.82 lakh sq. ft. with its presence in states like New Delhi, Gujarat, UP, Bihar, Punjab, Chandigarh, Haryana, J&K, Rajasthan and MP.

Strengths

·         V-mart has been a pioneer in setting stores in smaller cities and is supposed to get benefitted from the rising urbanization
·         V-mart has ERP(enterprise resource planning) based supply chain system that leads to efficient inventory and working capital management
·         V-mart has got strong & robust IT infrastructure with a strong emphasis on MIS(management information system)
·         V-mart is  a ‘one stop shop’ for a family and offers a  diversified range of products catering needs of a family

Concerns

·         The retail industry is highly capital-intensive and changing trends in fashion makes the company vulnerable to fierce competition.
·         V-Mart’s operations are mainly restricted to tier-2 and tier-3 cities and these are not lucrative markets in terms of the consumption in comparison to Tier-1 cities

Objects of the issue

·         To open 60 new stores : 69.7 crore
·         Expansion of distribution centers: 4.38 crore
·         Working capital requirement : 10 crore
·         General corporate purposes & issue expenses: NA

Financials

The uptrend in apparel sales

 # All calculations at the upper price band
# All calculations have been done using post-equity outstanding shares unless mentioned otherwise
# Debt-equity ratios are exhaustive

Parameter
FY 12
Post issue Outstanding shares
1,79,58,778
Earnings per share (EPS)
Rs. 5.9
Book Value
Rs. 30.2
P/E
36.4
P/B
7.1
4-year profit CAGR
32%
PEG
1.1
Operating profit margin (OPM) %
10 %
Net profit margin (NPM)
4%
Return on Equity
19.6%
Debt/Equity Ratio (pre-equity) #
2.9
Debt/equity Ratio (Post-equity)#
1.77
EV/EBITDA
16.3

Comparison with peers

# Peer data as per moneycontrol site as on 1/2/2013 for FY 12 unless mentioned otherwise

Company
P/E
NPM
ROE
M-cap
Debt/Equity
V-Mart
36.4
4%
19.6%
Rs. 386 crore
1.77
Pantaloon Retail
20.25
1.81 % ##
2.9 % ##
Rs. 5692 crore
.82 ##
Shoppers Stop
96.05
3.12 %
9.75 %
Rs. 3623 crore
.33
Trent
68.79
4.92 %
3.51%
Rs. 3811 crore
.19


## FY 11 figure

Inference

As evident from the above table V-mart is a much smaller player of the retail industry and thus ‘comparison to peers’ is quite meaningless . In the backdrop of the debacle of v2 reatil (erstwhile known as Vishal Retail   and promoters of both are blood related) this issue appears as a spooking one and hence there was no need of digging deeper into the financials

This issue is being floated mainly to provide an exit rule to the selling stake holder – Naman Finance & Investment Private Ltd. (an AV Birla group investment arm) besides opening new stores and for boosting the working capital. For a smaller company like this a price-to-earnings multiple of 36.4 seems expensive.
Retail industry works on a razor thin margin and players are hit hard in case of a global turmoil (V-Mart’s FY 09 results vouch for the same).
 To cut a long story short, risk-averse value investors should better overlook this issue and in future too they should not be swayed by any post-listing price rise (as the share price of such issues can be easily rigged).

    Disclaimer

Analysis is for the information purpose only. Though due care and caution have been taken while preparing this report, analyst shall not be responsible for any error and shall not bear any financial liability to the users of this report.



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