Dixon Technologies Ltd - Information Note

Dixon Technologies Ltd - Information Note
IPO
by Nikita Bhoota 09/06/2017

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Hearing Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so.

This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contacts or commitment whatsoever.

Issue Opens: September 6, 2017
Issue Closes: September 8, 2017
Face Value: Rs 10
Price Band: Rs 1,760-1,766
Issue Size: Rs 600 cr (3.4 mn shares)
Bid Lot: 8 Equity shares         
Issue Type: 100% Book Building

% shareholding

Pre IPO

*Post IPO

Promoter

46.2

38.9

Public

53.8

61.1

Source: RHP, * calculated based on information from RHP (at upper band)

Company Background

Electronic manufacturing firm Dixon Technologies manufactures consumer durables, lighting, mobile phones and home appliances, which made up for 34%, 22%, 33% and 8% of FY17 revenue respectively. It also provides reverse logistics (2.6%) services including set top boxes and mobile repairs. Additionally, it is also a leading Original Design Manufacturer (ODM) of lighting products, LED TV and semi-automatic washing machines in India. ODM contributes 22% to total sales. Its key customers are Panasonic, Philips, Haier, Gionee, Surya Roshni, Reliance Retail, Intex Technologies, Mitashi and DishTV.

Objects of the Issue

The offer consists of Fresh Issue of ~0.34 mn Equity Shares (aggregating upto ~ Rs 60 cr) and Offer for Sale of up to ~ 3.05 mn Equity Shares. The proceeds of the Fresh Issue will be utilized in setting up a unit for manufacturing of LED TVs at Tirupati Facility (Rs 60 cr), repayment or prepayment of debt (Rs 22 cr) enhancing backward integration capabilities in lighting products (Rs 8.9 cr) and for other general corporate purposes.

Key Points

The company targets to increase its share of ODM sales as it controls entire manufacturing cycle of a product; thereby leading to higher margins as compared to OEM segment.

Dixon is setting up a unit for manufacturing of LED TVs at Tirupati. Also, manufacturing of CCTVs and DVRs (through a joint venture) will be carried out at this facility. The company also plans to export its products to South East Asia market.

Dixon has low working capital cycle, stable operating cash flows and high returns.

Valuation

On post issue basis, the company is valued at 39.7xFY17 EPS (calculation based on upper band price and reported net profit considering post issue O/S shares). There are no listed entities similar to its business offerings.

*For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only.

Disclaimer: https://www.5paisa.com/research/disclaimer

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Third Party Administrators (TPA) - A Helping Hand in Claim Settlement

Third Party Administrators (TPA) - A Helping Hand in Claim Settlement
by Nutan Gupta 09/06/2017
Untitled Document

With soaring medical bills and hospitalization cost, you buy health insurance to live a stress-free and healthy life. But at the time of claim, you are not sure whom to contact for claim settlement or what is the process to file an insurance claim. In such cases, Third Party Administrators (TPA) comes to your rescue. You can coordinate with TPA anytime for any query or concern related to your claim settlement.

A Third Party Administrator (TPA) is an Insurance Regulatory Development Authority (IRDA) registered company or an organization that processes insurance claims on behalf of insurance companies. TPAs come into direct contact with customers and operate 24*7 to ensure faster processing of claims. TPAs ensure that in cash-less hospitalization the preauthorization is done within 90 minutes of receipt of claim request from customers.

You would be surprised to know about the various tasks performed by a TPA, all of which aims towards making claim settlement convenient for the customers:

1.  TPAs come into direct contact with customers and operate 24*7 to ensure faster processing of claims

2. TPAs ensures that in cash-less hospitalization the preauthorization is done within 90 mins of receipt of claim request from customers

3. In case of any medical emergency, TPAs should be immediately informed. The concerned authority there would assist you over the steps to be taken to file an insurance claim against the same.

4. The purpose of a TPA is to help process insurance claims of various insured customers. Hence, you should contact the TPA only regarding a claim process issue. In case of claim settlement problems, you should directly contact the insurance company.

5. If it so happens that the Third Party Administrator (TPA) takes more than 2 days to process your claim, you can straightaway contact the insurance company for further update regarding any development in your claim request.

6. It is the duty of a TPA to provide its customers with a friendly customer service. They are liable to respond to any insurance claim process related query that the customer produces.

7. A TPA has to provide the policy owners with an information guide. This guide contains details about the TPA’s role in helping the customers, right from the start to the end of the claim process.
8. One other interesting fact about a TPA's working is that they do not charge a single penny for the service they provide to the policyholders.

9. Third Party Administrators often have a widely branched network in various hospitals around various cities. As a result, they can provide you referrals of different surgeons and specialists, which will ease the burden of searching for a 'good' doctor. Apart from this, TPAs also helps you connect with different Ambulance services to tackle emergency situations.

10. Another interesting service that TPAs provide is the flexibility with which the insured can be shifted to another hospital during an ongoing treatment; without troubling the patient or their family members

List of TPAs:


Sr No

Insurer Name

TPA List

Contact Details

Email ID

1

Religare

Medi Assist

1800 425 9449 / 1800 208 9449 

info@mediassistindia.com

Vidal Health Insurance TPA

020 - 25530394 / 020 - 25530398

care@vidalhealthtpa.com

 

 

 

2

Cigna TTK

Vidal Health Insurance TPA

020 - 25530394 / 020 - 25530398

care@vidalhealthtpa.com

 

 

 

3

Apollo Munich

Medi Assist

1800 425 9449 / 1800 208 9449 

info@mediassistindia.com

 

 

 

4

Bharati Axa

Medi Assist

1800 425 9449 / 1800 208 9449 

info@mediassistindia.com

Paramount Health Services TPA

022 666 20808

contact.phs@paramounttpa.com

 

 

 

5

National Insurance

E-Meditek TPA Services

1800 102 3242 / +91 - 124 - 4980555

customercare@meditek.com

Medi Assist

1800 425 9449 / 1800 208 9449 

info@mediassistindia.com

Vidal Health Insurance TPA

020 - 25530394 / 020 - 25530398

care@vidalhealthtpa.com

 

 

 

6

New India Assurance

Paramount Health Services TPA

022 666 20808

contact.phs@paramounttpa.com

Heritage Health Insurance TPA Pvt Ltd.

1800 345 3477 / 033 - 22487179

heritage_health@bajoria.in

 

 

 

7

Max Bhupa

Vidal Health Insurance TPA

020 - 25530394 / 020 - 25530398

care@vidalhealthtpa.com

 

 

 

8

Oriental Insurance

E-Meditek TPA Services

1800 102 3242 / +91 - 124 - 4980555

customercare@meditek.com

Medi Assist

1800 425 9449 / 1800 208 9449 

info@mediassistindia.com

 

Summary
Though TPAs make the entire claim settlement process convenient, customers must follow the claim process and documentations properly to ensure that they get the maximum claim benefits without any dispute or delays

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Confused between ULIPs vs Mutual Fund? A Quick Guide

Confused between ULIPs vs Mutual Fund? A Quick Guide
by Nutan Gupta 13/06/2017
New Page 1

The moment when you have made up your mind to invest your money is clearly euphoric. You realize the potential of earning good profits in the near future and are satisfied with the way you are planning to secure your future. But this is just the beginning of the tough world decisions. Finance is complex and so are the decisions involved with it. Deciding on which product to invest is a long debate with yourself as well as your manager. Stocks, insurance, bonds, mutual funds or ULIPs, the list is endless. We help you resolve the long standing debate between investing in ULIPs or Mutual Fund with this article.

What is ULIP?

ULIP or Unit Linked Insurance Plan is a life insurance product. A ULIP ideally is an insurance cover plan for the policy holder with the benefit of opting to choose for any number of investment options such as stocks, bonds or mutual funds. The ULIP plan acts as a single integrated plan, so the dual benefits of investment and protection can be enjoyed according to the specific needs and choices of the investor.

ULIPs require the investor to pay a regular premium for the policy cover as well as the investment made in stocks and bonds for wealth appreciation. However, the premium amount is paid for both the parts only once. A part of the premium paid goes towards providing the policyholder insurance cover, and the other is invested in stocks and bonds for wealth appreciation.  A policyholder has the freedom to choose the financial product it would like to invest in as a part of the ULIP according to his risk appetite.

What is Mutual Fund?

Mutual fund is an investment scheme wherein many investors come together to invest their money through a collected pool. The collected corpus is under the care of a fund manager-a financial expert hired specifically to invest the collected money in different financial products such as stocks, bonds, and other asset classes. The investors in a mutual fund enjoy the dividends after a particular time frame. The dividends can be reinvested into the scheme to enjoy a greater profit at the time of exit.

While ULIPs and Mutual funds always keeps a smart investor busy with the thinking business, lets grab an overview on the similarities between the two.

ULIPs

Mutual Fund

There is definitely a risk involved in investing in ULIPs. ULIPs face the risk of defaults and changes in the rates of interest.

The risk involved in investing in this financial product is higher as the equity investment is dependent on market fluctuations and a fund manager’s decision.

An investor with the ULIP is awarded shares on the net asset value basis and the individual investor has the liberty to invest the money in any financial product of his choice.

While investors in mutual funds definitely have shares with them, the discretion to invest in a financial product solely lies with the fund manager.


While the similarities between the two are few, the points of contention are many and varied. Let’s look.

ULIPs

Mutual Fund

A ULIP is a two way investment into insurance as well as core investment product of an investor’s choice.

A mutual fund is a core investment product.

A ULIP is a carefully planned out financial investment with the help of a financial advisor who determines the monthly premium on the basis of the investor’s income and expenses for a specific time period.

A mutual fund investment can begin with as basic as an amount of 500 Rs per month for a minimum period of 12 months as a systematic investment plan (SIP).

The exit from the ULIP plan before its maturity requires the investor to bear the financial implication.

There are no penalty implications to be borne by the investor in case of the discontinuation of the SIP.

The expenses for ULIP are high as the Insurance Regulatory and Development Authority (IRDA)prescribe limits only in certain cases, thus an insurance company has an upper hand in determining the investor’s expenses. The high premium allocation charge is ruled to be not exceeding 10% of premium. With this are the additional charges of mortality, fund management charges, policy administration charges among others.

Expenses though seem to be lower for the mutual funds with the Securities and Exchange Board of India (SEBI) setting the upper limits for expenses, expenses charged by mutual funds to investors for a range of activities like fund management, sales and marketing, administration are subject to certain limits. Charges over and above the specified limit if any are borne by the fund house instead of investors.

ULIPs have an investment period determined, with a minimum of 5 years locked in from the very onset of the first transaction.

Mutual funds have the ease of being changed into liquid asset conveniently as they are traded in the market on a regular basis. However, all mutual funds are not liquid in nature with ELSS being the most apt example.

ULIPs are also expected to submit their quarterly reports before the investors.

Investors of the mutual funds, according to the SEBI guidelines need to quarterly updated on the numbers of their portfolio. However, a monthly practice is followed by industry to ensure a transparency between the fund manager and its investors.

ULIPs allow the investor to choose the sum that he wants to be invested in equities and in insurance cover. Investors are also given the option of entry and exit from a mutual fund whenever they want.

The decision of entry and the exit point of the investment relies with the fund manager with no flexibility to change the asset allocation midway.

ULIPs allow the investor tax relief up to a limit specified under the Section 80 C of income tax with the proceeds also remaining tax free in the hands of the investor.

ELSS is the only financial product while provides tax relief under the Section 80 C. A minimum of 1 lakh are allowed as deduction. The proceeds of the mutual fund

do not give the investor relief from tax payments and attract redemption charges. Non-ELSS funds have different terms and conditions for the tax implications depending on the nature of the mutual fund.


Making a decision between the two is indeed difficult, however if liquidity is a cause of concern for you then mutual fund is a safer bet with no lock-in period. ULIP should ideally be an option for an investor if he wishes to switch funds in between or aims for lower costs with less risks in the long run.

Whatever the choice, we wish you the best in all your financial planning.

Next Article

What is Exit Load in Mutual Funds?

What is Exit Load in Mutual Funds?
by Nutan Gupta 13/06/2017
New Page 1

Simplicity is the key to financial well-being. Whether it is investment products or financial decisions, life can be easy and uncomplicated if things are kept simple and easy to understand. This article is an attempt to make your financial decisions easy with respect to mutual funds. Mutual fund is a collective pool of money of multiple investors, invested in different financial products. Mutual fund companies collect a fee from investors for joining or exiting a fund. The fee charged is known as load. Exit load is the fee levied by the company at the time of an investor leaving a scheme or investment fund. Open ended funds allow the investor the option to exit the investment as per his choice.

Why is this exit load payable by the investor?

Free things are always taken for granted so is in the case of investments. Hence, mutual fund companies charge a commission from the investors for their exit from the mutual fund investment when they fail to honour the specified number of months that they agreed up on at the time of investment. To discourage investors from taking such a decision, an exit load is determined. The sole purpose of such a fee applicable at the time of exit is to reduce the number of withdrawals from the schemes of mutual funds. Exit load fee differs from one fund house to another.

The exit load is a percentage applied on the NAV (net asset value), and the reduction in the amount is credited back to the investor. For example, a mutual fund defines its exit load to be 1% on redemption within a year. If an investor invested his money in the beginning of the year on 10th January and he decides to redeem it on April 10th, when the fund’s NAV is at around Rs 25. Since April 10 is much before the agreed period of the redemption, the investor will attract an exit load on failing to honor his commitment. The amount returned to the investor post the exit load will be 24.75. The exit load amounts to Rs 0.25 (1% of Rs 25), which is deducted and credited back into the investor’s account. On completion of the agreed term, say the investor would want to redeem the load on 10th January the next year, then he is not entitled to pay any exit load on the same. It is to be noted that switching out of a fund from one to another is also qualified as a redemption. However, units that are under dividend reinvestment do not suffer exit loads.

Calculation of Exit Load in SIPs

Every installment of the Systematic Investment Plan is calculated for exit load. If the lock-in period for the SIP installment is agreed upon as 12 months than the load will be applied within the same time frame. The same rule of exit load is applicable when an investor makes multiple investments of varied sums at different points in the fund.

Every fund defines its own exit load and therefore investors are expected to read the terms and conditions carefully before investing in the mutual fund. Ideally, in most cases exit load is usually in the range of 0.25 to up to 3%. The rate and the lock-in time period differs too. For example, rate for redemption for 120 days can be different from rate applicable for redemption post six months.

For short-term funds the exit loads are for a short duration of 60 or 120 days, Exit load might not be charged for ultra-short term funds. Long term debt funds however follow the standard rule and have an exit load for around one year.

Merger of Schemes

In case of a merger of two funds for whatsoever reason, exit load will not be applicable in such a case. In such instances, investors are provided with the option of opting out from the fund and retrieve their amount in a specific time window. Failure to opt out within time window attracts an exit load.

We hope to have cleared most of your doubts on exit loads in the most simplified way possible. For more on the financial world, keep on reading.

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What are open-ended mutual fund & close-ended mutual fund?

What are open-ended mutual fund & close-ended mutual fund?
by Priyanka Sharma 13/06/2017

Financial world and its terminologies can leave the most intelligent people baffled with its nitty gritties. To a layman it all appears the same until he/she dwelves deeper to create a portfolio of their own. We simplify the financial terminology to help you understand this not so complex world of finance easily.

What are open-ended funds?

Open-Ended Funds are simply put a category of the mutual fund where there is no restriction on the number of shares issued. For example, when Mr X purchases shares in a mutual fund, the number of shares overall increases. But when Mr X sells his shares, those shares are taken out of circulation and if required for large dealings the fund manager may have to sell some of the investments to pay off Mr X’s money.

Funds and their managers are prone to seeing a continuous entry and exit of investors as the funds sell their shares on a regular basis. Open-ended funds allow the opportunity of purchasing and selling shares even after the initial offering (NFO) period. This is applicable only in the cases of new funds as the shares are bought and sold at the net asset value (NAV) declared by the fund.

Mutual funds are different from stocks in all respects and hence unlike your stocks you will not be able to monitor them or trade them in the open market. While the transactions happen on a daily basis on the fund with the selling and buying of new shares, in proportion to the same the total value of the fund or net asset value (NAV) is repriced accordingly.

What are closed-ended funds?

While the open-ended funds and closed-ended funds look similar, they're very different. To be precise a closed-ended fund is more like an exchange traded fund than a mutual fund. Like ETFs they are launched in the market through an IPO in order to raise money and then trade in the open market just like a stock or an ETF. The shares issues by this fund are limited and their value is estimated on the basis of the NAV. Though the value of these shares is based on the NAV, the actual price of the fund is determined by the supply and demand, and therefore the price of trading always differ according to the real market value.

Close-ended funds give a high dividend and therefore attract more investors. However, investors need to understand that though the borrowed money produce big returns on investment, using borrowed money for investment can get the fund under intense pressure in the long run.

Conclusion

While open-ended fund products are a safe choice for investment than closed-ended funds, the latter offers lucrative deal in terms offering higher dividend payments and capital appreciation.

We advise investors to be careful and come to any decision post a thorough weighing of all the pros and cons.

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Short Box Spread Explained - Online Option Trading Guide

Short Box Spread Explained - Online Option Trading Guide
by Nilesh Jain 20/06/2017
New Page 1

Short Box Spread explained:

The Short Box Spread is an arbitrage strategy that will be implemented with the combination of Bear Call spread along with Bull Put spread with the same expiry and strike price.

When to initiate a Short Box Spread?

Short Box Spread is initiated to capture riskless profit when the spreads are overpriced in relation to their expiration value.

How to construct a Short Box Spread?

Short Box Spread can be created by Selling 1 ITM call, Buying 1 OTM call, Selling 1 ITM put and buying 1 OTM put of the same underlying security with the same expiry and same strike price. Strike price can be customized as per the convenience of the trader; however, the upper and lower strike must be same for call and put.

Strategy

Sell 1 ITM Call, Buy 1 OTM Call, Sell 1 ITM Put and Buy 1 OTM Put

Market Outlook

Neutral

Motive

Earn risk free profit

Risk

Risk-free arbitrage, No risk involved

Reward

Limited

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price (Rs)

9500

Sell 1 ITM call of strike price (Rs)

9400

Premium received (Rs)

270

Buy 1 OTM call of strike price (Rs)

9600

Premium paid (Rs)

115

Sell 1 ITM put of strike price (Rs)

9600

Premium received (Rs)

112

Buy 1 OTM put of strike price (Rs)

9400

Premium paid (Rs)

51

Lot Size

75

Net Premium received (Rs)

216

Expiration value of Box

200

Risk-free arbitrage

16

Suppose Nifty is trading at 9500. Short Box Spread is currently trading at Rs 216, the actual value of box on expiry should be 200. Since the current value of box is more than its expiration value, a risk free arbitrage of Rs 16 is possible. Selling the box will result in a net premium received of Rs 16,200 (216*75). The expiration value of the box is computed as: 9600-9400=200, which is Rs 15000 (200*75). Since you have collected Rs 216 for shorting the box, your profit comes to Rs 16 after buying it back for Rs 200. Therefore, risk-free profit would be Rs 1,200(16*75).

For the ease of understanding of the payoff, we did not take in to account commission charges. Following is the payoff chart and payoff schedule assuming different scenarios of expiry.

The Payoff chart:

The Payoff Schedule:

On Expiry NIFTY closes at

Net Payoff from 1 ITM Call Sold (Rs) 9400

Net Payoff from 1 OTM Call Bought (Rs) 9600

Net Payoff from 1 ITM Put Sold (Rs) 9600

Net Payoff from 1 OTM Put Bought (Rs.) 9400

Net Payoff (Rs)

8900

270

-115

-588

449

16

9000

270

-115

-488

349

16

9100

270

-115

-388

249

16

9200

270

-115

-288

149

16

9300

270

-115

-188

49

16

9400

270

-115

-88

-51

16

9500

170

-115

12

-51

16

9600

70

-115

112

-51

16

9700

-30

-15

112

-51

16

9800

-130

85

112

-51

16

9900

-230

185

112

-51

16

10000

-330

285

112

-51

16

Impact of Options Greeks before expiry:

Overall Greek impact on this strategy will be neutral as this strategy provides risk free return.

Analysis of Short Box Spread:

A Short Box Spread is only used when the value of box is overpriced, so you can short and hold the position till expiry. However, this strategy should be used by advanced traders as the gain from short box is very minimal, the commission payable when implementing this strategy can wipe out all the profits, so this strategy should only be implemented when the charges paid are lower than the expected profit.