Nifty 18210.95 (-0.31%)
Sensex 61143.33 (-0.34%)
Nifty Bank 40874.35 (-0.88%)
Nifty IT 35503.9 (0.97%)
Nifty Financial Services 19504.75 (-0.74%)
Adani Ports 745.85 (-0.54%)
Asian Paints 3094.65 (4.20%)
Axis Bank 787.50 (-6.46%)
B P C L 427.70 (-0.78%)
Bajaj Auto 3776.50 (-0.40%)
Bajaj Finance 7482.15 (-4.75%)
Bajaj Finserv 18012.00 (-1.86%)
Bharti Airtel 702.35 (0.88%)
Britannia Inds. 3697.85 (0.14%)
Cipla 922.50 (1.65%)
Coal India 173.60 (-0.83%)
Divis Lab. 5149.35 (2.60%)
Dr Reddys Labs 4662.70 (-0.08%)
Eicher Motors 2583.90 (-0.25%)
Grasim Inds 1728.40 (-0.63%)
H D F C 2915.00 (0.12%)
HCL Technologies 1177.15 (0.89%)
HDFC Bank 1642.80 (-0.60%)
HDFC Life Insur. 693.85 (0.55%)
Hero Motocorp 2690.15 (-0.38%)
Hind. Unilever 2396.60 (-1.65%)
Hindalco Inds. 479.85 (-1.28%)
I O C L 130.80 (-0.53%)
ICICI Bank 835.00 (0.68%)
IndusInd Bank 1142.55 (-1.07%)
Infosys 1728.95 (1.48%)
ITC 238.45 (0.74%)
JSW Steel 684.90 (-1.36%)
Kotak Mah. Bank 2188.25 (-1.03%)
Larsen & Toubro 1784.55 (-0.65%)
M & M 886.80 (-0.87%)
Maruti Suzuki 7356.25 (0.81%)
Nestle India 19004.60 (-1.11%)
NTPC 141.30 (-1.33%)
O N G C 157.90 (-3.19%)
Power Grid Corpn 190.25 (-0.08%)
Reliance Industr 2627.40 (-1.26%)
SBI Life Insuran 1186.00 (1.19%)
Shree Cement 28107.75 (1.19%)
St Bk of India 519.15 (1.29%)
Sun Pharma.Inds. 825.10 (1.43%)
Tata Consumer 818.75 (1.22%)
Tata Motors 497.90 (-2.11%)
Tata Steel 1326.15 (-1.30%)
TCS 3489.75 (0.21%)
Tech Mahindra 1567.85 (0.29%)
Titan Company 2460.10 (0.22%)
UltraTech Cem. 7354.20 (1.17%)
UPL 741.50 (3.96%)
Wipro 671.10 (0.44%)

Future Supply Chain Solutions Ltd- Information Note

Future Supply Chain Solutions Ltd- Information Note
IPO
by Nikita Bhoota 12/04/2017

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 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 - December 6, 2017
Issue Closes - December 8, 2017
Face Value - Rs 10
Price Band- Rs 660- 664
Issue Size – ~Rs 650 cr
Public Issue: ~97.85 lakh shares
Bid Lot - 22 Equity shares              
Issue Type - 100% Book Building

% shareholding Pre IPO
Promoter 57.35
Public 42.65

Source: RHP

Company Background

Future Supply Chain Solutions (FSCS) is one of the largest organised third-party logistics (3PL) service operators in India, according to the A&M report. "The Company provides services in three key areas:  Contract Logistics - Warehousing, distribution and other services accounting for ~71% of overall revenues as on 1HFY18, Express Logistics - Point-to-point, less-than truck-load and time-definite transportation services accounting for ~20% of overall revenues as on 1HFY18 and Temperature-Controlled Logistics - Cold-chain warehousing, transportation solutions, distribution of perishable products accounting for ~4% of overall revenues as on 1HFY18.

Offer Details

The offer consists of an Offer for Sale (OFS) of up to ~97.85 lakh equity shares.

Key Points

FSCS’s customer base spans many sectors, including retail, fashion and apparel, automotive and engineering, food and beverage, FMCG, e-commerce, healthcare, electronics and technology, home and furniture and ATMs. Of the top 20 customers of the company (other than the promoter and certain group companies), which accounted for approximately 20.1% of the revenue from operations in FY17, the company has served nine customers for over five years. For FY17, company’s 10 largest customers (other than the promoter and certain group companies) accounted for 14.8% of the revenue from operations

FSCS is one of the India’s largest organised third-party logistics operators, according to the A&M Report. It has extensive network of 46 distribution centres, 14 hubs and 106 branches (including franchisees), covering 11,235 pin codes across 29 states and 5 union territories. A&M report further states that, its MIHAN distribution centre (Nagpur) is one of the largest and most automated distribution centres in India. As per the report, the Indian 3PL market has grown at a CAGR of approximately 12% over FY12-17 and the 3PL industry growth in India is expected to continue in line with the historical growth trajectory due to strong demand and supply side drivers.

Key Risk

Future Group Entities are the key customers of the company. The revenue from promoter and group companies accounted for 62.5%, 49.5% and 46.5% of the total revenue from operations for FY2017, FY2016 and FY2015 respectively. Further, the company is reliant on the various sectors in which the Future Group Entities operate. If any of those sectors suffer a downturn, the company’s financial performance would be impacted.

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How to Read the Mutual Fund Offer Documents?

How to Read the Mutual Fund Offer Documents?
by Nutan Gupta 13/04/2017

It is very difficult to not notice the words of caution after every mutual fund commercial - “Mutual Fund investments are subject to market risks. Please read the offer documents carefully before investing.” How many of us actually read the offer documents? 5 investors in every 100 investors might be going through the documents. Rest 95 either do not know how to read the offer documents or do not consider it important enough to go through the documents.

Here are some important aspects you should consider while reading offer documents:

Investment Objective

This is one of the most important things to look at in an offer document. It gives a fair idea about the thought process of the fund manager and the strategies that he will use in order to achieve the fund’s objectives. An individual can compare these objectives with his own expectations as per his risk appetite.

Past Performance

The past performance of the fund can be looked at to know if the fund has given consistent returns or not. Investors can also look at the launch date if the fund, its total assets under management and compare it with other funds in the similar space. However, this cannot be used to predict future returns, as one cannot determine future returns on the basis of past performance.

Fund Managers

Fund manager is an experienced professional who has an expertise is managing funds. The offer document clearly states who the fund manager to a particular fund is. This gives the investor an insight about the investment style of the fund manager.

Loads and Taxes

The offer document also states all the charges applicable like the entry and exit load, transaction charges and other charges applicable for managing a fund. All mutual funds do not have same charges as the charges vary according to the type of mutual fund.

Expense Ratio

Expense ratio is the ratio which is charged by AMCs to manage an investors’ money. It is charged in percentage terms. Different funds have different expense ratios. However, SEBI has restricted the limit for expense ratios that a fund can charge. Equity funds can charge a maximum of 2.5% and debt funds can charge a maximum of 2.25%.

Next Article

Why Are Debt Mutual Funds A Better Alternative To FDs?

Why Are Debt Mutual Funds A Better Alternative To FDs?
by Nutan Gupta 17/04/2017
New Page 1

A Debt Fund is a mutual fund which invests in fixed income securities. Fixed income securities include government bonds, certificate of deposit, commercial papers, treasury bills and corporate bonds. Investors with a low-risk appetite consider investing in debt mutual funds and fixed deposits (FDs). In one of our articles earlier, we had discussed the different types of debt mutual funds. This article will tell you why investing in debt mutual funds should be considered over FD.

Safety of capital is same

The safety of any instrument depends on the credit rating of the instrument. Fixed deposits with a AAA rating implies that it carries the highest level of safety. Debt mutual funds are not rated by themselves but their safety can be identified from the portfolio they invest in. While sovereign rating indicates the highest level of safety as it is issued by the Government of India, AAA and AA rating also indicate a high level of safety as the funds are issued by banks, public sector companies and private companies. Moreover, Securities Exchange Board of India (SEBI) being the regulator, keeps a close watch on the fund industry.

Debt funds provide higher returns

Fixed deposits provide fixed returns. At present, the interest rate provided by FDs is 6.5%. If one looks at the historical performance of debt mutual funds, it has given returns of 8-9%. Interest rate fluctuations can cause volatility in debt fund, otherwise they are very safe investments.

Taxation

The returns from fixed deposits are considered as interest income and hence are added to an individual’s normal income. An individual whose income comes in the tax bracket of 30%, tax takes away a large chunk of his returns. The tax rate is same for debt funds held for less than 36 months. However, if debt funds are held for more than 36 months, long term capital gain is applied and the returns are taxed at 20% with indexation.

Debt funds provide better liquidity

The proceeds of open-ended debt funds are credited to an individual’s bank account in 2-3 days. Although fixed deposits can also be liquidated in 2-3 days, there is a penalty for withdrawing FDs before the maturity date. Some debt funds may charge you exit load which is usually 0.25% if you withdraw within a certain period of time.

For example:

Mr. Shah has invested Rs. 1 lakh each in a Bank FD and Debt Fund for a period of 3 years and 1 day. The expected return for both these investments is 7.5%. Which investment will give him a better post-tax return?

Investment in FD

Investment in Debt Fund

Amount with interest/return

Rs. 1,24,230

Rs. 1,24,230

Index Cost

NA

Rs. 1,15,763

Tax Applicable Rate

30% (Higher Tax Slab)

20%

Taxable Gain

Rs. 24,230

Rs. 8,467

Tax Payable

Rs. 7,269

Rs. 1,693

Net Return (p.a.)

5.40%

7.00%

Next Article

Long Call Calendar Spread

Long Call Calendar Spread
by Nilesh Jain 17/04/2017

A Long Call Calendar Spread is initiated by selling one call option and simultaneously buying a second call option of the same strike price of underlying assets with a different expiry. It is also known as Time Spread or Horizontal Spread. The purpose of this strategy is to gain from Theta with limited risk, as the Time Decay of the near period expiry will be faster as compared to the far period expiry. As the near period option expires, far month call option would still have some premium in it, so the option trader can either own the far period call or square off both the positions at same time on near period expiry.

When to initiate a Long Call Calendar Spread?

A Long Call Calendar Spread can be initiated when you are very confident that the security will remain neutral or bearish in near period and bullish in longer period expiry. This strategy can also be used by advanced traders to make quick returns when the near period implied volatility goes abnormally high as compared to the far period expiry and is expected to cool down. After buying a Long Calendar Spread, the idea is to wait for the implied volatility of near period expiry to drop. Inversely, this strategy can lead to losses in case the implied volatility of near period expiry contract rises even if the stock price remains at same level.

How to construct a Long Call Calendar Spread?

A Long Call Calendar Spread is implemented by selling near month at-the-money/out-the-money call option and simultaneously buying far month at-the-money/out-the-money call option of the same underlying assets.

Strategy

Buy far month ATM/OTM call and sell near month ATM/OTM call.

Market Outlook

Neutral to positive movement.

Motive

Hopes to reduce the cost of buying far month call option.

Risk

Limited to the difference between the premiums.

Reward

Limited if both the positions squared off at near period expiry. Unlimited if far period call option hold till next expiry.

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price

9000

Sell near month ATM call strike price Rs.

9000

Premium received (per share) Rs.

180

Buy far month ATM call strike price Rs.

9000

Premium paid (per share) Rs.

250

Lot size (in units)

75

Suppose Nifty is trading at 8800. An investor, Mr. A is expecting no significant movement in near month contract, so he enters a Long Call Calendar Spread by selling near month strike price of 9000 call at Rs.180 and bought 9000 call for Rs.250. The net upfront premium paid to initiate this trade is Rs.70, which is also the maximum possible loss. The idea is to wait for near month call option to expire worthless by squaring off both the positions in near month expiry contract or reduce the cost of far month buy call by setting off the profit made from the near month call option. Another way by which this strategy can be profitable is when the implied volatility of the near month falls.

For the ease of understanding, we did not take into account commission charges. Following is the payoff chart of the expiry.

The Payoff Schedule on near period expiry date:

Near period expiry if NIFTY closes at

Net Payoff from near period Call sold (Rs.)

Theoretical Payoff from far period call Buy (Rs.)

Net Payoff at near period expiry (Rs.)

8700

180

-190

-10

8800

180

-160

20

8900

180

-120

60

9000

180

-70

110

9100

80

-10

70

9200

-20

+60

40

9300

-120

140

20

9400

-220

230

10

9500

-320

330

10

Following is the payoff schedule till far expiry, where maximum loss would be limited up to 320 Rs (250+70), Rs 70 is from near expiry and Rs 250 is the premium of far month call bought. Maximum profit would be unlimited since far month call bought will have unlimited upside potential.

Net Combined Payoff Schedule on next period expiry date:

NIFTY closing price on Near and Far period expiry

Theoretical Payoff from far period call Buy (Rs.)

Net Payoff at near period expiry (Rs.)

Net Payoff at Far period expiry (Rs.)

8700

-250

-10

-260

8800

-250

20

-230

8900

-250

60

-190

9000

-250

110

-140

9100

-150

70

-80

9200

-50

40

-10

9300

50

20

70

9400

150

10

160

9500

250

10

260

The Payoff Graph

Impact of option Greeks:

Delta: The net Delta of a Long Call Calendar will be close to zero or marginally positive. The negative Delta of the near month short call option will be offset by positive Delta of the far month long call option.

Vega: A Long Call Calendar has a positive Vega. Therefore, one should buy spreads when the volatility of far period expiry contract is expected to rise.

Theta: With the passage of time, if other factors remain same, Theta will have a positive impact on the Long Call Calendar Spread in near period contract, because option premium will erode as the near period expiration dates draws nearer.

Gamma: Gamma estimates how much the Delta of a position changes as the stock prices changes. The near month option has a higher Gamma. Gamma of the Long Call Calendar Spread position will be negative till near period expiry, as we are short on near period options and any major upside movement till near period expiry will affect the profitability of the spreads.

How to manage risk?

A Long Call Calendar spread is exposed to limited risk up to the difference between the premiums, so carrying overnight position is advisable but one can keep stop loss on the underlying assets to further limit losses.

Analysis of Long Call Calendar Spread strategy

A Long Call Calendar Spread is the combination of short call and long call option with different expiry. It mainly profits from Theta i.e. Time Decay factor of near period expiry, if the price of the security remains relatively stable in near period. Once the near period option has expired, the strategy becomes simply long call, whose profit potential is unlimited.

Next Article

Sovereign Gold Bonds Guide - Basics you need to know before Investing | 5paisa Article

Sovereign Gold Bonds Guide - Basics you need to know before Investing | 5paisa Article
by Priyanka Sharma 17/04/2017

Sovereign Gold Bonds are the new-age way of investing in gold. It presents an opportunity to invest in the precious metal that is not in the form of jewelry, coins or a bar, overcoming the hassles of physical safekeeping or theft, the expenses of a locker, and getting rid of impurities in gold. At same time, it ensures better returns as compared to physical gold, besides providing interest on the amount invested.

The Gold Monetization scheme was launched by Prime Minister Narendra Modi in November 2015. It sought to bring out some 20,000 tonnes of gold from households and temples, and merge into the mainstream banking system.

In general, buying paper gold will help the government in controlling gold import, and Sovereign Gold Bonds is just a start. According to one estimate, only 3060 kg of gold have been collected from five tranches so far.

The government regularly announces tranches of Sovereign Gold Bond (SGB) Scheme, the details of which are posted on the RBI website. In its latest offering, applications for the bond issue were accepted February 27- March 3, 2017, while the bonds were issued on March 17, 2017. The scheme enjoys immense government attention as Shaktikanta Das, Secretary, Economic Affairs Department, tweeted on the latest launch, "excellent opportunity to invest and benefit from gold price appreciation".

There is little doubt that Sovereign Gold Bonds can be helpful in diversifying one’s portfolio. By investing in SGB, one can open two simultaneous streams of revenue. One from the movement of gold prices and another from fixed interest rate.

And so before you take the plunge and get involved in Sovereign Gold Bonds, here are a few pointers to keep in mind:

Alternative exposure to gold

Don't put all your eggs in one basket. It is always good to diversify your portfolio with around 10-15% invested in gold.

Sovereign Gold Bonds offer a solid alternative to take exposure to gold as it offers additional interest. There are no annual recurring expenses as compared with gold ETFs (expense ratio in ETF is 1%). The sovereign gold bonds will be sold through banks, Stock Holding Corporation of India (SHCIL), designated post offices and the National Stock Exchange of India and the Bombay Stock Exchange, which would allow early exit.

Can be used as collateral

Bonds can be used as collateral for loans. The loan-to-value (LTV) ratio is to be set equal to ordinary gold loan mandated by the Reserve Bank of India (RBI) from time to time.

Who can buy the Bonds

The bonds are restricted for sale to resident Indian entities, including individuals, HUFs, trusts, universities and charitable institutions. Bonds will be denominated in multiples of gram(s) of gold with a basic unit of 1 gram.

Interest rate

Investors will be compensated at a fixed rate of 2.5% per annum payable semi-annually on the nominal value.

Tenure

The tenure of the bond will be for a period of eight years. However, an exit option is available from the fifth year.

How the SGBs have fared so far

Scheme

Issue period

Issue price (Rs/gm)

Sovereign Gold Bond 2015-16

Nov 5 – Nov 20, 2015

2648

SGB 2016

Jan 18 – Jan 22, 2016

2600

SGB 2016 – Series II

March 8- March 14, 2016

2916

SGB 2016 - 17 Series I

July 18 – July 22, 2016

3119

SGB 2016 - 17 Series II

Sep 1 – Sep 9, 2016

3150

SGB 2016 – 17 Series III

Oct 24 – Nov 2, 2016

2957

SGB 2016 – 17 Series IV

Feb 27 – March 3, 2017

2893

Prices as on Feb 23, 2017

Source: RBI

Next Article

Long Call Condor Options Trading Strategy

Long Call Condor Options Trading Strategy
by Nilesh Jain 17/04/2017

Long Call Condor options trading strategy

A Long Call Condor is similar to a Long Butterfly strategy, wherein the only exception is that the difference of two middle strikes sold has separate strikes. The maximum profit from condor strategy may be low as compared to other trading strategies; however, a condor strategy has high probability of making money because of wider profit range.

When to initiate a Long Call Condor

A Long Call Condor spread should be initiated when you expect the underlying assets to trade in a narrow range as this strategy benefits from time decay factor.

How to construct a Long Call Condor?

A Long Call Condor can be created by buying 1 lower ITM call, selling 1 lower middle ITM call, selling 1 higher middle OTM call and buying 1 higher OTM calls of the same underlying security with the same expiry. The ITM and OTM call strikes should be equidistant.

Strategy

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

Market Outlook

Neutral on market direction and Bearish on volatility

Motive

Anticipating minimal price movement in the underlying assets

Upper Breakeven

Higher Strike price - Net Premium Paid

Lower Breakeven

Lower Strike price + Net Premium Paid

Risk

Limited to Net premium paid

Reward

Limited (Maximum profit is achieved when underlying expires between sold strikes)

Margin required

Yes

Let’s try to understand with an example:

Nifty Current spot price

9100

Buy 1 deep ITM call of strike price (Rs)

8900

Premium paid (Rs)

240

Sell 1 ITM call of strike price (Rs)

9000

Premium received (Rs)

150

Sell 1 OTM call of strike price (Rs)

9200

Premium received (Rs)

40

Buy 1 deep OTM call of strike price (Rs)

9300

Premium paid (Rs)

10

Upper breakeven

9240

Lower breakeven

8960

Lot size

75

Net premium paid

60

Suppose Nifty is trading at 9100. An investor Mr. A estimates that Nifty will not rise or fall much by expiration, so he enters a Long Call Condor and buys 8900 call strike price at Rs 240, sells 9000 strike price of Rs 150, sells 9200 strike price for Rs 40 and buys 9300 call for Rs 10. The net premium paid to initiate this trade is Rs 60, which is also the maximum possible loss. This strategy is initiated with a neutral view on Nifty hence it will give the maximum profit only when there is little or no movement in the underlying security. Maximum profit from the above example would be Rs 3000 (40*75). The maximum profit would only occur when underlying assets expires in the range of strikes sold.

In the mentioned scenario, maximum loss would be limited up to Rs 4500 (60*75) and it will occur if the underlying assets goes below 8960 or above 9240 strikes at expiration. If the underlying assets expires at the lowest strike then all the options will expire worthless, and the debit paid to initiate the position would be lost. If the underlying assets expire at highest strike, all the options below the highest strike would be In-the-Money. Furthermore, the resulting profit and loss would offset and net premium paid would be lost.

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

The Payoff Schedule:

On Expiry NIFTY closes at

Net Payoff from 1 Deep ITM Call bought (Rs) 8900

Net Payoff from 1 ITM Call sold (Rs) 9000

Net Payoff from 1

OTM Call sold (Rs)

9200

Net Payoff from 1 deep OTM call bought (Rs) 9300

Net Payoff (Rs)

8600

-240

150

40

-10

-60

8700

-240

150

40

-10

-60

8800

-240

150

40

-10

-60

8900

-240

150

40

-10

-60

8960

-180

150

40

-10

0

9000

-140

150

40

-10

40

9100

-40

50

40

-10

40

9200

60

-50

40

-10

40

9240

100

-90

0

-10

0

9300

160

-150

-60

-10

-60

9400

260

-250

-160

90

-60

9500

360

-350

-260

190

-60

9600

460

-450

-360

290

-60

The Payoff Graph:

Impact of Options Greeks before expiry:

Delta: If the underlying asset remains between the lowest and highest strike price the net Delta of a Long Call Condor spread remains close to zero.

Vega: Long Call Condor has a negative Vega. Therefore, one should initiate Long Call Condor spread when the volatility is high and expect to decline.

Theta: A Long Call Condor has a net positive Theta, which means strategy will benefit from the erosion of time value.

Gamma: The Gamma of a Long Call Condor strategy goes to lowest values if it stays between sold strikes, and goes higher if it moves away from middle strikes.

Analysis of Long Call Condor spread strategy

A Long Call Condor spread is best to use when you are confident that an underlying security will not move significantly and stays in a range of strikes sold. Long Call Condor has a wider sweet spot than the Long Call Butterfly. But there is a tradeoff; this is a limited reward to risk ratio strategy for advance traders.