Category: Personal Finance

Savings Account Vs Special FDs: Which Can Be A Good Bet For Senior Citizens?

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A Comparison Between Bank FDs and Savings Accounts

Currently, the State Bank of India (SBI) provides the general public with a 5.4 percent interest rate on a five-year FD whereas an interest rate of 6.20% is provided to senior citizens under the special FD scheme of the bank. The special FD scheme for senior citizens of ICICI Bank is named ICICI Bank Golden Years. The bank pays a higher interest rate of 80 bps on such deposits. ICICI Bank Golden Years FD scheme proposes an interest rate of 6.30 percent per annum for senior citizens. HDFC Bank’s special FD scheme is named HDFC Senior Citizen Care for senior citizens. On these deposits, the bank is giving a 75 bps higher interest rate as of now. Which means that the interest rate applicable to the FD will be 6.25% for a tenure of more than 5 years if a senior citizen goes for HDFC Bank Senior Citizen Care FD. In the range of 1-1.5 percent on these FDs, premature withdrawal penalties exist. As of now, these FDs are only accessible until March 31. That being said, Bandhan Bank is promising an interest rate on its savings account of up to 7.15 percent for a minimum and maximum balance limit of Rs 1 lac up to Rs 50 Cr.

5 Best Savings Accounts With Higher Interest Rates

5 Best Savings Accounts With Higher Interest Rates

Banks Interest Rates per annum
Bandhan Bank 3 to 7.15%
IDFC First Bank 3.5 to 7%
RBL Bank 4.75 to 6.75
IndusInd Bank 4 to 6%
Yes Bank 4 to 5.5%

Our take

Our take

Considering the long tenure of 5 years, we believe that one should not lock in their whole money in special FDs instead of diversifying their investments across different investment vehicles. When it comes to other investment options for senior citizens apart from banks FDs, Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana(PMVVY), and Post Office Monthly Income Scheme(POMIS) are taken first into consideration. With a maturity period of 10 years PMVVY comes with an interest rate of 7.4% along with monthly, quarterly, semi-annual or annually payout options.

Whereas for a maturity period of 5 years which can be further be extended to 3 years a senior citizen can deposit up to a limit of Rs 15 lakh under SCSS and can reap good returns at 7.4% per annum. Finally, coming to POMIS it also comes with a tenure of 5 years with an interest rate of 6.6%, but the best takeaways of this scheme is that it gives you a monthly payout option as the name suggests. By summing up you can diversify your investment across special FDs and savings account with higher interest rates if you are going to park higher amount. That being said, one should note that the bank can adjust the interest rate without any advance warning while holding the money in a savings account, so one should go for special FDs as the interest rate will remain stable for the entire tenure or lock-in period.



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How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

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Planning

oi-Vipul Das

|

The National Pension System (NPS) Tier II Account is an add-on account that allows you the versatility to contribute and withdraw from multiple NPS schemes without any exit charge. NPS Tier II account has no lock in duration, whereas NPS Tier I Account has a lock in until 60 years of your age. Investment specialists claim investors can use the NPS Tier II Account as a replacement for the savings account of a bank. You can run the NPS tier II account as a savings account without a cheque book, but for each transaction you will have to pay transaction fees. Without holding an NPS Tier I account, depositors can not launch an NPS Tier II account. But if you’re a central government employee and have received a deduction under Section 80C for investment rendered to the Tier II account, the contribution made to the NPS Tier II account is not liable for any tax benefits, in which circumstance the amount so deposited will have 3 years of lock-in duration.

Under the NPS, NPS Tier II holders are entitled to pick any fund manager. Eight fund managers, namely SBI, UTI, LIC, HDFC, ICICI, Kotak, Reliance and Aditya Birla Sun Life Pension Fund, are currently in operation. For the NPS Tier 2 account, there is no minimum balance criteria or a minimum annual contribution. As long as the taxation of withdrawals from the NPS Tier II Account is important, no clear cut-off clause is given by the issuer. That being said, only the benefits on withdrawals will be taxable,

How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

5 Reasons Why You Must Go For NPS Tier II Account

Two types of accounts are offered by the National Pension System (NPS): NPS Tier I and NPS Tier II. Tier I is a mandatory pension account, whereas Tier II is an additional facility for owners of NPS Tier I accounts that can be accessed at the subscriber’s convenience. The NPS Tier-2 account is market-related and there are some benefits, according to the PFRDA or Pension Fund Regulatory and Development Body, for which one can have a more transparent NPS Tier-2 account:

  • In order to benefit from competent fund management to achieve superior returns, an NPS Tier II subscriber is welcome to select any of the approved Pension Fund (PF) and Investment Options, as in the NPS Tier I account.
  • NPS is a market-linked offering and can evaluate an acceptable asset allocation pattern (including equity, corporate bonds and government securities) under the specified limit to derive maximum returns, based on the risk tolerance of the subscriber.
  • NPS holds the advantage of being the nation’s cheapest possible pension product. Due to efficiency of scope in system implementation processes, the overall costs are minimal in NPS. Also, because of the compounding impact and negligible costs incurred by the subscriber, accumulation of the retirement corpus over a period is intensified.
  • For Central Government employees subject to a lock-in of 3 years, up to Rs 1.5 lakhs under section 80C of the Income Tax Act, 1961, special tax advantages on contributions made to Tier II are open. The capital gains resulting from investments in Tier II are subject to taxation at a nominal rate
  • It is possible to run the NPS Tier II account (including withdrawals) using an online/mobile application. Subscribers are now eligible to transfer funds to NPS Tier I from their Tier II account (pension account).



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How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

Personal Finance

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Planning

oi-Vipul Das

|

The National Pension System (NPS) Tier II Account is an add-on account that allows you the versatility to contribute and withdraw from multiple NPS schemes without any exit charge. NPS Tier II account has no lock in duration, whereas NPS Tier I Account has a lock in until 60 years of your age. Investment specialists claim investors can use the NPS Tier II Account as a replacement for the savings account of a bank. You can run the NPS tier II account as a savings account without a cheque book, but for each transaction you will have to pay transaction fees. Without holding an NPS Tier I account, depositors can not launch an NPS Tier II account. But if you’re a central government employee and have received a deduction under Section 80C for investment rendered to the Tier II account, the contribution made to the NPS Tier II account is not liable for any tax benefits, in which circumstance the amount so deposited will have 3 years of lock-in duration.

Under the NPS, NPS Tier II holders are entitled to pick any fund manager. Eight fund managers, namely SBI, UTI, LIC, HDFC, ICICI, Kotak, Reliance and Aditya Birla Sun Life Pension Fund, are currently in operation. For the NPS Tier 2 account, there is no minimum balance criteria or a minimum annual contribution. As long as the taxation of withdrawals from the NPS Tier II Account is important, no clear cut-off clause is given by the issuer. That being said, only the benefits on withdrawals will be taxable,

How You Can Run NPS Tier II Account Like A Savings Account Without Cheque Book?

5 Reasons Why You Must Go For NPS Tier II Account

Two types of accounts are offered by the National Pension System (NPS): NPS Tier I and NPS Tier II. Tier I is a mandatory pension account, whereas Tier II is an additional facility for owners of NPS Tier I accounts that can be accessed at the subscriber’s convenience. The NPS Tier-2 account is market-related and there are some benefits, according to the PFRDA or Pension Fund Regulatory and Development Body, for which one can have a more transparent NPS Tier-2 account:

  • In order to benefit from competent fund management to achieve superior returns, an NPS Tier II subscriber is welcome to select any of the approved Pension Fund (PF) and Investment Options, as in the NPS Tier I account.
  • NPS is a market-linked offering and can evaluate an acceptable asset allocation pattern (including equity, corporate bonds and government securities) under the specified limit to derive maximum returns, based on the risk tolerance of the subscriber.
  • NPS holds the advantage of being the nation’s cheapest possible pension product. Due to efficiency of scope in system implementation processes, the overall costs are minimal in NPS. Also, because of the compounding impact and negligible costs incurred by the subscriber, accumulation of the retirement corpus over a period is intensified.
  • For Central Government employees subject to a lock-in of 3 years, up to Rs 1.5 lakhs under section 80C of the Income Tax Act, 1961, special tax advantages on contributions made to Tier II are open. The capital gains resulting from investments in Tier II are subject to taxation at a nominal rate
  • It is possible to run the NPS Tier II account (including withdrawals) using an online/mobile application. Subscribers are now eligible to transfer funds to NPS Tier I from their Tier II account (pension account).



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Home Loans: Check The Top 15 Banks With The Cheapest Interest Rates

Personal Finance

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Investment

oi-Vipul Das

|

As a consequence of the Covid-19 outbreak, the Indian economy is still reeling from the disruptions, as an outcome of which the Reserve Bank of India has held the repo rate at a historic low of 4 percent to raise credit and support an economic recovery. This has prompted banks to lower their floating interest rates on home loans too. A big factor affecting the overall amount of your home loan is the interest rate. With higher value and longer duration of home loans, the interest rate on the loan can have long-term financial consequences for investors. Having home loans at a lower interest rate will not only decrease the EMI, but also the payout of interest.

Therefore, borrowers should aim to get housing loans at the lowest interest rate available. Their credit score, which has now been more important than ever before, is another thing that prospective homeowners must remember. They need to realize that these repo-linked home loans provided by the banks normally often comprise a range of credit risk. In other words, for all qualifying borrowers with stellar credit scores above 750, the lowest potential interest rates are typically set. The interest rate gap could be about 100 basis points for borrowers with outstanding and bad credit ratings.

Even so, in order to get the lowest possible rates, you will be well-advised to confirm your credit scores are decent if you are a potential property owner. Remember, the interest rate applied to you will be dependent on the size and location of your preferred home, your age, salary, gender, credit history, loan amount, lender, and other terms and conditions set by your bank. By summing up all if you are planning to purchase a home loan now, below are the cheapest rates that are currently provided by top 15 banks of India.

Top 15 Banks That Offer The Lowest Interest Rates On Home Loans

Top 15 Banks That Offer The Lowest Interest Rates On Home Loans

Sr No. Banks ROI in % per annum
1 Kotak Mahindra Bank 6.75 to 8.45
2 Union Bank of India 6.80 to 7.40
3 Punjab National Bank 6.80 to 7.75
4 HDFC Bank 6.80 to 7.85
5 SBI >=6.80
6 Central Bank 6.85 to 7.30
7 Bank of Baroda 6.85 to 8.20
8 UCO Bank 6.90 to 7.25
9 Punjab & Sind Bank 6.90 to 7.60
10 ICICI Bank 6.90 to 8.05
11 Bank of Maharashtra 6.90 to 8.40
12 Axis Bank 6.90 to 8.55
13 Canara Bank 6.90 to 8.90
14 IDBI Bank 6.90 to 9.90
15 Bank of India 6.95 to 8.35

Types of interest rates on home loan

Types of interest rates on home loan

Fixed Interest Rate: The rate maintains even across the tenure of the loan under this. The rate maintains even across the tenure of the loan in this computing framework. Since the rate stays constant, there will not be an adjustment in interest payments. After meeting a certain period of the loan tenure, you will be eligible to switch to the floating rate scheme based on the bid. Here, the interest rates are known to the borrower since the rate stays constant. If there is a rise in lending rates, the loan can be insulated from regular rate increases and prevents money in a longer time. As the interest variable stays fixed, if the regular loan rates decline, you will not gain.

Floating Interest Rate: Interest charges on a home loan are subjected to the bank’s latest maximum lending rates. The interest rate is related to the bank’s recent available rate, which in particular relies on numerous variables such as monetary policy of RBI and modifications of the lending rate, action of the bank to the adjustment, and so on. The most obvious benefit of going for the floating rate is that you get the benefit of being charged on the basis of the current rate. You save on interest charges if the rates drop. In extreme circumstances, the loan needs to face the burden of being paid a higher rate if the regular rates increase. Floating home loan interest rates, however, are lower than the fixed home loan interest rates.

Considerations that decide the interest rate on home loan

Considerations that decide the interest rate on home loan

There are many variables influenced by the background and income category that impact the offering of the rate bank. To aid you negotiate a better cost, let’s glance at some of the key variables.

  • Lenders are now using the credit score beforehand to adjust home loan interest rates over and above the external benchmark limit. A higher rate of interest on home loans generates a lower credit rating and inversely.
  • When you request for a home loan, your credit history is carefully scrutinized before processing. This includes reviews on the background and present credit. For a decent credit score, you’re up to date, you’re sure to get a fair offer. As well, an excellent credit history provides you the trust to make a majority.
  • It also has an impact on the location and surrounding. If the estate is located in a prime position or is purchased from a reputable builder/agency, on the interest rate side, you should look forward to an ideal rate.
  • The loan amount suggested has the potential to affect the rate. The general rule is that the higher the value of the loan the lower the rate you will get.
  • The interest rates issued often rely on the kinds of home loan you use. Standard loans such as home buying will appear at regular rates, although a higher rate will be applied to their alternatives such as home renovation.
  • When the bank agrees on the interest rate to be given to you, the loan tenure selected has an influence. Odds are that the interest rate provided is lower if you’re able to settle for a lengthy period.
  • Compared to the self-employed, salaried applicants are expected to get a marginally lower rate, due to the uncertainties present. For salaried and self-employed employees, banks hold different slabs.



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Home Loans: Check The Top 15 Banks With The Cheapest Interest Rates

Personal Finance

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Read More/Less


Investment

oi-Vipul Das

|

As a consequence of the Covid-19 outbreak, the Indian economy is still reeling from the disruptions, as an outcome of which the Reserve Bank of India has held the repo rate at a historic low of 4 percent to raise credit and support an economic recovery. This has prompted banks to lower their floating interest rates on home loans too. A big factor affecting the overall amount of your home loan is the interest rate. With higher value and longer duration of home loans, the interest rate on the loan can have long-term financial consequences for investors. Having home loans at a lower interest rate will not only decrease the EMI, but also the payout of interest.

Therefore, borrowers should aim to get housing loans at the lowest interest rate available. Their credit score, which has now been more important than ever before, is another thing that prospective homeowners must remember. They need to realize that these repo-linked home loans provided by the banks normally often comprise a range of credit risk. In other words, for all qualifying borrowers with stellar credit scores above 750, the lowest potential interest rates are typically set. The interest rate gap could be about 100 basis points for borrowers with outstanding and bad credit ratings.

Even so, in order to get the lowest possible rates, you will be well-advised to confirm your credit scores are decent if you are a potential property owner. Remember, the interest rate applied to you will be dependent on the size and location of your preferred home, your age, salary, gender, credit history, loan amount, lender, and other terms and conditions set by your bank. By summing up all if you are planning to purchase a home loan now, below are the cheapest rates that are currently provided by top 15 banks of India.

Top 15 Banks That Offer The Lowest Interest Rates On Home Loans

Top 15 Banks That Offer The Lowest Interest Rates On Home Loans

Sr No. Banks ROI in % per annum
1 Kotak Mahindra Bank 6.75 to 8.45
2 Union Bank of India 6.80 to 7.40
3 Punjab National Bank 6.80 to 7.75
4 HDFC Bank 6.80 to 7.85
5 SBI >=6.80
6 Central Bank 6.85 to 7.30
7 Bank of Baroda 6.85 to 8.20
8 UCO Bank 6.90 to 7.25
9 Punjab & Sind Bank 6.90 to 7.60
10 ICICI Bank 6.90 to 8.05
11 Bank of Maharashtra 6.90 to 8.40
12 Axis Bank 6.90 to 8.55
13 Canara Bank 6.90 to 8.90
14 IDBI Bank 6.90 to 9.90
15 Bank of India 6.95 to 8.35

Types of interest rates on home loan

Types of interest rates on home loan

Fixed Interest Rate: The rate maintains even across the tenure of the loan under this. The rate maintains even across the tenure of the loan in this computing framework. Since the rate stays constant, there will not be an adjustment in interest payments. After meeting a certain period of the loan tenure, you will be eligible to switch to the floating rate scheme based on the bid. Here, the interest rates are known to the borrower since the rate stays constant. If there is a rise in lending rates, the loan can be insulated from regular rate increases and prevents money in a longer time. As the interest variable stays fixed, if the regular loan rates decline, you will not gain.

Floating Interest Rate: Interest charges on a home loan are subjected to the bank’s latest maximum lending rates. The interest rate is related to the bank’s recent available rate, which in particular relies on numerous variables such as monetary policy of RBI and modifications of the lending rate, action of the bank to the adjustment, and so on. The most obvious benefit of going for the floating rate is that you get the benefit of being charged on the basis of the current rate. You save on interest charges if the rates drop. In extreme circumstances, the loan needs to face the burden of being paid a higher rate if the regular rates increase. Floating home loan interest rates, however, are lower than the fixed home loan interest rates.

Considerations that decide the interest rate on home loan

Considerations that decide the interest rate on home loan

There are many variables influenced by the background and income category that impact the offering of the rate bank. To aid you negotiate a better cost, let’s glance at some of the key variables.

  • Lenders are now using the credit score beforehand to adjust home loan interest rates over and above the external benchmark limit. A higher rate of interest on home loans generates a lower credit rating and inversely.
  • When you request for a home loan, your credit history is carefully scrutinized before processing. This includes reviews on the background and present credit. For a decent credit score, you’re up to date, you’re sure to get a fair offer. As well, an excellent credit history provides you the trust to make a majority.
  • It also has an impact on the location and surrounding. If the estate is located in a prime position or is purchased from a reputable builder/agency, on the interest rate side, you should look forward to an ideal rate.
  • The loan amount suggested has the potential to affect the rate. The general rule is that the higher the value of the loan the lower the rate you will get.
  • The interest rates issued often rely on the kinds of home loan you use. Standard loans such as home buying will appear at regular rates, although a higher rate will be applied to their alternatives such as home renovation.
  • When the bank agrees on the interest rate to be given to you, the loan tenure selected has an influence. Odds are that the interest rate provided is lower if you’re able to settle for a lengthy period.
  • Compared to the self-employed, salaried applicants are expected to get a marginally lower rate, due to the uncertainties present. For salaried and self-employed employees, banks hold different slabs.



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IRFC IPO To Open On 18 January: Should You Subscribe?

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IPO Details

  • IPO will be open from 18 January to 20 January.
  • Price of the IPO is Rs 25 to 26 per equity share.
  • The market lot size is 575 shares, which means the minimum order quantity to bid at the IPO will be 575 shares. A retail-individual investor can apply for a maximum of 13 lots (7475 shares).
  • Shares of the company will be listed on BSE and NSE.

The IRFC IPO will comprise of up to 178.20 crore shares, which will include a fresh issue of up to 118.80 crore shares and offer for sale (OFS) of up to 59.40 crore shares by the government, as per its draft prospectus.

At the upper price band, the company hopes to raise Rs 4,633 crore and at the lower end Rs 4,455 crore.

Ahead of the IPO, on Friday, IRFC raised Rs 1,390 crore from 31 anchor investors by allotting about 53.46 crore equity shares at the upper price band of Rs 26 per share.

About 61% of the anchor investment portion was allotted to four domestic mutual funds such as HDFC, Nippon Life, Invesco and ITPL who have applied through 20 schemes while about 16.93% was subscribed by the Government Of Singapore.

About IRFC

About IRFC

The company’s principal business is to borrow funds from the financial markets to finance acquisition/ creation of assets which are then leased out to the Indian Railways.

IRFC, set up in 1986, is a dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas markets.

Its primary objective of IRFC is to meet the predominant portion of ‘extra-budgetary resources’ requirement of the Indian Railways through market borrowings at the most competitive rates and terms.

The Union Cabinet had in April 2017 approved listing of five railway companies. Four of them (IRCON International Ltd, RITES Ltd, Rail Vikas Nigam Ltd and IRCTC) have already been listed.

IRFC has strong seen strong growth. In the last five years, its total income showed a CAGR (compound annual growth rate) of 12.99%. The profit after tax grew at a CAGR of 33.95%. Its IRFC’s total assets grew at a CAGR of 16.04%.

Factors to consider before subscribing to IRFC IPO

Factors to consider before subscribing to IRFC IPO

  • Since it is the financial arm of the Indian Railways (largely controlled by the Government of India), there isn’t any ideal benchmark company to compare business model or valuations with.
  • A change in the Ministry of Railways policies with regard to IRFC or the workings of railways in India can affect its profitability. It is susceptible to the Ministry’s initiatives to modernize the Railways and other such policies.
  • Its profits also depends on the revenue earned by the Indian Railways.
  • Despite having long-term debt, IRFC runs a risk-free business as long as its Standard Lease Agreement with Railway Ministry keeps on renewing. The renewals happen at the end of every fiscal year, which cannot be guaranteed. Its financial condition also depends on the margin on the Rolling Stock Assets leased to the Railways.
  • The primary market has seen strong investor participation in 2020 and similar interest is expected to be seen this year, making it a good bet for listing gains. However, since the IPO will clash with that of Indigo Paints, there may be division in subscriber participation levels, reducing chances of a huge over-subscription. Analysts believe that the issue is more suited for investors with a medium to long-term view.
  • Most brokerages have given a ‘subscribe’ rating to the IPO.
  • GEPL Capital has recommended ‘subscribe’ rating to the issue for the long-term on the back of the relatively low-risk business model, strategic role in financing growth of Indian Railways and long-term prospects considering electrification and network expansion.



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IRFC IPO To Open On 18 January: Should You Subscribe?

Personal Finance

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IPO Details

  • IPO will be open from 18 January to 20 January.
  • Price of the IPO is Rs 25 to 26 per equity share.
  • The market lot size is 575 shares, which means the minimum order quantity to bid at the IPO will be 575 shares. A retail-individual investor can apply for a maximum of 13 lots (7475 shares).
  • Shares of the company will be listed on BSE and NSE.

The IRFC IPO will comprise of up to 178.20 crore shares, which will include a fresh issue of up to 118.80 crore shares and offer for sale (OFS) of up to 59.40 crore shares by the government, as per its draft prospectus.

At the upper price band, the company hopes to raise Rs 4,633 crore and at the lower end Rs 4,455 crore.

Ahead of the IPO, on Friday, IRFC raised Rs 1,390 crore from 31 anchor investors by allotting about 53.46 crore equity shares at the upper price band of Rs 26 per share.

About 61% of the anchor investment portion was allotted to four domestic mutual funds such as HDFC, Nippon Life, Invesco and ITPL who have applied through 20 schemes while about 16.93% was subscribed by the Government Of Singapore.

About IRFC

About IRFC

The company’s principal business is to borrow funds from the financial markets to finance acquisition/ creation of assets which are then leased out to the Indian Railways.

IRFC, set up in 1986, is a dedicated financing arm of the Indian Railways for mobilising funds from domestic as well as overseas markets.

Its primary objective of IRFC is to meet the predominant portion of ‘extra-budgetary resources’ requirement of the Indian Railways through market borrowings at the most competitive rates and terms.

The Union Cabinet had in April 2017 approved listing of five railway companies. Four of them (IRCON International Ltd, RITES Ltd, Rail Vikas Nigam Ltd and IRCTC) have already been listed.

IRFC has strong seen strong growth. In the last five years, its total income showed a CAGR (compound annual growth rate) of 12.99%. The profit after tax grew at a CAGR of 33.95%. Its IRFC’s total assets grew at a CAGR of 16.04%.

Factors to consider before subscribing to IRFC IPO

Factors to consider before subscribing to IRFC IPO

  • Since it is the financial arm of the Indian Railways (largely controlled by the Government of India), there isn’t any ideal benchmark company to compare business model or valuations with.
  • A change in the Ministry of Railways policies with regard to IRFC or the workings of railways in India can affect its profitability. It is susceptible to the Ministry’s initiatives to modernize the Railways and other such policies.
  • Its profits also depends on the revenue earned by the Indian Railways.
  • Despite having long-term debt, IRFC runs a risk-free business as long as its Standard Lease Agreement with Railway Ministry keeps on renewing. The renewals happen at the end of every fiscal year, which cannot be guaranteed. Its financial condition also depends on the margin on the Rolling Stock Assets leased to the Railways.
  • The primary market has seen strong investor participation in 2020 and similar interest is expected to be seen this year, making it a good bet for listing gains. However, since the IPO will clash with that of Indigo Paints, there may be division in subscriber participation levels, reducing chances of a huge over-subscription. Analysts believe that the issue is more suited for investors with a medium to long-term view.
  • Most brokerages have given a ‘subscribe’ rating to the IPO.
  • GEPL Capital has recommended ‘subscribe’ rating to the issue for the long-term on the back of the relatively low-risk business model, strategic role in financing growth of Indian Railways and long-term prospects considering electrification and network expansion.



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Indigo Paints IPO To Open On January 20: Should You Subscribe?

Personal Finance

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Investment

oi-Roshni Agarwal

|

Indigo Paints shall be the second IPO of this year after IRFC opens on January 18, 2021. Here are the fine points of the issue which you must note, when considering the issue for subscription:

Indigo Paints IPO To Open On January 20: Should You Subscribe?

Indigo Paints IPO To Open On January 20: Should You Subscribe?

Issue details:

Issue size: Rs. 1170 crore IPO

Price band- Rs. 1488- Rs. 1490 per share of the face value of Rs 10 each

Grey market premium on January 15, 2020, when the market fell by over 1%: Commanded a premium of 57 percent i.e. in the range of Rs. 850-860.

Indigo Paints public issue will consist of a Rs 300 crore fresh issue of equity shares and an offer-for-sale (OFS) of 58.4 lakh equity shares worth Rs 870.16 crore. 50% f of the issue size is reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors, 15 per cent for non-institutional bidders and there is a reservation of up to 70,000 equity shares for subscription for employees, who will get a discount of Rs 148 per equity share to the offer price.

Company profile:

The paints company started in the year initially forayed into manufacturing low-end cement paints and now ranks at the 5th spot among its peers. The company manufactures a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints.

Issue objectives:

From the net proceeds, the company proposes to use Rs.150 crore towards funding capital expenditure, expansion of its existing manufacturing facility at Pudukkottai, Tamil Nadu by setting-up an additional unit adjacent to the existing facility; Rs. 50 crore for purchase of tinting machines and gyroshakers; Rs. 25 crore for repayment/prepayment of all or certain borrowings; and the balance towards general corporate purposes.

Financials:

In FY20, Indigo Paints reported ROE of 24.3 per cent which is slightly lower than Asian Paints and Berger Paints India but better than Kansai Nerolac Paints and Akzonobel. The firm has doubled its PAT margins from 3.2% in FY2018 to 7.7% in FY20 while peers like Asian Paints and Berger Paints India were able to increase margins by 2.5% and 3.4%, respectively.

Valuations:

Yash Gupta Equity Research Associate, Angel Broking Ltd said that currently Asian Paints and Berger Paints India are trading at PE of 111 and 148, respectively and Indigo Paints reported EPS of 10.49 valuing IPO at 149 at higher price band. “We expect the grey market premium of Indigo Paints to consolidate in a couple of days. We have a positive outlook towards the IPO,” Gupta said.

Positives of the company:

Margins for the company have already inched ahead of Berger Paints India and Kansai Nerolac Paints, as the company has better gross margins on the back of lower trade discounts on the differentiated portfolio and lower overhead costs. The gross margins are at highest in industry given it has only 3 plants near RM sources. “Margins can improve in the future with rising scale which will mainly reduce advertising and promotional (A&P) and freight costs. The return ratios are already comparable to top peers given best in class working capital,” analysts added.

Should you subscribe to Indigo Paints IPO?

An expert from the industry suggests that in comparison to its listed peers such as Asian Paints and Berger Paints, the counter is overvalued and one may take position in the scrip and if allotted should book gains at the time of listing and may later add the counter at dips in lots.

GoodReturns.in



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Indigo Paints IPO To Open On January 20: Should You Subscribe?

Personal Finance

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Read More/Less


Investment

oi-Roshni Agarwal

|

Indigo Paints shall be the second IPO of this year after IRFC opens on January 18, 2021. Here are the fine points of the issue which you must note, when considering the issue for subscription:

Indigo Paints IPO To Open On January 20: Should You Subscribe?

Indigo Paints IPO To Open On January 20: Should You Subscribe?

Issue details:

Issue size: Rs. 1170 crore IPO

Price band- Rs. 1488- Rs. 1490 per share of the face value of Rs 10 each

Grey market premium on January 15, 2020, when the market fell by over 1%: Commanded a premium of 57 percent i.e. in the range of Rs. 850-860.

Indigo Paints public issue will consist of a Rs 300 crore fresh issue of equity shares and an offer-for-sale (OFS) of 58.4 lakh equity shares worth Rs 870.16 crore. 50% f of the issue size is reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors, 15 per cent for non-institutional bidders and there is a reservation of up to 70,000 equity shares for subscription for employees, who will get a discount of Rs 148 per equity share to the offer price.

Company profile:

The paints company started in the year initially forayed into manufacturing low-end cement paints and now ranks at the 5th spot among its peers. The company manufactures a complete range of decorative paints including emulsions, enamels, wood coatings, distempers, primers, putties and cement paints.

Issue objectives:

From the net proceeds, the company proposes to use Rs.150 crore towards funding capital expenditure, expansion of its existing manufacturing facility at Pudukkottai, Tamil Nadu by setting-up an additional unit adjacent to the existing facility; Rs. 50 crore for purchase of tinting machines and gyroshakers; Rs. 25 crore for repayment/prepayment of all or certain borrowings; and the balance towards general corporate purposes.

Financials:

In FY20, Indigo Paints reported ROE of 24.3 per cent which is slightly lower than Asian Paints and Berger Paints India but better than Kansai Nerolac Paints and Akzonobel. The firm has doubled its PAT margins from 3.2% in FY2018 to 7.7% in FY20 while peers like Asian Paints and Berger Paints India were able to increase margins by 2.5% and 3.4%, respectively.

Valuations:

Yash Gupta Equity Research Associate, Angel Broking Ltd said that currently Asian Paints and Berger Paints India are trading at PE of 111 and 148, respectively and Indigo Paints reported EPS of 10.49 valuing IPO at 149 at higher price band. “We expect the grey market premium of Indigo Paints to consolidate in a couple of days. We have a positive outlook towards the IPO,” Gupta said.

Positives of the company:

Margins for the company have already inched ahead of Berger Paints India and Kansai Nerolac Paints, as the company has better gross margins on the back of lower trade discounts on the differentiated portfolio and lower overhead costs. The gross margins are at highest in industry given it has only 3 plants near RM sources. “Margins can improve in the future with rising scale which will mainly reduce advertising and promotional (A&P) and freight costs. The return ratios are already comparable to top peers given best in class working capital,” analysts added.

Should you subscribe to Indigo Paints IPO?

An expert from the industry suggests that in comparison to its listed peers such as Asian Paints and Berger Paints, the counter is overvalued and one may take position in the scrip and if allotted should book gains at the time of listing and may later add the counter at dips in lots.

GoodReturns.in



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Savings Account Vs Special FDs: Which Can Be A Good Bet For Senior Citizens?

Personal Finance

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oi-Vipul Das

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Senior citizens, who commonly place their retirement funds on fixed income vehicles such as fixed deposits (FDs) are now dealing with difficult circumstances as the interest rates are a decade low. And considering the same some banks have introduced special fixed deposits that deliver 30-80 basis points higher than regular fixed deposit rates in order to provide a solution for senior citizens. That being said, the interest rates paid by these FDs vary from 6.20% to 6.30%, whereas banks, namely Bandhan Bank and IDFC First, bid a 7.15% and 7% higher interest rate on their savings account. Capital invested in savings accounts has no lock-in and, in the event of withdrawal no penalty is imposed. Should senior citizens therefore opt for these special FDs that normally have a lock-in period and penalty on early withdrawal consider savings accounts that deliver higher returns? Let’s crack this confusion.

Savings Account Vs Special FDs: Which Can Be A Good Bet For Senior Citizens?

A Comparison Between Bank FDs and Savings Accounts

Currently, the State Bank of India (SBI) provides the general public with a 5.4 percent interest rate on a five-year FD whereas an interest rate of 6.20% is provided to senior citizens under the special FD scheme of the bank. The special FD scheme for senior citizens of ICICI Bank is named ICICI Bank Golden Years. The bank pays a higher interest rate of 80 bps on such deposits. ICICI Bank Golden Years FD scheme proposes an interest rate of 6.30 percent per annum for senior citizens. HDFC Bank’s special FD scheme is named HDFC Senior Citizen Care for senior citizens. On these deposits, the bank is giving a 75 bps higher interest rate as of now. Which means that the interest rate applicable to the FD will be 6.25% for a tenure of more than 5 years if a senior citizen goes for HDFC Bank Senior Citizen Care FD. In the range of 1-1.5 percent on these FDs, premature withdrawal penalties exist. As of now, these FDs are only accessible until March 31. That being said, Bandhan Bank is promising an interest rate on its savings account of up to 7.15 percent for a minimum and maximum balance limit of Rs 1 lac up to Rs 50 Cr.

5 Best Savings Accounts With Higher Interest Rates

Banks Interest Rates per annum
Bandhan Bank 3 to 7.15%
IDFC First Bank 3.5 to 7%
RBL Bank 4.75 to 6.75
IndusInd Bank 4 to 6%
Yes Bank 4 to 5.5%

Our take

Considering the long tenure of 5 years, we believe that one should not lock in their whole money in special FDs instead of diversifying their investments across different investment vehicles. When it comes to other investment options for senior citizens apart from banks FDs, Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana(PMVVY), and Post Office Monthly Income Scheme(POMIS) are taken first into consideration. With a maturity period of 10 years PMVVY comes with an interest rate of 7.4% along with monthly, quarterly, semi-annual or annually payout options.

Whereas for a maturity period of 5 years which can be further be extended to 3 years a senior citizen can deposit up to a limit of Rs 15 lakh under SCSS and can reap good returns at 7.4% per annum. Finally, coming to POMIS it also comes with a tenure of 5 years with an interest rate of 6.6%, but the best takeaways of this scheme is that it gives you a monthly payout option as the name suggests. By summing up you can diversify your investment across special FDs and savings account with higher interest rates if you are going to park higher amount. That being said, one should note that the bank can adjust the interest rate without any advance warning while holding the money in a savings account, so one should go for special FDs as the interest rate will remain stable for the entire tenure or lock-in period.



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