Month: September 2021

5 things investors should know, BFSI News, ET BFSI

Banking & Finance

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1. Banking and PSU debt funds are mutual fund schemes that invest debt and money market instruments issued by banks and PSUs and public financial institutions.

2. At least 80% of the corpus of the scheme needs to be in instruments issued by banks and PSUs, and PFIs.

3. All these entities are either backed, regulated or controlled by the government which reduces default risk and hence the scheme is supposed to have low credit risk.

4. Fund manager takes the call on whether to be in the short-term instruments or long-term debt instruments and hence the scheme carries interest rate risk.

5. These funds may give higher returns than Bank FDs of similar duration.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)

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A six-step strategy for every company to develop a supply chain finance plan, BFSI News, ET BFSI

Personal Finance

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To thrive in any economy businesses must create new offerings, optimize existing processes and invest in employees’ upskilling. For this, cash is king, and a strong working capital management strategy is central to growth. However, managing liquidity effectively and strengthening balance sheets is a struggle that businesses face. The ongoing pandemic has only intensified these challenges.

Traditionally, corporates have been following a singular strategy – maintaining a high credit periods (or DPO – Days Payable Outstanding), where they negotiate longer time to pay creditors and in the interim use any excess available cash for short-term activities. Now, while higher DPO and longer credit period may be seen as beneficial, the pandemic is forcing many corporates to expedite payments to vendors in order to keep them afloat.

According to the PwC research of the largest global listed companies in the last five years, GBP 1.2tr excess working capital is tied on global balance sheets and for two consecutive years a decrease of 3.8% in DPO has been witnessed. This indicates that use of DPO may not be a sustainable approach in the long term. This makes it difficult for cash-strapped buyers who don’t have any ready cash available to pay and hence need a long credit period. The only way to solve this is corporates need to re-look at their entire working capital strategy and cash cycles. .

Supply Chain Financing – An Underutilized Lever
Supply Chain Finance (SCF) is an underappreciated lever to optimize working capital strategies. SCF isn’t a new concept. It’s been around and practiced for more than two decades now. While some corporates have been able to modernize and automate their SCF operations, it still has a a one-size-fits-all approach. This method does not address issues around the lack of liquidity. However, other real challenges such as high transaction costs along with structural barriers such as paper invoices, lack of an integrated data flow that can provide real-time visibility on the end-to-end cash conversion cycle and lack of organizational guidelines are rarely addressed either.

So, while most business leaders understand the value delivered by SCF, the depth of it remains unexplored. Research says that a Fortune 100 company can potentially generate $2 billion in additional cash by simply optimizing working capital management, at par with the performance of top companies in the sector.

To achieve results such as these, every SCF program must align with unique business objectives that doesn’t just ensure business continuity and production planning but also plays a key role in uplifting sales and earning risk free high returns as well.

The key advantages of a well-defined SCF strategy are aplenty. It can speed up sales by injecting capital to the distributors, can create direct bottom line benefit and stretch working capital by extending longer credit periods to vendors who have the capacity to bear the extension, while paying struggling vendors before time. To enable these benefits, corporates need to have a unified supply chain and working capital strategy that is fully aligned with evolving business objectives; and look to modernize practices to achieve scale operations in SCF.

A six-step plan for a holistic SCF strategy

  1. Set up a 5-year working capital goal that will form the bedrock of the strategy. The goal needs to have a dual lens – profitability for the corporate, and health, resilience and ability to grow for the vendors.
  2. It’s critical for the corporate to understand their supply chain end-to-end and identify where exactly working capital is trapped and how much is trapped. Often, this occurs in multiple places – delayed payments by customers, early or excess capital made available to vendors, or simply, a slow-moving inventory – a harsh reality of the ongoing pandemic.
  3. Calculate potential material gains across each of these places, and cumulatively for the organization as a whole. This will help prioritize action areas with immediacy.
  4. Corporates need to undertake in-depth risk modelling – for this, one needs to deep dive into vendor specifics such as – how many vendors is the corporate working with? Of these, how many are financially strong and how many need support immediately or in the near future. This should also cover vendors and dealers in the second and third tier of network.
  5. They need to create a data-driven scenario analysis by looking into vendors’ past business performance and relationship with the company, and then create a customized vendor financing program that’s a win-win for both, the corporate and the vendor. Similarly, this needs to be done for all vendors. Here, corporates also need to model the plan in a way that there is flexibility of funding sources, allowing a corporate to dynamically switch between internal and external funds as needed, ensuring overall profitability for the corporate.
  6. Corporates need to have a contingency plan in plan and periodically assess and re-strategize their approach to suit all. After all, an entire strategy can never be locked into a single course of action – as a corporate’s goals evolve, so must the supply chain financing model.

(The writer is Founder and CEO, CashFlo)



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2 Top Rated Multi Asset Allocation Funds By Value Research To Start SIP In 2021

Personal Finance

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What are multi-asset allocation funds?

Multi asset allocation Funds are hybrid funds with a mandate to invest 10 percent in at least 3 of the asset classes. Typically, these funds have exposure in a mix of assets including equity, debt and one additional asset class say gold, real estate etc.

Benefits of Multi Asset Allocation funds

• Less riskier than most other hybrid funds as the corpus is spread across several asset classes and hence risk of concentration is minimal

• These funds are also known to offer steady returns over a period of time.

Who should invest in Multi Asset Allocation funds?

Investors with an investment horizon of at least 3 years or more and not willing to take on higher risk can consider investing in multi asset allocation funds for consistent returns over the period of their investment. The equity allocation in the long run helps to realize capital gains while at the same time if you are looking to diversify your portfolio, multi-asset allocation fund could be the right bet for you.

1. Axis Triple Advantage Fund:

1. Axis Triple Advantage Fund:

This multi-asset allocation fund from the house of Axis Mutual fund was launched in the year 2010 and since inception has offered a return of 10.74 percent. The fund as on August 31, 2021 manages an AUM of Rs. 1180 crore and its expense ratio is 2.15 percent. Benchmark of the fund is NIFTY 50 TRI (65), NIFTY Composite Debt Index (20), Domestic Price of Gold (15).

The fund’s corpus is largely allocated across equities, debt and commodities. Within the equity space, where it has maximum allocation, the fund is more concentrated into sectors such as financial, technology, chemicals and services among others. Top equity holdings of the fund include TCS, Infosys, ICICI Bank, HDFC Bank etc.

Likewise, top debt holdings of the fund are 7.9% LIC housing finance bond, state development loans, GOI securities and Bonds/NCDs etc.

Monthly SIP of Rs. 10000 started 5 years ago is now worth Rs. 9.48 lakh, providing gains of Rs. 3.48 lakhs, while the lump sum investment of Rs. 1 lakh over the same period has grown in value to Rs. 1.84 lakhs.

2. SBI Multi Asset Allocation Fund:

2. SBI Multi Asset Allocation Fund:

This hybrid fund from the stable of SBI Mutual fund was launched in December 2005 and since then has offered return of 8.67 percent. As of August 31, 2021, the fund’s AUM stands at Rs. 439 crore, while its expense ratio is at 1.74 percent. For the different asset classes, the fund’s benchmark are CRISIL 10-Year Gilt (45), NIFTY 50 TRI (40), Domestic Price of Gold (15).

Here are the funds are distributed across equity, debt, commodities and cash and cash equivalent. Within the equity space, the fund has maximum exposure in energy, followed by FMCG, healthcare, financial and services among others.

Top equity holdings comprise Bharat 22 ETF, CPSE ETF, SPDR Gold Trust, Info Edge, Apollo Hospitals among others.

Rs. 10000 monthly SIP started in SBI Multi Asset Allocation Fund has grown in value to Rs. 8.2 lakh, providing gains of Rs. 2.2 lakh.

2 Top Rated Multi Asset Allocation Funds By Value Research To Invest In 2021

2 Top Rated Multi Asset Allocation Funds By Value Research To Invest In 2021

Multi-asset allocation funds Rating by Value Research Minimum SIP amount SIP Annualised 1- year return SIP Annualised 3- year return SIP Annualised 5- year return
Axis Triple Advantage 5- star Rs. 1000 43.78% 26.71% 18.58%
SBI Multi Asset Allocation 5- star Rs. 500 22.93% 16.48% 12.35%

Disclaimer:

Disclaimer:

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advice to buy or sell stocks, gold, currency, or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature.



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DoP Introduces Charges For ATM transactions On ATM Outlets of lndia Post

Personal Finance

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Investment

oi-Vipul Das

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The Department of Posts under the Ministry of Communications has introduced various charges for ATM transactions on ATM outlets of lndia Post as well as other banks. According to the various transaction types, the applicable charges are as follows as on the implementation date 01.10.2021.

DoP Introduces Charges For ATM transactions On ATM Outlets of lndia Post

Debit Card Replacement Charges: Rs 300/- + GST

Duplicate PIN/Regeneration of PIN through Branch: Rs 50/- + GST

ATM/POU transaction technical declines attributable to the customer (i.e. lack of balance in account): Rs 20/- + GST.

AT PoS Cash withdrawals for DoP Debit cards (On-branch transactions): 1% of the transaction value subject to a maximum of Rs 5/- per transaction.

Charges for Withdrawal at ATM:

  • Financial Transactions at other ATMs – Beyond 3 free transactions- (ln Met Cities) and 5 free transactions in No Metro Cities Rs 20/- + GST.
  • Financial Transactions at branch ATMs – Beyond 5 free transactions- Rs 10/- + GST.
  • Non-Financial Transactions at other ATMs- Beyond 3 free transactions- (ln Metro Cities) and 5 free transactions in Non-Metro Cities – Rs 8/- + GST.
  • Non-Financial Transactions at branch ATMs- Beyond 5 free transactional Rs 5/- + GST.
  • ATM/Debit Card Annual Maintenance Charges: Rs 25/- + GST. This charge is applicable on cycles of 01.10.2021 to 30.09.2022 and subsequent cycles. Chargers to be collected at the end of the cycle i.e. on 30.09.2022.
  • SMS alert charges per annum for debit card holders: Rs 12/- + GST. This charge is applicable on cycles of 01.10.2021 to 30.09.2022 and subsequent cycles. Chargers to be collected at the end of the cycle i.e. on 30.09.2022.

Currently, India Post Payments Bank (IPPB), a division of Indian Post governed by the Department of Post, under the Ministry of Communications of the Indian government does not charge ATM monthly transactions at IndiaPost ATMs, and Punjab National Bank’s ATMs for all account variants. IPPB allows 3 free transactions at other bank’s ATMs across metro cities and 5 free transactions at other bank’s ATMs across non-metros.

Additional financial transactions at other bank’s ATMs will be charged Rs 20 and non-financial transactions will be charged Rs 8. These charges are applicable on Regular Savings Account – Safal Account, Basic Savings Bank Deposit Account (BSBDA) – Sugam Account, and BSBDA-Small Account – Saral Account. For regular savings accounts – Safal Account and Basic Savings Bank Deposit Account (BSBDA) – Sugam Account, IPPB allows a maximum ATM withdrawal per transaction of Rs 10,000 and maximum ATM withdrawal per day of Rs 25,000.

For the same account holders, IPPB allows maximum cumulative spend at POS outlets and e-commerce sites per day of Rs 65,000. Whereas for BSBDA-Small Account – Saral Account, IPPB allows INR 10,000 per month in aggregate by way of withdrawals through withdrawal slips at Branch, ATM, POS Outlets, and E-Commerce Transactions.

Story first published: Saturday, September 25, 2021, 13:38 [IST]



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Indian cryptocurrency market likely to reach up to $241 million by 2030: Nasscom

Banking & Finance

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The Indian cryptocurrency market has been growing exponentially over the last few years and is expected to reach up to $241 million by 2030 in India and $2.3 billion by 2026 globally.

As more and more young Indian investors are excited to explore newer investment options, they are adopting cryptocurrencies such as Bitcoin, Ethereum, and Polygon to make investments that promise them viable returns, a study on “Crypto Industry in India” by the National Association of Software and Services Companies (Nasscom) and industry partner WazirX said on Friday.

These digital currencies and other applications have garnered significant attention leading to an exponential growth of the CryptoTech Industry in India.

According to the report, with more than 60 per cent of States in India emerging as CryptoTech adopters and over 15 million retail investors, the industry is increasingly attracting new start-ups. Over 230 start-ups are already operating in India in the CryptoTech space, adding that the rising investment from institutional and retail investors has heightened awareness of the benefits of CryptoTech in the country.

The report further highlights that Bitcoin, Smart Contracts, Decentralised Finance, The Wave of Tokenisation, Non-Fungible Tokens, Rise of CryptoTech Capital and Central Bank Digital Currencies would be seen as seven key trends driving the growth and adoption of CryptoTech in India.

While at a nascent stage, the industry is already picking up and creating employment opportunities across trading, software development, analytics, and other practices, the report further said.

“CryptoTech industry in India has not only demonstrated a positive impact at the grassroots levels but is emerging as one of the fastest-growing technology sub-sector. India provides the most unique ecosystem to CryptoTech to play a transformative role in strengthening key priority areas such as healthcare, safety, digital identification and trade and finance,” Debjani Ghosh, President, Nasscom, said.

Further, the report said that the market in India is expected to grow 2X faster and has the potential to create eight-lakh+ jobs by 2030. It can create an economic value addition of $184 billion in the form of investments and cost savings.

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Cost-effective micro ATMs gain traction

Banking & Finance

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Micro ATMs have been gaining traction steadily even as the traditional ATM model faces challenges amid cost and infrastructure-related issues.

According to RBI data, the number of micro ATMs deployed by banks stood at 4.94 lakh by August-end, a 60.9 per cent increase compared to the 3.07 lakh deployed a year ago.

In contrast, there were 2.41 lakh ATMs by August-end, a 3.4 per cent increase from 2.33 lakh deployed last August.

“Micro ATMs, through business correspondents (BCs), are a cost-effective retail model of banking vis-à-vis the more sophisticated ATM operations,” said the RBI’s Booklet on Payment Systems in January. Fino Payments Bank had the largest network of micro-ATMs in the country, with 2.44 lakh micro ATMs by July, followed by State Bank of India with 43,960 such devices.

With the surge in AePS transactions in recent years, along with the Covid pandemic, micro-ATMs have been gaining more popularity.

This is also reflected in cash withdrawals from micro ATMs, which amounted to ₹26,830 crore in August this year, compared to ₹19,513 crore a year ago.

Fintechs are also working on micro ATMs as they try to expand the market by offering financial services to the unserved and underserved population.

“Micro ATMs are important as they are the touch point to acquire and support the user. That is the onboarding practice,” said Ram Shriram, Founder and CEO, Mahagram.

Unlike its name, a micro ATM cannot store cash like a traditional ATM, but can be used by the merchant to authenticate the customer and physically dispense cash or take deposits.

It is a portable device that can be used by a merchant or business correspondent to connect with their bank, authenticate users, and perform financial transactions.

Many fintechs and banks are also partnering to provide banking services and cash withdrawals through micro-ATMs. PayPoint India and Bank of Baroda recently announced a tie-up to widen the reach of banking services.

PayNearby has partnered with Visa and RBL Bank to launch SoftPoS and mPOS for its over 15 lakh retail network.

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RBI allows banks to sell ‘fraud loans’ to ARCs

Banking & Finance

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The Reserve Bank of India on Friday allowed loan exposures classified as fraud to be transferred to Asset Reconstruction Companies (ARCs). This comes in the wake of banks reporting frauds aggregating ₹3.95-lakh crore between FY19 and FY21.

Stressed loans, which are in default for more than 60 days or classified as non-performing assets (NPA), can be transferred to ARCs. This shall include loan exposures classified as fraud as on the date of transfer.

Issuing the guidelines for transfer of loan exposure, including stressed loans, the central bank said the transfer of such loans to an ARC, however, does not absolve the transferor from fixing the staff accountability as required under the extant instructions on frauds.

Until now, when an account is declared fraud, banks had to set aside 100 per cent of the outstanding loan as provision. Under the new rules, banks can hope to recover a part of the loan. For ARCs, this will allow them to buy debt cheaper than regular loan accounts.

Swiss Challenge method

The RBI also said the transfer of stressed loans above ₹100 crore negotiated on a bilateral basis between lenders and permitted acquirers, including ARCs, must necessarily be followed by an auction through the Swiss Challenge method. Under the Swiss Challenge auction, the price bilaterally negotiated for the sale of a stressed asset becomes the floor price for inviting counter-proposals from other interested buyers.

Loan transfers are usually resorted to by lending institutions for multiple reasons ranging from liquidity management, rebalancing of exposure or strategic sales. “A robust secondary market in loans can be an important mechanism for management of credit exposures by lending institutions and also create additional avenues for raising liquidity,” the RBI said in a circular to lenders.

New guidelines

Under the new guidelines, loans can be transferred only after a minimum holding period (MHP) of three months in case of loans with tenor up to 2 years, and six months fior those with tenor of more than 2 years. In case of loans where the security does not exist or cannot be registered, the MHP shall be calculated from the date of first repayment of the loan.

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₹1 crore, minimum ticket size to issue securitisation notes: RBI

Banking & Finance

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As per the Master Direction – Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021, exposures to securitisations that are STC (simple, transparent and comparable)-compliant can be subject to the alternative capital treatment.

Lenders can provide supporting facilities such as credit enhancement facilities, liquidity facilities, underwriting facilities and servicing facilities supporting securitisation structures.

Securitisation involves transactions where credit risk in assets are redistributed by repackaging them into tradeable securities with different risk profiles, which may give investors of various classes access to exposures which they otherwise might be unable to access directly.

The RBI emphasised that the priorities of payments for all liabilities in all circumstances should be clearly defined at the time of securitisation and appropriate legal comfort regarding their enforceability should be provided.

This is aimed at preventing investors being subjected to unexpected repayment profiles during the life of a securitisation; listing of securitisation notes, especially in respect of certain product class, such as Residential Mortgage Backed Securities, and/ or generally above a certain threshold is recommended, though not mandatory, the RBI said.

In any case, any offer of securitisation notes to fifty or more persons in an issuance would be required to be listed in terms of Securities and Exchange Board of India (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008.

To help provide investors with full transparency, all triggers affecting the cash flow waterfall, payment profile or priority of payments of the securitisation should be clearly and fully disclosed in offer documents and in investor reports, per the Directions.

Investor reports should give information that clearly identifies the breach status in respect of expected cash flows to the note holders, the ability for the breach to be reversed and the consequences of the breach.

To ensure rights and interest of the securitisation note holders are protected, definitions, policies and remedies pertaining to the contours and caveats around the performance of the underlying loans must be suitably communicated.

Further, the rights and control of the securitisation note holders must be documented to account for all circumstances, including insolvency of all entities involved in securitisation, such as the originator Special Purpose Entity.

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Concerns on banks ‘mispricing’ risks: SBI Chief

Banking & Finance

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Dinesh Kumar Khara, Chairman, State Bank of India on Friday said that mispricing of risk by banks was a cause of concern. Though banks have tightened the underwriting standards, the surplus liquidity in the system may push banks to a situation where they end up mispricing the risk.

“There is temptation on bankers to go down the risk curve and misprice the risk……we are starting to see this,” Khara said at the Financial Market e-Conclave organised by the Bengal Chamber of Commerce & Industry here on Friday.

The SBI Chairman does not feel there is any concern regarding the underwriting standards as most banks have tightened norms following the previous experience of decline in asset quality and high NPAs.

The system is flush with liquidity given the low credit offtake due to slowdown in economy on the back of Covid-19 pandemic. The funds parked with the RBI, in its reserve repo window, is estimated to be around ₹7 trillion, while the government’s cash balances with the central bank is close to ₹3.4 trillion.

Credit offtake to pick up

According to Khara there are greenshoots visible in certain sectors including commodities, iron and steel and aluminium. Credit demand is expected to pick up once investments start flowing into these sectors. “We have started seeing traction (in credit demand) from public sector enterprises and some private sector companies are also coming for fresh investments,” he said.

He said there was some stress in the retail portfolios at the end of Q1FY-22 on account of the regional lockdowns. However, things have been improving since the beginning of Q2.

On reduction of rates on new home loans, he said that the mortgage market has started showing signs of growth and banks are trying to capture the same.

‘Status quo likely’

“Inflation is mainly on account of supply side disruptions and once that is addressed we may have elbow room for keeping the rates at current level and wait for growth to come back in full force and at that point of time the central bank might think of recalibrating interest rates. But at this point of time it looks like interest rates should remain as it is,” he said.

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1 Mid Cap And 1 Small Cap Stock To ‘Buy’ By HDFC Securities For The Short Term

Personal Finance

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JB Chemicals and Pharmaceuticals-Buy for a target price of Rs. 2200

HDFC Securities is bullish on the counter of Mumbai based pharmaceuticals company that is engaged in the manufacture of pharmaceuticals formulations herbal remedies as well as APIs, JB Chemicals and Pharma. The brokerage has suggested to ‘Buy’ the scrip for gains of 19.8% and has set a target price of Rs. 2200 for the investment horizon of 3 months. Stop loss suggested for the trade is Rs. 1620.

Technical observations:

• Stock price has broken out from the downward sloping trendline on the daily chart with higher volumes.

• Stock price is forming bullish higher top higher bottom formation on the weekly chart.

• The counter is trading above its 5,20 and 50-day EMA and this shows short and medium term trend of the stock is positive.

• Oscillators including RSI and MFI is placed above 60 and rising upwards, which indicates strength in the current uptrend

• Plus, DI is trading above -DI while ADX line has started sloping upwards, indicating momentum in the current uptrend, adds the brokerage research report.

Stock Last traded price Target Upside Horizon
JB Chemicals and Pharmaceuticals Rs. 1835.8 Rs. 2200 19.80% 3 months

Kajaria Ceramics:

Kajaria Ceramics:

For the short term of 3 months, brokerage house HDFC Securities recommends on buying Kajaria Ceramics scrip for a target price of Rs.1490, implying gains of 19.95% from the last traded price of Rs. 1242.15

Technical observations:

• The company’s stock price has breached the earlier top resistance of Rs. 1229

• Stock price has been finding support on its 34 days EMA

• Primary trend of the stock is bullish with higher tops and higher bottoms

• On the weekly charts the stock has broken out from bullish “Flag” pattern.

• Price breakout is accompanied with jump in volumes.

• Stock has been holding levels above its medium to long term moving averages Indicators and oscillators have turned bullish on daily and weekly charts, adds the brokerage.

The ceramics and granite sector entity is the largest manufacturer of vitrified or ceramic tiles in the country. The company’s annual aggregate capacity stands at 70.40 mn. sq. meters, which spans across eight plants located in different states including UP, AP, Gujarat and Rajasthan.

Stock Last traded price Target Upside Horizon
Kajaria Ceramics Rs. 1242.15 Rs. 1490 19.95% 3 months

Disclaimer:

Disclaimer:

Investing in equities poses a risk of financial loss. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only.

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