Attention Investors - Half of Your Salary Raise Should Go Towards the Future

Attention Investors - Half of Your Salary Raise Should Go Towards the Future
02/12/2018

Getting a raise in salary is one of the best things for an employee. Professionals from all walks of life set targets and make wish lists in anticipation of a salary raise. A salary raise is usually an occasion for a celebration. To the more savings-minded, it is an opportunity to top-up on their investments. But before you decide to splurge the money, let’s have a look at why a fifty percent of the raise should be invested for your future.

The prevalent thought – Percentage Savings

Retirement planners bank upon the classic “save a percentage” model. It usually means taking a slice out of the income pie every year. There’s no universal consensus on what’s a reasonable amount. A 10% savings on the pre-tax salary seems reasonable to most. The general idea is that, as your salary increases, so does your savings. But there are pitfalls that we turn a blind eye to.

Drawbacks

  • Increasing standard of livingWhen you save 10% of your income, you save only 10% of your raise. This puts you in a position of spending 90% of your salary, no matter what the increase. This significantly increases the standard of living and requires much greater savings for an equivalent retirement corpus.

  • Post-retirement difficulty - With the standard of living peaking just before retirement, it becomes difficult to sustain the lifestyle. Troubles multiply after hanging up your boots and a reduced corpus doesn’t help at all.

The alternative – Save your raise

Alternatively, you spend only 50% of each raise, implicitly saving the raise. Instead of dedicating the same percentage of your income to savings, you save the same percentage of our salary hikes.

Benefits
  • The controlled standard of living Saving half of your salary raise helps you to control the rise in your living standard. Expenditure is capped and savings grow in parallel to your paychecks.

  • Early retirement opportunity  With your standard of living in check, and your salaries burgeoning, you can easily move for an early retirement.

A Case Study

Figures rarely lie. Logic and reasoning need to be backed up by some solid figures to support claims.

Let’s take two examples to illustrate the point.

Case A: Traditional Savings

Mohan starts off with a Rs 4,00,000 per annum salary in the mid-twenties. He follows a 3% savings growth plan. With a reasonable increment of Rs 20,000 per annum, his savings build up somewhat like this:

Now in a period of 3 years, Mohan will have an annual contribution of Rs 13,800 per annum.

Though Mohan possibly becomes a millionaire, he’s forgotten to take the bigger picture into account. He is raising the lifestyle costs by 90% each year.

Thus, an initial living cost of Rs 3,88,000 per annum (Rs 40K minus the 3% saved) can exponentially increase.

With a 4% withdrawal rate, Mohan is going to need a lot more to make it through.

Case B: Saving half your raise

Mohan’s friend Rohan started off on the same Rs 4,00,000 per annum as Mohan. However, he doesn’t plan to save exactly 3% every year. He plans to save half his salary raise every annum.

He puts aside 3% for the first year and then spends only 50% of each salary raise, saving the rest.

In a period of 3 years, Rohan has saved much more than Mohan. His annual savings contribution is now Rs 42,000. His savings graph now looks something like this.

Since he has significantly reduced his lifestyle growth, he’s more likely to make do with a much smaller corpus than Mohan’s on retirement. He had a lifestyle growth which was slower, but it definitely means that he won’t have to do with less once he hangs up his boots

Saving more and spending less is a double blessing. It grants more flexibility during your working career and significantly increases the chance that you will enjoy a comfortable retirement.

It’s worth your while to save that next pay raise—and you deserve it!

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IPO Note: Aster DM Healthcare Ltd - Not Rated

IPO Note: Aster DM Healthcare Ltd - Not Rated
by Nikita Bhoota 02/12/2018
Untitled Document

Issue Opens: February 12, 2018
Issue Closes: February 15, 2018
Face Value: Rs10
Price Band: Rs180-190
Issue Size: ~Rs980cr
Public Issue: 5.16-5.37 crore shares
Bid Lot: 78 Equity shares       
Issue Type: 100% Book Building

% Shareholding

Pre IPO

Post IPO

Promoter

43.0

37.0

Public

57.0

63.0

Source: RHP

Company Background

Aster DM Healthcare (Aster) is one of the largest private healthcare service providers in multiple GCC countries (Gulf Cooperation Council). Company also has operations in India and Philippines. It has a diversified portfolio of healthcare facilities, consisting of 9 hospitals, 90 clinics and 206 retail pharmacies in the GCC countries, 10 multi-specialty hospitals and 7 clinics in India and 1 clinic in Philippines. Domestic business generated 18% of H1FY18 revenue, while rest came from GCC region and Philippines. Aster is planning to add 1,658 beds over the next 2-4 years through 4 new multi-specialty hospitals in the UAE and 5 new hospitals in India.

Objective of the Offer

The Initial Public Offer consists of an Offer for Sale for 1.34cr equity shares amounting to `255cr (on the upper price band) by promoter group company, Union Investments Private Ltd. The IPO also includes fresh issue of Rs725cr, which comprises of issuance of 3.82cr new shares on the upper price band. Company proposes to use the fresh issue proceeds to repay debt (Rs564.2cr) and to purchase medical equipment (Rs110.3cr).

Financials

Consolidated Rs Cr.

FY15

FY16

FY17

H1FY18

Revenue

3,876

5,250

5,931

3,123

Adj. EBITDA

506.0

445.6

332.1

178.2

Adj. EBITDA Margin %

13.1

8.5

5.6

5.7

Adj. PAT

272.1

8.2

-329.3

-82.7

Adj. EPS* (Rs)

5.4

0.2

-6.5

-1.6

P/E*

35.3

1,169.1

--

--

P/BV*

4.3

16.1

4.3

--

EV/EBITDA*

20.2

28.0

36.6

--

EV/Sales*

2.6

2.4

2.1

--

RONW (%)

12.1

1.5

11.9

--

ROCE (%)

11.5

5.4

0.2

--

Source: Company, 5 Paisa Research; *EPS & Ratios at higher end of the price band.

Key Points

During the Union Budget 2018-19, Indian government announced National Health Protection Scheme (NHPS) to cover ~10cr poor and vulnerable families (up to Rs5 lakh cover per family/ year) for secondary and tertiary hospitalization. This brings ~50cr people under health insurance coverage, boosting domestic healthcare industry, including hospital sector. Aster operates in India with 10 hospitals (3,887 bed capacity) and plans to expand by adding 5 new hospitals (1,372 beds) over the next 4 years. Aster, with its presence in the tier 2/ 3 cities is likely to emerge as one of the beneficiaries of NHPS in India.

The Emirate of Abu Dhabi introduced mandatory health insurance for locals and expatriates in 2006, which increased number of insured people in Abu Dhabi at a CAGR of 7.4% over FY08-13 and covered 3.43 million people in 2015. The mandatory health insurance was also implemented in Dubai in March 2017, which is likely to have brought 1.5-2 million additional people under health insurance coverage by 2017. Aster is well placed in the GCC countries due to its early mover advantage, deep understanding of the region and strong presence.

Key Risk

Profitability has been inconsistent over the past and is likely to remain weak due to cost associated with new hospital additions and lower occupancy in the existing hospitals.

Research Disclaimer

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Do’s and Don’ts of Stock Market Investing for Beginners

Do's and Don'ts for beginners

With a trading account and demat account you are ready to trade. But if you are a beginner in the stock markets, then that is not all. You also need to keep a tab on some major do’s and don’ts before you venture into investing in the stock markets. Let us look at 10 such key dos and don’ts for investors.

10 important do’s and don’ts for investment beginners

Do’s are about doing the right things in the market when you are starting off on your investing journey while the don’ts are the ones to avoid. Here are ten such important dos and don’ts for investing beginners.

  1. Do your research before investing? Remember, research of a stock is not a rocket science and it is all about getting your research process right. Get comfortable reading the balance sheets and income statements of a company. Also read the Management Discussion and Analysis (MDA) of the stock you are planning to invest in.

  2. Start with your goals in mind. You must be clear about how much risk you are willing to take and how much risk you can afford to take. Your equity portfolio should be within the limits defined by your allocation. Always start with a plan.

  3. Don’t put all your eggs in one basket. That is age old wisdom and applies to investing as well. In technical parlance it is called diversification where you effectively spread your equity investments across sectors and themes so that your investment performance is not dependent on any one stock or sector.

  4. Take a long term view and cultivate that habit in the very beginning. It is futile to time the market. Not only that it is hard to consistently get the tops and bottoms of the market right but it hardly makes any difference to your eventual returns.

  5. Try to invest consistently and regularly instead of putting a large corpus in a stock of your choice. The advantage of being regular is that it instils discipline in your investment and also gives the added benefit of rupee cost averaging. That means; over time your average cost of investing comes down.

  6. Even through equity is about the long term, try to get bargains. Even if you are convinced about the long term prospects of Infosys, it makes a lot of business sense to buy at Rs.650 than at Rs.750. Quite often, a market correction creates salivating bargains. Use such corrections to add quality stocks at low prices.

  7. Divide your equity portfolio between core holdings and satellite holdings. Your core holdings are your long term investment portfolio and you don’t sell these stocks at every correction. On the other hand, the satellite portfolios are more of a trading portfolio where you look out for short to medium term opportunities in the market. Have a separate approach to both these types of stocks.

  8. Don’t ignore trading costs. Even if you are a long term investor, take at a close look at your costs. Your cost is not just about brokerage costs but there are a number of other costs too. There are statutory costs, exchange charges, demat AMC, DIS charges, demat and remat charges etc. All these need to be added to calculate your effective cost. Nowadays, it makes a lot of sense to opt for low-cost discount brokers who can give the same execution at a much lower cost.

  9. As a beginner, remember that quality always wins in the end. When we talk about quality we are talking about quality at a number of levels. Look at quality of earnings; more of the earnings must be coming from the core business. Look at profitability; the company must be earning more margins than the peer group. Take stock of asset turnover; it tells you how efficiently the business is using assets. At a qualitative level, prefer companies that have high standard of disclosure and transparency. Large caps or mid caps, this quality approach always works in your favour.

  10. Make effective use of technology and if you are a beginner then you better get used to it early. Ideally use the online trading platform; it gives you a lot more control over your trades. Also, if possible you can download the app on your smart phone which allows you to trade on the run. Get used to reading electronic contract notes and ledgers; they are a lot more convenient and environment friendly than printed stuff.

In an effort to chase stocks, investors tend to forget that investment success is a lot more about discipline than about skills or flair. It is in your hands to make your investments work in a systematic manner.

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Everything you need to know about Burger King IPO

Everything you need to know about Burger King IPO
by Mrinmai Shinde 12/01/2020
Quick service restaurant chain, Burger King India is launching its three-days long IPO from 2nd December to 4th December. The company has set the price band at ?59-?60 per share for its IPO.

Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.

Burger King IPO details at a glance

IPO Date

Dec 2, 2020 - Dec 4, 2020

Finalisation of Basis of Allotment

Dec 9, 2020

Initiation of refunds

Dec 10, 2020

Transfer of shares to demat accounts

Dec 11, 2020

Listing Date

Dec 14, 2020

Issue Size

?810.00 Cr

Fresh Issue

?450.00 Cr

Offer for Sale

?360.00 Cr

Face Value

?10 per equity share

IPO Price

?59 to ?60 per equity share

Min Order Quantity (each lot)

250 Equity Shares

Min Amount Cut off

?15,000

Maximum Lots allowed

3250 Shares (13 lots)


Want to know our suggestion? Read here - Burger King IPO Note.

Things you need to know:

Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.

Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.

If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.

This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.

How to apply for Burger King IPO?
  • In 5paisa Trading App, go to IPO Section reflected on the home screen
  • Click on Apply IPO
  • Enter Quantity and Price to bid for
  • Enter UPI id to block funds on
  • Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved

If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.

Watch the video below to know more about the Burger King IPO

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Union Budget 2020 – What’s It All About?

Union Budget 2020
01/02/2020

Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.

Response to macro pressures

  • Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.

  • The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.

  • There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.

Some cheer for Corporates and MSMEs

  • Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.

  • Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.

No cheer for markets and that was evident

  • LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.

  • While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.

  • Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.

Direct tax; more complicated than effective

  • Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.

  • Under the new tax regime, direct taxes will be as under:

Income bracket

Below 5l

5l to 7.5l

7.5l to 10l

10l to 12.5l

12.5l to 15l

Above 15l

Tax Rate (%)

Zero

10

15

20

25

30

Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.

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Hurled by the IPO Rush? Here’s All You Need to Know About ASBA

ASBA IPO
IPO
by Nikita Bhoota 27/02/2020

ASBA (applications supported by blocked amounts) was introduced by SEBI to protect the interests of the retail investors. ASBA can used to apply for IPOs, FPOs, rights issues etc. In ASBA, the designated bank account only gets blocked to the extent of the application money. On the date of allotment, the amount gets debited to the extent of allotted shares and the balance gets released. If zero shares are allotted to the applicant, then the entire blocked amount under ASBA is released.

Who can make an ASBA investment?

ASBA is mandatory for all IPOs after January 01st 2016. However, an ASBA investor has to fulfil some basic conditions.

  • He must be a resident individual applying under the Retail Quota
  • Bid must be at cut-off price with a single option of number of shares bid
  • ASBA application has to be made through self certified syndicate bankers (SCSB)
  • Such price intibid made in ASBA cannot be revised later on
  • ASBA cannot be used for other categories like employees / shareholders etc.

What are the advantages of ASBA?

ASBA comes as a major boon to retail investors. Here are some of the major advantages.

  • Since the amount is only blocked, you continue to earn interest
  • You don’t worry about refunds as only the allotment money is debited
  • The application process is very simple and you can apply through your bank
  • The blocked amount is included in average quarterly balance (AQB)
  • Even through bids cannot be revised, they can be cancelled.

How can an ASBA application be cancelled?

While an ASBA application cannot be revised as per the rules, the ASBA application can certainly be cancelled. There are two distinct situations here. If the IPO has not closed, you can cancel the ASBA application through your online trading account or through the bank. Your SCSB will cancel the bid and unblock the amount right away. However, if you withdraw after the issue closes, then you have to write to the registrar to cancel the bid. The SCSB will only remove the block after the allotment is complete and they get intimation from the registrar.