Category: Personal Finance

Investment Schemes For Central Government Employees Covered Under NPS

Central Government Employees or Subscribers covered under NPS can customize their Tier I account by specifying any of the Pension Funds (PFs) as well as an investment plan. If the Subscriber does not pursue the option, NPS contributions will be allocated in the existing default schemes of the three Pension Fund Managers (PFMs), namely LIC Pension Fund Limited, SBI Pension Funds Pvt. Limited, and UTI Retirement Solutions Limited, in a fixed amount, as specified in the Statement of Transaction (SoT), in accordance with PFRDA’s standards. According to NSDL, a subscriber can choose from the following investment plans:

1. Default Scheme – Investments would be done in defaults schemes of LIC, UTI, and SBI in a predefined proportion.

2. Scheme G – 100% of contribution shall be invested in Government Bonds and related instruments.

3. Scheme LC 50 – Life cycle fund where the Cap to Equity investments is 50% of the total asset.

4. Scheme LC 25 – Life cycle fund where the Cap to Equity investments is 25% of the total asset.

Initiatives Made By Department of Pension and Pensioners’ Welfare For Central Government Subscribers

In the event that a government employee receives benefits under the old pension scheme due to in-service death or discharge from employment due to invalidation or disablement, the government contribution and returns thereon in the Government servant’s accumulated pension fund under NPS would be surrendered into the Government account, and employees’ contributions with returns thereon would be hand over to the subscriber or his or her family.

According to a DoPPW OM dated 01.01.2021, if a government employee who was hired on or after January 1, 2004, and is covered by the NPS is disabled, he will be eligible for a lump sum compensation calculated in accordance with rule 9(3) of the CCS(Extraordinary Pension) Rules, if the disablement is directly related to Government service and the Government employee is retained in employment.

Initiatives Made By Department of Financial Services For Central Government Subscribers

Notification from the Department of Financial Services dated January 31, 2019 – In response to the committee’s proposals for initiatives to streamline NPS implementation, the Department of Financial Services, in a notification dated 31.01.2019, extended the following advantages to government employees covered by NPS:

(i) Employee contribution 10% of the salary and DA with matching contribution @ 14% by the Government w.e.f. 01.04.2019.

(ii) Investment of NPS wealth upto 95% in infrastructure/Debt funds and 5-15% in equity for Government employees. Life Cycle-based funds viz. LC-50 and LC-25 are also available w.e.f. 01.04.2019.

(iii) Option for investment choices and Pension Fund made available to Government servants w.e.f. 01.04.2019.

(iv) Investment in NPS Tier II has been brought under Section 80 C for tax exemption w.e.f. 01.04.2019

Exit Rules Made By Department of Financial Services For Central Government Subscribers

Employee contributions and government contributions were allocated by Pension Fund Managers according to the investment plan established by the PFRDA for Central Government workers. For government personnel, there were three PSU Pension Fund Managers. Employees in the government have no option in terms of Pension Fund Managers or investment schemes. A member must invest at least 40% of his or her accumulated pension corpus in Tier-I to purchase an annuity from an Annuity Service Provider, and Insurance Regulatory and Development Authority (IRDA) regulated Insurance Company registered with PFRDA when exiting NPS on superannuation.

A maximum of 60% of the accumulated corpus in the Tier-I account is allowed for central government employees. If a government employee exits the NPS before reaching superannuation, that is, before reaching the age of 60, he or she must deposit at least 80% of the accumulated corpus in an annuity and withdraw the remaining 20% as a lump sum.

Benefits Available In The Case of Death of a Central Government Employee Covered under NPS During Service

Under rule 10 of the CCS(Implementation of NPS) Rules, 2021, Central Government workers covered by the National Pension System have the choice of receiving benefits from either the old pension plan or the accumulated pension corpus under the NPS in the instance of their demise. This option is not available to the family of a deceased government employee. If a Central Government employee fails to provide a preference in this respect, the default mode is to receive benefits under the old pension plan for the first 15 years of service, after which the default option is to receive benefits under the NPS.

In accordance with these laws, the default mode of the old pension plan is currently in vogue until March 2024, even if a government employee has fulfilled 15 years of employment. According to the official website of the Pensioners Portal, in the case of the in-service death of a Central Government Employee covered by NPS, the following benefits are available:

(i) Family pension under CCS(Pension) Rules, 1972 as per option exercised by Government servant or default option or In case, Government servant has opted for benefits under NPS, the family would get benefits from his accumulated pension wealth under NPS.

(ii) Death Gratuity

(iii) Leave Encashment

(iv) Benefits from CGEGIS,

(v) CGHS facilities

Rule 20 of CCS (Implementation of NPS) Rules, 2021

1. If a government employee had preferred for benefits under the old pension scheme or if no alternative was enforced, the relevant office would act immediately to sanction family pension to eligible members of the deceased government employee’s family, since it is accomplished for government employees covered under the old pension scheme, i.e. as is pertinent to those who joined service before the scheme was implemented.

2. Concurrently, the concerned office would close the government servant’s PRAN under NPS and the contribution made by the government and return would be transferred into the Government account respectively. The outstanding amount would be given in lump sum to the nominee or legal successor in accordance with PFRDA regulations.

3. Those government employees who had selected for NPS benefits in the incident of their death, or if no option was enforced, whose default option is NPS benefits, the concerned office would close the deceased government servant’s PRAN under NPS and hand over lump-sum benefits of up to 20% of accumulated pension wealth and annuity from the remaining pensions to the eligible member from annuity service provider registered with PFRDA.

4. In both situations, additional benefits such as death gratuity, leave encashment, CGEGIS, and CGHS would be available.

Source: Pensioners’ Portal

Buy Cholamandalam Inv & Fin, Says Motilal Oswal

Broking firm Motilal Oswal has said to buy the stock of Cholamandalam Inv & Fin in its latest report. According to the broking firm, the organization announced 1QFY22 PAT of INR3.3b (11% beat), up 34% QoQ/down 24% YoY. This was by virtue of solid authority over opex, regardless of raised credit costs.

Expectations of financials in years to come by Motilal Oswal

Target price of Rs 650 on Cholamandalam Inv & Fin

According to Brokerage, it expects a strong recovery in disbursements from 2QFY22. Also, they expect asset quality to show gradual recovery – given the pickup in business activity and improvement in collections in the second half of Jun’21 as well as in Jul’21.

” Our higher credit cost estimate in FY22E was mitigated by an expected improvement in NII and other fee income, leading to only a minor change to our estimates. We expect the company to deliver healthy RoE of 17-20% over the next two years. The stock trades at 3.0x FY23E P/BV. We maintain our Buy rating on the stock, with TP of INR650/share (4x FY23E BVPS),” the brokerage has said.

Buy Emami stock, says Motilal Oswal

Another stock that Motilal Oswal has a buy on is the stock of Emami. The brokerage sees a decent upside in the stock.

Expectations of financials of Emami stock

Price target of Rs 660 on the stock

According to Motilal Oswal, it is too soon to get down on an underlying recuperation in deals, before the COVIDled blip on optional utilization in 1QFY22, the organization had announced three progressive quarters of two-year normal deals of 7.5-10% – a level we trust HMN can return to 2QFY22 onwards.

“We maintain our Buy rating, encouraged by the following factors: a) inexpensive valuations at 30.3x FY23E EPS, b) a sharp reduction in pledged shares (now at 30% levels), and c) potential tailwinds for HMN over the next few quarters (~50% of HMN’s domestic sales comes from rural India) – just like other peers with higher rural salience. We arrive at our TP of Rs 660/share (valuing the company at 32x Sep’23E EPS, a 40% discount to peers),” the brokerage has said.

Buy Vinati Organics, Motilal Oswal

According to Motilal Oswal, Vinati Organics (VO) reported mixed results, with revenue above our estimate (+20%), while EBITDA came in below our estimate (-8%). Higher efficiencies, as a result of a ramp-up, would reduce operating costs and help EBITDA margins.

Expectations of financials in years to come by Motilal Oswal

Price target of Rs 2,220 on the stock

According to the brokerage, the company is in the process of merging VAL and VO, which would result in the production of AOs from Butyl Phenol and further forward integration. VO would become the world’s largest and only doubly integrated AO producer.

“Gradual ramp-up in expanded capacity over the next three years would drive huge growth for VO, with further development on the product molecules currently under R&D. With new products such as AO and Butyl Phenol resulting in higher import substitution, we forecast a revenue CAGR of ~38% over FY21-24E (unchanged), translating to an EBITDA and EPS CAGR of 31-32% over this period. Valuing the stock at 43x Sep’23E EPS, we arrive at TP of INR2,220. Maintain Buy,” 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 are near record highs.

Buy, the stock of Indian Oil, says Sharekhan

Top retail broker, Sharekhan has recommended the stock of Indian Oil, which is the India’s largest oil retailer. The broking firms sees an improvement in margins, BPCL privatisation and solid dividend yield as the big positives.

Estimates by Sharekhan on Indian Oil

Several positive triggers for Indian Oil stock

According to the broking firm, Q1FY2022 net profits at Rs. 5,941 crore was higher than its own estimates and street estimates, led by solid margins, particularly gross refining margins of $6.6/bbl.

Sharekhan believes that the strong earnings performance will sustain led by volume recovery (petrol/diesel at >100%/85-90% of pre-COVID level).

The likely structural improvement in auto fuel margin, cyclical recovery in GRM, sustained high petchem margin, and inventory gain are positives according to the brokerage.

“Maintenance shutdown at Paradip refinery will have a slight impact on Q2 refinery throughput. We retain buy on Indian Oil Corporation, with an unchanged target price of Rs 125 given attractive valuation (FY23E PE of 4.8x), earnings visibility, RoE of 17-18%, and dividend yield of 10%. Pipeline asset monetisation and BPCL privatisation are key re-rating catalyst,” the brokerage has said.

Buy Laurus Labs: Sharekhan

Brokerage firm, Sharekhan also has a buy on the stock of Laurus Labs. The firm believes that Laurus Labs is well supported by capacity expansion plans and emerging opportunities from patent expiry of drugs. Strong topline growth prospects, visibility on earnings and healthy return ratios and low debt-equity are the key positives, according to Sharekhan.

Estimates by Sharekhan on Laurus Labs

Why to buy the shares of Laurus Labs?

“The company is building new capacities that would support robust demand and also propel growth in the coming years. Emerging opportunities from patent expiry of drugs in areas of anti-diabetes and cardiology offer significant potential for Laurus and the company has been building capacities which could enable it to capitalize on the opportunity.

“The first quarter of FY 2022 was a strong quarter and basis the strong growth outlook we have revised our estimates upwards by 4% each for FY22E and FY23E. At current market price the stock trades at 26.8 times and 21 times its FY22E and FY23E EPS respectively. Strong topline growth prospects, visibility on earnings and healthy return ratios and low debt-equity are the key positives. We retain a Buy recommendation on the stock with a revised target price of Rs. 800,” the brokerage has said.

Buy Tech Mahindra stock, says Sharekhan

Another stock that Sharekhan is suggesting to buy is the stock of Tech Mahindra. The brokerage house continues to prefer Tech Mahindra because of improving deal wins, 5G opportunities, and anticipation of stable margin performance.

Tech Mahindra is expected to report USD revenue/earnings CAGR of 11%/17%, respectively, over FY2021-FY23.

“We assume Tech Mahindra would continue to generate higher free cash flow (FCF) in the coming years, which would increase dividend/buyback payouts. We have a Buy rating on the stock with a revised price target of Rs. 1,300,” 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 are near record highs.