Godrej Agrovet Ltd - IPO Note
Issue Opens: October 04, 2017
Issue Closes: October 06, 2017
Face Value: Rs 10
Price Band: Rs 450-460
Issue Size: ~Rs 1,157cr (at upper price band)
Public Issue: ~25.2 mn shares (at upper price band)
Bid Lot: 32 Equity shares
Issue Type: 100% Book Building
|% Shareholding||Pre IPO|
Godrej Agrovet is an India based agri-business company with operations in five business verticals - animal feed, crop protection, oil palm, dairyand poultry and processed foods. Godrej Agrovet was the largest crude palm oil producer in India in terms of market share (source: Oil Palm Report).Animal Feeds is the flagship business of the company (53% of sales), in which the products comprise of cattle feed, poultry feed, aqua feed and specialty feed. The company also has 50:50 joint venture with Bangladesh-based Advanced Chemical Industries (ACI).
In crop protection (15.5% of sales), products include organic manures, generic agrochemicals and specialized herbicides. It owns 56.8% stake in AstecLifeSciences which is into agrochemical active ingredients (technical), bulk and formulations. In oil palm business (~10% of sales), the company produces crude palm oil, crude palm kernel oil and palm kernel cake. In dairy business (~21% of sales), the company operates through its subsidiary - Creamline Dairy and sells milk and milk-based products under the ‘Jersey’ brand across Telangana, Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra.
Godrej Agrovet also manufactures and markets processed poultry and vegetarian products through its brands ‘Real Good Chicken’ and ‘Yummiez.
Objective of the Offer
The offer consists of Fresh Issue of ~6.34 mn equity shares (aggregating up to ~Rs292cr). It also includes offer for sale of up to ~ 18.8 mn shares (promoters selling stake of about ~Rs300cr and V-Sciences Investments selling 12.3 mn equity shares). The proceeds of the issue will be used for repayment/prepayment of working capital (Rs100cr), repayment of commercial papers (Rs150cr) and for other general corporate purposes.
Key Investment Rationale
Godrej group is one of India’s oldest and most prominent corporate groups. The ‘Godrej’ brand is recognizable in India due to its long established existence and its diversified businesses.
Godrej Agrovet has a strong pan-India presence with a strong procurement base, diversified product portfolio and large-distribution network. This enables it to achieve economies of scale in sourcing of raw materials and distribution of products. It has total ~14,000 distributors in animal feed (4,000), crop protection (6,000) and dairy (4,000) businesses.
The company targets to achieve cost leadership in animal feed business by improving operational efficiency of its animal feed business through R&D as well as cost rationalization initiatives. Through its R&D efforts, the company wants to develop innovative livestock nutrition products that provide product differentiation, which will help in improving its profit margins and market share.
Godrej Agrovetaims to diversify its oil palm business by creating additional revenue streams and lower operational costs. This may reduce price risk of crude palm oil and crude palm kernel oil. In dairy business, the company plans to increase market share by growing its brand in southern states of India and broadening the value-added product portfolio. This is likely to help the company increase its margins.
Fluctuations in the price of crude palm oil and other oil palm products could adversely affect Godrej Agrovet’s businesses
Outbreaks of livestock diseases in general and poultry and shrimp disease in particular can also hamper company’s operations.
At upper price band, P/E on post-issue shares works out to 38.6x (FY17 EPS). We recommend investors to SUBSCRIBE to the IPO from long term perspective.
Tax Saving Investments and their Features
This is the time of the year when you start getting calls from the HR of your company asking for investment declarations. If you have not made any investments yet, here is the list of instruments where you can invest.
|Instrument||Investment||Section of IT Act||Lock-in Period||Returns||Risk||Taxation at Maturity|
|ELSS||ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products.||80C||3 years||Not fixed, depend upon the performance of equity market. However, in the past, ELSS has given average returns of 12-14%.||Carries some risk||Tax-free|
|PPF||It is a type of investment which is provided by the Government of India||80C||15 years||The rate of returns changes as per government policies.
Current returns - 8.1% compounded annually
|NSC||NSC are bonds issued by the government for small savings and one can purchase these bonds from post offices.||80C||10 years||The interest rate on NSC is decided by the government every year. It is linked to the yield of 10-year government bonds.
The current interest rate is 8%.
|Low Risk||Interest is Taxable|
|Pension Mutual Funds||Pension Mutual Funds invest 40% of the money in equity and 60% in debt instruments.||80C||Until you reach the age of 58||The returns in pension mutual funds are not fixed as it depends on the performance of the equity and debt market. Pension mutual funds have given an average return of 8-10% for a 5-year and 10-year period.||Carries some risk||Tax-free|
|Tax Saving FD||It is a special fixed deposit made with any bank.||80C||5 years||The interest rate varies from one bank to another. It usually ranges from 6.5-7.5%.||Risk Free||Interest earned is taxable|
|Rajiv Gandhi Equity Saving Scheme||Exclusively for first time retail investors. Individuals with an annual income below Rs. 12 lakh can invest.||80CCG||3 years||Depends on the performance of equity markets.||Carries some risk||50% of the invested amount|
What is the right age to buy a term life insurance cover?
Death comes knocking at the door without any prior notice. The death of the only breadwinner of the family brings the family into severe financial crisis. This is the time when you realise the importance of a term insurance policy the most. A term insurance plan secures the life of your loved ones and helps them to meet their day-to-day expenses. It is always better to buy a term insurance plan early in life as an individual gets immense benefits for starting early. Also, the premium charges are also low when you are young.
Let’s take a look at the different ages and factors that one should consider while buying a term insurance.
During the 20s, an individual just steps into his professional life and is relatively debt free. He has lesser family responsibilities and buying a term cover at this age can help him pay off his education loans if any. Moreover, term insurance premiums are less expensive when an individual is young.
An individual, in his 30s, tend to have family and kids. While his income is higher at this age, the responsibilities are much more. He may have financial liabilities like home loan, car loan etc. The premium will tend to be slightly higher, given the family responsibilities.
During this age, an individual’s long term financial liabilities like a home or car loan is paid-off. However, he may have higher responsibilities like his child’s higher education or his own retirement planning. It is better to opt for a cover which provides a greater coverage and financial protection. The cover should be able to take care of your family expenses after your death.
When an individual reaches this age, his children already start earning and most of the debts are paid-off. Family members are not financially dependent on your earnings. During this age, what an individual is most concerned about is his retirement. At this age, the best option for an individual is to buy an endowment plan which will help him save and give him a lump sum amount on maturity.
Term Insurance Premium amounts for a cover of Rs. 50 lakh
The above table shows the difference in premiums as per the age of an individual. As the age increases, premium increases.
Age plays a major role in deciding the amount of your term insurance. The biggest mistake an individual makes is to not opt for a substantial cover for the family. One should make sure that the term cover takes care of all the basic necessities of the family in case of the sudden demise of the policyholder.
How To Buy Stocks Online?
In the older times, stock market was difficult for a common man because of lack of know-how. That is why it was extremely essential to consult a stock broker before investing. Back then, the brokers were the only source of stock purchase.
The internet has solved this problem for the common man. Now there are a large number of websites that give you a good working knowledge of the stock market. They can also give you good advice about when you should and shouldn’t invest in shares.
Thus, with the authentic information about stocks that is available on the internet, people with limited savings can get good knowledge about the stocks. They can not only get information about the stocks, but they can also buy stocks online starting from prices as low as Rs. 500.
Process of Buying Shares Online
1) To buy and sell shares, one needs Demat and Trading accounts. Both of these are provided by the two Depositories namely NSDL and CDSL through brokerage companies. One has to visit or contact a brokerage company offices for opening those accounts.
2) Generally, stock trading is possible in India between 9:30AM to 3:30PM. Stocks can be traded on all working days from Monday to Friday. The stock exchanges are closed on bank holidays and national holidays.
3) You can log into you online Trading account. Visit the online portal of your trading account. To log into your trading platform, you will have a user name and a password. Make sure you memorize these important login details.
4) It is important to do a pre-study before selecting a stock. Stock study is not just a study of its market price. More than the price, it isimportant to judge the company’s fundamentals.
5) To buy stocks, put a buy-order to trading account and wait for order execution. Setting up a price-limit to buy stocks is a good habit.
As you can see brokers are no longer a necessary part of the transaction while buying and selling shares. However, it is still advisable to consult a broker.
With the changing times brokers too have modified their services. Few years ago, there was only one type of broker, the Full-time broker who handled the complete buying, selling and monitoring of your shares. Today there are different types of brokers available in the stock market:
Types of Brokerage services
Full-service broker is a broker who gives Stock advisory plus trading facility to the investors. They generally charge 0.3% to 0.5% of the total amount invested by the customer as brokerage. Suppose you buy 1000 ICICI bank shares for Rs.500 each, your brokerage charge would be Rs.500000*0.5%= Rs.2500
These are new brokers who provide a trading platform to the investor but don’t give much advisory. Discount brokers usually charge Rs.20 per trade, irrespective of amount. Suppose you buy 1000 ICICI bank shares for Rs.500 each, your brokerage would be flat Rs.20.
People who are not so internet savvy and hesitate to buy stocks online it is great to refer a broking agency. Check out 5paisa.com to find out the services on offer for trading in stocks online. We offer a flat rate of Rs.10 for every transaction whatever the value of the deal. This makes our services valuable whenever you are buying shares.
5 Financial Priorities When You Turn 40
Whether it’s your 20’s, 30’s or your 40’s, every decade brings its own set of experiences and expectations. However, it can be said that there is something sweet about your 40’s. You are more or less settled in your life, where you have a fair idea of what your future will be like.
This decade also signals the approach of your retirement, and hence, you cannot afford to make any financial mistakes as opposed to your carefree 20’s where new things were considered adventurous and worth a try.
Following are the five priorities that any 40-something should abide by :
1.Make Sure You Are Insured
There is a big difference between being insured just for namesake and being adequately insured while taking your lifestyle into consideration. Don’t delay in buying the right insurance policy[Keywords are added in Bold in the article. Please make sure to add keywords in the article and make them bold from the next time. ] as there is a hike in premium rates as your age progresses.
Term insurance is a great way of getting a high-risk cover as well as keeping your savings intact. A comprehensive health cover is a must as well in the face of ever-rising healthcare prices.
2.Get Your Family Involved
Many don’t realise it, but it makes a world of difference when our family members are in sync with our financial goals. Whether it’s your parents or spouse, by aligning your financial plan with them, you can save more as opposed to going at it alone. Even a minuscule amount at present can add up to great savings for the future.
3.Learn Something New
Just because you are in your 40’s doesn’t mean that you have to settle down completely. Mix up that routine by practising a skill that you’ve always wanted to master. This also prevents the eventual complacency that comes with getting used to your regular work.
A well-learned skill can translate to a new side venture which will lead to you earning and eventually saving more money for your retirement corpus.
4.Wipe Off Your Debt
Without you even knowing it, being in debt takes away a huge chunk of your future savings. Thus paying off all your high-interest debt (other than long term home loan) is the first step towards being financially sound.
Start using portions of your bonuses or even tax refunds to pay off your high-interest credit card bills and other accrued debt, or else you will end up losing a huge chunk of savings in interest payments.
It also makes sense to start organising your expenses. By now most of your bills should be on auto pay which makes your expenses streamlined and easier to keep track of. It also saves valuable time.
5.The Retirement Goal
There is no better time than your 40’s to seriously start building up your retirement savings. Create a retirement fund and keep a portion of your income dedicated towards its growth. You can also invest in Public Provident Fund and National Pension Schemes by the government for better returns.
In a nutshell
As the saying goes, ‘It’s better late than never,’ take control and manage your finances well in your 40s so that they take care of you when you need them later. A better plan would be to have an organised approach by getting a financial planner/portfolio manager to draw up a retirement portfolio for you.
How do I set up a goal and invest?
Shoot for the moon. Even if you miss, you'll land among stars! While this is true for many cases, this is not what you would want to do when you are planning your finances. There is a chance that you might not land among the stars; improper planning could land you back to square one or worse in a ruined financial state.
Before you start investing, you need to define your goal for which you are saving for. This is because to save for the future, you are cutting back on your spending now. This sacrifice must not be in vain; you need to get an appropriate reward for this sacrifice. Goal-based investing is just what would help you.
Type of goals
No matter how different and unique your goals are, you are bound to find the correct financial instrument. However, the first step of successful planning is to set the goal. What are the common goals that many of you could relate to?
Build sufficient amount for retirement
Buy a vacation home/Save a down payment for a home
Create an income stream after retirement
Start a new business
Pay for your wedding
Save for your children’s education/marriage
Take a special vacation
All of the above
Timeline to achieve the goal
Setting a goal is important as they help you define the timeline in which you need to achieve the goals. For example, paying for your vacation, creating a constant income stream post-retirement, or your wedding could be a short-term goal while planning for your retirement could be a long-term goal.
Your goals will also help you determine your risk tolerance. Your age will also play a factor in determining your risk tolerance. If you are in early stages of your career, you can afford to take more risks as you might not have been married. However, if you are a businessman and have a family dependent on you, you might not want to be too adventurous.
Your investment goals will also determine your liquidity requirements. If you are investing post having an emergency fund, you might want to invest in an investment option that would not provide you instant liquidity such as real estate. However, if you do not have an emergency fund, you might want to invest in mutual funds to gain while having the option of quick liquidity.
4 Tips to set your goals
Setting appropriate goals can be difficult. Consider the following tips before setting up your goals.
1. Know why you are investing.
You can set the right goals if you can point to a specific reason for investing.
This will also provide you with a way to stay motivated.
2. Be realistic:
Do not grandly proclaim that you can invest Rs.5000 while you aren’t even sure of the groceries.
Consider your financial situation and set achievable goals.
3. Break it down:
Chip down your investment goals into easy milestones.
Start out small and increase gradually.
4. Start simple:
If you are unsure whether you can really stick to the plan, start with a simple plan.
Also, begin with simple SIPs and do not assume that you know everything about equities.
To sum it up
Having an aim in life is important. However, having a goal while financial planning is furthermore important. If you follow the above-mentioned tips, you could better align your goals with your needs.