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Embassy Office Parks REIT- Information Note

Embassy Office Parks REIT- Information Note
15/03/2019

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 Herring 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 contract or commitment whatsoever.

Issue Opens- March 18, 2019
Issue Closes- March 20, 2019
Price Band- Rs299- 300
Issue Size- 15.8cr units
Allocation to Strategic Investors~2.9cr units
Net Issue Size-~12.9cr units
Issue Size#- ~Rs4,750 cr
Post Issue MCap#- Rs23,046cr
Bid Lot- 800 units

 Note: # - at upper band         

Share Reservation

% of Net Issue

Institutional

75.0

Non- Institutional

25.0

Source: offer document

Company Background

Embassy Office Parks REIT’s (Embassy REIT) Portfolio comprises seven best-in-class office parks and four prime city-center office buildings totaling 32.7 msf as of December 31, 2018, with strategic amenities, including two completed and two under-construction hotels totaling 1,096 keys, food courts, employee transportation and childcare facilities. It has invested in amongst the highest quality assets in the key office markets of Bengaluru, Pune, Mumbai and Noida.

Issue Details

The issue consists of Fresh Issue of up to 15.8cr units.

Financials

Consolidated Rs.Cr

FY16

FY17

FY18

9MFY19

Revenue from operations

1,397

1,485

1,612

1376

Growth (%) yoy

-

6.3

8.5

-

EBITDA*

1,229

1,240

1,241

1,139

EBITDA margin (%)

88.0

83.5

77.0

82.7

Reported PAT

93

177

257

285

Source: Company, 5Paisa

For additional information and risk factors please refer to the Offer Document. Please note that this document is for information purpose only.

*EBITDA is excluding share of profit of equity accounting investees

Key Points

India is the sixth-largest and the fastest growing major economy in the world and has become a leading services hub for global corporates over the last 20 years. As the owner of one of India’s largest Grade A office portfolios, Embassy REIT is in a prime position to continue to capitalize on this incredible growth story and the sustained demand from services sector tenants (72.2% of its tenant base) for Grade A office space.

Although its properties have world class infrastructure and high-quality tenants, capital values for our assets as per CBRE’s valuation are $150 per square foot as of March 31, 2018, implying a 82.9%-95.2% discount to Grade A properties in New York, Tokyo and Hong Kong. Moreover, capitalization rates for such properties in India at 7.5%-8.5% represent a 175-575 bps premium to capitalization rates for assets of similar quality and tenant profile in countries like the US, Japan and China.

Key Risk

Its Gross Rentals as of December 31, 2018 and March 31, 2018, 2017 and 2016 from its top 10 tenants amounted to 42.31%, 44.84%, 46.72% and 48.35%, respectively of its combined Gross. Rentals as of these dates. Tenants in the technology industry accounted for approximately 49.40%, 49.48%, 52.76% and 56.15% of its combined Gross Rentals over the same period.

Its Leases with tenants across our Portfolio may expire and may not be renewed. The Asset SPVs and Investment Entity may face delays in finding suitable tenants which could also have an adverse impact on the revenue from the Portfolio Assets and the Portfolio Investment.

Summary of key line items for the period of Projections

INR cr, except percentages

FY2019

FY2020

FY2021

Portfolio Assets

Revenue from operations

1,882

2,304

2,512

NOI(1)

1,614

1,967

2,145

NOI Margin (%)

86%

85%

85%

EBITDA(2)

1,517

1,856

2,026

EBITDA Margin (%)

81%

81%

81%

Cash flows from operating activities

1,349

1,608

1,825

Portfolio Investment

Revenue from operations

343

400

416

NOI(1)

330

388

405

NOI Margin (%)

96%

97%

97%

EBITDA(2)

310

364

379

EBITDA Margin (%)

90%

91%

91%

Cash flows from operating activities

272

281

303

NDCF for Embassy Office Parks Group(3)

1,634

1,910

2,074

  1. For details in relation to NOI, refer to General Terms, Definitions and Abbreviations
  2.  For details in relation to EBITDA, refer to General Terms, Definitions and Abbreviations
  3. For details in relation to NDCF, refer to General Terms, Definitions and Abbreviations

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A cheerful budget for the aam aadmi, and possibly markets

A cheerful budget for the aam aadmi, and possibly markets
by Prakarsh Gagdani 02/04/2019

By Prakarsh Gagdani

A cheerful budget for the aam aadmi, and possibly markets

In many ways the budget 2019 has been different and it promises to bring big relief for the Aam Aadmi. With direct cash to farmers, pension for unorganised workers and tax break for middle class, we see a new way of populism. Knowing that this is a pre-poll budget, it is definitely a master stroke by the current government.

Of all the major announcements, the hike in tax rebate has been the most-awaited announcement. One of the major distress points for the common salaried man has always been the income tax. The move to increase the income tax rebate limit for individual with taxable income upto Rs 5 lakh is expected to benefit 3 crore tax payers. Moreover, individuals availing the Rs 1.5 lakh deduction u/s 80C, will not be required to pay any income tax up to gross income of Rs 6.5 lakh. Such a person would be saving tax of Rs 12,500 compared to the tax payable in current FY 2018-19.

Even though the basic exemption limit and tax-slabs remain the same for taxpayers with annual income beyond Rs 5 lakh, the government has increased the provisions of tax saving for them too. It has proposed to increase the standard deduction limit to Rs 50,000 from Rs 40,000 earlier and also raised the TDS limit on bank deposit interests to Rs 40,000 from Rs 10,000 currently. This will benefit small depositors and non-working spouses and ultimately get more savings in the household. Further, the New Pension Scheme (NPS) has been liberalized by increasing the government contribution from 10% to 14%, while keeping the employee contribution same at 10%. 

In addition, a number of measures have been announced with respect to tax around real estate. Notional rent on the second self-occupied house has been done away with; benefits of rollover of capital tax gains will be increased from investment in one residential house to two residential houses for tax payer having capital gains up to Rs 2 crore; and TDS threshold of deduction of rent u/s 194-I has been increased from Rs 1.8 lakh to Rs 2.4 lakh.

All in all, this is the budget which India needs for the growth in household savings. The budget has indeed put more money in the hands of the salaried class and this increase in savings can be channelized into long-term investments, either through the traditional route or through capital markets. To my belief, the tax relief has been a major announcement and impact of this will be seen over time in increased participation in the capital markets. That way, the domestic flows could possibly counter-balance global liquidity fluctuations. 

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How Can You Invest In Direct Mutual Funds?

How Can You Invest In Direct Mutual Funds?
01/09/2019

Direct plans of mutual funds enable the investor to save on costs. Direct Plan investors are not charged the distributor and trail commissions. For an average equity fund, this reduces the Total Expense Ratio by 60-70 basis points. This makes a big difference over longer periods.

The KYC process remains the same, irrespective of whether you opt for the Direct Plan or the Regular Plan. Also you have to register with the AMC or the aggregator once. The investor can either do a lump sum investment or follow SIP route through the Direct Plan. Once your SIP is registered as a Direct Plan, then it continues that way. You can convert a Regular Plan into a Direct Plan by writing to your fund. How do you invest in Direct Mutual Funds?

Direct Plan Investing Through AMCs

Walk into the nearest office or Investor Service Centre of the AMC of your choice. If you are a first time investor, then you will have to complete your KYC and you will be allotted a ‘Folio Number’. Once folio number is allotted, subsequent investments can be done online. Ensure that you specifically check the Direct Plan box in your application. The only challenge in this approach is that you will have to obtain a distinct folio number for each AMC.

Direct Plan Investing Through Fund Registrars

Registrars are the record keepers and folio managers of all mutual fund accounts. There are two key players viz. Karvy and CAMS. You can register with either registrar online to invest in Direct Plans. Of course, when you approach a registrar, you can only invest in funds for which they are the registrars. In fact, when you submit an application to your AMC, it is processed by the registrar only. So, this is an extension of the first method.

Leveraging MFUs and Fund Aggregators

Mutual Fund Utilities (MFU) or aggregators are an agnostic platform to invest in mutual funds. You will have to take a one-time registration and obtain a Common Account Number (CAN). Once the CAN is obtained, you can map all your existing folios to that particular CAN and they would be treated as Direct Funds. The advantage is that you don’t have to interface with multiple AMCs and the MFU aggregates and gives you requisite analytics for better decision making. The challenge is that you can only deal in the funds where the AMCs have tied up with the MFU. This platform is convenient and centralized.

Direct Plan Investing Through Investment Advisors, Online Direct Investment Portals

The challenge in the above 3 methods is that you still have to be self-driven. As an investor you need to take all the decisions including screening, selecting and ensuring that funds are in sync with your long term goals. One alternative is to go through on online platform of Registered Investment Advisor or through a Robo Advisor. These platforms provide investment recommendations to investors on the basis of certain details keyed in by the investor. 

Direct Plans Of Mutual Funds – How To Make The Choice?

Investing through Direct Plans requires that you are comfortable with a self-driven approach to investing in mutual funds. While mutual funds offer diversification and professional management, they are also exposed to the vagaries of the markets and macros. You must be confident to handle these gyrations. Ideally, Direct Plans are for investors who have the time, wherewithal and resources to spend in making investment decisions. Otherwise, you are better off opting for a Regular Plan and letting your broker advice you appropriately.
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The Difference Between Regular and Direct Mutual Fund

The Difference Between Regular and Direct Mutual Fund
01/09/2019

Browse through the NAVs of mutual funds either in the pink papers or the AMFI website and you will find that the same growth or dividend scheme of a mutual fund is subdivided into Regular plans and Direct Plans. Have you ever wondered what are these Direct Plans and Regular Plans? Let us check out a live NAV table first.

Date Source: AMFI

In the above table, you will find that the DSP Top 100 Equity Fund is subdivided into Direct Plan and Regular Plan. You will also find that the Direct Plan has a higher NAV compared to the Regular Plan. Before comparing Direct Plans and Regular Plans, let us briefly dwell on the brief history of Direct Plans.

A Brief History of Direct Plans

Prior to 2009, fund houses charged investors entry loads on mutual funds to cover selling and distribution costs. In August 2009, SEBI banned the collection of entry loads from mutual fund clients. However, the official model of Direct Plan came only from January 2013 when SEBI asked all fund schemes to classify into Direct Plans and Regular Plans.

Currently, funds are allowed to debit their annual expenses up to a ceiling of 2.25% of the AUM in case of equity funds to the fund NAV. This is called the Total Expense Ratio (TER). The fund does not bill the distribution and trail commission costs to Direct Plan investors. Hence, Direct Plans are subject to lower TERs and the NAV are higher. Here are three key points.

Direct Funds Have Lower Expense Ratio

The TER on Direct Plans is lower since the distribution and trail fees are not billed to them. However, there are other costs too in a mutual fund. Mutual funds have to incur operational costs, fund management fees, auditor fees, registrar charges, execution costs, statutory costs and brand expenses, among others. Even if you are holding a Direct Plan, these expenses will still be charged to you. It is only the distribution and trail commissions that are not billed to your NAV. In a typical equity fund the regular plans will have a TER of around 2.25% while the TER for a Direct Plan will be 60-70 bps lower. This cost saving each year enhances your return over the longer period of time.

Direct Plan Does Not Involve Any Intermediary

Direct Funds are simple in nature and the process of investing, especially through an online platform is easy as you do not deal with any intermediary. You can invest directly and make your own investment choice. Just ensure that the NAV in your statement actually reflects the Direct Plan NAV as available on the AMFI website.

Choose Direct Plans If You Can Make Financial Planning Decisions Independently

The common question is - who should opt for a Direct Plan. There are no hard and fast rules. If you are savvy enough to manage your financial planning and investments on your own, then you can consider Direct Plans. When you invest via Direct Plans you do not get the benefit of the advisory services of a broker or financial advisor. Hence, you need to make your choice of Direct Plan after due consideration. Ensure that you have the time and resources to make your financial planning decisions independently.

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5 Factors to Look at While Selecting a Stockbroker

5 Factors to Look at While Selecting a Stockbroker
01/10/2019

Today, there is an abundance of stockbrokers offering their premium services to individuals wanting to accumulate wealth through the financial markets. As such, it is vital to choose a good stockbroker who understands the investor’s financial goals and guides him/her towards substantial returns.

Investors of today have two choices when it comes to stockbrokers: the traditional stockbroker and the discount brokerages. Traditional brokers charge a certain percentage as a fee, which differs with the type and size of the transaction. These brokers also send out trading tips and research bytes to the clients.

Discount brokerages, on the other hand, offer the standard services but at a fixed (flat) cost, i.e. regardless of the type and size of the transaction. They, however, do not offer any trading expertise, i.e. they do not give out trading or stock tips nor do they provide any insights into a trade. As such, they are suitable for those who prefer to self-educate themselves and take independent decisions.

Considering these, an investor has to carefully think about his/her requirements as well as exercise caution when choosing a stockbroker.

Here are five factors that would help a new investor in selecting a stockbroker who understands the financial goals of the investor.

  1. Credibility

    It is vital to perform a thorough background check on the stockbroker before entrusting them with your life savings. Finding out how many years the stockbroker has been in business, how it has performed in the past, what do the clients say about the firm, and any other relevant questions. This will help the individual to know more about the broker.

  2. Minimum Balance

    Investors need to maintain a minimum balance in their stockbroking account, and hence, it is vital to inquire about the same. This amount varies from broker to broker, hence, investors should choose a broker who not only provides the best services, but also has a low minimum amount threshold so that it does not tax their monthly budget. Other than the minimum amount, there should also be ease of access when it comes to depositing and withdrawing funds. Typically, brokerage houses have tie-ups with local banks which lets investors access their funds at any time. Withdrawals normally take three days to reach the client’s account.

  3. Technological Expertise

    Brokers who constantly update their platforms with the latest technology are able to give a unique advantage to the investor. There are also able to match the evolving needs of the investors and educate them on new features and solutions. Choosing a broker who consistently provides a stable and steady platform to their clients is a must.

  4. Availability

    A broker should be available during stock market hours to execute orders without any lag or delay or to address any issues that may arise on their electronic platforms. An investor should also check the speed and the stability of the website/mobile applications, especially during peak hours, to ensure that the pages load quickly and easily as even a split second can lead to the investor losing out on a profitable trade.

  5. Transparency and Capability

Transparency and capability are also important parameters when looking for the perfect stockbroker. There are many ways in which brokers charge their clients. Hence, the client has to ensure that all charges involved are mentioned in a lucid and transparent manner while opening an account. This will help you avoid any hidden costs that brokers might impose later. Apart from this, a broker should also have strong business policies that maintain the quality of the business.

When it comes to the capability of the brokers, investors should make sure that the stockbroker and his team have a strong background and passion for trading in order to have a hassle-free experience. When the team is able, it largely influences the business practices and delivers a profitable outcome to its investors.

Choosing the right stockbroker is vital to trading as the investor is entrusting their life savings into the former’s care. If a stockbroker or his brokerage satisfies the above-mentioned criteria as well as provides real-time customer support, add-on financial services and, as a bonus, is interested in enhancing the client’s knowledge of the markets, then engaging with them is a wise decision.

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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.