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5 Mantras To Read A Company’s Balance Sheet

5 Mantras To Read A Company’s Balance Sheet
by 5paisa Research Team 08/09/2021

5 Mantras To Read A Company’s Balance Sheet

 

 Financial Position: A balance sheet is one of three important statements for companies, along with a profit & loss statement and cash flow statement. A balance sheet shows the financial position of a company as on a particular date. It is an overview of the business.

 Sources and Uses of Funds: A balance sheet is divided into Sources of Funds and Application of those Funds. This statement tells us where the management has got its funds from and how it is being used. Sources of funds could be from raising equity, taking on some debt, sale of assets, etc. Whereas, application of funds includes operating expenses, asset purchases, decrease in a liability, etc. All figures in a balance sheet are updated to current value. .

 Shareholder’s Equity: Shareholder’s Equity is the money that the shareholders would get if the business was liquidated immediately. If the company is doing well, the shareholder’s equity keeps increasing. It does not, however, include retained earnings of the company.

Shareholder’s Equity = Assets – Liabilities 

 Assets: Anything owned by the company is an asset. Assets could be Current or Non-current. Current assets are assets that can be easily liquidated such as cash, accounts receivable, inventory, marketable securities, etc. Non-current assets are more permanent in nature and cannot be liquidated as fast. Examples are Land, plant and machinery, other equipment, goodwill, etc.

 Liabilities: Anything owed by the company is a liability. Similar to assets, liabilities can be Current and Non-Current in nature as well. Current liabilities would be accounts payable, overdraft, etc. These are payments that need to be made in the short-run. Non-Current liabilities are loans, leases, bonds etc., that are more long-term in nature. 

Also Read: 7 Red Flags to Look at While Studying the Financial Statements

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SAIL to Double Steel Capacity to 50 MTPA by 2030

SAIL to Double Steel Capacity to 50 MTPA by 2030
by 5paisa Research Team 08/09/2021

Steel Authority of India Limited (SAIL) has laid out an elaborate plan to double its steel manufacturing capacity from the current 23 million tonnes per annum (MTPA) to over 50 MTPA  by 2030. This phase of expansion will begin from 2023-24, after the ongoing expansion program is completed.

 

SAIL Plant

Current Capacity

Phase 1

Phase 2

Capacity by 2030

Durgapur

2.50 MTPA

7.50 MTPA

Nil

7.50 MTPA

Rourkela

3.70 MTPA

8.80 MTPA

Nil

8.80 MTPA

Bokaro

4.60 MTPA

9.50 MTPA

Nil

9.50 MTPA

Burnpur IISCO

2.50 MTPA

3.00 MTPA

7.50 MTPA

7.50 MTPA

Bhilai

7.00 MTPA

Nil

14.00 MTPA

14.00 MTPA

Others

3.00 MTPA

Nil

Nil

3.00 MTPA

 

The capacity expansion across the various plants of SAIL will be spread over two phases. While Durgapur, Rourkela and Bokaro will see capacity expansion in Phase 1, Bhilai will see capacity expansion in Phase 2. The IISCO plant in Burnpur will expand capacity in both the phases. Once the two phases of expansion are completed, the total capacity of SAIL will grow from the current 23 MTPA to 50 MTPA by year 2030.

The total expansion program will entail an investment of Rs.150,000 crore. SAIL has already procured a 30-year mining lease for iron ore in Rajasthan’s Bhilwara district to ensure steady supply of iron ore for steel production. This expansion is part of the National Steel Policy 2017, which had envisaged India’s steel output to grow 3-fold to 300 MTPA by the year 2030 with SAIL having one-sixth market share.

Steel companies have been in a structural rally in the last one year as is evident from the stock prices which have grown multi-fold. There has been a massive demand for steel coming domestically and from abroad. The global steel shortage has also ensured that steel prices remain buoyant on the London Metals Exchange (LME). The expansion seeks to make the best of this robust demand.
 

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5 Mantras To Know When You Are Saving For A Downpayment

5 Mantras To Know When You Are Saving For A Downpayment
by 5paisa Research Team 08/09/2021

5 Mantras To Know When You Are Saving For A Downpayment

 

 Start Early: Most people start saving only a couple years before they decide that they want to buy a house. The key to making the saving process easier is to start early and allow your savings to grow before you ‘need’ to buy a house. This will allow you to go at a slower pace and save smaller amounts of money each month towards the same and not pressurize you into changing your lifestyle significantly or become a burden.

 Budgeting: The first step is to sit down with your income and expenses and figure out in what range you could buy a house and what kind of down payment you could afford. It is essential to go over the expenses that you are currently incurring and see where you could cut down and save money. Set a realistic budget for the future and try to stick to it. Ensure that you put aside a portion of your income towards saving for the down payment each month.

 Discipline yourself by automating your savings: If you are not the kind of person that could be disciplined about saving, then consider automating them. Decide how much you would like to save each month and set up an automated transfer of that amount to a savings account at the start of each month or start Systematic Investment Plan (SIP) in a mutual fund scheme of your choice. This will make saving and investing a habit.

 Make the most of your savings: Consider maximizing your savings by starting an SIP in an equity mutual fund. Since equities are best if you have an investment time frame of more than 5 years, it is always best that you start this as early as possible. An SIP will not only automate your savings and inculcate discipline, it will also help you reap the benefits of equity investing while smoothening some of the volatility associated with equity markets.

 You also have to pay interest: When you are looking to buy a house, the down-payment is not the only thing you need to consider. You also need to consider the monthly instalments that you pay for your home loan. You must ensure that you always have savings in a liquid investment that can take care of at least one year of home loan instalments.

 

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RBI Removes UCO Bank from PCA Framework

RBI removes UCO Bank from PCA framework
by 5paisa Research Team 08/09/2021

In a significant boost for UCO Bank, the RBI has decided to move UCO Bank out of the Prompt Corrective Action (PCA) framework. UCO Bank had been brought under PCA framework in 2017 after its financials showed a lot of stress. Its net NPAs had gone as high as 8.57% and that is a typical basket case for a bank to be put under PCA.

The PCA framework puts severe restrictions on the operations of the bank so as to limit the risk burgeoning. For example, banks under the PCA framework are constrained from expanding their loan books. They are also not allowed to undertake any fresh recruitments nor pay any bonuses to the senior managerial staff. Such banks also face severe restrictions on branch network expansion and are also restricted from paying dividends to shareholders.

The decision to remove UCO Bank from the PCA framework was taken after there was a significant improvement in its financials for the Mar-21 fiscal. In addition, UCO Bank has also given an undertaking to the government that it would meet all the criterial to remain outside the PCA framework. 

UCO Bank’s net NPAs have fallen from 8.57% in Mar-17 to 3.94% as of Mar-21. In addition, the capital adequacy ratio at 14.24% was comfortable with 85% accounted for by Tier-1 capital. In the light of these systemic improvements in numbers, RBI has decided to remove UCO Bank from the PCA framework.

Apart from having a positive impact on the stock price, the removal from PCA framework will benefit in other ways too. Now, UCO Bank can once again start to expand its branch network in an aggressive manner. The bank can also pay dividends to shareholders and look for fresh senior talent. UCO Bank has been aggressive in offering one-stop services to customers, like through its recent tie-up with Fisdom for wealth management. Exiting from the PCA should help UCO Bank generate better ROI per customer.

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World EV Day 2021- Best EV Stocks to Buy

World EV Day 2021
by 5paisa Research Team 08/09/2021

World EV Day is celebrated on 09th September. Electrical Vehicles (EV) do not use the traditional fossil fuels like petrol and diesel. Instead, they use batteries to power their vehicles, that are more environment friendly and have a more acceptable carbon footprint. They do not pollute the air or deplete the ozone layer as traditional fossil fuels do.

India may not have scaled its EV plans to the same level as China, but the government is serious about a long-term shift to zero-emission EVs. That entails the right ecosystem like availability of electrical vehicles, adequate charging points, ancillaries for EVs, manufacture of batteries etc. Here are companies that could emerge as key players in the EV shift.

•  Tata Motors (CMP Rs.298.40) – Tata Motors and Jaguar Land Rover are substantially electrifying their fleets. Tata’s Tigor and Nexon models are already EV leaders. It is the one auto company to bet big on EVs.

•  Hindalco (CMP Rs.463.25) – India’s premier aluminium manufacturer is also in the midst of deleveraging. Aluminium due to its light weight has great demand among EVs. It is likely to see exponential demand growth from the EV thrust.

•  Amara Raja Batteries (CMP Rs.720.05) – It has already invested in developing lithium-ion cells that are considered a lot more efficient for EVs. Amara Raja is one of the recipients to get this technology from ISRO.

•  Minda Corp (CMP Rs.123.50) – It is first of the auto component makers off the block supplying to EV manufacturers. It has already secured orders to supply mobility components for EVs. It is largely R&D driven and has a marquee EV client list.

•  Greaves Cotton (CMP Rs.141.45) – It announced a foray into the multi-brand EV retail segment and expects it to become a big contributor to top line and bottom line. It is the only multi-brand EV store and an extension of its high-end engine focus.
(Note: Above prices are closing NSE prices as on 09-Sep-2021)

These 5 stocks are indicative of the EV opportunity and the direct and indirect beneficiaries. It would be advisable to consult with your advisors before making any investments.
 

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Indian Bonds to be Included in Global Bond Market Indices

Indian bonds to be Included in Global Bond Market Indices
by 5paisa Research Team 08/09/2021

A recent report by Morgan Stanley has highlighted that Indian bonds could be included in global bond market indices before February 2022. The Indian government has been lobbying for some time with global index majors like JP Morgan, FT and MSCI for inclusion in the global bond indices. That effort appears to be fructifying.

As per a recent report by Morgan Stanley, India was likely to be included in JP Morgan’s GBI-EM (Global Bond Index – Emerging Markets) as well as in the Global Aggregate Index. However, it will take some more time before India is included in the World GBI indices as Indian bond markets are yet to reach that level of depth and liquidity. 

Why is the inclusion in global bond indices important? Typically, a large chunk of the global money gets allocated by passive funds like index funds and ETFs. This is true of equities and also of bonds. While India has been present in most of the benchmark equity indices, it had been absent in the bond indices. That had impacted global capital flows into Indian debt.

It is estimated that the inclusion in the bond index would right away result in infusion of an impressive $40 billion into Indian debt. Also, Morgan Stanley, has pointed out in its report that over the next 10 years, Indian bonds could get as much as $250 billion of flows from such passive funds. That would not only reduce the pressure on equity flows, but make bond markets substantially more liquid.

Also Read: Difference Between Convertible and Non-Convertible Debentures

Currently, foreign ownership of Indian government debt is less than 2%. This figure is expected to increase to 9% over the next decade. This would also impel the Indian government to remove foreign portfolio limits on bonds. Morgan Stanley has also estimated that the rupee could appreciate 2% over next few years and that would add to the dollar yields for global investors and make effective yields a lot more attractive.