Prataap Snacks IPO Note

Prataap Snacks IPO Note
IPO
by Nikita Bhoota 21/09/2017

Issue Opens: September 20, 2017

Issue Closes: September 26, 2017

Face Value: Rs 5

Price Band: Rs 930-938

Issue Size: Rs 514 cr

Public Issue: 0.51 cr shares (at upper price band)

Bid Lot: 21 Equity shares

Issue Type: 100% Book Building

% shareholding Pre IPO Post IPO
Promoter 93.0 71.0
Public 37.0 29.0

Source: RHP

Company Background

Prataap Snacks Ltd (PSL), which sells its products under the Yellow Diamond brand, is one of the fastest growing companies in the Indian organized snacks market. Its product category includes- Extruded Snacks (Chulbule, Rings, Puffs, Wheels, Scoops and Seven Wonders), Potato Chips and Namkeen (Dal, Sev, Mixture, etc). As per industry reports, PSL was one of the top six Indian snack food companies in terms of revenues in 2016 and had ~8% market share in the organized extruded snack market.

Objective of the Offer

The offer consists of Fresh Issue of `200 crore shares and an Offer for Sale (OFS) of up to 0.30 crore shares. The net proceeds from the Fresh Issue will be utilized as follows - Rs 67 crore for capex requirements, Rs 13 crore for repayment of loans, Rs 29 crore for repayment of borrowings availed by its subsidiary Pure N Sure, Rs 40 crore for marketing and brand building activities and balance will be utilized for general corporate purposes.

Key Investment Rationale

  • PSL is a relatively newer entrant as compared to its peers having completed ~13 years of operations. Its larger peers have been in business for most part of the century and have already been through their growth phase. As per the company, its region-wise split is East – 33.4%, West - 33.1%, North - 24.1% and South – 9.4%. We believe that the company is yet to drive deeper into metros and other geographies, which should enable it to maintain its high growth rate. Moreover, the company is also planning to explore foreign markets like South Asia that can provide support to top-line.

  • The company also plans to foray into newer categories like chocolate-based confectionaries to add to its recent launches in “Better For You” segment (healthier snacking). Chocolate-based confectionaries are generally a high margin business. Increasing contribution from this category will expand EBITDA margins as the company will be using its existing infrastructure for the product.

Key Risks

Brands such as Lays and Kurkure owned by PepsiCo have much higher advertisement budget compared to PSL. So far PSL has grown by targeting regions where major peers have lower focus. Failure to make inroads in territory where stronger competition has firm hold will have a negative impact on PSL’s revenues.

Conclusion

At upper end of the price band, P/E multiple on post-IPO shares works out to 222x (FY17 EPS). Considering, strong growth outlook and margin expansion, we believe that the IPO provides a good entry point and hence we recommend SUBSCRIBE on the issue.

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The ABC’s of Investing

ABC's of Investing
by Nutan Gupta 25/09/2017

The money that you earn is partly spent and the rest is saved for a rainy day. Savings refer to the funds that are kept aside in safe custody, such as a savings account. Instead of keeping this money idle, you can invest your savings in various financial instruments which will pay you a hefty return in the near future.

The question that arises now is how and where to invest this money. Potential investors can always take the help of a financial advisor and an investment advisor, both of who are capable of providing detailed knowledge on the subject on investment and investing money. Investors can start investing after fulfilling the following simple steps:

  1. Obtaining documents relating to Personal Identification Proof and Address Proof.
  2.  Approaching intermediaries like a broker, RM etc.
  3. Filling up the KYC form and furnishing the details required.
  4. Filling up of the broker-client agreement.
  5. Opening a DEMAT Account and linking it with a savings account.

As soon as these steps are completed, an investor can start investing in the financial market.

The investment options can be well classified into 2 parts. They are:

  1. Physical assets: It comprises of tangible items like real estate, commodity, goldand silver in the form of jewelry and even antiques. 
  2. Financial assets: It comprises of FDs with banks, small savings instruments with the post offices, provident fund, pension fund, money market instruments and capital market instruments.

The money market gives the scope of short term investment options. It deals with debt instruments such as bills of exchanges, commercial bills, treasury bills, certificate of deposits etc. These have relatively low risk and relatively low returns. However, they are one of the safest investment options, especially for those investors who want to play safe.

A capital market is an option for long term investment. The various instruments of capital market are shares of companies (equity), mutual fundsSIP investmentderivatives market, IPOS, etc. These have a higher risk and higher returns in comparison to the instruments of the money market. Although stock investing is considered to be more rewarding, the high risk factor associated with it can result in loss if there is a downswing in the activities of a company.

The investment strategies of an individual depend on certain factors, such as:

  1. The risk taking appetite of investor
  2. The time horizon of investment
  3. Expected return
  4. Need for investment

Investments make our fund grow over a period of time whereas savings is just idle cash. Our short term needs can be fulfilled with the help of our savings but for the achievement of our long term financial goals, investment is a must. This is only possible with financial planning.

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Sectors to benefit from Indo-Japan bullet train project

Sectors to benefit from Indo-Japan bullet train project
by Nikita Bhoota 29/09/2017

Indian stock markets have rallied 23% (Nifty 50) and 21% (S&P BSE Sensex) in the first 8 months of FY17. Nifty 50 has crossed the 10,000 mark and Sensex surpassed 32,000 for the first time. It is an uphill task to identify stocks for investment in such a bullish market. One way to select stocks is to spot sectors that are likely to see an organic growth supported by concrete development plans/policies of the government.

Among the recent developments, Mumbai-Ahmedabad bullet train project in collaboration with Japan is a remarkable project. In this project, Japan will be the primary financier wherein it will fund 81% of the project cost at an interest rate of 0.1%; the overall cost is expected to be Rs 1.1 lakh crore. The project is expected to be completed by FY22.

On the basis of the above development, we believe Capital Goods, Metals, Infrastructure and Cement sectors to benefit the most from this project.

Capital Goods

Capital Goods sector is the backbone of the numerous manufacturing subsectors in the country such as Heavy Electrical Equipments, Power, Defense and Railways. The sector has seen 3.7% growth in FY17. Going forward, Capital Goods sector is expected to grow with the support of government initiatives like Make in India and bullet train project. Some of the stocks that are likely to benefit from bullet train project include:

BHEL - Government-owned BHEL, India’s largest power equipment manufacturer with 55% market share in the segment, is likely to play a major role in country’s bullet train project. BHEL and Japan-owned Kawasaki Heavy Industries have formed a joint venture to manufacture rolling stocks for the project. According to recent reports, the company is expected to manufacture the coaches at its Jhansi Plant in Uttar Pradesh or Bhopal in Madhya Pradesh. The company has an order backlog that stands at Rs 101,380 crore in Q1 FY18.

Siemens and ABB - These companies are expected to benefit from bullet trains as they manufacture electrification systems and high-speed rail traction. ABB derives ~25% of the total revenue from electrification products business.

Metals

India is the 3rd largest steel producer in FY17 with total production of finished steel at 83.01 million tonnes. Government is taking steps to improve the country's domestic steel sector and raise its capacity to 300 million tonnes (MT) by 2030-31. Pickup in domestic activity as well as commencement of developmental programs like construction of smart cities, bullet train etc will increase the demand for metals and related products. Some of the companies to benefit from the bullet train project include:

Tata Steel and JSW Steel - These stocks are likely to benefit from the project as it will increase the demand for commodities like steel, iron etc. JSW Steel is one of India’s largest private sector steel manufacturers with a capacity of 18mtpa followed by Tata Steel with an installed capacity of 10mtpa.

Infrastructure

The Government of India is highly focused on improving the rail and road connectivity in the country. Road Transport & Highways Ministry has invested around US$ 47.7 bn and Union Budget 2017 has further allocated Rs 131,000 crore for laying down 3,500 km of railway lines in 2017-18. Metro rail and bullet train project are the step towards developing urban infrastructure in the country. Some of the stocks to benefit from these initiatives:

NBBC- The company is likely to get new orders for development of new railway stations once the bullet train project is commissioned. The company recently got orders to develop 50 stations (10 stations in June 2017 and rest in September 2017). The company has a strong order book of Rs 75,000 crore in Q1 FY17 (90% from PMC and redevelopment segment, 10% from real estate and EPC division).

Larsen and Toubro Ltd - L&T offers services like construction of railway sidings and yards, bridges (steel and concrete), tunnels, rail-based urban transit systems (metro systems), stations (including underground stations), railway electrification, rolling stock, locomotives, intercity coaches, wagons and so on. The company has a total order book of Rs 262,900 cr as on Q1FY18.

Cement

India is the 2nd largest producer of cement in the world.  It has a production capacity of 420 MT as on June 2017. The country has a lot of potential for development in the infrastructure and construction sectors and the cement sector is expected to largely benefit from it. Some government initiatives like smart cities and bullet train project will boost the demand for cement. Some of the companies to benefit are:

Ultratech Cement- It is the largest cement producer in India with a cement capacity of 95.3 MT (includes acquisition of the cement plants of JAL and JCCL- 21.2 MT and overseas operations). It has a market share of 22% on a pan-India basis and is the 4th largest player globally.

Some of the other cement companies to benefit from this project are ACC, Ambuja and Prism Cement.

ENDS

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Tax Saving Investments and their Features

Tax Saving Investments and their Features
by Nutan Gupta 01/10/2017

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
Risk-free Tax-free
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
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What is the right age to buy a term life insurance cover?

What is the right age to buy a term life insurance cover?
by Nutan Gupta 01/10/2017

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.

20’s

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.

30’s

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.

40’s

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.

50’s

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

Age Premium Amount
22 Rs. 4,270
32 Rs. 5,455
42 Rs. 9,606
52 Rs. 17,534

The above table shows the difference in premiums as per the age of an individual. As the age increases, premium increases.

Conclusion

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.

Get a Term Insurance Cover Now!

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How To Buy Stocks Online?

How To Buy Stocks Online?
07/10/2017

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
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

Discount Broker
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.