NEW DELHI: There are visible signs of economic rejuvenation since the second half of May, with the second wave of the pandemic abating in most parts of the country and state governments lifting restrictions in phases, a finance ministry report said on Tuesday, while calling for sustaining the vaccination progress and the need for Covid-appropriate behaviour.
“The receding of India’s second wave, along with rapid progress in vaccination, has set the stage to further accelerate economic recovery. The movement of high frequency indicators in July clearly point towards a broad-based economic revival,” said the finance ministry’s monthly economic report for July, adding that these signs resonate with the fact that the economic impact of the second wave is expected to be muted.
It said PMI manufacturing sharply rebounded to be in expansionary zone across output and input sub-components of the index. Marking swift economic recovery, GST collection has reclaimed its Rs 1 lakh crore-plus territory in July, signifying increased business and consumer activity.
Rail freight at 112.7MT in July hit a record for the month and registered 18.3% growth (year-on-year) and13.2% rise compared to pre-Covid July 2019. The surge in economic activity is further corroborated by trends in Kharif sowing, fertiliser sales, power consumption, vehicle registrations, highway toll collections, e-way bills and digital transactions, said the report.
“Latest available data on growth of eight core industries, auto sales, tractor sales, port traffic, air passenger traffic also indicate sequential improvement from the contraction induced by the second wave,” it further added.
“At this juncture, the economy and society are at a crucial inflection point where sustenance of economic recovery, vaccination progress and Covid-19 appropriate behavioural strategies are needed in close synergy with each other.”
It said that having antibodies reduces the probability of acquiring serious illnesses, as is borne by studies. So, any subsequent waves are expected to be mild in terms of severity of disease.
The latest Sovereign Gold Bond Scheme 2021-22 – Series V is open for subscription until August 13, 2021. The issue price is ₹4,790 per bond (equivalent to one gram of gold). Those applying online and paying digitally get a discount of ₹50 on the issue price.
Why invest?
The 16 per cent fall in gold price in rupee terms since the August 2020 high provides a window of opportunity for investors. Those with a long-term investment horizon can consider buying SGBs in the ongoing issue to add to their long-term gold allocation.
The current SGB issue price of ₹4,790 is lower by ₹17 to ₹99 per bond than in the preceding three issues — one in July and two in May this year. The price is a simple average of the price of gold (999 purity) for the last three business days preceding the subscription period.
Gold does well when other asset classes such as equity fare poorly and can form part of your portfolio (around 10 per cent) as a hedge against underperformance in other assets. Given that returns from gold can be lumpy — long periods of poor returns followed by short periods of high return, having a longer holding period helps. Over the last 30 years, gold has offered an average 5-year return (CAGR) of 9.4 per cent with the possibility of these returns being negative 13 per cent of the time. Over the same period, the average 7-year gold return (CAGR) has been 9.7 per cent with only 1 per cent possibility of negative returns.
Keep powder dry
However, investors are advised to keep some powder dry for future tranches, which may come at lower prices. The near-term outlook for gold appears weak. The stronger-than-expected US jobs data has fuelled fears of the US Fed unwinding its ultra-loose monetary policy to rein in inflation. A stronger US dollar and rising bond yields are expected to keep gold prices under pressure. As of now, there is another SGB issue opening on August 30.
The brass tacks
SGBs are issued in denominations of one gram of gold and in multiples thereof. You can buy a minimum of 1 gram and up to a maximum of 4 kilograms during a financial year. The limit includes bonds bought in the primary issues as well as those from the secondary market. SGBs can be bought from banks, designated post offices, stockbrokers and the NSE and the BSE.
The investment tenure of these bonds is eight years. However, early redemption with the RBI is allowed from the fifth year. For this, you must approach the concerned bank or whoever you bought them from, 30 days before the coupon payment date (half-yearly). While you can also sell the SGBs in the secondary market any time before maturity, the lack of adequate trading volumes can be an impediment.
Those interested in better liquidity must instead consider gold ETFs that can be bought and sold anytime. However, gold ETFs involve an expense ratio while there is no purchase cost for SGBs. Also, the capital gain on SGBs is tax exempt in certain cases.
Returns and taxation
Apart from the possibility of capital gains (appreciation in gold price between the time of purchase and redemption), SGBs offer investors interest of 2.5 per cent per annum on their initial investment. The interest income is taxed at your relevant slab rate.
If you hold the bonds until maturity (eight years), then the capital gain, if any, is exempt from tax. Capital gains on SGBs sold prematurely in the secondary market are taxed at an individual’s income tax slab rate, if held for 36 months or less, and at 20 per cent with indexation benefit if held for more than 36 months.
HPCL is one of the top oil marketing companies in the country. Broking firm Sharekhan believes that there is a potential to see an upside of at least 25% in the stock.
Sharekhan expects earnings to recover as volumes revive (petrol/diesel at >105%/91% of pre-COVID level), likely structural improvement in auto fuel margin, cyclical recovery in GRM and inventory gains.
“Commissioning of Mumbai/Vizag refinery in FY22E would drive refinery throughput and FCF,” the brokerage has said.
Re-rating on HPCL possible with BPCL privatization
HPCL reported a Q1FY22 PAT at Rs 1,795 crore (down 41% q-o-q) lagged estimate by 20% as the company reported GRM of $3.3/bbl and sharply missed estimates.
“The refinery/pipeline throughput was weaker than expected at 2.5 mmt/4.3 mmt, down 42.8%/19% q-o-q. Implied marketing margins rose 7% q-o-q (against an expected q-o-q decline) to Rs. 3,101/tonne led by auto fuel price hikes. Marketing sales volume of 8.8 mmt was in-line; refinery throughput fell due to shutdown for Mumbai refinery,” the brokerage said.
According to Sharekhan, BPCL’s privatisation could re-rate oil marketing company stocks. Apart from this, the stock also has a solid dividend yield.
“Valuation of 4.3x/0.8 FY23E EPS/BV is attractive considering recovery in core earnings, RoE of 20% and dividend yield of 7-8%. We maintain a Buy on HPCL with an unchanged price target of Rs. 340 on the stock,” the brokerage has said.
Buy the stock of KEI Industries for an upside of 26%, says Sharekhan
KEI Industries current market price
Rs 718.20
KEI target price
Rs 909
Potential profits
26.60%
KEI Industries is a top player in the cable industry business and offers an extensive range of cabling solutions. The company manufactures and markets Extra-High Voltage, Medium Voltage and Low Voltage power cables.
KEI reported better-than-expected performance for Q1 FY22 with revenue/ EBITDA/ net profits at Rs. 1018 crores, Rs 114 crores and Rs 67 crores. The performance was driven by strong growth in cables and stainless steel wire segment.
KEI industries: An upside of 26% on the stock
According to Sharekhan, the stock price of KEI industries can reach a price of Rs 909, which is about 26% higher from the current levels.
“KEI’s outlook is expected to be positive with its diversified user industries, increased focus on retail, high-margin EHV cables, and export sales along with focused industry approach as well as utilisation-driven capex plans which is likely to help in sustaining a strong growth trajectory.
An uptick in housing demand bodes well for KEI Industries given its increased focus on brand building, distribution expansion & increasing B2C sales ahead of proposed entry into FMEG products. The stock is currently trading at a P/E of 16x/14x its FY2023E/FY2024E EPS which leaves further room for upside. Hence, we retain Buy on the stock with a revised price target of Rs. 909,” the brokerage has said.
Disclaimer
Investing in stocks poses a risk of financial losses. 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. Investors should take care because the markets have hit a new peak. Please consult a registered professional advisor before you take a decision.
According to Motilal Oswal, Gujarat State Petronet reported a marginally higher (+5%) transmission volume than its own estimate at 36.8 mmscmd (+11% YoY and +9% QoQ), with implied tariff at Rs 1,282/mscm. Demand recovery from the refining and petrochemicals segment offset a weak demand from CGDs, while demand from the Power sector recovered quarter-on-quarter.
Gujarat State Petronet: Strong growth likely
Motilal Oswal believes that the company can easily record an 8-10% CAGR in transmission volumes over the next 5-6 years (in line with the 10% volume CAGR over the last five years).
Since Gujarat State Petronet is currently operating at 90-95% utilization rate, the company needs to incur a capital expenditure of Rs 45.4 billion to accommodate the rise in volume. This would ensure that tariffs are not cut for the HP gas grid. The stock trades at 16 times FY23E EPS of Rs 20 and 10x FY23E EV/EBITDA. We maintain our Buy rating with a target price of Rs 500 per share,” Motilal Oswal has said in a report.
The firm has also noted the investments in Gujarat Gas and Sabarmati Gas, at a 25% holding discount, offer a valuation of Rs 360 (after a huge run up of 45% in Gujarat Gas’ share prices over the last two months).
“Valuing the core at 7x adjusted Sep’23E EPS of Rs 20 and adding the value of investments, we arrive at a valuation of Rs 500 per share. Buy the stock, ” the brokerage has said.
Indian Hotels: Buy for an upside target of 28%
Current market price
Rs 142.65
Projected price
Rs 183
Gains
29%
Motilal Oswal has suggesting buying the stock of Indian Hotels and sees an upside potential of as much as 28% from current levels.
“Faster demand revival in the Leisure Travel segment has aided Indian Hotel’s performance in FY21. The second COVID wave has delayed recovery in the Hospitality sector. However, the impact this time is less severe and the recovery is quick when compared with last time,” the brokerage has said.
According to the brokerage, new revenue generating avenues have a higher EBITDA margin, and this is being done without deploying capital or with very minimal capital, which bodes well for the returns on capital employed.
“Revenue/EBITDA in 1QFY22 was above our estimate. Factoring the same, we have increased our FY22E revenue/EBITDA estimate by 2%/4%, and have maintained our estimate for FY23E. We maintain our Buy rating on the stock, with a Sept’23E SoTP-based target price of Rs 183,” the brokerage has said.
Disclaimer
The 2 stocks or mentioned above are taken from brokerage report of Motilal Oswal institutional Equities. Investments mentioned here need not be construed as investment advice, the company and the author shall not be responsible for any decisions taken based on the above report. Investors are advised caution as the markets are now at a new historic peak.
Mumbai: The IPO frenzy on Dalal Street continued with four offers together this week trying to mobilise about 14,600 crore, making it one of the busiest weeks for IPOs in several years. The previous week saw 3,614 crore, while during the week of July 12-16, 9,375 crore was raised from just one IPO — Zomato, data from exchanges and merchant bankers showed.
The previous large week for an IPO mobilisation was March 2-6, 2020 when SBI Cards raised 10,355 crore. A combination of easy availability of funds globally, a stock market that is recording a new peak on a regular basis and strong listing gains have combined to prompt promoters, merchant bankers and private equity investors to take companies public, industry players said. During the current week, Nuvoco Vista Corp is raising 5,000 crore through its IPO, which is the first such offer from a cement company in the last one and half decades. Nuvoco Vista is majority owned by Karsanbhai Patel who is also the owner of Nirma detergent. Its aim to raise 5,000 crore would make it the second-biggest IPO this year after Zomato’s. The last IPO of a cement company was launched in 2006 when JK Cement went public.
Nuvoco Vista is the fifth largest cement company in India and the biggest in eastern India. The shares are being offered at a price band of 560-570 per share. The IPO will close on August 11. According to a report by IIFL Securities, “given NVCL’s size, strong brand ownership, leadership position in the fast-growing eastern Indian market, availability of limestone mines for future expansion, and scope for improving profitability & deleveraging balance sheet, we believe valuations are reasonable. We recommend subscribing to the IPO.” Along with Nuvoco, three other IPOs are also open now. The IPO for CarTrade is for a tech-enable auto listing company while for Chemplast Sanmar, a speciality chemical company, it’s the second coming to be publicly listed after being delisted about 10 years ago. The IPO for Aptus Value Housing is for a mortgage finance company serving mid- and low-income segments.
According to the brokerage, despite the COVID-related delays, JSP’s steel volumes increased by 21% in FY21, reflecting a utilisation rate of 88 percent. The company’s announced 85 percent increase in steel capacity to 15.9 million tonnes per annum in stages by FY25, at a competitive cost of USD390 per tonne, should be RoCE accretive and support volume outperformance in the long run.
Current Market Price
Rs 400
Target Price
Rs 495
Upside
24%
“We raise our FY22E EBITDA by 13% on expectations of higher steel prices in the fiscal. Strong cash flows, coupled with cash proceeds of INR30.1b from the JPL divestment, should lead to a fall in net debt to INR34.5b by FY23E, implying 0.3x FY23E EBITDA. We reiterate our Buy rating.
Our TP of INR495/share is based on 5x FY23E EV/EBITDA and factors in further net debt reduction of INR30.1b from the divestment of JPL. At the CMP, the stock trades at an attractive 4.5x FY23E EV/EBITDA,” the brokerage has said.
Buy Motherson Sumi with target price of Rs 285
According to Motilal Oswal, exogenous problems in all of Motherson Sumi‘s businesses (COVID in India and supply-side issues in abroad businesses), significant copper price inflation, and non-recurring charges at PKC hampered the company’s 1QFY22 performance.
Current Market Price
Rs 223
Target Price
Rs 285
Upside
28%
“Our positive view on MSS remains intact (led by cyclical recovery, turnaround at the greenfield plant, and the execution of SMRPBV’s strong order book). It trades at 28.8x/19x FY22/23E consol. EPS. Maintain Buy, with TP of ~INR285 (Sep’23 SOTP).
We cut our FY22E EPS estimates by 8%/3%, factoring in headwinds from the semiconductor We cut our FY22E EPS estimates by 8%/3%, factoring in lower production, while maintaining our FY23 EPS estimates. Our positive view on MSS remains intact (led by industry recovery, turnaround at the greenfield plant, and the execution of SMRPBV’s strong order book). The stock trades at 28.8x/19x FY22/23E consol. EPS. As we shift our TP to Sep’23, which factors in total normalization as well as the peak cycle, we normalize the multiple for SMRPBV and PKC to 20x (v/s 23x earlier). Maintain Buy, with TP of ~INR285 (Sep’23 SOTP), the brokerage has said.
Buy Indian Hotels, Says Motilal Oswal
Motilal Oswal believes that, despite the second COVID wave, standalone RevPAR nearly doubled year over year due to ARR growth and occupancy increase, as the impact was less severe this time and the recovery was faster than the first. In addition, IHIN’s operational performance was excellent.
Current Market Price
Rs 143
Target Price
Rs 183
Upside
28%
The EBITDA margin of new revenue-generating avenues is better, and it is done without or with very little capital, which bodes good for RoCE.
“Revenue/EBITDA in 1QFY22 was above our estimate. Factoring the same, we have increased our FY22E revenue/EBITDA estimate by 2%/4%, and have maintained our estimate for FY23E. We maintain our Buy rating on the stock, with a Sept’23E SoTP-based TP of INR183.
While FY21 earnings are weak, we expect a gradual/sharp recovery in FY22E/FY23E on: a) a low base, b) improvement in ARRs once things normalize, c) improved occupancies, d) positivity in cost rationalization efforts in FY21, e) an increase in F&B income as banqueting/conferences resume, and f) higher income from management contracts, the brokerage has said.
Disclaimer
Views mentioned herein are taken from the brokerage report of Motilal Oswal. Neither the author, nor the brokerage nor Greynium Information Technologies would be responsible for losses incurred based on the article. Please consult a professional advisor. Investing in stock markets is risky.
For Shriram Housing Finance (SHFL), which has completed a decade of operations, the second quarter this fiscal promises to be one of the highest quarters ever in terms of disbursements, says its MD & CEO Ravi Subramanian. In an interview with Mithun Dasgupta, Subramanian says the company would not need “significant” loan restructuring going forward as the market has improved. Edited excerpts:
How is the demand for housing loans after the second Covid wave in comparison to the first one?
After the first Covid wave, a lot of pipeline transactions just went on hold from March to May. People who came into the market in June saw a huge uptake from July (2020) onwards. In the last financial year, the third and fourth quarters were very good for most housing loan players. We also did record numbers as our disbursal last year was 95% more than the previous year.
This fiscal, there was a slowdown in demands. The pick-up has not been of the same nature as last year. Nevertheless, in July (2021), the business was back to last year’s pick levels. Demand for housing has picked up. I just hope that it sustains.
What percentage of housing loan demands are coming from people who already own houses?
There is around 10-15% increase in the number of persons who are building additional rooms in their existing houses, which means that people are going in for expansion. We have also seen a lot of people, who already own a house, coming in to buy a slightly larger house and clearly expressing an intent that they would sell off the old house to meet the liabilities. That too was a 10-15% increase over the previous quarters. So, there is an increase, there is a definitive shift towards people going in for larger properties.
SHFL’s disbursements for Q1FY22 stood at Rs 221 crore, against Rs 77 crore for the same period of FY21. What will disbursements look like going forward?
Q1FY21 was a very slow quarter. April and May this year was a washout. In June, we were back to about 80% of our normal disbursal. In July, we were back to our last year’s numbers. So, we are very much back on track in June and July, which means that business has picked up significantly. My company has grown through Covid-19, in the sense that my numbers before Covid were not as high as there are now. Pre-Covid, one year was a period of investment for us.
We had started transforming the organization, started growing the book, started building the distributions. So, we were on the growth path when Covid hit us. Q2FY21 was the first time our company crossed `500 crore disbursal in a quarter. This year, in July we already clocked `225 crore disbursal, which was about 30% more than what we did in June. Thus, for the company, Q2FY22 promises to be one of the highest quarters ever, if I go by the July trajectory.
What are the factors that contributed to the growth in numbers?
We had transformed the organisation in terms of areas of focus, customers segments and the products that we wanted to launch sometime in Q4FY19. After that, we have been investing in our teams and focusing on six states in south and west, and building our books. We aspire to hit about `400-500 crore in about 24 months, which we will. Today, we are one of the largest housing finance players in terms of growth in disbursal, assets under management, profitability and the portfolio quality of the new book. The portfolio quality of the new book is roughly about 77% of our total book, which is the best in class (in affordable housing loan) today. We believe in slow and steady growth.
What was the number of loans the company restructured in the first quarter?
In Q1FY22, we restructured around Rs 72 crore of loans. In the previous quarter, we had restructured loans of Rs 58 crore. Total, we have restructured roughly 3% of our book, out of which about 1.4% was in current up to 30 days when we restructured. So, it is not that we only restructured delinquent customers and higher bucket customers, but also genuine customers who had been paying and were going through some stress.
Collections in our restructured book are also very good. In fact, in July, on the new book, roughly 99% of our customers paid one EMI at least. I don’t think that we will be restructuring anything significant going forward because the market has improved.
In contrast, the bad loan ratio of scheduled commercial banks stood at 7.5% as of March 2021, having eased from 8.4% a year before, the RBI said in its latest report in July.
The number of frauds in urban and state cooperative banks dropped in FY21 from a year ago with tighter oversight by the central bank, Parliament was informed on Tuesday.
Finance minister Nirmala Sitharaman said urban cooperative banks reported 323 frauds in FY21 as against 568 in the previous year and 1,193 in FY19. Similarly, state cooperative banks witnessed 482 frauds in FY21, down from 508 in the previous fiscal but much higher than the FY19 level of 290, she said in a written reply to a question.
While Maharashtra, home to the highest number of cooperatives, accounted for 67% of the fraud cases in urban cooperative banks in FY21, Kerala made up for 44% of the frauds in state cooperative banks.
The finances of cooperative banks came under heightened scrutiny recently after the government carved out the department of cooperation from the agriculture ministry to make it a full-fledged ministry under Amit Shah.
Before that, affairs of the cooperative sector came under focus following the crisis at the Punjab Maharashtra Cooperative (PMC) Bank in 2019. This had prompted the government to amend the Banking Regulation Act to empower the RBI for more effective regulation of cooperative banks. The idea was to better protect the interests of depositors and avoid a PMC Bank-like crisis in future.
The amendment was also aimed to ensure that the “affairs of the cooperative banks are conducted in a manner that protects the interest of depositors by increasing professionalism, enabling access to capital, improving governance and ensuring sound banking through RBI’, Sitharaman said in the reply.
Last month, the minister had told the Rajya Sabha that gross bad loans of district central cooperative banks (DCCBs) were among the highest in the banking system, at 12.6% (Rs 35,298 crore) of their advances as of March 2020.
The gross non-performing assets (NPAs) of urban cooperative banks (UCBs), too, remained elevated at 11.3% (Rs 35,528 crore) at the end of March 2021. However, the gross NPAs of state cooperative banks were 6.7% (Rs 13,477 crore) as of March 2020, Sitharaman had said in a statement in the Upper House.
In contrast, the bad loan ratio of scheduled commercial banks stood at 7.5% as of March 2021, having eased from 8.4% a year before, the RBI said in its latest report in July.
There are 34 state cooperative banks, 351 DCCBs and 1,534 UCBs in the country. Many of the cooperatives, thanks to their opaque structure and severe governance issues, have been allegedly used to funnel black money for long.
Return on equity is by and large a ratio that calculates the rate of return that the shareholders or common stock owners’ of the company get on their shareholding. Primarily, the ratio is suggestive of the fact as to whether or not the company generates decent returns on the investment it secures from its shareholders.
Calculation of Return on equity or RoE
Formula for Return on equity = 100%* (net income or profits/ shareholder’s or total equity); herein the denominator or shareholder’s equity implies the difference between the company’s total assets and liabilities. Also, in a case when the company at any given point decides to clear its outstanding liabilities then the shareholder’s equity would amount to whatever is remaining. This is perhaps the book value of the firm.
Simply stating it is computed by dividing the company’s net income extracted from the latest income statement by the total equity at the end of the period.
There is also an alternate method to compute RoE, wherein average total equity is made use of and this is the average equity value between the starting and the year end.
Illustration to understand the calculation of RoE
Say for an instant company’s ‘X’ latest net income is Rs 1000 crores and their total equity is Rs 15,000 crores. Using the formula, RoE of company ‘X’ comes to be as below:
The RoE of Rs. 1 for a firm means that Rs. 1 of common shareholding shall generate net income of Rs. 1
Importance of RoE for investors/Shareholders in the firm
This metric of Return on equity (RoE) is highly important for shareholders as it enables them to analyze the degree of efficiency with which a company is able to use or employ their invested corpus to generate additional revenues.
How to use RoE to make better stock selection?
Importantly, here you need to understand that RoE- the parameter can be used to pick stocks within the same sector only. This is because there can be huge gap in net income or profits across sectors. Also, within a sector, the RoE levels may be different. This is when a specific company in that sector may go in for dividend distribution and may not prefer to keep the profits as idle cash.
From this, we infer that RoE varies across sectors, say for instance a normal RoE in utility sector could be 10 percent or even less. Likewise, for retail or technology enterprise, normal RoE could be 18% or more.
So, as a thumb rule, you can pick stocks based on RoE by selecting or targeting a stock with RoE equal to or just above the average for the peer group.
Another important point that cannot be overlooked and needs to be mentioned is that RoE is even more important than Return on investment as it tells shareholders how efficiently their capital is being reinvested for generating returns. In a usual case, higher the return on equity better or more is the company’s capacity to generate cash. So, higher return on equity points to a better standing of the company with respect to its capacity to yield returns for its shareholders.
List of 16 companies with RoE more than 30 percent
Company name
RoE in %
01. TCS
38.55
02. Laurus Lab
45.15
03. Deepak Nitr
39.60
04. Page Ind
39.96
05. Tata Elxsi
30.15
06. Alkyl Amin
44.6
07. Clean Scie
45.00
08. CAMS
39.11
09. BASF
36.57
10. Balaji Amin
31.38
11. Sonata Soft
31.08
12. Tatva Chint
36.85
13. LTI
30.79
14. Supreme Ind
30.65
15. lndiamart
30.63
16. Info Edge
42.84
Conclusion:
Market gurus have always recommended to invest in high RoE stocks. High RoE stocks have a capability or tendency to double investors’ money in 3-4 years. The stocks listed above are the market leaders in their own industry and command highest range of RoE.
Amid Covid 19 second wave it was seen that many people were unprepared financially to deal with health exigencies. In such a crisis, people in the formal sector are at an advantage as they can seek financial assistance from their employers either by way of overdraft or loan at concessional rates.
Loan From Employer At Concessional Rates: Know Tax Implications
In the latest notification, the government said, financial assistance availed for Covid by employees from the employer will be tax-free in the hands of employees. But based on the company policy, employer also extends loan to employees for various other financial requirements of employees such as for health emergency, child’s education, higher education, marriage etc. And this financial assistance sought from the employer as loan will be then taxable for the employee.
Concessional loans from employer attract tax implication as perquisite
Employers based on company-specific policies may extend loan to employees at either zero percent interest rate or concessional rates. Then on such concessional loans income tax is charged as a perquisite in the hands of the employee. The income tax department deems such concessional loans as savings owing to low interest rate as in a case when the loan would be taken from an outside source it would involve a higher cost element.
Say for instance, if you avail a concessional loan from your employer of an amount Rs. 10 lakh at say 5 percent and this in the market is available for say 8% then the interest differential will be added to your perquisites as income, thus increasing your overall salary for taxation purpose.
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