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businesstoday.in SPECIAL ISSUE
OC
September 20, 2020 `100
THE WEALTH
CREATORS
HOW RELIANCE’S MUKESH AMBANI, BAJAJ FINANCE’S
SANJIV BAJAJ, DEEPAK NITRITE’S MAULIK MEHTA, GMM
PFAUDLER’S ASHOK PATEL AND A HOST OF OTHERS MADE
INVESTORS AND PROMOTERS WEALTHIER
Mastering Wealth
Editor-in-Chief: Aroon Purie
Group Editorial Director: Raj Chengappa
Y ou earn. You manage. You protect. That’s easier said than done Deputy Editors: Ajita Shashidhar,
Naveen Kumar (Money Today)
though. Especially under the circumstances when businesses and in-
SPECIAL PROJECTS AND EVENTS
dividuals alike have their eye set on wealth erosion and wealth protec- Senior Editor: Anup Jayaram
tion rather than wealth generation.
CORRESPONDENTS
But wealth is really in the eye of the beholder. Nothing is more awe-inspir- Senior Editors: P.B. Jayakumar, Nevin John,
Joe C. Mathew, E. Kumar Sharma,
ing than super wealth generators. They remain THE role models to emulate Dipak Mondal, Manu Kaushik, Sumant Banerji
in democratic, free economies. In the past five years, Reliance’s Mukesh Am- Associate Editor: Nidhi Singal,
Senior Assistant Editor: Sonal Khetarpal
bani, Bajaj Finance’s Sanjiv Bajaj, Minda Industries’ Nirmal Minda and GMM
RESEARCH
Pfaudler’s Ashok Patel have made investors and themselves far wealthier than Principal Research Analysts: Niti Kiran, Shivani Sharma
their peers. Coupled with some equally impressive wealth creation at HDFC COPY DESK
Bank, The Titan Company, Deepak Nitrite and Alkyl Amines, they represent Senior Editor: Mahesh Jagota
Associate Editor: Samali Basu Guha
the cream of the money spinning super-large, large, medium and emerging Copy Editor: Aprajita Sharma
enterprises in the country today. Ambani has made investors — and himself PHOTOGRAPHY
— wealthier by 4.5 times since 2015; 2.5 times during just the lockdown. Read Deputy Chief Photographers:
Yasir Iqbal
their stories starting page 18. Principal Photographer: Rajwant Singh Rawat
Next, even though crystal-gazing is a risky proposition when the future is ART
so uncertain, which firms will generate wealth in the future can be still gauged Deputy Art Director: Amit Sharma
Assistant Art Director: Raj Verma
with deep data intelligence and smart exclusions. Consider our list of ‘value
PRODUCTION
stocks’ with potential to continue the good run into the future. They have Chief of Production: Harish Aggarwal
grown faster than the industry while maintaining higher return on equity Senior Production Coordinator: Narendra Singh
Associate Chief Coordinator: Rajesh Verma
vis-a-vis peers. Their track record may give you confidence about their future.
LIBRARY
Rashmi Pratap brings you the chosen ones on page 52. Assistant Librarian: Satbir Singh
Just as important as wealth creation is the prospect of wealth management Publishing Director: Manoj Sharma
and protection. It’s easier to generate wealth, but far more difficult to manage Associate Publisher (Impact): Anil Fernandes
it. Managing it responsibly is the mantle increasingly being taken over by Fam- IMPACT TEAM
Senior General Manager: Jitendra Lad (West)
ily Offices — the newest concept in the progression from the age-old munim to General Managers: Upendra Singh (Bangalore)
HUFs to Trusts to holding companies. They not just manage investment and Kaushiky Gangulie (East)
properties with an aim of enhancing wealth but, more importantly, ensure Marketing: Vivek Malhotra, Group Chief Marketing Officer
smooth inter-generational transfer. Nevin John explains why glamorous Fam- Newsstand Sales: Deepak Bhatt, Senior General Manager
ily Offices have some very complex nuts and bolts. (National Sales); Vipin Bagga, General Manager (Operations);
Rajeev Gandhi, Deputy General Manager (North),
To fathom life beyond equity as an asset class, dive into the world of bonds, Syed Asif Saleem, Regional Sales Manager (West),
S. Paramasivam, Deputy Regional Sales Manager (South),
alternative investments and asset classes such as gold, real estate and com- Piyush Ranjan Das, Senior Sales Manager (East)
modities in the following pages.
Finally, on to protecting wealth. For those invested in debt, it’s a Hobson’s
Vol. 29, No. 19, for the fortnight September 7 to
choice. Real interest rates are already in the negative zone because of high September 20, 2020. Released on September 7, 2020.
Editorial Office: India Today Mediaplex, FC 8, Sector 16/A, Film City, Noida-201301; Tel:
inflation and falling interest rates. And with regulator RBI indicating it’s not 0120-4807100; Fax: 0120-4807150 Advertising Office (Gurgaon): A1-A2, Enkay Centre,
Ground Floor, V.N. Commercial Complex, Udyog Vihar, Phase 5, Gurgaon-122001; Tel: 0124-
reached the end of the rate-cut cycle, they’re likely to stay in the negative ter- 4948400; Fax: 0124-4030919; Mumbai: 1201, 12th Floor, Tower 2 A, One Indiabulls Centre
ritory for some time. So, where should they invest? Tread carefully, but don’t (Jupiter Mills), S.B. Marg, Lower Parel (West), Mumbai-400013; Tel: 022-66063355; Fax: 022-
66063226; Chennai: 5th Floor, Main Building No. 443, Guna Complex, Anna Salai,
lose heart. There are options in fixed deposits, company deposits and deben- Teynampet, Chennai-600018; Tel: 044-28478525; Fax: 044-24361942; Bangalore: 202-204
Richmond Towers, 2nd Floor, 12, Richmond Road, Bangalore-560025; Tel: 080-22212448,
tures, public provident fund and debt schemes of mutual funds. Returns may 080-30374106; Fax: 080-22218335; Kolkata: 52, J.L. Road, 4th floor, Kolkata-700071; Tel:
033-22825398, 033-22827726, 033-22821922; Fax: 033-22827254; Hyderabad: 6-3-885/7/B,
be low but are decent under the circumstances. Anand Adhikari lays bare the Raj Bhawan Road, Somajiguda, Hyderabad-500082; Tel: 040-23401657, 040-23400479;
Ahmedabad: 2nd Floor, 2C, Surya Rath Building, Behind White House, Panchwati, Off: C.G.
priorities before investors to protect — even grow — their capital. Road, Ahmedabad-380006; Tel: 079-6560393, 079-6560929; Fax: 079-6565293; Kochi:
Karakkatt Road, Kochi-682016; Tel: 0484-2377057, 0484-2377058; Fax: 0484-370962
Topping these up are expert tips on how to manage risk by age, product Subscriptions: For assistance contact Customer Care, India Today Group, C-9, Sector 10,
Noida (U.P.) - 201301; Tel: 0120-2479900 from Delhi & Faridabad; 0120-2479900 (Monday-
mix and asset mix; life and general insurance as wealth protection tools and Friday, 10 am-6 pm) from Rest of India; Toll free no: 1800 1800 100 (from BSNL/ MTNL
lines); Fax: 0120-4078080; E-mail: wecarebg@intoday.com
how to borrow smartly to boost wealth. Sales: General Manager Sales, Living Media India Ltd, C-9, Sector 10,
Noida (U.P.) - 201301;
Just why we believe this issue could not have come at a more appropriate Tel: 0120-4019500; Fax: 0120-4019664 © 1998 Living Media India Ltd.
All rights reserved throughout the world. Reproduction in any manner is prohibited.
time. Be wealthy, stay wealthy. Good luck! Printed & published by Manoj Sharma on behalf of Living Media India Limited.
Printed at Thomson Press India Limited, 18-35, Milestone, Delhi-Mathura Road,
Faridabad-121007, (Haryana). Published at K-9, Connaught Circus, New Delhi-110 001.
Editor: Rajeev Dubey
Business Today does not take responsibility for returning unsolicited
publication material.
All disputes are subject to the exclusive jurisdiction of competent
courts and forums in Delhi/New Delhi only.
16
All
About
Wealth
IT’S NOT
JUST ABOUT
GENERATING
WEALTH
500
450
400
350
300
July 2019 July 2020
400 32 1.6 4
300 24 1.2 3
200 16 0.8 2
100 8 0.4 1
0 0 0 0
July July July July July July July July
2019 2020 2019 2020 2019 2020 2019 2020
(in $billion)
10
China 3,154
Japan 1,320
Switzerland 896
India 535
Saudi Arabia 436
Russia 427
South Korea 404
Brazil 337
Mexico 183
UK 142
Indonesia 127
Canada 77 India
France 54 Now Has
Turkey 46 Fourth
Italy 44 Biggest
US 42 Reserves
South Africa 42
Germany 38
($billion)
Argentina 37
Australia 33
Contributing Factors
Lower Trade Surge in
Deficit Gold Prices
Trade Balance Highest Price 24 Carat
($billion) Gold (`Per Gram)
5 6,000
0 5,500
5,000
-5
4,500
-10
4,000
-15 3,500
-20 3,000
July July July July
2019 2020 2019 2020
17.2
15.2
13.1 13.2
10 10.4 9.8 10.4
8.6
29.9
CONTRACTION IN BANK CREDIT (Y-O-Y %)
5.8
5.6
4.9
4.8
-2
1.4
Beverage &
1.4
0
Tobacco -9.1
-0.2
-2.5
-3.1
-0.6
-3.1
-6.1
Glass & Glassware
-10.8
-7.3
-8
Gems & Jewellery
-6.4
-2.4
82.3 -36.6
All Engineering
135.5
137.4
132.8
132.6
130.7
129.2
128.5
127.4
-6.3
120.7
137
134
134
106.9
112.9
Rubber, Plastic & 0.1
Their Products -4
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Shows Severe
0 0
-10 -10
-30 -30
Ô Index of Industrial Production (IIP) grew
20.5 per cent in June over May. Still, in the -40 -40
first quarter, it was 35.9 per cent lower
compared to its level a year ago -50 -50
Jun Quarter Jun Jun Quarter Jun
Ô This is expected to translate into a sharp 2017 ended 2020 2017 ended 2020
fall in Gross Domestic Product
during the quarter due to loss MINING ELECTRICITY
of industrial activity 10 10
Ô IIP has been in the red for four 0 0
consecutive quarters now
Source : MOSPI -10 -10
-20 -20
-30 -30
Jun Quarter Jun Jun Quarter Jun
2017 ended 2020 2017 ended 2020
Picks Up
-2.3
-2.3
Usage -6.1
-6.9
Down 22%
-22.2
Ô Indian Railways carried 95.2 million
tonnes of freight traffic in July (1.7 per -19.1
cent more than in June) Ô While domestic crude oil
output was down 6.9 per
Ô There has been a sharp recovery cent in Q1 FY21, consumption
after the 36.6 per cent dip in April when CONSUMPTION
PRODUCTION
100
458
356
Q1FY21
328
80
Q1FY20
60
40
20
60
56
0
Dec-19
Jun-20
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
MILLION BARRELS
Source: Ministry of Railways
14.9
Salaried
Salaried Employees
Jobs See the
Daily Wagers
-0.1 Business
Steepest Fall
Farmers
Ô Over 12.5 crore jobs were lost in April.
This fell to 10.03 crore in May, 2.99 crore
-6.8
in June and 1.1 crore in July
Ô The biggest hit has been in salaried
jobs, which shrank 18.9 per cent during
April-July. In sharp contrast, farm jobs JOB LOSSES
rose 14.9 per cent during the period, April - July
-18.9
YEAR PREMIUM
22,986 (6.9%)
32,241
5,000 (`crore)
13,739 (-25%)
0
21,509
18,414
6,728 (-33%)
-5,000
9,982
-10,000
-15,000
Debt Equity Total
-20,000
Jul 2019 Jul 2020 March April May June July
10
RIL AS % OF INDIA
LISTED MCAP
8
-4
6
-15
4
-27 -28
-44 -41
2
0
THREE-WHEELERS TRACTORS
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Jul-20
36
Source: Motilal Oswal
14 17
-51
-65 All figures are y-o-y %
-77 Production
Domestic Sales
Exports
BY NAVEEN KUMAR
ILLUSTRATION BY RAJ VERMA
H
deft investment skills. Diversification with the right mix
of asset classes like equity, debt, gold and real assets is the
time-tested tool to manage wealth. Each asset class has its
own challenges. Check out the factors affecting different
asset classes and how to handle your wealth effectively un-
der the circumstances.
This special issue of Business Today goes beyond asset
creation — into asset management and protection.
ad you invested `1 lakh in Reliance Industries in 2015, When your corpus grows and your risk-return ex-
it would be worth `4.4 lakh now. If you had invested two pectations do not remain confined to mutual funds, seek
days before the lockdown, it would have grown even faster professional fund management services of PMS and AIFs.
to `2.5 lakh today. But if you invested in smaller firm GMM Top performers have delivered over 15 per cent in the past
Pfaudler, it would have grown to a whopping `14.68 lakh in year even though the market is still to recover fully. When
last five years. Letting your money work as hard as you do is your wealth grows to the next level, avail the services of a
the key to wealth creation. Equity investment remains the family office on the lines of the Bajaj Family, Azim Premji
preferred mode of wealth creation and sharing. or N.R. Narayana Murthy’s Catamaran Ventures. They
In the following pages, consider how some of India’s not only help manage and grow wealth, investment and
biggest equity wealth creators have fared in the past five properties but also ensure seamless transfer to the next
years. They are clubbed in four categories: Super Large, generation.
Large, Medium and Emerging. If you missed investing Last, but not the least, is protection of wealth from any
in them, check out those that are the potentially biggest unfortunate incident related to life or damage to physical
wealth creators in future (See Stocks to Look Out For). assets — events that could ruin years of asset creation. That
Still, with Murphy’s Law at work, it’s vital to diversify is where life, health and general insurance help with asset
and look beyond equities. The recent market crash, when protection at least cost. But how? Find those answers in the
the Sensex fell almost 38 per cent from peak within two pages ahead.
of minimum four-year CAGR of required. To select the top three per cent CAGR in operating profit
15 per cent in gross sales for all companies in the Large category, a over the last four years was applied.
categories except Super Large. filter of 20 per cent CAGR in share In Emerging category, a filter of
The top players were identified as prices over the last five years and 50 per cent CAGR in share prices
best combination of four-year gross 20 per cent CAGR in operating in last five years and 20 per cent
profit CAGR and five-year equity profit over the last four years was CAGR in operating profit in last
returns CAGR. In the Super Large applied. In the Medium category, a four years was applied. The data
category, since there are very few filter of 30 per cent CAGR in share was sourced from the Ace Equity
companies, no secondary filter was prices in the last five years and 20 database.
THE WEALTH ISSUE — RELIANCE INDUSTRIES LTD
Changer
BY REINVENTING OIL MONOLITH RIL
INTO A TECHNOLOGY AND RETAIL
ENTITY, MUKESH AMBANI HAS
HELPED DOUBLE INVESTOR WEALTH
BY NEVIN JOHN
PHOTOGRAPH BY BANDEEP SINGH
CONSUMER
BUSINESSES TODAY
CONTRIBUTE
ABOUT 35% OF OUR
CONSOLIDATED
IN FIVE YEARS... Promoter EBITDA. JUST
FIVE YEARS AGO,
stake valued NEARLY ALL OF
`1 Lakh at `1.43 lakh OUR EBITDA WAS
Invested In crore is now FROM OUR ENERGY
2015 is now worth AND MATERIALS
BUSINESS”
`4.4 `7.27 Mukesh Ambani,
Lakh Lakh Crore Chairman, RIL at the
company’s virtual AGM in
All values as of August 6, 2015 and August 6, 2020 July 2020
W
emerged as India’s largest telecom service provider with
398 million subscribers in three years.
Ambani now calls RIL a technology company. In the
last six years, RIL invested `6 lakh crore to transform the
empire. Of that, almost `4 lakh crore went to the digital
business, `50,000 crore in retail and just `1 lakh crore
into expanding petrochemicals capacity. In the process
the market capitalisation of RIL crossed the `14-lakh-
crore mark, going way ahead of Tata Consultancy Ser-
vices (TCS) with which it was in a neck-to-neck battle to
be India’s most valued company over the years.
RIL’s market value at `14 lakh crore, is around 145 per
cent higher than what it was since the historic market
hen Mukesh Ambani addressed the Reliance Indus- crash on March 23. It is now valued more than the com-
tries (RIL) annual general meeting in 2017, the launch of bined market cap of the top 15 Tata companies (around
telecom venture Reliance Jio was still a couple of months `12 lakh crore) as on August 20. It is even bigger than the
away. Though shareholders knew about Ambani’s proj- GDP of West Bengal, Andhra Pradesh, Telangana, Rajas-
ect execution skills, many were unconvinced about the than, Madhya Pradesh, Kerala and Delhi.
investment opportunity in an incumbent dominated, RIL’s big push in the technology space was evident
price-war driven telecom business. Ambani then an- during the pandemic, when 13 global marquee technol-
nounced the next 10 years will be the ‘Golden Decade’ ogy investors, including Facebook, Google, Silver Lake,
of RIL as the company founded by his father Dhirubhai KKR and Vista, invested `1.52 lakh crore in RIL subsid-
Ambani celebrates the Golden Jubilee of its initial public iary Jio Platforms Ltd (JPL) for 32.97 per cent stake.
offering (IPO) in 2027. Today, JPL and Reliance Retail Ventures Ltd (RRVL) ac-
As the world pushes towards a future in renewables, count for around two third of RIL’s valuation.
Ambani literally pivoted RIL from a core sector, oil & RIL also executed a `53,125 crore rights issue that
gas monolith to a new-age software, technology and re- was oversubscribed 1.59 times. The stake sale and the
tail business. Till quite recently, petrochemicals and oil rights issue helped Ambani to make his new-technology
refining accounted for 90 per cent of RIL’s cash flow. To- empire net-debt-free. There are deals pending to make
Source:
Ace Equity
45.36 9.80 40.76 8.92
@nevinji
Consumer Loans
Drive Bottomline
HDFC BANK HAS MANAGED TO CREATE MASSIVE
WEALTH BY FOCUSING ON RETAIL BANKING,
ESPECIALLY AUTO, GOLD AND EDUCATION
LOANS. EXPANSION IN RURAL MARKETS ALSO
HELPED IN SCALING UP FURTHER
BY ANAND ADHIKARI
HDFC
BANK LTD
T
Change % CAGR %
GROSS REVENUE
FY16 60,221
FY20 1,14,813
in ` Crore
17.51
he best of our bank is yet to come,” wrote Aditya
Puri, Managing Director and Chief Executive Officer of 90.65
HDFC Bank in his farewell message to shareholders. The
70- year-old ex-Citibanker's words carry a lot of weight
in the market — after all, in the past two-and-a-half de-
cades, Puri had built a bank with market leadership in
products, including car loans, credit cards and personal
loans from scratch. The bank has one of the biggest and
the strongest balance sheets in the industry with a size OPERATING PROFIT
of `15.30 lakh crore, only next to the country’s largest
lender, State Bank of India. FY16 21,364
The private bank promoted by mortgage lender
HDFC Ltd under Deepak Parekh's guidance reported a FY20 48,750
net profit of `26,257 crore in FY20, more than its parent in ` Crore
at `22,826 crore. The asset quality, a barometer of lend-
ing, is the best in the financial services sector. Its mar-
ket valuation at `6.14 lakh crore is only next to Reliance
22.91
Industries Ltd (RIL) and TCS. Investors are laughing
all the way to the bank. For instance, `1 lakh invested in 128.19
2015 is now `1.89 lakh.
In the last five years, the bank has more than doubled
its balance sheet, advances, retail assets and profits. The
focus has been on consumer banking where net NPAs
have been the lowest at less than 1 per cent. Retail bank-
ing today constitutes over 50 per cent of the bank’s to-
tal advances. The share of large corporates in loans and was scaled up by first offering loans to existing custom-
advances is less than 15 per cent. In fact, the strategy to ers. On the liabilities side, the bank aggressively tapped
focus on working capital loans instead of long gestation the low-cost retail deposit segment instead of wholesale
project loans has paid rich dividends as other banks got deposits, which are costly. Currently, CASA is close to 50
mired in non-performing assets (NPAs) in steel, power, per cent of the bank’s total deposits and cost of funding
telecom and other sectors in the last five-six years. is 5.0 per cent. The low cost of capital offers a competi-
The biggest growth engine has been the retail seg- tive advantage for the bank in businesses such as auto
ment with a book of`5 lakh crore, especially auto, gold, loans, where margins are relatively low.
agri and education loans. The bank didn’t get into home “In the last decade when most banks were grappling
loans which parent HDFC does more efficiently. The with asset quality issues, HDFC Bank actually created
bank simply sources business for HDFC for a fee. The wealth for shareholders,” says S. Ranganathan, Research
high-yielding credit card and personal loan business Head, LKP Securities, a Mumbai-based securities firm.
platforms and collaborate for customer acquisitions,” tage. Puri recently said Covid crisis opened new ideas
Jagdishan said. In the payments space, the bank has for the bank, especially being efficient while working
built a strong base of card holders and merchants. Its fo- from home, readying for tomorrow via e-learning and
cus is to bring small merchants, including kirana stores, leveraging the opportunity to further its digital agenda.
into the formal banking system by digitising their pay- The market will keep a close watch on developments
ments solutions. Lending, too, is taking place digitally at the bank. Jagdishan is expecting normalcy in con-
with 10-second personal loans. Branch banking is be- sumer spending, asset product sale, disbursal and col-
ing transformed into a financial marketplace backed by lection to start from October onwards. That is also the
Artificial Intelligence (AI)-led Big Data Analytics to ad- time when he will occupy the corner room. Investors,
dress customer needs and cross-sell products. meanwhile, have high hopes.
Jagdishan's big challenge will be to compete with the
likes of Bandhan Bank and small finance banks in rural @anandadhikari
Home Run
LARGE
COMPANY
And A Bit
Of Retail
BAJAJ FINANCE, THE PIONEER IN RETAIL
LENDING, HAS KEPT NPAs LOW WHILE
EXPANDING ITS REACH AND SERVICES
BY NEVIN JOHN
IN FIVE YEARS...
cost structure. In the last five years, BFL has made sig-
nificant investments for broadening its presence in
payments through EMI card, credit card and wallet of-
T
ferings. It plans to integrate its sales finance ecosystem
with payment operations. The NBFC has been testing its
omnichannel strategy of ‘online to offline’ and ‘offline
to online’ for the last three years, by integrating custom-
ers and retailers. The transformation is set to help the
company and retailers sell more products and services.
It is present in 1,049 urban areas and 1,359 rural areas.
In 10 years of operations, BFL is part of the 30 Sensex
scrips. The stock has risen around 100 times between
January 2008 and February 2020. Its market value stood
at `2.2 lakh crore in the last week August. The holding
company, Bajaj Finserv, which also has two insurance
he 2007 decision by Bajaj group Chairman, Rahul Ba- firms under it, had a market value of `1.04 lakh crore.
jaj, to convert the two-wheeler lending subsidiary into a The company's consolidated profit grew 32 per cent
full-fledged non-banking finance company (NBFC) was to `5,264 crore in 2019/20. Net interest income (NII)
a turning point in the fortunes of the 94-year-old group. was up 42 per cent to `16,913 crore. Operating expense to
Bajaj Finance Ltd (BFL) was the sole retail lender giving NII stood at 33.5 per cent, against 35.3 per cent in 2018/19.
loans to purchase TVs, refrigerators and air condition- In the first quarter of FY2021, assets under management
ers among other things. It built a pool of loyal customers (AUM) grew 7 per cent to `1,38,055 crore. BFL had con-
and widened its portfolio to offer loans for smartphones, solidated liquidity buffer of `20,590 crore and SLR in-
apparel and groceries over time. vestments of `2,550 crore, which represent 19.2 per cent
The financial services business today accounts for of its total borrowing. Given the environment, the com-
73.3 per cent (`3.3 lakh crore) of the Bajaj group’s market pany will continue to run high liquidity buffer, despite
capitalisation of `4.5 lakh crore. an impact on cost of funds in the short term, BFL said.
BFL is deploying ‘zero-based budgeting’ to reimag- However, BFL is today at the crossroads. Just before
ine its businesses and functions. It means getting into the coronavirus outbreak, it lost its guiding force Na-
micro details of every process to enhance customer noo Pamnani, former CEO of Citibank India, who built
experience and digital orientation, besides a leaner the business along with Sanjiv Bajaj, the younger son
36.01 31.81
Source:
242.24 201.88 Ace Equity
@nevinji
LARGE
COMPANY
PHOTOGRAPH BY SANDESH RAVIKUMAR
Titanic
30
Innovations Business Today 20 September 2020
"WHEN YOU ARE FAIR TO ALL
YOUR STAKEHOLDERS, IT GIVES A
FAR BETTER SHAREHOLDER VALUE
AND THAT IS SOMETHING THAT
WE HAVE CONSISTENTLY DONE"
Subbu Subramaniam, CFO, The Titan
Company Ltd
BY AJITA SHASHIDHAR
ators for shareholders. In the last five years the stock rose
138.43 per cent, while revenue and PAT grew 67.35 per cent
T
and 84.39 per cent, respectively. Subramaniam attributes
the growth in wealth for its shareholders to its DNA of car-
ing for multiple stakeholders. “It’s not just about share-
holder perspective, but also employees, channel partners,
business partners and customers.”
Much of Titan’s wealth creation is due to the way it
built brands and made lifestyle affordable. From afford-
able watches — Titan and Sonata — to launching high-end
perfumes (Skinn) in 20 ml bottles and branded spectacle
frames at `300, it always believed in democratising fashion.
Be it watches, jewellery, eyewear or saris, Titan has con-
sistently made a successful brand story out of unorganised
he Titan Company's watch business was at an all-time businesses. “In jewellery, our focus was to organise the
low during 2015/16. Despite an over 50 per cent market manufacturing process, make buying gold jewellery fair as
share, it grew in low single-digits. That had nothing to do well as help the karigars,” explains Subramaniam.
with watch-making skills, but analog watches were be- Titan in Q1FY21 reported a loss of `297 crore against a
coming passé and the company had not been able to react profit of `364 crore during the same period last year. With
to the change. Titan's biggest competitor was not another consumers locked down in homes, the last thing they are
watchmaker, but Apple and Samsung, which sold close to thinking about is to buy a watch or jewellery. The lifestyle
80 million smartwatches, while Titan managed to sell only major continued to be restless for growth even during the
15 million watches.
Bhaskar Bhat, the then MD of The Titan Company,
had admitted Titan watches had lost their attractiveness.
The senior management realised the team lacked agility to
adapt to the changing times. That's when Titan decided to
rebuild the company on four pillars — agility, accountabil-
ity, innovation, and anticipating and adapting to change.
“We realised we were reacting to situations rather than be-
ing proactive. That’s when we brought in the four pillars,"
remembers Subbu Subramaniam, Chief Financial Officer,
The Titan Company.
Also, consumers wanted good looking smart watches. THE BIG THE IMPACT
The available ones were smart, but consumers were look- DEVELOPMENTS
ing for a higher style quotient. Therefore, Titan partnered Despite phases of de-
with Intel and launched a range of fully touch-screen hy- Foray into highly growth, the company
unorganised has managed to
brid smartwatches with a strong design element. categories such as bounce back
It also made corrections in its cash-cow, the jewellery jewellery, eyewear and
business (Tanishq), by launching new collections and in- saris From almost zero in
troduced a gold jewellery exchange offer. These strategies 2015, ecommerce
worked and in 2017/18, it reported a 20.75 per cent growth Focus on four pillars — is now a `600-crore
in revenue after years of low growth. The watch business agility, accountability, business
innovation and
reported its highest-ever profits and Titan's market cap adaptability Watch business is
doubled from `41,082 crore in 2016/17 to `83,656 crore in growing at 13-14 per
2017/18, making it the third-most valuable Tata company Transition from analog cent year-on-year,
after TCS and Tata Motors. Five years hence, the company to smartwatches from low single-
still abides by the four growth pillars. "Even during the peak digits in 2015/16
Building a robust
of lockdown there was no room for excuses. We found new ecommerce business Growth in consumer
ways of reaching out to consumers," says Subramaniam. by making digital a base to 18 million due
The lockdown brought business to a halt in April and separate profit centre to attractive pricing
May. However, these ups and downs have seldom impacted
the `20,010-crore company’s spirit to bounce back.
Titan has managed to be among India's top wealth cre-
@ajitashashidhar
Encashing
the Right
Chemistry
PRODUCT MIX IS CRUCIAL
IN CHEMISTRY AS WELL AS
IN BUSINESS. CHEMICAL
COMPANY DEEPAK NITRITE
RELIED ON THIS MANTRA TO
CREATE A SUCCESS STORY
BY K.T.P. RADHIKA
Impact of Lockdown
The rapid spread of the pandemic and resultant lock-
L
downs have sharply derailed industries across the coun-
try. The lockdown has affected capital project timelines
of the company. There have been disruptions on the sup-
ply chain front as well. That said, the company launched
Iso Propyl Alcohol (IPA) during Covid-19. It is used as a
solvent in the pharmaceuticals industry and an input for
sanitisers. “Our facilities are operating at sub-optimal
levels (some plants are functioning at full capacity while
a few are functioning at 50-70 per cent capacity) after the
lockdown,” says Mehta.
With global customers seeking alternative supply
CAGR %
67.38 55.67
684.89 Source: Ace Equity 814
THE IMPACT
tegration of the chemicals sector,” says Mehta. “Our
Doubled core philosophy is to have import substitution and
revenues and self-reliance. Thus, we will increase our IPA capacity
tripled profits from 30,000 to 60,000 tonnes per annum and invest in
Emerged as brownfield projects for agro intermediates in the next
alternative to one year,” says Mehta. The company is also planning
Chinese suppliers to set up a new R&D centre and a captive power plant to
reduce costs. “We will also explore newer downstream
Plant utilisation products related to phenol and acetone business,”
over 80 per cent
says Mehta.
The company is going all out for fast growth it seems.
MEDIUM
COMPANY
Consolidate
+ Diversify
= Growth
HOW COMPONENT MAKER MINDA INDUSTRIES
BECAME AN OUTLIER IN A DOWN AND OUT
SECTOR LIKE AUTOMOBILES
BY SUMANT BANERJI
PHOTOGRAPH BY YASIR IQBAL
GROSS REVENUE
If
FY16 346
FY20 3,175
in ` Crore
816.92 74.01
someone were to tell you that one of the Indian com- then our Chief Financial Officer (Sunil Bohra) would
panies that have made most money for shareholders in point it out in one of our meetings,” he says. “My primary
the last few years is a supplier of automotive parts, you focus is to keep my customers happy. I know if I do that
would be forgiven for thinking of it as a joke. India’s well, it will take care of the business of creating wealth
$120 billion automobile industry has been in the grip of for my shareholders.”
an unprecedented slowdown for almost two years now, While this partly explains the company’s run at
and the pandemic has exacerbated matters. Sales of ve- bourses, diversification and strategy to consolidate sub-
hicles declined 18 per cent in FY20 and are expected to sidiaries and joint ventures into the parent firm have
contract another 30 per cent this year. The component contributed significantly in reinforcing the trust of in-
industry registered its worst performance in FY20 with vestors. Since 2015, as many as 11 subsidiary companies
a 12 per cent dip in revenues. FY21 looks set to be worse. have been merged in a process that is still not finished.
Yet, Gurgaon-based Minda Industries is as big an “This has benefited us in two ways. One, it has strength-
outlier as any. The company, which makes components ened our balance sheet both in terms of top line and bot-
as diverse as cigar lighters and CD tuners to sensors, ac- tom line performance and presented a more cohesive
tuators and steering wheels with airbags, has increased entity to investors, increasing their confidence in the
its turnover at a compounded annual growth rate of firm,” says Sunil Bohra, CFO, Minda Industries.
over 21.25 per cent in the last five years with 20.94 per At the same time, the company has been spending
cent annual growth in profitability. The performance more time in building rapport with investors and bro-
saw its Chairman, the soft-spoken 62-year-old Nirmal kerage houses through roadshows and investor meets.
Minda, become one of Business Today’s biggest wealth “It has been our endeavour that no query from any inves-
creators between 2015 and 2020. Minda Industries has tor, howsoever small or insignificant, should go unad-
outperformed every other automotive company in the
stock market with its share price galloping from just `39
in August 2015 to `282, a rise of 623 per cent. This trans-
lates into a return of 48.52 per cent a year for sharehold-
ers and makes Minda one of the top wealth generators in THE BIG
the industry. DEVELOPMENTS
So, what is it that makes the company the darling
of stock markets at a time when most investors are not The company has
willing to even look at automobile companies? Minda consolidated 11
says he does not keep tabs on his company’s share per- subsidiaries with the
formance on daily or even weekly basis and was a bit parent firm in the last
five years
surprised when presented with facts about the five-year
performance. “To be honest, this is not something I am Diversified into
obsessed about. Sometimes, weeks would pass and I segments like alloy
wouldn’t check the company’s stock performance and wheels and sensors
Source: 48.52
Ace Equity
807.47 73.56
623
dressed. At the same time, we are clear that no selective April 1 this year, demand for sensors will grow manifold.
information will be shared with anybody,” says Bohra. It expanded capacity for sensors. In the same way, it
In a dynamic sector where rampant technological joined hands with Taiwan’s Tung Thi Electronic Co in
changes are on the anvil, including electrification and 2017 to develop and produce driver assistance products
autonomous driving, Minda has diversified and expand- and safety systems such as reverse parking camera and
ed its product portfolio to stay ahead of the curve. For tyre pressure monitoring systems.
example, it ventured into alloy wheels early on after real- “We are open for more. There are big opportuni-
ising the potential. Adoption of alloy wheels was slow in ties. We are still dependent on China for many compo-
India till 2015 and the industry was heavily dependent on nents — semi-conductors, small motors, printed cir-
imports from China. They now account for 40 per cent cuit boards. Some of them we can’t make it here but we
of the market compared to 10 per cent then. Minda, as a should not be fully dependent on China,” he says. “Lo-
first mover, has been a big beneficiary. It set up a factory calisation of technology is a big area. Wherever we see a
for four-wheeler alloy wheels in Bawal, Haryana, in 2016. chance for growth in any business in automobiles, even
A second factory, for two-wheelers, will be operational if we are not manufacturing that product today, we will
next month. look at it. That is the way to future-proof ourselves and
“Maruti welcomed this step of ours with open arms,” stay relevant.”
says Minda. “People are talking of import substitution While the outlook for the industry is bleak, at least in
from China today but we have already shown how it can the short term, Minda is confident that its growth story
be done in alloy wheels.” will not be impacted. Beyond the domestic market, it
Similarly, the company was quick to realise that un- wants to increase the share of exports from 10 per cent
der the new BS VI emission regime, which kicked in from to one-third of revenues by FY25. “We are looking at
exports. That is something where potential is huge but
we have only scratched the surface so far,” he says. For
example, the company has a manufacturing facility in
Indonesia for the ASEAN region but wants to expand its
presence in the market by making more products there.
THE IMPACT “We are doing switches and lights but are in active dis-
Consolidation has made cussions to sell more products in the region. In the do-
balance-sheet stronger, mestic market, the projections for this fiscal are conser-
given confidence to vative, but growth will return. Our per capita ownership
investors of cars and two-wheelers is nowhere close to the global
average. We are bound to grow in the long term.”
New areas of business
have expanded portfolio, The prognosis for the industry may be dire, but if you
improved top line and are an investor in Minda, you can rest easy.
bottom line and cushioned
it against sluggish demand @sumantbanerji
EMERGING
COMPANY
On a
Mission
Mode
GMM PFAUDLER HAS MADE STRATEGIC
ACQUISITIONS, DIVERSIFIED ITS PRODUCT
BASKET AND INVESTED IN NEW CAPACITIES
WITH AN EYE ON LONG-TERM GROWTH
BY P.B. JAYAKUMAR
PHOTOGRAPH BY MANDAR DEODHAR
`1 Lakh invested
in 2015 is now
`14.68 Lakh
Promoter stake
valued at
`104.8 crore is
now worth
`1,538.1
crore
G THE BIG
DEVELOPMENTS
Acquired French competitor
De Dietrich Process System’s
ujarat Machinery Manufacturers (GMM), which Indian arm DDPSI in July 2020
started off in 1962 on a 20-acre facility near Vadodara,
Acquired industrial
will hold a majority stake in the parent company, Pfaudler mixing solutions division
Group, owned by German private equity firm Deutsche of Sudershan Chemical
Beteiligungs AG. GMM Pfaudler will acquire 34.4 per cent Industries in April 2019
stake, while its Swiss subsidiary, Mavag AG, will buy an-
other 19.6 per cent. The promoters — Ashok Patel and his Added two new glass
line furnaces at Gujarat
son Tarak Patel — will buy another 26 per cent in the global
manufacturing facility
business. The deal is expected to be completed over the recently
next four-five months.
GMM Pfaudler, a leading supplier of anti-corrosion More professionalised
process equipment for the pharmaceutical and chemical systems and processes put in
industries, has seen a steady rise in its revenues and prof- place over the years
its in the past five years. The stock is a clear winner in the
emerging companies category.
Its main line of business is glass line manufacturing
— making reactors with glass-coated linings inside ves-
sels to avoid metal contact and corrosion while mixing
various pharmaceutical or chemical ingredients. Nearly 70
per cent of the company’s revenues come from glass lined
equipment; the rest are from pressurised vessel manufac-
turing in heavy engineering (10 per cent) and proprietary
products (20 per cent).
The glass lined machinery is a `700- 800 crore market THE IMPACT
in India, and GMM is the market leader with a 55 per cent
share. In July, it acquired French competitor De Dietrich The company is now ready to
Process System’s Indian arm DDPSI for 6.25 million eu- make the entire line of reactors,
ros (around `53 crore). The new capacities, which will be storage vessels and related
equipment
added by September, will increase GMM’s market share to
around 70 per cent. To boost its product mix, the company It also plans to foray into new
also acquired the industrial mixing solutions division of areas such as heavy equipment
Sudershan Chemical Industries in April last year. for oil and gas and other
Founded in 1962 by J.V. Patel at Karamsad near Vado- industries
dara, GMM grew under Ashok Patel, and got listed on the
It is looking at a 70 per cent
Bombay Stock Exchange later. In 1988, US-based glass line share of the `700-800 crore
manufacturing specialist Pfaudler Inc acquired 40 per cent glass lined equipment market in
stake in the company. By 1999, it increased its stake to 51 India; aims to double revenue to
per cent, and renamed the company GMM Pfaudler Inc. `1,300 crore within five years
EMERGING
COMPANY
Following Atma
Nirbhar Mantra
ALKYL AMINES CHEMICALS, THE
MANUFACTURER AND SUPPLIER OF SPECIALTY
CHEMICALS FOR PHARMACEUTICAL
AND AGROCHEMICAL SECTORS, HAS
CONSISTENTLY REMAINED AHEAD OF
COMPETITION FOR THE LAST FEW YEARS.
NEW PRODUCTS AND EXPANSION PLANS ARE
SET TO PROPEL ITS GROWTH FURTHER
BY P.B JAYAKUMAR
IN FIVE YEARS...
ALKYL AMINES
CHEMICALS
Change % CAGR %
V
GROSS REVENUE
FY16 523
FY20 993
in ` Crore
89.74 17.36
@pbjayakumar
Money Spinners
COMPANIES THAT MADE THE CUT IN
WEALTH CREATION SWEEPSTAKES
Stocks to
Look Out For
nvesting is a unique kind of casino — one where you
cannot lose in the end, so long as you play only by the rules
I
that put the odds squarely in your favour.” When British-
born American economist and investor Benjamin Graham,
who was also Warren Buffett’s mentor, said this sometime
early in the last century, he was guiding investors on ways
to earn good returns while playing it safe. This is truer now
than ever before in India where, in a volatile stock market,
only a handful of stocks are driving the rally, while most
others are refusing to move.
Graham was a proponent of value investing, the
most reliable way to generate good returns in stocks
markets. The idea is to pick good quality stocks trading
Ideal Time for Value Picks quarters. The FMCG division now accounts for a quar-
Value investing involves buying a piece of a quality com- ter of ITC’s revenues; its PBIT rose 31 per cent in FY20.
pany which is undervalued compared to its fair value. This is likely to support ITC’s valuation going forward.
“In the current market scenario, a beaten down stock Similarly, Power Grid Corporation is trading at
will enable an investor to compound his returns if there around 30 per cent discount to its five-year average P/E
is a mismatch between its current price and fair value. multiple. There has been a slowdown in top line growth
The pandemic-led lockdowns have disrupted a number in the last few quarters but it has one of the best return
of industries and many companies are suffering. on equity (RoE) in the power sector. While the
But a wise investor will look beyond that and sector’s RoE is 10-11 per cent, the figure for
pick companies that he feels will emerge Power Grid is 15 per cent, making it an ide-
stronger on the other side of this pan- al value stock for long-term investors.
demic,” says Nirali Shah, Senior Re- Bajaj Auto, too, is trading at a 30 per
search Analyst, Samco Securities.
Ajit Mishra, VP - Research, Reli-
Fall
40%
in broader market
cent discount to its historical average
P/E multiple. The company is not
gare Broking Ltd, says markets have only a bet on two- and three-wheeler
already run up significantly from indices between markets in India, it also leads the
March lows and some large caps are January 2018 two-wheeler market in Africa and
trading at stretched valuations. The and March 2020 Latin America. Other large-cap stocks
BSE Sensex hit a three-year low on available at a discount to their long-
March 23 and closed at 25,981. Exactly term valuation ratios include JSW Steel
three months later, it was at 38,435, up al- and GAIL.
most 50 per cent. The beaten-down stocks like ITC, GAIL,
“In such a scenario, investors should opt for Power Grid and ONGC have strong fundamentals.
the ‘bottom-up’ approach and look for stocks which are Mishra of Religare says one can invest in these compa-
available at a fair valuation. They may consider broader nies. “These stocks are fundamentally sound and are
markets to start with as these are picking up pace due to trading at low valuations due to business mix and Covid-
attractive valuations,” says Mishra. led disruption. However, going forward, as the situation
Tobacco and FMCG major ITC, for example, is cur- stabilises and demand picks up, we may see these stocks
rently trading at 16 times its trailing 12-month earnings, gain traction. Investors may start accumulating these at
about 50 per cent discount to its five-year average price
to earnings (P/E) multiple of 29x. Such a low valuation
was last seen in the aftermath of the 2008 global finan-
cial crisis in the March 2009 quarter. There has been a Sanjeev Puri,
sharp fall in ITC’s top line and earnings growth in the CMD, ITC
last two years due to shrinking of its tobacco business
but the company has shifted its focus to the fast-growing
FMCG division that should yield dividend in the coming
54
VALUE PICKS THAT MAY GIVE GOOD RETURNS
Current Valuation 5-Year Average 5-Year CAGR Growth (%)
Price to Return Mkt cap as on
Company Name P/E Book Value on Equity P/E P/B Net Sales Opr Profit Adj PAT Aug 14 (`cr)
ITC 15.8 3.7 23.5 29.0 6.8 5.9 7.4 7.6 2,41,788.0
Power Grid Corpn 8.3 1.4 14.7 12.8 1.9 18.3 16.1 25.5 91,762.1
Bajaj Auto 16.6 4.0 24.2 18.5 4.5 10.0 13.5 10.4 86,455.6
JSW Steel 15.9 1.8 13.2 -9.3 1.8 11.9 19.2 78.2 64,153.0
GAIL (India) 4.6 0.9 9.7 17.2 1.6 6.4 15.4 21.1 43,274.8
Petronet LNG 14.4 3.5 18.8 17.1 3.2 -0.5 22.9 26.6 39,000.0
Bajaj Holdings 9.7 1.0 13.1 9.5 1.2 55.4 57.2 10.7 28,990.5
Amara Raja Batteries 19.2 3.5 19.3 30.2 5.9 12.8 7.6 4.1 12,687.1
National Aluminium 48.1 0.7 10.4 11.9 1.1 9.6 4.6 10.5 6,548.3
Finolex Cables 11.0 1.4 16.5 20.7 3.3 7.7 17.6 25.4 4,286.1
Caplin Point Lab 19.2 4.4 38.9 29.1 11.6 27.6 41.4 43.7 4,137.7
Garware Technical Fibres 22.7 5.2 17.7 15.7 2.9 7.0 26.5 28.8 4,044.5
Sundaram Clayton 9.9 1.3 17.4 19.4 3.3 17.0 30.6 26.7 3,323.7
Cera Sanitary. 27.3 4.0 18.4 38.5 7.1 13.2 15.0 13.8 3,093.7
Suprajit Engg. 22.7 2.8 19.4 27.3 5.3 27.9 28.1 28.6 2,363.8
Meghmani Organics 7.3 1.5 15.2 9.0 1.4 15.0 28.0 49.3 1,764.8
JK Paper 3.6 0.7 10.5 2.3 1.0 9.3 36.9 LP 1,712.0
India Glycols 7.5 0.8 -1.6 5.5 0.9 7.0 41.4 LP 857.6
Repco Home Fin 2.8 0.5 15.6 21.6 3.4 14.6 15.0 17.0 824.6
L G Balakrishnan & Bros 7.8 1.0 15.7 13.6 2.1 10.0 10.3 8.6 711.8
Fiem Inds. 8.7 1.2 14.2 21.9 2.9 15.1 11.1 6.9 652.2
Sterling Tools 20.9 2.1 20.1 18.3 3.6 11.7 17.8 20.4 638.0
Associated Alcohols & Breweries 9.5 2.4 18.9 13.6 2.6 8.3 15.2 29.1 468.9
NCL Inds. 8.0 0.8 15.4 14.3 1.9 20.6 17.4 50.8 406.9
Nitin Spinners 9.5 0.5 18.7 7.5 1.3 19.0 14.7 11.5 226.9
LP : Loss to profits
METHODOLOGY
The two most common valuation ra- compared to their average in the have since shown an improvement in
tios to filter out potential wealth gen- last five years. But not every low P/E their financial ratios.
erating stocks are price to earnings ratio or low P/B ratio stock has been We have also excluded companies
(P/E) and price to book (P/B) value. included. We have considered only with poor working capital manage-
Both are based on actual or reported those companies that grew faster ment as those find it tough to convert
earnings and not forward earnings. than the industry in five years prior to profits to cash flows and this leads to
P/B ratio is especially useful in case the pandemic and had high average financial problems.
of companies in capital intensive or return on equity among peers during We have also looked at compa-
asset heavy sectors such as banking, the period. Some companies such nies’ debt sustainability by comparing
NBFC, oil & gas and utilities, among as India Glycols and JK Paper were historical movement of ratios
others. loss-making in the past but have since such as debt to equity, total debt to
The companies in the list are become profitable. This may translate operating profits and interest
cheaper on P/E and P/B value basis into lower RoE historically but they coverage ratio.
current levels and adding more on dips with a time hori- of which may have dragged down growth in the near
zon of two-three years,” he says. term, even if they are positive for long-term growth,”
In the midcap space, value investors should look at according to global brokerage Morgan Stanley.
Petronet LNG, Bajaj Holdings and Amara Raja Batter- Mishra says broader markets provide valuation
ies. While Petronet is the country’s top LNG producer, comfort at these levels given their sharp underperfor-
Bajaj Holding is the main holding company for the Bajaj mance since 2018. “The earnings growth trajectory
Group with large stakes in Bajaj Auto, Bajaj Finserv and has also improved as the economy is opening up and
Bajaj Finance. The company also has equity investment growth is showing signs of improving. However, one
in non-Bajaj companies. Besides, it invests in debt in- should stick to quality names in this space and avoid
struments and operates like a diversified close-ended penny stocks,” he says.
mutual fund, making it a good long-term investment for
value investors. Eye on the Future
Amara Raja Batteries is the country’s second-largest G. Chokkalingam, Founder and Managing Director of
automotive battery maker and has gained market share Equinomics Research & Advisory Services, says most
from incumbents in the last few years. The company’s investors today are fixated with quick returns in a vol-
margins and earnings growth took a hit due to price war atile market. “Most new investors don’t look at valua-
in the industry and slowdown in auto sales. However, tion multiples and that’s why value investing seems to
things are looking up due to de-
cline in international commod-
ity prices and improved growth
outlook for the automotive in-
dustry in the coming quarters. BAJAJ AUTO IS
In the small-cap space, Ster-
ling Tools, LG Balakrishnan & TRADING AT A
Bros, Fiem Inds and Cera Sani- 30 PER CENT
tary Ware remain value buys at DISCOUNT TO
current valuations. While the
ITS HISTORICAL
56
solidated numbers at the end of the financial year.
Similarly, the JB Chemicals stock, with face value of
HOW TO INVEST IN `10, was trading at `68 in 2010. It split to `2 per share
THIS MARKET and is now at `700, giving 54 times returns, says Chok-
kalingam.
However, experts throw a word a caution. “The mil-
With the current stock lennials, people out of job or small entrepreneurs who
market rally built are trading in the market don’t have the patience to wait
on weak economic in the current tight liquidity scenario. So, the risk is very
fundamentals, it is high right now. Penny stocks or those with bubble valu-
even more important
for investors to
ations can fall like a pack of cards anytime,” says Chok-
buy value stocks kalingam.
with strong growth Moreover, value investing has another crucial com-
potential ponent – the vision to correlate a company’s perfor-
mance with broader socio-economic, policy and future
scenario. MRF scrip is a case in point. It was trading at
`6,000 in 2011-12. It closed at `59,720 on August 21. An
investor who realised in 2011 that India’s fast-growing
As the big auto market is alongside creating a consistent demand
stocks have run for tyre replacement too, would have seen her money
up quite a bit, grow 10 times in eight years. “The visionary aspect of
investors should value investing looks at the future, as happened in case
be cautious and
of MRF,” says Chokkalingam.
look for stocks
available at a fair Shah agrees that future growth opportunities
valuation should be considered in value investing too. “Currently,
valuations in some pockets are extremely low and earn-
ings growth is slowly picking up due to pent-up demand.
The crisis has pushed recovery in corporate earnings by
at least a few months. Recovery may take longer than ex-
pected. So, value investments should be made looking
However,
companies with
at the PEG ratio (which compares P/E ratio to growth of
high debt or high the company) and future growth opportunities in small
promoter pledge pockets. Not all companies in broader markets are at-
should be avoided tractive,” she says.
even though they So, what are the boxes which need to be checked be-
are available at low fore investing in companies even with low valuations?
valuations Primarily, companies with high debt or high promoter
pledge should be avoided even though they are available
at low valuations, says Shah. “Also, companies which
start showing a significant decline in sales or margins
should be observed more closely. High investment in
capex, without any material return, is again a red flag. A
be losing favour. But it is well-known that some of the number of such parameters must be considered before
best wealth generating scrips of today were value stocks investing in strong yet undervalued stocks,” says Shah.
some years back,” he says. Just as value investment requires caution, even an
For instance, Bombay Burmah is trading around exit should be well thought out. “In a crisis, investors
`1,500. It was nearly `80 in January 2012 and has grown should not run to exit the stock just because the price is
almost 19 times in the last eight years. Bombay Burmah, falling. It would be prudent to check if the fundamental
originally a tea trading entity, is the holding company debt and cash story is intact, and if all seems well, the in-
for Britannia Industries, the flagship of Mumbai-based vestor should continue holding the stock irrespective of
Nusli Wadia Group. Investors usually don’t track shares certain corrections,” says Shah.
of Bombay Burmah actively because it includes finan-
cials of Britannia only when it presents its audited con- (The writer is Co-founder and Editor of 30stades.com)
BY NEVIN JOHN
ILLUSTRATION BY RAJ VERMA
reating wealth is easier than ma- “When the size of the economy
naging wealth, says Raamdeo Agrawal, doubles, the wealth of business families
C
Co-Founder & Non-Executive Chair- increases manifold. Assigning Family
man, Motilal Oswal Group. Fortunes Offices to protect and utilise the wealth
are made — and destroyed — often according to the wish of its founders
within a generation. But when busi- will help avoid mismanagement of as-
nesses do survive beyond the first, sets,” says Agrawal.
expanding families and conflicts of Several business families in pre-lib-
interest among family members could eralisation India disappeared because
potentially implode businesses and de- of a lack of focus on wealth manage-
stroy wealth. ment and preservation. However, an
`6-7
maran Ventures of NR Narayana Mur- MAJOR
thy, doing investments, including in INVESTMENTS
start-ups. Ratan Tata has invested in
over a dozen startups, including Paytm, lakh crore Reinvestment in
Ola Electric, Snapdeal, Tork Motors, Wealth deployed existing companies
UrbanLadder and Lenskart. Mukesh by Indian business Start-up investments
Ambani's Reliance Family Office has families through in family group
last year facilitated sale of the private Family Offices
pipeline owned by him to Brookfield PE investments
for `13,000 crore. Catamaran has ven-
Fixed income bonds
ture capital investments in Paper Boat,
Innoviti and Healthspring. Land/real estate/
The business of Family Offices is infrastructure
becoming increasingly relevant these that there is a ‘safety pot’ kept aside to
days as the churn in the economy has deal with any exigencies and manage Hedge funds
started affecting investments of high- their cash flow requirements,” she Foreign currency
income earners. Gautami Gavankar, adds.
Executive Director & Head, Estate Another emerging trend is that Gold/precious metals
Planning and Family Office Services, many families are exploring immigra-
Kotak Mahindra Group, says most tion, and considering various places in Art/antiques
Family Offices today are looking for in- Europe for the long term, according to
vestment opportunities in diverse sec- Gautami.
tors, and the smart money is moving The reason for that is diversifica-
into sectors where value creation can tion of risk and taking advantage of
be seen over the long term. cross-border opportunities over time, long-term investment opportunities
“In addition, ultra high networth apart from the reasons of lifestyle, be- and prefer direct investments that offer
individuals (UHNIs) and high net- ing closer to the family and ease in liv- more control and lower fees. In the cur-
worth individuals (HNIs) are ensuring ing and doing business abroad. In such rent scenario, distressed assets are also
cases, it is important to set up Family a big focus area for them. Many families
Offices in India to manage wealth. are looking at impact investments and
Family Offices tend to look for social investments as well. “Philan-
thropy, which is usually a big part of
most family ethos, has seen a ramp-up
recently. The next generation, in partic-
ular, is looking to make a social impact
and bring about a positive change, says
Gautami of Kotak.
“While multi-Family Offices follow
a disciplined, asset allocation-based
I HAVE BEEN HANDLING approach depending on the risk profile
THE BAJAJ FAMILY
of investors, single Family Offices in
OFFICE FOR THE LAST
30 YEARS... THE India are more inclined to make invest-
FAMILY OFFICE ACTS ments based on the patriarch’s views,”
AS A SUPPORTIVE she adds.
SYSTEM FOR THE Multi-Family Offices also focus on
BETTERMENT OF other aspects such as compliance, tax/
BUSINESS AND legal implications and give more round-
SAFEGUARDS ed and holistic advice, Gautami thinks.
PERSONAL Ultimately, it’s all about using
WEALTH” wealth responsibly.
Niraj Bajaj, Director,
Bajaj Group @nevinji
Building
Riches in 2020
REAL
ESTATE
BASICS
Real estate has
delivered good
returns in the
long run
Residential
real estate sees
abrupt growth
cycles
Commercial real
estate offers
higher rental
yield but one
needs deep
pockets for
investing
REITs give
investors the
option of making
small-ticket
investments in
the sector
W
hen it comes to building assets, especially in
India, real estate attracts a large section of inves-
tors. The reason is that, unlike a financial asset,
it is something investors can see, touch and feel.
That is why almost three-fourth of Indian house-
hold wealth is parked in real estate and only a
small fraction in financial assets. “The average
household holds 77 per cent of its total assets
in real estate (which includes residential build-
ings, buildings for farm and non-farm activities,
constructions such as recreational facilities, and
rural and urban land) compared to 5 per cent in
financial assets (such as deposits/savings ac-
counts, publicly traded shares, mutual funds,
life insurance and retirement accounts),” says a
2017 report by the Reserve Bank of India titled “Indian in life, mainly for living. The market is conducive for the
Household Finance Survey.” latter as prices have either corrected or remained stag-
However, in the last few years, returns, especially nant over the last few years. Besides, due to huge inven-
from the residential segment, have been muted or even tory, developers are ready to negotiate prices. “Property
fallen. Many have even predicted the end of real estate as rates are at their lowest. Many developers are offering
an investment, a view that gained further currency after further enticements such as attractive payment options
the outbreak of Covid-19. However, as life slowly moves and offers. Also, unlike in earlier years, buyers can get
towards normalcy, there are enough signs that the sec- completely de-risked, ready-to-move-in homes at prices
tor cannot be written off as an investment. With inter- previously fetched by early-stage, under-construction
est rates on fixed income instruments falling and stock properties,” says Anuj Puri, Chairman, ANAROCK
markets volatile, investors are seriously looking at seg- Property Consultants. However, it is not advisable to
ments such as commercial real estate, which has given
decent returns over the past few years, and real estate
investment trusts (REITs), whose early returns have
been promising.
“Indian real estate consumers still remain positive
about the economic scenario and income stability for
the coming six months. Real estate (35 per cent) is still
perceived as the preferred mode of investment, followed
THE WINNING Investors can
STRATEGY consider commercial
by gold (28 per cent), fixed deposits (22 per cent) and properties like shop
stocks (16 per cent),” says a recent report by Housing. Liquidating real or office space at a
com and National Real Estate Development Council. estate can be a good location
Barring some periods in the short to medium term, big hassle. Make
A commercial
real estate has given decent returns over long periods. sure you have
property at a good
However, before writing the cheque, one must under- considerable
location can fetch
liquid assets for
stand that there are different segments within real you a return of 6-8
contingencies and
estate, and risk, return and other factors differ in each per cent per annum
other financial goals
case.
REIT is a good
Unless it is for end
investment
Why Real Estate use, avoid investing
avenue. Low ticket
While it is true that almost everyone wants a piece of real in the residential real
size (`50,000),
estate segment, as
estate, financial planners say one should invest in the transparency and
capital values are
sector only if it fits in one’s portfolio. “Any investment liquidity make it
expected to remain
decision regarding real estate ought to be made with apt for all types of
muted and rental
an eye on overall allocation of finance and short-term investors
yields are low
liquidity requirements,” says Lovaii Navlakhi, Manag-
ing Director and Chief Executive Officer, International
Money Matters Pvt. Ltd, a financial planning firm. This
makes even more sense during a period like this when
household incomes have fallen. But the key questions
are — Who all should invest? And in which segment?
“One should consider real estate only after building a buy a house for investment at this stage. Market trends
sizeable liquid fund through financial assets such as mu- hint at tepid demand and severe stress on builders due to
tual funds,” says Varun Girilal, Executive Director, Mi- large unsold inventory.
traz Financial Services Pvt. Ltd. What about commercial property? In contrast to
Rohit Shah, Founder and CEO, Getting You Rich, a residential real estate, commercial assets have been do-
financial planning firm, says, “Real estate is considered ing well in most major Indian cities. They are becoming
a growth vehicle and can give decent returns in the long popular among not just institutional investors and high
run. But concentrating all your money there is not a net worth individuals but also retail investors. Commer-
good idea. Check for asset allocation, liquidity, EMI ra- cial properties can yield 8-10 per cent in major markets
tio, rental yield and investment horizon.” depending upon location, demand-supply and quality
Among the different segments, buying a house may of asset. Though the pandemic has dented growth and
not be a good idea at present, though most financial returns due to fall in demand for office spaces, experts
planners encourage purchase of a house at some stage believe it will rebound soon. “As a result of the pandem-
610
AND CHENNAI
10,
AVG. PRICE AVG. PRICE IN
IN 2010 (`/SQ FT) Q1 2020 (`/SQ FT) % CHANGE
5
7,96
PUNE BANGALORE HYDERABAD KOLKATA
67 49 45 44
4,385 CHENNAI
20
4,19
4,
97
5
5
5
3,050
93
NCR
0
5,
4,
51
4,1
0
2,8
19
97
3,
34
0
5
85
3, ,580
4
3,3
0 0
Source:
ANAROCK
Property
Consultants
ic, there has been a flight towards liquidity, which is im- India over the next five-seven years. The cities include
pacting this asset class. Commercial real estate has been Bengaluru, Hyderabad and Gurugram. The trend is like-
impacted more as many organisations are asking em- ly to gather pace in the coming quarter where we will see
ployees to work from home and downsizing. That said, at more such announcements. So, it is an appropriate time
some point, the tide will turn, and prices will rise. How- for investors to get into Grade A commercial spaces that
ever, one has to remember that real estate cycles last lon- are future-ready and can align with the new normal now
ger, five-seven years, and hence it could be a while before and in the future with ease.”
things start looking up,” says Navlakhi. Puri says office spaces near residential hubs have
Puri echoes this. “Undoubtedly, there was a dip in de- great potential. “Offices in a decent workplace hub or
mand for commercial spaces, especially during the lock- shops in residential areas make investment sense. Most
down. But we are gradually seeing pick-up in demand in retail investors may lack the bandwidth to participate in
key cities. Google, for instance, is on an office leasing Grade A office buildings, which are the best bet, but they
spree as a follow-up to its planned massive investment in can still buy space in smaller office buildings that are
well-connected and can draw work- Therefore, one can study the past
force,” he says. performance of only one REIT for
However, even for that, you need reference.
deep pockets. You also have to carry “In the first year of our REIT,
out proper due diligence in terms of FY20, we delivered a 15 per cent YoY
legal issues and future market out- growth in NOI (net operating in-
look. That is why, for retail investors, come), early delivery and healthy
Real Estate Investment Trusts (RE- pre-commitments on our 1.4 msf on-
ITs) make perfect sense. campus development, culminating
in strong distributions for our unit
The REIT Bet holders of `1,882 crore,” says Mike
REITs address the challenges of tick- TAX IMPLICATION Holland, CEO, Embassy REIT. “We
et size and transparency. “REITs are ON INVESTING successfully navigated through the
good for investors who have small IN REITs 1st quarter of FY21 despite the pan-
appetite for real estate - as small as demic and maintained a healthy 92.2
`50,000 - and yet want to invest in “REITs are regarded as per cent occupancy, collected a ro-
the otherwise highly cost-intensive hybrid pass-through bust 98.9 per cent of rentals and dis-
commercial real estate market. They entities to avoid double tributed `4,49.9 crore,” he says.
can take a small bite of the large com- taxation,” says Sandeep Some financial planners suggest
Jhunjhunwala, Partner,
mercial real estate pie with REITs,” caution. “Like in case of any other as-
Nangia Andersen LLP.
says Puri. set class, you should focus on sustain-
Sameer Kaul, MD and CEO, Trust There are different types ability of returns, that is, ability of the
Plutus Wealth Managers, says REITs of incomes —interest, asset to generate steady and growing
should be the preferred vehicle for re- dividend and capital gains returns. At present, the listed REITs
tail investors. “Investors should look — that an investor can earn in India have marquee commercial
by investing in a REIT. Tax
to participate in real estate indirectly office assets and sticky Grade A ten-
implications and rates
through more efficient structures differ accordingly. ants, offering clear visibility of sus-
such as REITs, which have better re- tainable returns. It is critical to assess
turns visibility, higher transparency Withholding Tax Rate: 10% the ability of the REIT manager to
and a certain degree of liquidity (high- and 5% on distribution of maintain the property and renegoti-
er than hard assets),” he says, adding, income to resident and ate rentals,” says Kaul of Trust Plutus.
non-resident individuals,
“REITs have been made available at an Some financial planners such as
respectively
appropriate time given the volatility in Suresh Sadagopan, Founder, Lad-
debt and equity markets.” Tax on interest income: der7 Financial Advisories, doubt that
Girilal of Mitraz is also positive Interest earned is fully REITs will be able to generate an av-
on REITs. “REITs have done well in taxable in hands of unit erage return of over 9 per cent year
developed markets such as the US holder on year over a long period. Girilal
and Europe, so one hopes that they Tax on dividend: Dividends suggests that in the current market,
grow in India with more options and are fully taxable in hands one can allocate 5-10 per cent of one's
transparency,” he says. “Embassy and of unit holder portfolio to REITs. “So, we would still
Mindspace REITs offer decent po- recommend REITs as a satellite/non-
tential for returns. Returns through TAX ON CAPITAL GAINS core allocation only after one has
ON SALE OF UNITS:
lease rentals and capital appreciation adequately diversified across bonds,
can range between 8 per cent and 12 Long-term capital gains equity-based MFs and debt MFs.”
per cent. One does not have to part (holding period is more If you are looking at investing in
with a large capital for REITs. They than 36 months) - 10 per real estate, consider commercial real
also come with the added benefit of cent for gains over `1 lakh, estate such as shop or office space at a
liquidity and diversification of proj- good location which can fetch you de-
Short-term capital
ects,” he says. gains (up to 36 months) cent returns. Go for REITs if you have
The issue is that there are only –15 per cent budget constraints.
two REITs in India so far. The first
one was launched last year while the Source: Nangia Andersen LLP
Ashwini Kumar Sharma is a
second one was launched last month. Delhi-based Writer
ECONOMIC UNCERTAINTY
D
ACROSS THE GLOBE HAS
INCREASED THE APPEAL
OF THE YELLOW METAL
AMONG INVESTORS. THIS
MAKES IT A GOOD STORE
harmesh Solkar, a Mumbai-based middle-level IT
OF VALUE IN THE NEAR professional, decided to go for a week-long summer va-
FUTURE cation to the Maldives when he got promoted in Novem-
ber last year. He and his wife Surabhi, a home maker, had
been planning the trip for years. They had to cancel due
to the Covid-19 outbreak.
Soon, he started worrying about the future when he
BY P.B. JAYAKUMAR heard about jobs cuts across sectors. In 12 years of his
ILLUSTRATION BY RAJ VERMA working life, he had saved little. The `2 lakh he had set
aside for the trip was lying in his savings account when vestment in future as well.
he got a call from a jewellery chain’s executive, who gave
him gold price data from as far back as 1923 to March 31, Wealth in Crisis
2020. “Since 1925, when a sovereign of eight grams was Dharmesh is not an exception. A new set of young custom-
priced at `13.75, prices never went down till 2014,” he ers, who used to spend on lifestyle products, vacations,
said. As Solkar saw prices hit historic highs of `54,000- dining and entertainment, are now investing in latest
plus per 10 gm this year, he thought he had missed the fashions in jewellery, says Ramesh Kalyanaraman, Ex-
bus. But a few days later, the relationship manager men- ecutive Director of Kalyan Jewellers. Middle-class senior
tioned the ‘Independence Day Freedom Offer’, a dis- citizens, who either kept money in fixed deposits or real
count of nearly `3,000 for eight grams, for purchases on estate, are also increasingly buying jewellery for their next
August 15. Dharmesh bought a small diamond gold chain generation. With restrictions on number of guests, wed-
for his wife. dings have become a closed family affair. A part of those
While Covid-19 has ruined businesses around the savings is being used to buy jewellery for the newly-weds.
Equity Equity
Gold Silver LargeCap SmallCap
Equity
MidCap MF
ElSS MF Sensex Nifty
Real
estate
17.7% 16.6% MF
8.02%
MF
7.92% 7.9% 7.62% 6.1% 5.5% 5.3%
* Real estate is from RBI's Housing Price Index from Q1FY16 to Q4FY20; MF values from Aug 25, 2015, to August 25, 2020;
For the rest, it is August 6, 2015, to August 6, 2020; ELSS is equity-linked mutual fund scheme
globe, including the gems and jew- WHY GOLD WILL “Even we were surprised when
ellery business, the yellow metal is REMAIN IN FAVOUR sales picked up within weeks of the
still shining as a key instrument for complete lockdown to 80-85 per cent
creating wealth, even as the industry Economic uncertainty of what they were during the period
is still undergoing Covid-19 turbu- means people will a year ago, though there are still is-
lence. Consider this: Gold has been prioritise safe investments sues like showrooms falling in con-
the best investment in the past five tainment zones,” says Ramesh. This
Dollar is expected to
years and returned 17.7 per cent per remain weak, so globally, is despite retail gold prices rising 60
year, far ahead of equities, which have people and central banks per cent since January 2019 and 20
returned 7-8 per cent, and even real will buy more gold per cent since January 2020.
estate, which has returned a mere 5.3 Even diamond sales are picking
per cent per year during the period. No asset class has given up. De Beers Group, the world's larg-
decent returns in the last
With economic uncertainty worsen- est diamond producer and retailer,
five years in India
ing across the globe, investors will in- witnessed about 30 per cent growth
creasingly add gold in their portfolio Fear of inflation will in India last year, but Covid-19 slowed
for safety. A weakening dollar (also further increase the the momentum. “Demand is gradu-
considered a safe haven) is also good appeal of the yellow metal ally growing in Tier-I cities and sales
for gold. Industry experts say the yel- may get back to 70-80 per cent of last
low metal will remain a preferred in- year’s level by October-November,”
BY VISHAL DHAWAN
technically refer to it, clarity on a few term investments, that is, between
A
things could be of significant value. one and 10 years away.
Customised
for HNIs
MASS PRODUCTS SUCH
AS MUTUAL FUNDS DO
NOT WORK FOR THE VERY
RICH. WELCOME TO THE
T
WORLD OF PORTFOLIO
MANAGEMENT SERVICES
AND ALTERNATIVE
INVESTMENT FUNDS
Only equity funds with AUM of `100 crore or above were considered; returns in %; ranking based on five-years returns; all performance as on
July 31, 2020; above one-year returns in CAGR; *** MODEL; Source PMSBazaar
AIF Taxation
Just like the product, the taxation, too, is complex. “AIF Cat
BEST PERFORMING AIF CAT-III III is not a pass-through entity for taxation. Typically, the
'LONG ONLY' SCHEMES nature of income under AIF Cat II would be capital gains or
business income. Income which is not under a special rate
AUM Return like capital gain, i.e., business income, interest, dividend,
AMC / Fund Name (`cr) 1-year etc, would be taxed at the maximum marginal rate in AIF
GIRIK Multicap Growth Equity Fund *** 68.69 17.34% Cat III. For FY21, the rate would be 42.74 per cent. If busi-
ACCURACAP - Vectra Fund *** 35.85 12.70%
ness income is earned by AIF Cat III, the AIF will automati-
cally pay a tax of 42.74 per cent (tax bracket for individuals
Proalpha Capital - QGD ** 41 12.87% with over `5 crore taxable income). This may lead to the
ACCURACAP - ALPHAGEN NEXT *** 109.9 11.30% investor paying more tax than his tax bracket requires him
Ampersand Capital - Growth 155.1 9.86% to,” says Rajmohan Krishnan of Entrust Family Office.
Opportunities Fund Scheme 1 ***
Word of Caution
So, what should you go for – AIF or PMS? The first thing to
look at is the ticket size, which is `50 lakh for PMS and `1
crore for AIF Cat III. The next could be your comfort with
strategies adopted by the two. “If you are looking for multi-
BEST PERFORMING AIF CAT II asset, more flexible or differentiated strategies, go for AIF
'LONG SHORT' SCHEMES Cat III, but if it is a simple buy & hold trade, PMS is better,”
says Jain of Edelweiss Wealth Management.
AUM Return Whether PMS or AIF, these are high-stake investments
AMC / Fund Name (`cr) 1-year
and suited for investors who understand the risk-return
ITI Long Short Equity Fund ### 169.8 14.64% dynamics in depth. “Besides, while investing in thematic
Edelweiss Alternative Equity 877 13.06% strategies, you should be aware if such thematic portfolios
Scheme### invest in a single sector (or only a handful of sectors) or ac-
Varanium Capital Dynamic Fund ## 72 6.40% cess the theme through multiple sectors. If it is the former,
Edelweiss Alpha Fund Scheme 1## 74 4.10%
then once again, the investor runs concentration risk,” says
Kulkarni.
***Post Expense and Tax; **Post Expense, Pre Tax; ## Gross
Return; ### Post Expense & Pre Perf. Fees & Tax; all performance
as on July 31; above one-year returns are in CAGR; only funds @naveenkumar80
which disclosed their AUM considered; Source PMSBazaar
75
THE WEALTH ISSUE — COLUMN
Don’t Invest
Based on Age
INSTEAD, FINANCIAL GOALS SHOULD
DECIDE RISK APPETITE
BY C. S. SUDHEER
to 100 minus your age. For example, chasing a car in the next one year.
I
if you are 30 years old, your portfo- Equities, real estate, gold and govern-
lio can have 70 per cent equity. This ment schemes are ideal for long-term
means as you grow older, you must goals. Debt funds are ideal for short-
move your portfolio from equity to term goals.
debt. But it is time to change this
thought. Returns Expected
The risk a person takes must be The returns expected are as impor-
based on his financial goals, irrespec- tant as the time required to get those
tive of age. Along with his goals, he returns. Some investment options
nvestment is a process of allocating must also consider the time period to might give higher returns than oth-
money to assets for creating wealth achieve those goals, his financial situ- ers. If you are looking forward to a
and achieving financial security. ation as well the returns expected. massive amount, investing in a bank
There are several investment options. These four things determine his risk fixed deposit (FD) will not serve your
Each comes with ample risk. Selec- appetite. purpose. Equity and real estate must
tion is largely based on the investor’s A 60-year-old person who wants be looked at in such a scenario. At
risk appetite. Also, traditional belief to start a business after 10 years can- the same time, if your goal is to raise
is that age determines an investor’s not depend on debt funds. Instead, an amount in the next five months, a
risk-taking capability. Is that true? equities will yield higher returns. bank FD is the perfect option. Invest-
Should we manage our portfolio Again, if a person’s goal is to earn sta- ment options can have different fea-
based on age? ble and steady returns each month, he tures: safety, stability, risk, returns,
must invest in debt funds. etc. So, while choosing your invest-
Risk Vs Age ments, consider all these to make sure
Investing in equities can fetch great Time Period that they are in line with your goals.
returns. However, the risk involved Financial goals can be short-term
is high. According to the traditional or long-term. It is important to seg- Financial Situation
school of thought, a person should regate them and choose investment The investor’s financial situation also
reduce exposure to portfolio risk as options accordingly. You cannot in- plays an important role in risk man-
he grows older. Here, risk primarily vest in the same instrument for two agement. A person who earns `5 lakh
refers to equity risk. According to a widely different purposes such as per annum and another who earns
thumb rule, the proportion of equity your child’s education, which is likely `12 lakh per annum will have entirely
in your portfolio must be equivalent to be after 12 years, as well as for pur- different sets of options. Other things
Invest
Short,
Stay
Safe
DEBT INVESTORS
NEED TO TREAD
CAREFULLY IN THE
FIXED INCOME
MARKET AS THE
BALANCE SHEETS
OF THE TWO
BIGGEST ISSUERS —
THE GOVERNMENT
AND CORPORATE
SECTOR — ARE NOT
IN THE PINK OF
HEALTH
BY ANAND ADHIKARI
ILLUSTRATION BY RAJ VERMA
O
goes beyond the government paper. So, investors need
to tread carefully.
CASE FOR Economic Insured FDs, There is safety MF debt Tax benefits
FIXED slowdown PPF and of capital schemes offer on interest
and likely good funds in fixed diversified and deduction
INCOME recession set offer assured income portfolio under 80C up
OPTIONS to increase returns securities under single to `1.5 lakh/
credit risk scheme annum
points (1 basis point is one hundredth of a percentage of up to `5 lakh per depositor. Currently, every bank de-
point) in the near future. The balance sheets of the two posit is insured with the Deposit Insurance and Credit
big issuers of debt — the government and the corporate Guarantee Corporation (DICGC) up to a maximum of
sector — are also not in the pink of health, which raises `5 lakh in case the bank goes into liquidation. It is there-
concerns on credit risk. fore advisable to go for a deposit of a maximum of `5 lakh
The priority of investors today is to protect their with new banks just to be on the safer side.
capital investments. So, where should one invest his or “One can actually choose multiple banks to protect
her hard-earned money in these times? A number of op- deposits if they have a higher amount to invest,” says a
tions are available under fixed income schemes — from banker. For example, an amount of `20 lakh can be de-
fixed deposits, company deposits and debentures to posited in four different banks (`5 lakh each).
public provident fund (PPF) and debt schemes of mu- There are also tax benefits in bank fixed deposits.
tual funds. The returns range from 5 per cent to 10-12 Interest up to `10,000 is exempt from income tax. How-
ON THE TABLE
INSTRUMENTS INTEREST P.A. (IN %) TAXABILITY RISK
Fixed deposits 4.0-8.0 Interest of up to `10,000 Deposits of up to `5
exempt from tax lakh insured
NCDs 8.0-12.0 Interest taxable, capital gains Unsecured
on market sale
PPF 7.1 `1.5 lakh deduction under 80C; 15-year lock in
Interest exemption
Money market funds 3.5-7.0 Taxable Liquidity risk
compared to bank deposits. the pre-IL&FS days due to high returns, are something
PPF provides an additional source of resource for the that wealth advisers are cautioning against. These funds
government. Investors looking for higher return, safety take a risk by investing in corporate bonds with credit
and tax benefits should look at PPF. ratings below the highest investment grade. “The credit
environment is challenging. Downgrades are rising. The
Short Is Safe moratorium and forbearance also indicate the stress in
For those who want to avoid the hassles of studying vari- the corporate sector,” says a wealth adviser.
ous debt schemes, the mutual fund industry offers an The perception among investors is that the debt mar-
array of investment avenues in the fixed income space. ket is risk free. But that is not the case if you are shopping
They offer a single-point entry for investing in a scheme for higher yields. “Everything is not issued by the Gov-
with a diversified pool of debt securities. Various op- ernment of India or comes with a guarantee,” Cheruvu
tions are available in terms of returns, risk and liquidity. of Validus Wealth cautions.
“What is not very clear is for how long this phase
of low interest rates will continue. If the assumption is @anandadhikari
Securing
The Gains
INSURE YOUR LIFE BEFORE ANYTHING ELSE
SO THAT THE FAMILY DOES NOT MISS OUT
ON GOALS DEAR TO THEM
BY NAVEEN KUMAR
ILLUSTRATION BY RAJ VERMA
tor & Chief Marketing Officer, Max Life plan is an affordable financial tool that
W
Insurance. allows individuals to financially secure
Here is how you can use a term plan the future of loved ones in their ab-
to ensure the well-being of your family sence, adding a layer of security to navi-
when you are not around. gate an unfortunate crisis,” says Bhan
of Max Life Insurance.
Protect Your Dreams: “When start- It scores above all other life insur-
ing on the wealth creation journey, one ance-cum-investment products. “It is
of the first things an investor should much cheaper and gives a higher cover
think about is buying adequate insur- compared with other life insurance
ealth building is a long journey that ance. Insurance is a great tool to pro- products such as Ulips and, therefore,
ends usually when you have either met tect oneself and one’s family from un- can give investors the most value for
your life’s goals or earned enough to be foreseen costs and, therefore, preserve money,” says Manekia of Kairos Capi-
able to meet them in future. However, wealth” says Rishad Manekia, Founder tal. A 30-year-old can get a `1 crore
given life’s uncertainties, if something and Managing Director, Kairos Capital cover at annual premium of around
bad happens to the earning member Private Ltd., a Mumbai-based financial `10,000. This means you spend just
midway through this journey, should planning firm. `1.5 lakh in 15 years, almost 1.5 per cent
the family members be left to their fate? You should not get complacent of the protection amount.
A well-planned wealth building even when both spouses are working
journey plugs this gap through term in- as dual income means higher goals and Enhances Risk Appetite: The more
surance – a pure life insurance product lifestyle expenses which a single person sure you are about the well-being of
that pays the cover amount to the nomi- will find it difficult to sustain in ab- your family, the more risk you can take
nated family member if the insured per- sence of the spouse. while investing. This means you can go
son dies. “The aim of creating wealth is heavy on equities, which are known to
to achieve some goals. A term plan pro- Least Costly: A term plan gives you be volatile in the short term but offer
tects that goal,” says Aalok Bhan, Direc- higher life cover at a low cost. “A term higher returns in the long run.
Keeping
Assets Safe
A LOOK AT NON-LIFE INSURANCE PLANS
THAT PROTECT YOUR WEALTH
G BY APRAJITA SHARMA
ILLUSTRATION BY RAJ VERMA
eneral insurance products hardly Cyber insurance is not very expen- lower than that for content. However,
find favour with customers in India. sive. For example, the premium on ICI- it is advisable to go for a comprehensive
People buy travel and motor insurance CI Lombard’s policy ranges from `6.5 policy,” says Tarun Mathur, Chief Busi-
when they are mandatory, but home, (for `50,000 sum assured) to `65 per ness Officer, General Insurance, Policy-
cyber security or sachet sized insur- day (`1 crore sum insured). The policy bazaar.com.
ance products such as cycle/dengue in- provides coverage to the entire family, As per Policybazaar, HDFC Ergo’s
surance, etc, do not have many takers. including children, for a year. In Bajaj Home Shield policy provides compre-
You may need some of these products: Allianz's cyber policy, the sum insured hensive coverage for one year at `15,905
ranges from `1 lakh to `1 crore, for a for a cover of `1 crore for structure and
Cyber Insurance premium of `662 to `8,933. `25 lakh for contents. The coverage for
From office work and education to only structure or contents costs `2,374
purchase of grocery, most of our daily Home Insurance and `13,423, respectively.
activities have gone online. Digital There have been more and more cases There are also some lesser known
transactions which require you to share of torrential rains damaging property covers a home insurance policy may
bank details have become frequent. of late. You also never know when a provide. “Many people are unaware
This has led to a surge in online frauds. natural disaster or a burglary or a theft that home insurance covers pet vet-
A cyber insurance policy can protect will cause you a financial loss. A home erinary costs. Damage due to burst-
you against online identity compro- insurance policy covers loss or damage ing and/or overflowing of water tanks/
mise, fraudulent transactions, cyber to the building and its contents due to pipes, landslides, missile testing opera-
extortion, phishing and malware at- natural calamities such as lightning, tions, leakage from automatic sprinkler
tack. “Since our financial and other im- fire, volcanic eruption, bush fire, forest installations are also covered,” says Na-
portant data, including identity proofs, fire, earthquake, storm, flood, explo- val Goel, Founder & CEO, PolicyX.com.
are stored in our phone or laptop, any sion/implosion, anti-social activities
loss of the same can be a hassle. This is such as strikes/riots, burglary and theft. Travel Insurance
where a cyber insurance plan comes in The premium is reasonable, a few Around 34 countries such as Cuba,
handy. It is gaining impetus with the thousand rupees per year, depending USA, UAE, Turkey and Russia and
millennials,” says Dhirendra Mahya- on house type, structure and security. 26 Schengen countries have made
vanshi, Co-Founder, Turtlemint. “The premiums for the structure are travel insurance mandatory for tour-
86
THE WEALTH ISSUE — HEALTH INSURANCE
your health insurance should play a cover their children along with them- covered under the group health insur-
critical role in your financial planning selves in the same policy on a floater ba- ance policies provided by their employ-
as it prevents you from dipping into and sis against an individual basis, the sum ers. However, if you find that the cover
depleting your savings in case of medi- insured should be sufficient to take is insufficient you can consider top-up
cal emergencies,” adds Shanai Ghosh, care of multiple incidences of illness in plans as well” says Gurdeep Singh Ba-
Executive Director and CEO, Edelweiss the family during the policy period,” tra, Head, Retail Underwriting, Bajaj
General Insurance. says Rakesh Jain, Executive Director Allianz General Insurance.
“The premium is nothing com- and CEO, Reliance General Insurance. The next big question is whether
pared to what you would pay in case of If there is a family history of chronic to opt for individual plan or a family
hospitalization… My advice would be to ailments you need to look for higher floater plan.
act now, if you haven’t already.” coverage. “Ideally, people living in met- “An individual policy offers more
ros must have a health insurance cover extensive coverage. In the case of a
Deciding The Right Cover of around `10 lakh, the reason being the calamity, the sum assured may not be
One of the important things to decide is high cost of living” says Angirish. If you adequate for the entire family” says
the cover amount. “There is no set rule are living in other places, the minimum Angirish. If you are going for a family
to arrive at the amount of insurance starting point could be `5 lakh for each floater plan make sure that it has higher
one may require. One must account individual. coverage in case multiple members are
for medical inflation while purchasing hospitalised. One can also choose a
health insurance. Currently, medical Type Of Policy separate senior citizen cover for par-
inflation is hovering at 17 per cent per Having a corporate health policy is ents, says Batra.
annum,” says Angirish of Investonline. common among salaried people. These The Checklist
in. So, while deciding the cover amount policies are considered to offer wider One needs to understand the basic nu-
you have to think about the present as coverage. "Most of the group policies ances before buying a health insurance
well as the future. If you buy a policy at of companies have various advantages policy.
a young age, you will need it for a much like coverage of pre-existing diseases, “It’s imperative to thoroughly read
longer period, so the cover should be coverage of maternity expenses and through your policy documents in or-
sufficient for long duration. The good new-born child from the first day just der to be informed regarding the cover-
thing is the sooner you buy a health to name a few, which are usually not age you receive, the SI (sum insured) of
insurance policy the lower will be the available in case of individual policies,” your policy and also your exclusions (e.g
premium. So, you will be able to afford a says Jain. room category /capping, co-payment if
higher coverage. You can also buy a ba- But corporate policies also have any, sub-limits for any illness, etc). It’s
sic cover and enhance it at a later stage. their disadvantages. "It will be prudent also essential to have adequate cover-
While deciding the cover, you to have an individual plan along with age which is at par with medical costs,”
should also keep other factors in mind. your corporate plan. This ensures you says Batra. Also, compare the features,
"Some of the key factors one needs to have an added cushion, in case your coverage and premiums of different
consider are the size of the family and medical emergency goes over limits of policies before buying one, and disclose
age group of members. For example, your corporate,” says Ghosh. all details while filling your application
the sum insured opted by a newly mar- If you have a good corporate health form.
ried couple may be lower than a middle- policy then you add top-up plans as
aged couple. Also, if a couple wants to well. “Conventionally, most Indians are @naveenkumar80
Q: What was the problem you were Domain. He was also someone who understood the
grappling with? dynamics of the industry deeply. He advised me to con-
A: I started as a software developer fresh out of college sider two changes to further my growth — move to a cus-
in 1995. While I enjoyed being able to create solutions for tomer-facing role to get an end-to-end view of business,
complex problems, my interests diversified. I wanted to and move to global assignments to broaden my exposure.
go beyond coding. So, there were questions about when The advice helped me get a new perspective. I moved
to move, what to do, and whether it was the right move from the role of a systems and software engineer to con-
from a career standpoint. sulting and sales. I also moved to overseas territory.
Q: Who did you approach and why? Q: How effective was it in solving your
A: I have always been fortunate to have mentors and problem?
managers guide me. During that period, I reached out to A: I was still in my early 30s, and the shift was not easy.
my manager Pankaj Kathuria at my then employer Digital But I persisted. Soon, I was able to find my ground. I
Domain. I shared my aspirations candidly. He acted as started managing large global projects sitting across the
my bouncing board and helped me think with clarity in table with C-suite leaders of Fortune 100 clients, includ-
choosing the next steps in my career. ing Nestle, DHL, J&J, Cisco, and Cardinal Health. As I
worked through them, I gained confidence, started see-
Q: What was the advice you received? ing success and enjoyed the impact I was able to create in
A: He had observed me during my tenure at Digital my role.
90 Vol. 29, No. 19 for the fortnight September 7 to September 20, 2020. Released on September 7, 2020. Total number of pages 92 (including cover)