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SEBI allows trading of Real Estate Investment Trusts
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Online transfer of PF accounts by month-end
PERSONAL FINANCE
How to choose right fund category in ULIP
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SEBI allows trading of Real Estate Investment Trusts
New Delhi, August 18 The move is aimed at allowing investors to buy and sell units of REITs and providing them an investment vehicle for the real estate sector, similar to mutual fund and Exchange Traded Fund structures for stocks, bonds and other securities, a senior official said. However, SEBI is initially considering restricting the investments in REITs to only foreign funds, domestic institutional investors and HNIs given the higher level of risks associated with the real estate sector, the official said, adding small retail investors could be allowed at a later stage. The move is likely to help channelise investor interest towards REITs, while leaving the physical real estate market (comprising housing units and office spaces) for the end users thus helping the market reach a pricing level based on real demand and supply metrics. As per the proposal being considered, REITs can issue units of their investment schemes through a public offer and list them thereafter on a stock exchange in a way similar to the issuance and listing of shares during an IPO. Thereafter, the units can be traded on the stock exchange platform just like shares. The money collected by the REIT through the public offer can be used for development of real estate projects as per its stated objective disclosed in the offer document. Also, the scheme would need to be terminated after sale of the project developed with investors' money, and the proceeds would need to be distributed proportionately to the unit holders. However, REITs may have much tougher rules on various fronts such as appointment of independent valuation agencies, transactions with related entities, maintenance of accounts, auditors' role and mandatory disclosures, given a higher level of risk associated with such investments. SEBI would also impose penalties in cases of default and subject the REITs to stricter surveillance and inspection process to safeguard the investors' interest. — PTI Listing guidelines
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NSL to focus on R&D, inorganic growth via acquisitions
Q: What is the outlook on the domestic seed industry? A: Domestic seed market has grown at 15-20% in the past two years, which is almost double the growth experienced by other countries. Development of new varieties of seeds in the country is low and also replacement of new varieties of seeds is low as compared to rest of the world. This will change as demand goes up. Worldwide, the seed industry is a $42 billion market. Top six countries, including India, control 67% of the global market. In terms of crops, cotton seed market size is estimated to be nearly 23% that of the seed industry. Paddy seeds dominate the market in terms of the volumes with around 50% of the market followed by wheat with 37%. With kharif sowing crossing record levels across the country, the season proves to be promising one for the seed industry as well. Area under kharif crops, including paddy and other foodgrains, has increased by over 17% to around 750 lakh hectare till the last week of July. Q: Traditional food crop growing areas like Punjab and Haryana are moving to cash crops. What does this mean for your business model? A: Punjab and Haryana are facing problems like over-exploitation of water resources forcing farmers to diversify into cash crops like maize. Nuziveedu Seeds has good presence in Punjab, Haryana and UP for cotton, varietal and hybrid paddy. Apart from these states, the company intends to increase participation in government subsidy programmes in states such as Bihar, Jharkhand and Odisha to market products to more farmers. The Indian Council of Agricultural Research has identified seven hybrid seeds developed by Nuziveedu Seeds for paddy, maize, sorghum and pearl millet, of which five are eligible for subsidies. Q: Has NSL expanded its product portfolio in other crops such as paddy, maize and vegetables? A: We are focusing on non-cotton seed segments like paddy, maize and vegetables. We have also developed hybrid seeds for vegetables such as tomatoes, chillies, okra and brinjals. We intend to continue to produce these high quality products at affordable prices in order to increase our market share. Sale of these crops today contributes more than 25% of the total seeds business. Q: How big is NSL’s infrastructure and distribution network? A: We own 16 processing plants which are spread in Andhra Pradesh, Maharashtra, Uttarakhand, Odisha and Gujarat. The processing centres have a combined processing capacity of 148 TPH (ton per hour) and an aggregate capacity to store 79,500 metric tonne of seeds. Q: Recently NSL implemented a PPP model with Maharashtra government. How successful has been this model? A: We engage in collaborative research activities with various government and international organisations. The Maharashtra government along with Nuziveedu Seeds took this initiative to increase per acre yield of cotton by employing innovative crop methods like high density planting and improved agronomic practices. The project is the largest in the country covering nearly 10,000 acres. More than 3,000 farmers from the region benefitted through this project. The results have been quite encouraging. The Maharashtra government has now evinced interest in extending the project to 20,000 acres this year covering seven districts. Q: What is NSL’s growth strategy? Any plans to expand into overseas market? A: Our strategy rests on five pillars — consolidating leadership position in cotton; increasing market share in crops like varietal and hybrid paddy, hybrid maize and hybrid seeds for vegetables such as tomatoes and brinjal; expanding our customer and distribution base; focus on R&D activities; and pursue inorganic growth via acquisitions. Our major focus markets within India are North and East. We are also actively looking to expand our footprint in South and South-East Asia. We invest around 3 per cent of our total revenue towards R&D activities and our research facilities are spread over 815 acres.
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Form 15-H applicable only if total income is nil
by SC Vasudeva Q. I am an assessee aged over 83 years. My taxable income is little over Rs 5 lakh. My income is from pension, SCSS, MIS and fixed deposit in banks only. It is learnt that a senor citizen is not required to deposit advance tax. The bank and the post office deduct TDS on the interest paid. a) Can I furnish Form 15-H to avoid TDS and deposit estimated tax at the end of the financial year, i.e. in March 2014? b) For the assessment year 2012-13, my refund after adjustment of TDS is above Rs 29,000. The same has not yet been received from the Income Tax Department. Please advise if there is any chance of getting the refund now or not? — Amar Nath Sharma A. You can file Form 15-H with the bank only in case your estimated total income for previous year would be nil. On the basis of the facts given in the query you have a taxable income and therefore the provision of the Act relating to the filing of Form 15-H would not be applicable to you. a) You are entitled to refund of Rs 29,000 plus the interest due on such excess deposit of tax provided the same has been correctly computed. There is no question of lapse of the amount refundable to you. You should approach the assessing officer for getting the due refund together with the interest payable thereon.
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Online transfer of PF accounts by month-end
New Delhi, August 18 According to the source, the EPFO will conduct a live testing of service from Monday onwards whereby workers of some selected establishments would be allowed to file their transfer claims online. — PTI |
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PERSONAL FINANCE Maneesh Dangi It has long been thought that stocks, held long enough, are inevitably better investments than bonds. And since the average Indian investor’s experience has been coloured by what he has seen over the past two decades, this blanket assumption has taken on somewhat sanctimonious proportions. So much so that most do not question its basic tenet: How are stocks and bonds different?
Keen observers already know that stocks and bonds, in economic substance, are similar. Both represent claims on some productive enterprise. Stocks represent floating claims, while bonds represent fixed claims. The ability of stock claims to float ‘up’, and compensate for rising prices (inflation) has become an important reason for their relative attractiveness. In fact, for most parts of the past two decades, this ‘up’ factor has resulted in a significant premium paid for stocks. Corporate bonds, on the other hand, having no ready answer for the scourge of rising prices, have always sold much closer to their par value. So how far ‘up’ did stock claims actually go? Looking back, between 1995 and 2000, the average annual return on book equity of the BSE 500 was 14%. Between 2000 and 2005, it was 16%. From 2005 to 2010, it was 18%. And for the past two fiscal years, it has dropped back to 16%. The returns for few exceptional years were somewhat higher (2007), or lower (2008) than the 5 year averages, but over the years, and in aggregate, the return on book equity has tended to hover around 16%. So it turns out that stocks after all have offered a somewhat ‘fixed’ claim of around 16%. And this fix, albeit loose, makes them quite comparable to bonds. This may be disappointing news to those stock investors who think growth in earnings, automatically means higher returns on equity. They fail to see that the cost of incremental capital used to generate higher earnings keeps their share of claims from continuously floating up. And, if stocks are purchased at a substantial premium then it puts even more downward pressure on their claim.
Conceptually, stocks also offer their holders an implicit ability to reinvest earnings at 16% — until eternity. Bonds, in contrast, mature, and involve a periodic renegotiating of this reinvestment option. The eternal reinvestment characteristic of stocks can be good or bad. It was good in 2003 when corporate bonds were yielding 6%. In that environment, the right to reinvest automatically at 16% offered enormous value. It was a situation that left very little to be said for cash dividends and a lot to be said for earnings reinvestment. In fact, the more money, investors thought, likely to be reinvested at 16%, the more valuable they considered their reinvestment privilege, and the higher premium they were willing to pay. If during this period, a high grade non-callable bond with a 16% coupon had existed, it would have sold at far above par. And if it were a bond with a further unusual characteristic — which was that its coupons could automatically be reinvested — at par, in similar bonds, the issue would have commanded an even greater premium. In essence, growth stocks retaining most of their earnings represented just such a bond. When their reinvestment rate on capital was 16% while bond rates were 6%, the stock premium naturally grew. However, as bond rates eventually rose, the trade-off between stocks and bonds narrowed. And the premium shrank. The comfort factor While we have seen that stock claims are more or less fixed over longer periods of time, they do fluctuate somewhat from year to year. And attitudes about the future can be affected substantially by those yearly changes. We have also seen that stocks come equipped with infinite maturities. To compensate for these two additional risks, the natural reaction of investors is to expect a stock return that is comfortably above the bond return —Today, 16% on stocks versus, say, 10% on bonds would seem adequate. But when you throw in the premium paid for stocks: which in 2007 rose to as high as 500%, and after much turmoil is still as high as 220%; the comfort begins to subside. Our goal at this juncture is not to recommend one asset class over the other; but to give investors a framework to think about their relative standings. It should be remembered that neither stocks nor bonds confer upon their owners a win-win proposition to be held forever. A closer evaluation of the premium paid must be a key consideration. In fact, many stock investors of 2007 are still being schooled on this basic point. What should an investor do as of today? Though, the long-term attractiveness of equity is well established, the recent experience in stocks investing has put off a lot of investors. Many have begun to question the utility of stock investing. Don’t make that mistake. Stocks are must if you want your capital to earn substantial real returns over long period of time, just that one must choose the right time frame to assess the earned returns on stocks, i.e. at least five years. More importantly, stocks must be wrapped in good debt instruments. Investors have participated in debt only through fixed deposits of banks, but there exists superior instruments of debt investing. Fixed income funds do a better job of ensuring not only certainty but also superiority of real returns (due to better tax incidence and agile investing). It is ideal to explore some good debt funds to invest in. The author is co-chief investment officer, Birla Sun Life Asset Management Co. Ltd. The views expressed in this article are his own
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How to choose right fund category in ULIP
It is a widely known fact that money invested in equity will generate far better returns in the long term than other instruments. But investing in equity comes with its own set of risks, due to the volatile nature of these investments. In an uncertain economic environment, people are increasingly looking for investments that maximise returns and also safeguard against life’s uncertainties. Unit-linked Insurance Plans or ULIPs are one of the better ways to achieve these twin objectives. Despite the apprehension surrounding savings in these plans, it would be a good idea to consider these plans keeping in mind return on investment along with insurance protection. The problem investors face is choosing the right fund for their ULIPs. Most of the time, these products are bought on the advice of the agent without ascertaining if the product suits the investor’s needs or not. The problem is compounded when investors see that many funds have similar objectives. For example, if an investor's objective is to preserve capital and gain returns, there are scores of funds that claim to do precisely that. Therefore, it is imperative for customers to find out which type of product suits them and make a decision based on clear understanding of their needs and the product’s features. Major types of funds offered with ULIPs
Life insurers offer wide varieties of funds with ULIPs. However, they can be broadly divided into three major categories: Growth/aggressive funds: These funds invest major part of their money in equities. Since equities are the riskiest investment of all, these funds entail high risk. The objective of such funds is to provide capital appreciation in the long run. Balanced funds:
These funds invest equal amount of money in equity and bonds. Since a significant part is invested in fixed income bonds where the returns are low compared to aggressive fund, this also makes it less risky. The objective of such funds is to provide moderate returns by taking moderate risk. Conservative funds:
Conservative funds invest major part of the fund in bonds. Since bonds provide fixed return, these funds are considered safest of the three. The return will also be lower because of higher proportion of debt investments. Choosing the right fund
Following are the three most important driving factors to choose the right fund category: Investment horizon: Your choice of funds should represent your objective. If you have medium-term goal (5 to 10 years), you could invest in funds that are conservative as these funds will ensure a decent return and no loss of capital. However, if you want to invest for a longer term (greater than 15 years), investing in an aggressive fund is advisable as aggressive funds have a better chance of doing well in the long term. Balanced funds are ideal for investors with a mid (10 to 15 years) to long-term investment horizon. Age and risk-taking capacity A younger person has a longer investment horizon and higher inherent “risk-taking capacity”, hence can afford to invest a larger portion of his or her savings in growth/aggressive funds. An older person would rather invest in conservative funds in order to preserve his capital. Typically, a person of 30 years of age should invest 60 to 70 per cent of her/his money in equity-oriented funds while a person of 50 years of age should invest 50 to 60 per cent in conservative funds. Risk appetite The appetite for risk may differ from person to person, irrespective of the age or the life stage of the individual. Even a young investor who is not comfortable with volatility and is risk averse should not invest a majority of their savings in equity funds. Today, life insurers offer various mechanisms to ensure that the impact of volatility can be reduced. One such mechanism is Systematic Transfer of Funds which ensures that the consumer’s investment hits the market in 12 equal instalments. It works on the concept of ‘Rupee Cost Averaging’ and thus makes the volatility in the market work to one’s advantage. This ensures the purchase of more units for same amount at lowered prices thus lowering average purchase price. Another mechanism to contain impact of volatility is Dynamic Fund Allocation which enables a automatic rebalancing of portfolio keeping in view the risk appetite of the customer at different stages of life. Under Dynamic Fund allocation, the premium paid and the policy fund is dynamically allocated in debt and equity at a pre-determined percentage in the pre-determined funds based on the years remaining for maturity. This helps strike a right balance between risk and return throughout the policy tenure. In a nut shell, deciding to invest in the right fund is a function of one’s risk profile, financial condition, understanding the nitty-gritties of financial instruments and planning with an objective in mind. ULIPs are a great way to build wealth for passive investors who either do not have time to study the markets; nor have enough knowledge to take a ‘buy’ or ‘sell’ decision. This route can be used to build wealth and happiness over the long term. The author is Head, Products Solutions Management, Max Life Insurance. The views expressed in this article are his own What are Options & Futures*
In Futures, you buy a contract which will have a specific lot size of shares. When you buy a Futures contract, you don’t pay the entire value of the contract but just the margin. Open interest is the the total number of contracts not closed or delivered on a particular day. |
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Nuziveedu Seeds Ltd (NSL) is the largest hybrid seed producer in the country. It is the dominant player in cotton seed segment with a 25 per cent share of the Rs 3,500-crore market. It’s seeds are used by more than 5.5 million farmers. Recently, M Prabhakar Rao, chairman and managing director of Nuziveedu Seeds, was elected president of the National Seed Association of India, which is represented by 238 seed companies including private and public sector companies as its members. Prabhakar Rao talks to
Sanjeev Sharma about the growth of hybrid seed industry in the country and how kharif sowing has crossed record levels thereby boosting the seed industry.
Similarities between stocks & bonds
What sets them apart
