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  • Swiggy Case Study: Fundings, Business Model, Financials, and SWOT Analysis

    Swiggy Case Study: Fundings, Business Model, Financials, and SWOT Analysis

    If you are a foodie who enjoys placing online orders for meals, you have probably used Swiggy, but have you ever thought about the operations of this company, including its earnings, profits, etc.? 

    Worry not because today’s blog will cover details about Swiggy’s business model, financials, and SWOT Analysis. 

    Swiggy Company Overview

    Swiggy is an Indian food delivery platform that offers customers the ease of ordering from their preferred restaurants while sitting at home. In addition, they offer an instant package delivery service known as Swiggy Genie and an on-demand quick-grocery-delivery business under the name Instamart.  

    Swiggy was established in 2014 in Bangalore. The founders are – Sriharsha Majesty, Nandan Reddy, and Rahul Jaimini. In 2015, the company launched its mobile application after securing its first round of funding. 

    In the beginning, Swiggy had six delivery executives and 25 partner restaurants. Today, they operate in more than 500 Indian cities and have more than 3 lakh restaurant partners, 10 crore deliveries, and more than 2 lakh delivery partners. 

    Funding

    Swiggy has raised a total of $3.62 Billion over 17 funding rounds. Some of its most prominent ones are given below:

    Date of FundingFunding AmountRound NamePost Money ValuationInvestors
    Feb 06, 2015$970KSeries A$4.02MElevation Capital
    Dec 31, 2015$35MSeries C$134MHarmony Partners, RB Investments, Accel, Norwest Venture Partners, DST Global, Elevation Capital
    May 29, 2017$80MSeries E$399MNaspers, Accel, Bessemer Venture Partners, Harmony Partners, Norwest Venture Partners, Elevation Capital
    Dec 20, 2018$1BSeries H$3.2BNaspers, Tencent, DST Global, Hillhouse, Wellington, Meituan, Coatue
    Apr 05, 2021$1.25BSeries J$5.25BProsus, SoftBank Vision Fund, Alpha Wave, Amansa Capital, Accel, Qatar Investment Authority, GIC, Naspers, INQ Holdings, Alpha Wave, Lathe Investment, Wellington, Goldman Sachs Investment Partners, SoftBank, Carmignac, Goldman Sachs, Think Investments

    Read Also: Swiggy Vs Zomato: Business Model, Marketing Strategies, Strengths, and Financials Compared

    Business Model of Swiggy

    The company serves as a middleman between customers and restaurants through its smartphone application. They permit customers to browse restaurant menus and place direct orders.

    Most restaurants the organization works with are chain restaurants and local eateries. The restaurant also helps them reach a wider audience and increase their visibility.

    They also maintain a network of delivery partners known as Swiggy delivery executives. Partners pick up orders from the restaurant and drive them to customers’ locations.

    Swiggy food

    Revenue Model

    The company earns revenue through 4 broad segments:

    1. Commissions – Swiggy charges commissions from restaurants for each order placed through the platform. Typically, the commissions fall within the range of 15 % – 25% of the order value.  
    2. Digital Real-estate fee – Swiggy charges restaurants to give them more visibility on the platform.  
    3. Delivery Fee – In exchange for delivering the food quickly, Swiggy charges customers a delivery fee. 
    4. Subscription Fee – Swiggy offers a subscription service to customers that allows users to deliver food without paying a delivery fee, along with other benefits. 

    Note – The company is not listed on any stock exchanges, so the financials are not released in the public domain. Therefore, we have estimated these segments based on the services offered. 

    Financial Highlights of Swiggy

    Below are the Swiggy Financials:

    Balance Sheet

    Particulars31st March 202331st March 202231st March 2021
    Non-Current Assets5,26,6403,18,0701,31,580
    Current Assets2,21,12011,02,5002,02,400
    Total Assets11,47,76014,20,5703,34,670
    Equity9,80,990.0112,59,949.92,21,009.25
    Long Term Liabilities22,01028,41046,500
    Current Liabilities1,44,7601,32,210.167,160.5
    (Figures are in lakhs unless stated otherwise) 

    According to the above graph, the company’s non-current assets increased in value from Rs. 31,070 in FY 2022 to Rs. 5,26,640 in FY 2023. However, its current assets decreased significantly in FY 2023 compared to FY 2022. 

    Income Statement

    Particulars31st March 202331st March 202231st March 2021
    Revenue from operations4,65,3303,55,7102,00,800
    Total Income5,36,1304,04,6202,14,500
    Total Expenses8,88,6006,74,0903,31,050
    Profit before tax(3,75,760)(3,76,810)(1,31,360)
    Profit after tax(3,75,760)(3,76,810)(1,31,360)
    (Figures are in lakhs unless stated otherwise)

    The preceding table makes it clear that although the company’s revenue is growing year over year, its expenses are growing at the same rate, which means the business is still losing money.  

    Cash Flow Statement

    Particulars31st March 202331st March 2022
    Net Cash flow from operating activities(38,633)(24,729)
    Cash flow from investing activities33,395(1,07,276)
    Cash flow from financing activities(604)1,36,703
    (Figures are in lakhs unless stated otherwise)

    It is clear from the cash flow statement that the company’s cash flow from investing activities increased, indicating that it had received income from the sale of property. In contrast, its cash flow from operating activities declined further. The cash flow from financing activities should not be given much weight as it reflects the funding received from institutional investors.

    Note – As of 23rd March 2024, we could only find the past 2 years’ data for the cash flow statement.

    KPIs

    Particulars31st March 202331st March 202231st March 2021
    Debt Equity Ratio0.090.060.32
    Net Profit Margin (%)-70.09-93.13-61.24
    Return on Capital Employed (%)-65.58-26.27-57.51
    Current Ratio4.298.343.01
    Return on Equity (%)-38.30-29.91-59.44

    The company’s debt-to-equity ratio decreased in 2022 compared to 2021. However, it increased slightly in 2023, indicating a rise in debt, but the number is still far too low and thus should not affect the company’s operations.

    The company’s loss margins narrowed but still showcased the huge losses.

    Read Also: Blinkit Case Study: Business Model, Financials, and SWOT Analysis

    SWOT Analysis of Swiggy

    The Swiggy SWOT Analysis highlights its strengths, weaknesses, opportunities, and threats, showcasing its market position and growth potential.

    SWOT Analysis of Swiggy

    Strengths

    • Due to its widespread clientele and high popularity, Swiggy is regarded as one of the sector’s top providers of food delivery services. 
    • The company offers its customers a wide selection of cuisines thanks to its partnerships with various restaurants. 
    • Swiggy always strives to incorporate cutting-edge features into its mobile app.     The company has strong investors supporting it, giving it the money it needs to grow.  

    Weaknesses

    • Swiggy’s business relies heavily on its delivery partners; it may affect its earnings if they are unavailable or on strike. 
    • The business invests a lot of money in marketing and advertising to attract new clients and retain its current clientele. 
    • Despite their efforts, the company is not able to generate a profit as it has been experiencing losses for the last 3 financial years.
    • The company faces intense competition from other players in the market, such as Zomato.

    Opportunities

    • Swiggy hasn’t penetrated the tier 2 and tier 3 cities; therefore, concentrating on them could bring in new clients. 
    • They can diversify their product line beyond food and grocery items. 
    • They can form strategic alliances with cloud kitchens and other businesses, which will increase their income.
    • The business can package food products using environmentally responsible methods, drawing in customers who share its values.

    Threats

    • Their operations may be impacted by any modifications in the policies regarding labor welfare or food safety rules. 
    • The fees charged by them from restaurants are extremely high and thus could lead to restaurants switching to competitors. Such loss of partnerships could lead to reduced margins. 

    Read Also: Zomato Case Study: Business Model, SWOT Analysis, and Financials Explained

    Conclusion

    Swiggy is one of the biggest online food delivery services in India. Although the company has expanded quickly since its founding, it has been experiencing financial difficulties for a considerable amount of time. Though the food delivery industry is popular for its cash burn, Swiggy must find ways to turn profitable before the funding tap runs dry. 

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    Frequently Asked Questions (FAQs)

    1. Is Swiggy an Indian company?

      Yes, Swiggy is an Indian company founded in the year 2014 and has its headquarters in Banglore.

    2. What is the original name of Swiggy?

      The original name of Swiggy is Bundle Technology Limited. 

    3. Is Swiggy a profit-making company?

      Unfortunately, Swiggy is a loss making company and has been operating on periodic fundings.

    4. Who is the CEO of Swiggy?

      Mr. Rohit Kapoor is the CEO of Swiggy.

    5. Is Swiggy listed on the Indian Stock Exchange?

      No, swiggy is not listed on the stock exchange.

  • Enfuse Solutions Limited: IPO, Business Model, And SWOT Analysis

    Enfuse Solutions Limited: IPO, Business Model, And SWOT Analysis

    The country’s digital sector is constantly evolving, and businesses need cutting-edge solutions to stay ahead. Enfuse Solutions Limited is built on innovation and helping businesses across industries leverage data, analytics, and AI to achieve transformative results.

    In this blog, we will delve deeper into the SWOT analysis, business model, and key IPO details of Enfuse Solutions Limited.

    About the Company

    Business Model of Enfuse Solutions

    Enfuse Solutions Limited is an Indian company founded in 2017 that provides integrated digital solutions across various domains. The company works as a consultant for its clients.

    Business Model

    The company’s major source of revenue comes from providing digital services and integrated solutions. The company has a specialisation in:

    1. Data Management & Analytics

          The company helps businesses improve the quality and accuracy of their data to facilitate better decision-making. It ensures the highest standard of data integrity as well as availability with data management and data governance services.

          key components in Data Management & Governance that Enfuse Solutions offer are as follows: Master Data Management, Data Stewardship, Data Quality, Data Governance, Product Information Management (PIM)

          The company also partners with businesses to build and scale their analytics and AI capabilities, driving industry-wide transformation and analytics capabilities, including Product Analytics, Customer Analytics, Pricing Analytics, Campaign Analytics & Sales Analytics.

          2. E-commerce & Digital Services

            The company develops and manages custom e-commerce platforms to ensure a smooth online experience for businesses. E-commerce services cover a wide range of offerings designed to support and enhance online business activities, which include E-commerce Platform Management, Content Management, SEO and SEM Services, Digital Marketing, Web Analytics & Reporting, Customer Experience & Quality Assurance.

            3. Edtech & Solutions

              Enfuse Solutions also provides solutions in the education technology sector and other tech-related areas. Within Edtech, various solutions include Live Proctoring, Record & Review, Auto Proctoring, and artificial intelligence algorithms.

              4. Machine Learning (ML) & Artificial Intelligence (AI)

                The company offers AI and ML-enabled services, such as data tagging to improve content searchability and fuel other AI applications.

                Additionally, the company gets diversified revenue from multiple geographical locations across India and places outside India, including the USA, Ireland, Netherlands, Canada, etc. The company boasts around more than 150 clients and has successfully delivered 1000+ projects.

                Read Also: Exicom Tele-Systems IPO: Business Model, KPIs, SWOT Analysis, and FAQs

                Business Process

                The first step in the business process of Enfuse Solutions is identifying customers or prospects depending on their needs. This is a consistent process for generating new business.

                The incoming leads through websites or digital campaigns organised by the company. One thing to note is that customer references are considered the most important sources.

                After the customer identification, a detailed process to understand the requirement of the IT service required by the prospects in terms of efficacy, efficiency, and user interface is carried out. Once the needs of the customers are identified, the man hours required to achieve the requirement of the Client are estimated.

                The documentation and execution process with the client is completed and kept for record purposes. After end-to-end negotiation, the contract will be signed, carrying the terms and conditions agreed upon.

                Enfuse Solutions faces tough competition from several competitors offering similar products and services: Vertexplus Technologies Limited, Systango Technologies Limited,  eClerx Services Limited, etc.

                Key IPO Details

                IPO DateMarch 15, 2024 to March 19, 2024
                Price BandINR 91 to INR 96 per share
                Lot Size1,200 Shares
                Total Issue Size2,337,600 shares
                Issue TypeBook Built Issue IPO
                IPO TypeSME IPO
                Basis of AllotmentWednesday, March 20, 2024
                Initiation of RefundsThursday, March 21, 2024
                Listing DateFriday, March 22, 2024  

                Objectives of the Issue

                1. Repayment of certain borrowings availed by the company.

                2. To meet working capital requirements.

                3. For general corporate purposes.

                Enfuse Solutions Financial Statements

                Have a look at the key metrics of the Enfuse Solutions Limited (in INR crore):

                Key MetricsFY 2023FY 2022FY 2021
                Total Assets11.658.894.61
                Total Sales26.1025.5617.20
                Total Expenditure22.1322.8715.11
                PAT2.931.981.55

                Cash Flow Statements

                 ParticularsFY 2023FY 2022FY 2021
                Net cash flow from operating activities1.341.962.17
                Net cash flow from investing activities(1.36)(4.18)(2.36)
                Net cash flow from financing activities(0.10)2.28(0.04)
                Cash equivalents at the end of the year0.130.250.19
                *all figures are in INR crore

                Read Also: AVP Infracon IPO: Overview, Key Details, Financials, Strengths, and Weaknesses

                Enfuse Solutions SWOT Analysis

                SWOT analysis of Enfuse Solutions

                Strengths

                1. The company’s global presence as an IT solutions provider helps in the expansion of client-base across diverse geographical markets. Further, this international footprint keeps the company at the forefront of the technological innovation.
                2. A passionate leadership team and a highly skilled workforce have combined to drive impressive growth and a commitment to innovation.
                3. The company delivers a broad range of IT solutions to diverse industries by partnering with established players through subcontracting agreements.

                Weaknesses

                1. High dependence on sub-contractors might limit control over project delivery and quality.
                2. The company is relatively new and might have lower brand recognition than established competitors.
                3. The IT solutions market is competitive in India and needs constant innovation and differentiation.

                Opportunities

                1. Expanding into new geographical locations with high growth potential can be a significant opportunity.
                2. Emphasising on specific high-demand industry sectors can increase the company’s expertise and brand recognition.
                3. Staying informed about and capitalising on new technologies can lead to new service offerings and attract new clients.

                Threats

                1. The current revenue streams are concentrated in the US and Netherlands, and any adverse developments in these markets can affect the business operations of the company.
                2. A competitive market for technology services can put pressure on pricing, which can reduce the share of business from clients and can have a significant impact on revenues and profitability.
                3. The business could also suffer substantial setbacks because of cyberattacks or security breaches within the company’s system, or of the clients can adversely affect the business. 

                Read Also: Ullu Digital Case Study: Business Model, Financials, and SWOT Analysis

                Conclusion

                To sum it up, Enfuse Solutions is positioned for impressive growth in the ever-evolving IT landscape. Their global presence, focus on innovation, and skilled workforce empowers them to offer exceptional value to clients across diverse industries. By making an effort to stay ahead of the curve on emerging technologies and geographic markets, the company is well-equipped to transform businesses.

                Frequently Asked Questions (FAQs)

                1. What does Enfuse Solutions do?

                  Enfuse Solutions is a leading provider of integrated digital solutions, including data management, e-commerce, AI &ML, and education technology solutions.

                2. In which year the company was founded?

                  The company was founded in the year 2017.

                3. Is Enfuse Solutions a good investment option?

                  This depends on the investor’s risk tolerance and investment goals. It is a relatively new company, so do your research and consult financial advisor before investing. Further, it is an SME company; one can buy its shares in a lot only, and the lot size is 1200 shares (app. INR 1.35 lakhs).

                4. Where is Enfuse Solutions located?

                  The company is headquartered in Bombay, India but functions across multiple geographies.

                5. How did the company’s share price perform on the listing date?

                  On the listing date, i.e., 21 March 2024, the share price of Enfuse closed at around INR 115, which is almost 20% up from its issue price (INR 96).

              1. Krystal Integrated Services: IPO, Business Model and SWOT Analysis

                Krystal Integrated Services: IPO, Business Model and SWOT Analysis

                Did you know there is an Indian company recently listed on NSE and BSE, which provides integrated facility management services (FMS) such as housekeeping, sanitation, gardening, plumbing services, pest control, etc?

                The company is a nationwide provider of such services and offers a powerful combination of extensive geographic reach, exceptional service quality and unwavering expertise.

                But what truly sets Krystal Integrated Services Limited apart? Let’s dive deep into the key IPO details, company overview, financial statements, and SWOT analysis.

                Krystal Integrated Services Overview

                Krystal Integrated Services Limited is a prominent player in India’s facility management segment with a major focus on sectors like healthcare, education, public administration, railways, airports, etc. offering a range of services across various industries. The company was established in the year 2000 and has grown into a leader with a strong track record of success. The national footprint allows them to cater for the diverse needs of customers.

                Business Model

                Business Model of Krystal Integrated

                Krystal Integrated Limited offerings include soft services such as housekeeping, sanitation, landscaping and gardening, hard services such as mechanical, electrical and plumbing services, solid, liquid and biomedical waste management, pest control and façade cleaning and other services such as production support, warehouse management and airport management services (including multi-level parking and airport traffic management).

                The company also provides staffing solutions and payroll management to its customers, as well as private security and manned guarding services and catering services.

                Additionally, Krystal also offers solutions to the government sector has a track record of executing large contracts and is among select companies in India to qualify for and service large, multi-location government projects. Some of the company’s government customers include Maha Mumbai Metro Operation Corporation Limited and the Education Department, Brihanmumbai Municipal Corporation.

                Furthermore, the company offers services in 14 states and operates 21 branch offices across India.

                Key IPO Details

                IPO DateMarch 14, 2024 to March 18, 2024
                Price BandINR 680 to INR 715 per share
                Lot Size20 Shares
                Total Issue Size4,197,552 shares
                Issue TypeBook Built Issue IPO
                IPO TypeMainboard IPO
                Basis of AllotmentTuesday, March 19, 2024
                Initiation of RefundsWednesday, March 20, 2024
                Listing DateThursday, March 21, 2024

                Objectives of the Issue

                There are three key objectives of the issue:

                1. Repayment/prepayment, in full or part, of certain borrowings availed of by the company.

                2. Funding working capital requirements and capital expenditure for the purchase of new machinery.

                3. General corporate purposes.

                The promoters of the Company are Prasad Minesh Lad, Neeta Prasad Lad, Saily Prasad Lad, Shubham Prasad Lad and Krystal Family Holdings Private Limited. The pre-issue shareholding of the promoters was at 99.99%. Currently, i.e., after listing, the shareholding of promoters stands at 69.96%.

                Financial Statements Analysis

                Have a look at the key metrics of the company (in INR crores):

                Key MetricsFY 2023FY 2022FY 2021
                Total Assets343.46404.38338.47
                Total Borrowings51.0574.5368.39
                Total Revenue703.96550.85468.30
                Total Expenses641.94510.75447.88
                PAT38.4426.2716.82
                EBITDA66.5047.4531.10

                Basic EPS of the company for the FY 2023, 2022, and 2021 stands at 33.33, 22.69, and 14.45, respectively.

                Key metrics of Krystal Integrated Services

                Cash Flow Statements

                ParticularsFY 2023FY 2022FY 2021
                Cash flows from operating activities71.7819.987.95
                Cash flows from investing activities(32.00)(17.89)17.60
                Cash flows from financing activities(30.89)(3.05)(26.77)
                Cash and cash equivalents as of the end of the year9.370.491.45
                *all the figures mentioned above are in INR crores
                Cash flows of Krystal Integrated Services

                Inferences from the above figures:

                1. The revenue of the company has shown steady growth over the past few years, showcasing an increase in its market presence and operational scalability.
                2. The PAT has also seen impressive growth, i.e., roughly a two-fold jump in the past three years which suggests effective management of expenses.
                3. Positive operating cash flows signify the company’s ability to generate cash from its core operations, which is important for the financial health of the company.

                Read Also: Gillette India Case Study: Business Model, SWOT Analysis, and Financial Overview

                SWOT Analysis of Krystal Integrated Services

                SWOT analysis of Krystal

                Strengths

                1. With a diverse portfolio and extensive reach, Krystal Integrated Services stands out as a top pan-India facility manager.
                2. The company is a trusted partner for complex government projects, with a proven ability to handle large-scale contracts across multiple locations.
                3. By combining unwavering quality with cutting-edge services, Krystal fosters strong and lasting partnerships with its key customers.
                4. The company’s PAN India reach combined with expertly trained team, allows the company to tackle projects of any size.

                Weaknesses

                1. A significant portion of the company’s revenue comes from a limited number of clients, which makes them vulnerable and increases the concentration risk.
                2. While government contracts offer stability, securing them can be unpredictable. Additionally, changes in government regulations could negatively impact the company.
                3. The company relies heavily on a large workforce, which can be expensive and complex to maintain and any kind of labour shortages could hinder their ability to fulfil existing contracts.
                4. Delivering services across diverse environments needs constant adaptation to local needs. This can lead to inefficiency in maintaining quality control across different project locations.

                Opportunities

                1. The Indian facility management sector is poised for growth which will eventually create a fertile ground for KIS Limited to expand their service offerings and client base.
                2. By seeking new clients in several industries beyond government contracts, the company can reduce their dependence on a few customers. This would help them mitigate risks and open doors to new revenue streams.
                3. Embracing technological advancements like automation and data analytics can improve the company’s efficiency and streamline business operations.
                4. As environmental awareness grows, Krystal can develop eco-friendly facility management solutions that cater to businesses seeking sustainable practices.

                Threats

                1. The dependence on government contracts exposes the company to the volatility of the public bidding process, with no guarantee of future success.
                2. The company’s revenue from operations is highly dependent upon a limited number of customers.
                3. The diverse nature of the services across various segments requires constant adjustments, which can be disruptive and cause inefficiencies.
                4. The manpower-intensive nature of the business can create a significant risk of stagnation and it will become difficult for the company to attract and retain enough qualified personnel to keep pace with evolving industry demands.

                Read Also: AVP Infracon IPO: Overview, Key Details, Financials, Strengths, and Weaknesses

                Conclusion

                Krystal Integrated Services is well-positioned to capitalise on the burgeoning Indian facility management market. With their commitment to quality, adaptability, and a skilled workforce, they are poised for continued success.

                As they recently navigated through their IPO in an increasingly competitive landscape, their focus on client diversification and innovative service offerings will be important to watch.

                Frequently Asked Questions (FAQs)

                1. What does Krystal’s integrated services do?

                  The company is a leading Indian management company offering a wide range of services like housekeeping, security, waste management, staffing, etc.

                2. Does Krystal Integrated Services only work with the government?

                  No, while they have a strong presence in government contracts, the company also serves clients in several industries.

                3. What are some key challenges that the company can face?

                  Retaining skilled workers and dependence on a limited number of clients are the challenges that the company may encounter.

                4. When was Krystal Integrated Services established?

                  The company was established in the year 2000.

                5. What was the performance of the company’s share on the listing date?

                  On the listing date, i.e., 21 March 2024, the stock was opened at INR 785 (almost 10% up). However, stock is closed at INR 713, slightly below its issue price.

              2. Global Financial Crisis 2007-08: Causes, Key Events, and Impact on Indian Stock Markets

                Global Financial Crisis 2007-08: Causes, Key Events, and Impact on Indian Stock Markets

                We distinctly remember the aftermath of the Global Financial Crisis 2007-08, but very few of us know the reasons behind its occurrence. It was not a sudden event but rather a culmination of risky practices and vulnerabilities within the financial system. 

                What began as a seemingly positive trend in the housing market ultimately unraveled into a domino effect that weakened the global economies. 

                Today’s blog discusses the causes of the Global Financial Crisis, the unfolding drama, and its lasting impact.               

                Global Financial Crisis 2007-08

                The Global Financial Crisis, also known as the 2007-08 financial crisis, was a severe economic downturn that began in the United States and then spread throughout the world. It is regarded as the most serious economic crisis since the Great Depression.

                Global Crisis 2008

                Global Financial Causes 2007-08

                The causes of global financial crisis 2007-08 were not due to a single factor but rather a combination of systemic issues within the financial system. Here are some key causes.

                1. Subprime Mortgage Crisis

                One of the primary triggers was the collapse of the housing market bubble in the United States, fuelled by the issuance of subprime mortgages. These mortgages were given to borrowers with poor credit history or insufficient income to afford them and were often bundled together into complex financial instruments called mortgage-backed securities (MBS). The assumption was that housing prices would keep rising, making these investments safe. When many of these borrowers defaulted on loans, the value of mortgage-backed securities significantly declined.

                1. Lack of Regulation

                Financial Institutions were allowed to take on excessive risk with little oversight. There were lax regulations on mortgage lending practices and the creation of MBS, which masked the underlying risk. The risk profile of MBS products was downplayed to make them seem more attractive to investors and also opened the door to fraudulent practices like income falsification.

                1. Bubble Burst

                Fuelled by easy credit, housing prices soared in many countries, creating a bubble. When the bubble burst, house prices plummeted, and many homeowners defaulted on their mortgages. This triggered a wave of defaults on MBS, causing their value to collapse. Banks and investors also engage in short-term borrowings like overnight loans to buy illiquid assets, which is risky. This created a situation where they depended heavily on lenders constantly renewing these loans to avoid defaulting.

                Housing crisis 2008

                Global Financial Key Event 2007-08

                With trigger points in the US housing market causing a domino effect, the Global Financial Crisis (GFC) unfolded like a disaster movie in slow motion. 

                1. Low-interest rates and deregulation in the mortgage industry fuelled a surge in risky lending practices. 
                2. Subprime mortgages became increasingly common. Fuelled by easy credit, housing prices soared and people bought houses they could not afford.
                3. When interest rates started to rise and the housing market was at its peak, many homeowners defaulted, leading to a wave of foreclosures, with millions losing their homes.
                4. As the value of MBS dropped, financial institutions that held them faced massive losses. Banks became wary of lending to each other, fearing insolvency, which froze credit markets.
                5. The panic spread throughout the financial system. Major investment banks like Lehman Brothers collapsed, and stock markets around the world crashed.
                6. Businesses struggled to get loans, hindering their ability to invest and grow. This led to widespread layoffs and a global recession.
                7. To prevent a complete economic meltdown, governments around the world implemented bailout packages for banks and stimulus programs to revive the economy.

                The GFC’s impact was far-reaching, causing widespread unemployment, economic hardship, and a major loss of trust in the financial system. The recovery process was slow and uneven, highlighting the need for stricter regulations and a more responsible approach to lending practices.

                Read Also:  Trading For Beginners: 5 Things Every Trader Should Know

                Impact on Indian Stock Markets

                The GFC of 2008 had a significant impact on the Indian markets, even though India was not directly at the centre of the storm.

                1. As risk gripped global investors, FIIs pulled out funds from the Indian Stock Market. This exodus of foreign capital led to a sharp fall in stock prices.
                2. With global risk rising, the Indian Rupee depreciated significantly against the US dollar. It fell roughly 20% between April 2008 and November 2008, eventually making imports costlier. However, the RBI took measures to stabilize the situation.
                3. The BSE SENSEX witnessed a sharp fall, dropping over 56% between its peak in January 2008 and its trough in November 2008.
                indian market crash in 2008

                Corrective Actions Taken by the RBI

                The RBI could not single-handedly control the GFC since it was a global phenomenon. However, some important steps were taken to mitigate the crisis.

                1. The RBI injected liquidity into the financial system through open market operations which helped ease credit flow for businesses and individuals.
                2. The Repo rate was lowered (the rate at which RBI lends money to commercial banks). This made it cheaper for banks to borrow reserves and lend further.
                3. The RBI sold US Dollars from its foreign exchange reserves to support the rupee’s value during its depreciation phase.

                While the measures could not completely prevent the slowdown, RBI helped India bear the storm of the GFC.

                Read Also: How does the Price of Oil affect the Stock Market?

                Conclusion

                The GFC’s scars ran deep. It was not just a financial crisis but a turning point in our lives. It eroded public trust in financial institutions, widened the gap between rich and poor, and fuelled social unrest. 

                The long-term implications of the GFC can still be felt while shaping economic policies and understanding risk. Though the global economy eventually recovered, the GFC is a stark reminder of the importance of responsible lending practices and a commitment to financial stability.

                Frequently Asked Questions (FAQ)

                1. What was the Global Financial Crisis?

                  The GFC was a major financial crisis that began in 2007 and had severe repercussions globally. It originated from the US housing market collapse.

                2. In which year did GFC happen?

                  GFC happened in the year 2007.

                3. How did the GFC impact the global markets?

                  Stock markets worldwide crashed, with some indices dropping over 50%. Volatility surged and highlighted investors’ fear, and interbank lending came to a standstill due to fear of insolvency.

                4. What was the long-term impact of the GFC?

                  The GFC led to stricter regulations. The focus on risk management increased and investors became more cautious in emerging markets.

                5. How did GFC unfold?

                  GFC unfolded in multiple stages. It started from the Housing bubble and subprime lending in the middle 2000s, bubble bursts (2006-07), MBS unraveling and financial panic (2008) and global recession (2008-09).

              3. Bandhan Long Duration Fund NFO: Objective, Benefits, Risks, and Suitability Explained

                Bandhan Long Duration Fund NFO: Objective, Benefits, Risks, and Suitability Explained

                The Bandhan Asset Management Company is launching a new mutual fund offering in the debt category, the “Bandhan Long Duration Fund.” Let us begin by analyzing the New Fund Offer (NFO). 

                Debt Fund

                A debt fund is a mutual fund that predominantly invests in fixed-income securities such as government bonds, corporate bonds, debentures, treasury bills, etc. These are suitable for investors who are risk averse and want stable and consistent returns in their portfolio.

                Long Duration Fund

                This category of debt fund primarily invests in fixed-term securities with longer maturity, i.e., from 7 years to 20 years or more.

                Benefits of Bond Investing

                1.  The country’s current account deficit is decreasing, creating a stable interest rate environment and lowering the need to issue bonds to cover the deficit. 

                2.  The government aims for a 4.5% fiscal deficit by FY 26, which suggests that there will be a decrease in the bond supply, which will be beneficial for the market.

                3.  The country’s Core inflation remains below 4% as the government is effectively managing the food supply chain.

                4.  An extra 23–25 billion in foreign investment is anticipated to enter the Indian bond market due to India’s inclusion in global indices.

                5.  As global inflation eases, reduction in the rate of interest is expected.

                Bandhan AMC

                It was first founded as IDFC AMC in 2000, and by 2020, it was one of India’s top 10 AMCs in terms of AUM. In 2023, IDFC AMC was acquired by a group of institutions led by Bandhan Financial Holdings Limited. Bandhan ended up controlling 60% of the AMC, and thus rebranded it as Bandhan AMC. 

                The stakeholders include Chrys Capital (20%) and Singapore’s sovereign wealth fund, GIC (20%). 

                Bandhan Long Duration Fund NFO

                Read Also: What is NFO? Features, Types, & How to Invest in It

                Bandhan Long Duration Fund

                Bandhan Asset Management Company is coming up with a new fund offering named “Bandhan Long Duration Fund” which will open for subscription on 5th March 2024 and close on 18th March 2024.

                Investment Objective

                The company intends to diversify its portfolio into debt and money market securities in such a manner that the Macaulay duration of the fund is greater than 7 years. Thus, it intends to generate an optimum return over the long run.

                Key Points

                Date of Issue5th March 2024
                Closing Date18th March 2024
                CategoryDebt
                Sub-categoryLong Duration
                PlanRegular and Direct
                OptionsGrowth and Income Distribution Cum Capital Withdrawal (IDCW)
                Minimum Purchase AmountINR 1000
                Exit Load0%
                BenchmarkNifty Long Duration Debt Index A-III.

                Fund Manager

                Mr. Gautam Kaul, the senior fund manager of this fund, would supervise the fixed-income fund. Having managed over 27000 crores of assets using both active and passive techniques, he has a solid grasp of the fixed income securities market. 

                He worked for Edelweiss Asset Management Company before joining Bandhan Mutual Fund and received his MBA and B.Com. degrees from the University of Pune, where he focused on accounting and finance. 

                Benefits and Risks 

                Similar to any other NFO, the Bandhan Long Duration Fund NFO also holds its definite set of advantages and risks. Below mentioned are some of the key advantages and risks involved. 

                Benefits 

                1.  High-quality debt instruments with the lowest credit risk will be the fund’s primary investment focus. Thus making it suitable for risk-averse investors. 

                2.  Fund management will investigate opportunities in bonds issued by governments and corporations with maturities longer than seven years. Hence, long-term investors would benefit from this fund. 

                3.  The fund manager of the Bandhan Long Duration Fund has managed fixed-income assets for over 20 years. Hence, the investors would benefit greatly from the manager’s extensive work experience.  

                Risks

                1.  The fund needs to maintain a minimum duration of 7 years which will limit its flexibility in case of any adverse situation.

                2.  Putting money into a long-term debt fund will yield smaller returns. You won’t have the chance to earn larger gains if the stock market experiences a bull run. 

                Risks of Bandhan Long Duration NFO

                Suitability

                1.  Investors who are looking for higher returns in debt funds.

                2.  Investors who are looking for consistent returns.

                3.  Investors who want to reduce the risk associated with reinvestment by maturing their portfolio. 

                4.  Retired investors who can’t take on the risk associated with equities need a systematic withdrawal strategy to provide them with a steady income.

                Did you know? 

                After April 1, 2023, debt funds will no longer enjoy indexation benefits and thus will be taxed at applicable slab rates. 

                Read Also: Bandhan Bank Case Study: Business Model, Financial Statement, SWOT Analysis

                Conclusion

                In summary, long-term debt funds are a solid option for investors who want a consistent return without taking on too much risk and are wary of market fluctuations. After carefully assessing the risk involved, one can invest in this fund based on their investing horizon and risk tolerance.  

                S.NO.Check Out These Interesting Posts You Might Enjoy!
                1NFO Alert: PGIM India Large & Mid Cap Fund
                2What Is An IPO Mutual Fund? Should You Invest?
                3What is PSU Index? Performance, Comparison, Benefits, and Risks Explained
                4Top AMCs in India
                5The Rise of ESG Funds: Overview, Growth, Pros, Cons, and Suitability

                Frequently Asked Questions (FAQs)

                1. What is the Long Duration Fund’s tenure?

                  The tenure of a long-duration fund is more than 7 years (Macaulay Duration).

                2. Who is the fund manager of Bandhan Long Duration Fund?

                  The fund manager of the Bandhan Long Duration Fund will be Mr. Gautam Kaul. He has managed debt funds for the past 20 years. 

                3. Was Bandhan AMC named IDFC AMC before?

                  In 2023 Bandhan purchased IDFC AMC; as a result, it is now referred to as Bandhan Mutual Fund.

                4. When does Bandhan’s long-duration fund NFO close?

                  The NFO’s subscription period will end on March 18, 2024.

                5. Is it possible to use SIP to invest in Bandhan’s long-duration fund?

                  You may invest with a SIP of INR 1000 in the Bandhan long-term fund.

                Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.

              4. IIFL Case Study: RBI Ban, Implications for Investors, Financials, and Road Ahead

                IIFL Case Study: RBI Ban, Implications for Investors, Financials, and Road Ahead

                IIFL Finance, a major player in the Indian financial market, has been in the news recently, but not for the usual reasons. The RBI took severe steps regarding IIFL’s gold loan practices, leaving investors anxious about the situation.

                Today’s blog will uncover what caused this commotion, what it means for IIFL and its investors, and the details of the RBI’s action.

                IIFL Overview

                IIFL, or Infoline Finance Limited, is a leading diversified financial services company headquartered in Mumbai, India. The company was founded in 1995 by Nirmal Jain; since then, IIFL has grown into a major player in the Indian financial market. IIFL offers a wide range of products and services in the financial markets and caters to retail and institutional clients.

                Subsidiaries

                The company holds 3 major subsidiaries and has a large network of branches across India, thus making the company accessible to a wide range of customers.

                1. IIFL Home Finance Limited – Registered in 2009, it provides affordable home loans, small ticket-sized home loans, secured MSME Loans, and project loans.
                2. IIFL Samasta Finance Limited – Incorporated in 2008, it provides microfinance services to women enrolled as members and organized as a Joint Liability Company (JLG).
                3. IIFL Open Fintech Private Limited – It offers neo-banking services to consumers, micro-enterprises, and retail customers, including lending, investment, and wealth management services to certain target groups.

                Did you know?

                IIFL Samasta Finance Limited was formerly known as Samasta Microfinance Limited. 

                The Story

                As of 26th March 2024, IIFL Finance Ltd’s share price is down by 46% in just the past month! Let’s have a quick rundown of what happened.

                The Reserve Bank of India has stopped IIFL Finance from issuing new gold loans, disbursing funds for existing approved gold loans, and selling or transferring the existing gold loans to other institutions. However, IIFL can continue to manage its current gold loan portfolio, which means the company can collect repayments from existing borrowers and recover any outstanding loans through standard procedures.

                Reasons behind the Ban

                The RBI has taken this action to address some concerns regarding IIFL’s gold loan practices.

                The RBI conducted a financial review of IIFL Finance Limited on March 31, 2023. RBI identified significant concerns with IIFL’s gold loan portfolio during this inspection. These concerns included serious discrepancies in how the purity and weight of the gold were assessed and certified. This occurred when loans were approved, and gold was auctioned off after loan defaults.

                The other concerns highlighted by the RBI included lending more money than allowed against the gold value, handling large cash transactions exceeding regulations, failing to auction off gold collateral after defaults properly, and needing to be clearer about customer fees.

                IIFL Gold loan

                Implications for Investors

                The RBI’s action on IIFL’s gold loans will have several implications for investors.

                1. Gold loans are a significant part of IIFLs operations (~32% of loan assets). The ban on issuing new loans could lead to a decline in profits. We can anticipate a drop in the EPS if the ban is extended further.
                2. This action raises questions about IIFL’s internal controls and compliance practices. Thus, it has damaged the investor’s confidence and led to a more than 46% decline in the stock price.
                3. The duration of the restrictions imposed by the RBI remains to be determined, making it difficult for investors to assess the long-term impact of the ban on business operations.

                Hence, it is advised that investors should closely monitor the developments and consider several other factors before investing in IIFL.

                The Road Ahead

                The road ahead for IIFL is bumpy as the ban on disbursing new gold loans, along with other crippling limitations, acts as a major hurdle for the company’s growth. Recovering profitability and investor confidence hinges on getting these restrictions lifted immediately. 

                IIFL needs to address the concerns about gold loans. This may involve taking stringent procedures, improving transparency, imposing internal controls, etc. The company’s governance issues must be streamlined to the best of the management’s capabilities if they hope to recover investor confidence. 

                In recent news, it was declared that RBI will start special audits of 2 NBFCs – IIFL Finance and JM Financial on April 12. 

                Check out our blog here to learn about the RBI’s ban on JM Financial.   

                Now, let’s have a look at the company’s financials. 

                Read Also: Rectangle Chart Pattern: Definition, How It Works, Advantages, and Limitations

                Financial Highlights of IIFL

                Let us have a quick overview of the current company financials

                Balance Sheet and Income Statement

                Key MetricsFY 2023FY 2022
                Loans40,001.1133,692.89
                Investments3,511.001,192.16
                Total Assets53,001.3245,910.44
                Total Liabilities42,799.1839,440.71
                Total Income8,447.117,023.61
                Total Expenses6,334.595,487.63
                Profit After Tax1,607.551,188.25
                (all the figures mentioned above are in INR crore)
                IIFL BS and IS

                The graph shows a healthy increase in Total Assets figures for FY23. The surge in Loans largely fueled the growth. Thus, the ban on disbursing loans could significantly cripple the company’s balance sheet. 

                Cash Flow Statement

                Cash Flows FY 2023FY 2022
                Net cash (used in)/ generated from operating activities(4,940.56)1,783.73
                Net cash (used in)/ generated from investing activities(2,730.45)(995.79)
                Net cash (used in)/ generated from financing activities5,090.042,780.80
                (all the figures mentioned above are in INR crore)
                IIFL CFS

                The graph indicates heavy turbulence in the Cash Flow Statement. This turbulence could increase significantly in the coming quarterly results due to the ban imposed by RBI. 

                Read Also: JM Financials Case Study: RBI Ban, Segments, and the Road Ahead

                Conclusion

                On a parting note, IIFL’s recent stumbles with the RBI have raised a question about the company’s image. Investors are also facing uncertainty with both short-term challenges and long-term improvements. The road ahead for IIFL is challenging but not necessarily a dead end. The company’s success will depend on how effectively it resolves the issues and reshapes its business in the long term.  

                Keep yourself updated with further developments as IIFL charts its course forward.

                Frequently Asked Questions (FAQs)

                1. What is the issue with the IIFL?

                  RBI identified issues with the company’s gold loan practices and banned IIFL from issuing new gold loans.

                2. What does the ban mean for existing borrowers?

                  Existing gold loan borrowers will continue making repayments as usual.

                3. Should I sell my IIFL shares?

                  We advise you to research and consult a financial advisor before making any investment decision.

                4. How long will the RBI restrictions last?

                  The duration of the ban remains uncertain as it completely depends on the company’s ability to navigate the situation.

                5. In FY23, the company saw a significant increase in the total assets. What was the reason for the surge?

                  The increase in loan disbursement largely caused IIFL’s growth in total assets. Since a ban has been imposed on this asset type, the future of the balance sheet remains uncertain.    

              5. Explainer on Imitation Investing: Psychology, Advantages, Limitations, and Strategies

                Explainer on Imitation Investing: Psychology, Advantages, Limitations, and Strategies

                Have you ever tried to imitate a renowned investor’s portfolio or investment approach? Well, there’s a term for it, “Imitation Investing”.

                Today, we’ll describe the idea of imitation investing, its features, benefits, etc.

                Imitation Investing Overview

                Imitation investing, or copycat investing, is the process of mirroring the investment strategies of established market players. This method appeals to individuals seeking to capitalize on renowned investors’ expertise and successful track records, aiming to replicate their financial success.

                Hence, it is important to understand that there’s no guarantee that you’ll make money with this investment.

                Imitation Investing Methodology

                • Platform Selection: Choose a platform that allows tracking and replicating the portfolios of leading investors.
                • Investor Selection: Identify a successful investor whose strategy aligns with your financial goals and risk appetite.
                • Portfolio Allocation: Invest your funds in the same assets as your chosen investor.
                • Monitoring: Keep a close watch on the investor’s portfolio changes to adjust your investments accordingly.
                Benefits of Imitation Investing

                Imitation Investing Psychology

                • Fear of Missing Out – When we witness someone making money, we tend to become anxious about missing out on profitable opportunities, which makes us follow the portfolios of different investors before conducting adequate analysis. 
                • Lack of Information – Most investors think that renowned traders are better because they can access more information. Hence, copying their trades may increase profits in the short run.  
                • Trust –  We tend to trust investors who have earned above-average returns. This trust grows stronger over time, leading to us blindly following such traders. 

                Read Also: Explainer on Cigar Butt Investing: Features, Advantages, Limitations, and Suitability Explained

                Imitation Investing Advantages

                • Saves Time – It helps an investor save time when researching before investing.
                • Expertise – The investor may benefit from the expertise of successful investors due to their meticulous stock selection, complex strategies, and experience in the market.
                • Cost Efficient – Imitation investing is a financially advantageous strategy since it allows the investor to avoid paying for expert advice since certified advisors charge different costs for making financial recommendations. 

                Imitation Investing Limitations

                • Blind Imitation: Copying another investor’s moves without understanding the underlying rationale or market conditions can lead to poor investment outcomes.
                • Time Lag – The delay between an investor’s action and the imitator’s replication can result in missed opportunities or reduced profitability.
                • Investment Horizon – Every investor has unique financial goals and timelines, which may not always align with those of the investor being copied.
                • Risk-taking ability – Individual risk profiles vary, and blindly following another investor’s strategy may lead to too much or too little risk relative to one’s comfort level.
                Limitation of Imitation Investing

                Strategies for Effective Imitation Investing

                • Portfolio Review – Regularly assess your investment portfolio to ensure it remains aligned with the strategic moves of the chosen investor.
                • Stay Updated – Stay updated on all market trends, economic indicators, and financial news to understand the broader context of your investment decisions.
                • Personal Research – Do not blindly copy the trade of any investor; you must first understand the rationale behind their decisions.
                • Diversification – Diversifying the portfolio into different asset classes will help you reduce the overall portfolio risk as it ensures that all eggs are not in the same basket. 
                • Track Record – Before following an investor, thoroughly review their performance history, investment style, and strategy adaptability to changing market conditions. This will give you greater insight into the investor’s ability to generate higher returns. 

                Read Also: What is Contrarian Investing?

                Conclusion

                Imitation investing can be used as a strategic approach to learn from the expertise of successful investors. However, it’s important to apply it with a clear understanding of its benefits and limitations. 

                You can make more informed investment decisions by combining the insights from proven investors with your own research and judgment. This combination of techniques allows investors to improve their investment outcomes in the long run.

                Frequently Asked Questions (FAQs)

                1. How can I pick a profitable trader?

                  Selecting a profitable trader is a challenging process that needs extensive study into their track record, level of risk tolerance, investing philosophy, etc. 

                2. Should I develop my investment skills or copy only the investment style? 

                  To become a successful investor, you must develop your investment skills.

                3. Is Imitation Investing a suitable strategy?

                  Imitation Investing can sometimes be profitable for an investor, but it does not give you a guaranteed profit.

                4. Should I copy every trade of a successful investor?

                  No, you should not copy every trade of a successful investor, as their risk-taking capacity could differ from your risk profile.

              6. What is AIF? Characteristics, Types, Taxation, Benefits, and Risks Explained

                What is AIF? Characteristics, Types, Taxation, Benefits, and Risks Explained

                In the world of finance, investment products are increasing at a very high speed because investors are continuously looking for different investment opportunities that will fetch them higher returns.

                So, in today’s blog, we will introduce you to a new-age investment product gaining popularity among the elite class of investors.

                Overview of AIF

                Alternative Investment Funds (AIF) are designed to cater to the needs of Ultra High Net Worth Individuals. These types of funds pool money from investors and invest them into different non-traditional asset classes. The asset classes include private equity, venture capital, real estate, hedge funds, commodities, etc. These investment funds carry a higher risk than any other asset class.

                Characteristics

                1. Diversification – These funds invest the pool amount into different asset classes that are not correlated with the market.

                  2. High Risk – The AIF funds possess a risk higher than any other investment product.

                  3. Liquidity – The AIF funds provide lower liquidity as most of them have a lock-in period.

                  4. U-HNI Client – The product caters to investors with a higher risk-taking capacity and high net worth, known as Ultra High Net-Worth Individuals. 

                  5. Fee Structure – The fee charged by AIFs is much more than traditional AMCs. 

                  Minimum Investment

                  The minimum investment stated by SEBI to invest in an AIF is 1 crore.

                  Note – Investors who are employees or directors of the AIF can invest with a minimum value of twenty five lakh rupees.

                  AIF in India

                  Types of AIF

                  Based on the investment product and risk, the AIF is categorized into 3 categories –

                  Category 1 AIF 

                  Funds collected in this category are invested in small and medium-sized businesses (SMEs), social initiatives, startups, and industries backed by government or regulatory support.

                  The funds included in this category are-

                  1. Venture Fund and Angel Fund– New-age startups, which require funding in their initial stage, approach a venture capital fund for capital infusion and in exchange, VC firms take up a sizeable portion of the company’s equity.

                  Angel fund is a sub-category of Venture Fund. Angel funds can accept investment from angel investors for a maximum period of 5 years, and the investment amount should not be less than 25 lakhs. The risks associated with investing in these funds are very high.

                  2. SME Funds – These funds’ investments go to small and medium enterprises that offer good value propositions.

                  3. Social Venture Fund – Social venture funds invest in companies that positively impact society and have an environmentally friendly approach.

                  4. Infrastructure Fund – These funds are invested in infrastructure companies involved in constructing railways, roadways, ports, etc.

                  Category 2 AIF

                  The funds that do not fall under category 1 or 3 of AIF fall under this category. They only take loans to meet their daily operational expenses as permitted by SEBI. Some of the Category 2 funds are mentioned below:

                  1. Private Equity Fund – The investment under this category is made into unlisted companies, which generally face difficulty in raising capital. These funds generally come with a lock-in period.

                  2. Debt Fund – These funds invest in listed and unlisted companies through debt such as bonds, debentures, etc.

                  3. Funds of Funds – This category of AIF invests in the portfolio of other investment funds, as they do not invest directly in stocks and bonds. Hence, they invest in other AIFs.

                  Category 3 AIF

                  This category of AIF uses complex trading strategies and sometimes leverages its position to invest in listed or unlisted securities. Some of the funds that fall under this category are:

                  1. Private Investment in Public Equity Fund (PIPE) – Under this category, the fund invests in listed companies but through private mode or without going through the secondary market. Investments are generally made at a discount on the share price.

                  2. Hedge Funds – Hedge funds pool funds from investors and invest them in domestic and international markets, employing complex trading strategies like short selling, arbitrage, futures, and margin trading to maximize returns.

                  Eligibility to Invest in AIF 

                  Indian residents, NRI, and foreign citizens are eligible to invest in AIF. Joint holders are also eligible to invest in this product.

                  Read Also: Decoding Hedge Funds In India – Types, Advantages And Distinctions

                  Category-Wise Contribution

                  Category of AIFCommitments RaisedFunds RaisedInvestments Made
                  Category I73,60139,40743,486
                  Category II8,83,2163,08,4722,67,911
                  Category III1,28,05881,67688,256
                  (In Crores and as of December 2023)

                  The graph mentions the significantly higher contribution made by Category 2 AIFs. 

                  Taxation of AIF

                  The taxation in AIF depends on the category in which you are investing.

                  Categories 1 and 2

                  These categories are given a pass-through status under the Income Tax Act of 2015. Pass-through status means that the income earned under these funds will be taxable in the hands of investors. The taxability in the hands of investors is as follows –

                  1. Long-Term Capital Gain – Taxed at 10%, and unlisted securities will be taxed at 20% with an indexation benefit.

                  2. Short-Term Capital Gain – The short-term gain will be taxed at the rate of 15%.

                  3. Dividend and Interest Income – Taxed as per the income tax slab.

                  Category 3  

                  Gains generated under this category will be taxed in the hands of funds as Income Tax does not give them pass-through status.

                  1. Long-Term Capital Gain – Taxed at the rate of 10%.

                  2. Short-Term Capital Gain – Taxed at the rate of 15%.

                  3. Dividend and Interest Income – Taxed at a flat rate of 30%.

                  Benefits of investing in AIF

                  1. Investment made in AIF can potentially earn higher returns than other investment options.

                  2. Diversification techniques are employed while investing and this minimises the overall portfolio risk.

                  3. These funds are typically not directly related to the market, so they are not prone to extreme volatility.

                  Risks of investing in AIF

                  1. The funds may invest in assets that might possess liquidity risk and they cannot be sold easily and converted into cash.

                  2. The trading strategies used are complex. The fund manager’s incompetence in using such complex strategies can potentially lead to losses.

                  3. our capital invested into startups, whether in the form of a loan or equity, needs proper monitoring. If the startups are not able to perform then it can lead to a loss in your portfolio.

                  Read Also: Arbitrage Mutual Funds – What are Arbitrage Funds India | Basics, Taxation & Benefits

                  Conclusion

                  Ultra-net-worth individuals aware of the risks associated with investing in AIFs can find AIFs to be a lucrative investment option. Investing in AIFs involves high risks due to the allocation of funds into unlisted shares and the execution of complex trading strategies.

                  Hence, if one wants to invest in this for higher returns then they should consider their risk profile before making any investment decision.

                  Frequently Asked Questions (FAQs)

                  1. Is there any lock-in period in AIF?

                    Yes, there are a few categories of AIF that come with a lock-in period.

                  2. Is AIF better than Mutual Funds?

                    Choosing between AIF or mutual funds lies at the investor’s discretion because both products have pros and cons. While AIFs are suitable for investors who can take risks for higher returns, mutual funds are ideal for investors who don’t want extra returns and can take moderate risks.

                  3. Who regulates AIF in India?

                    Securities and Exchange Board of India (SEBI) regulates AIFs under the Alternative Investment Fund Regulations 2012.

                  4. How many AIFs are there in India?

                    As of 9th March 2024, there are a total of 1276 AIFs in India.

                  5. What is the minimum investment amount in AIF?

                    The minimum investment amount in AIF is 1 crore.

                1. Rupay Case Study: Features, Timeline, Types, Growth, and Comparison

                  Rupay Case Study: Features, Timeline, Types, Growth, and Comparison

                  Payment merchants like Visa and Mastercard have just gotten major competition from our homegrown merchant, Rupay. 

                  We have all heard about Rupay, but very few know its story. Read this blog to learn more about its characteristics.

                  Overview Rupay

                  India developed the Rupay payment service system in 2012 to substitute for global payment networks like Visa and Mastercard. Rupay is a combination of “Rupee” and “Payment.” 

                  It operates in both Debit and Credit card segments and facilitates cardholders in making online transactions at different merchants and ATMs nationwide.

                  Read Also: Zepto Case Study: Business Model, Financials, and SWOT Analysis

                  Features

                  1. Target Audience – Rupay Card’s primary target is the domestic market, which aims to reduce reliance on foreign payment systems. 
                  1. Cost Efficient – The Rupay facilitates transactions with online merchants, retailers, etc., at a significantly lower cost.
                  1. General Acceptability – Almost all merchants and online platforms accept the card.
                  1. Security – The cards issued by Rupay are secured with EMV chip technology and two-factor authentication, which makes them much more secure.
                  1. Partnership – NPCI has collaborated with various financial institutions and banks to expand their network. They have partnered with domestic institutions and international networks.
                  Rupay

                  Timeline

                  2009 – The Reserve Bank of India realised there should be less dependency on the international payment system.

                  2014 – NPCI launched a credit card network in collaboration with various Indian banks.

                  2021 – NPCI collaborated with Kotak Mahindra Bank to launch a special credit card for the Indian Armed Forces. It also launched co-branded cards with several banks like Union Bank, Federal Bank, etc.

                  Did you know?

                  Rupay is the 7th payment network in the world after Visa, Mastercard, American Express, Discover, Diners Club, and JCB.

                  Issuing Banks

                  This card is currently issued by around 1100 banks, ranging from cooperative to regional rural banks and public to private sectors. 

                  Bank of India, Union Bank of India, Canara Bank, Bank of Baroda, State Bank of India, ICICI Bank, HDFC Bank, Citibank, and HSBC Bank are the primary promoter banks of the Rupay card. 

                  Growth of Rupay

                  Since its introduction, the Rupay card has experienced exponential growth, surpassing Visa in 2017 in terms of transaction volume. Additionally, between FY 2017 and FY 2022, their debit card sector grew at a rate of more than 40% CAGR. 

                  There has been a strong trend in credit card growth. In December 2023, the total volume of credit card transactions surpassed the 10,000 crore mark for the first time. It accounted for approximately 6% of domestic credit card transactions, and by December 2023, about ten million credit cards had been issued by Rupay. 

                  Read Also: IndusInd Bank Case Study: Business Model, Product Portfolio, and SWOT Analysis

                  Types of Rupay Cards

                  The cards issued can be divided into different categories-

                  Function

                  1. Credit Card – The bank that issued this Rupay card gives you a credit limit that you can use and then pay back to the bank after some time.

                  2. Debit Card – This is an individual’s most commonly used card. It allows you to spend the money in your bank account.

                  3. Prepaid Card – This card needs a periodical recharge from a particular vendor, after which you can use it until its limit exhausts.

                  4. Special Purpose Card :

                  1. Rupay Kisan Card – This card is designed to cater to the needs of the farmers. Through it, farmers can receive government subsidies.
                  2. Rupay Jan Dhan Card – This card is issued under Pradhan Mantri Jan Dhan Yojna to provide financial services to low-income groups of people.

                  Facilities

                  1. Classic – This type of card bank issue has basic facilities such as ATM withdrawal and online payment.

                  2. Platinum – This type of card possesses some other features like airport lounge access, cashback offers, rewards points, etc.

                  3. Customized – This type of card is issued according to the utility of the customer.

                  Rupay Credit Cards

                  Comparison of Rupay, Visa, and Mastercard

                  Although Visa, Mastercard, and Rupay all provide comparable services, there are differences between them in terms of features and target customer base.

                  Costing – Rupay cards have lower annual fees than Visa and MasterCard as they charge fees based on the card’s features.

                  Types of Card – Rupay offers debit, credit, and prepaid cards, but its credit card network is still growing. On the other hand, Visa and MasterCard provide corporate cards and have a wider network of credit cards.

                  Support System – Visa and MasterCard have a wider range of support systems, while Rupay is still developing.

                  Rewards – Visa and Master cards provide numerous benefits, from cash back to rewards points and travel miles to extended warranties. On the other hand, Rupay has fewer reward points than them and generally offers cashback and discounts.

                  Read Also: Hero MotoCorp Case Study: Business Model and SWOT Analysis

                  Conclusion

                  Since its establishment in 2014, Rupay has swiftly risen to prominence within the global payment landscape, posing a strong challenge to established giants such as Visa and Mastercard in just ten years. Distinguished by its laser-focused approach to the domestic market, Rupay has carved a niche for itself through its cost-effective operations, extensive acceptance network, and stringent security measures, propelling its meteoric rise. Surpassing Visa in transaction volume, Rupay has witnessed exponential growth across the debit and credit card sectors.

                  Through strategic alliances with many financial institutions and banks, Rupay has not only influenced the payment processing industry but also diversified its suite of services to cater to the unique needs of various demographics, including farmers and economically disadvantaged groups. 

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                  Frequently Asked Questions (FAQs)

                  1. Which company established Rupay?

                    National Payment Corporation of India (NPCI) established Rupay.

                  2. When was Rupay launched?

                    Rupay was launched in 2012.

                  3. Which country accepts Rupay?

                    The countries that accept Rupay are Bhutan, Nepal, Mauritius, Singapore, and UAE.

                  4. What is the full form of Rupay?

                    The word Rupay is a combination of two different words “Rupee” and “Payment” which means India’s card payment system.

                  5. Which merchant should I choose for my credit card?

                    All payment merchants provide separate benefits. It is recommended to perform your own analysis to find out which merchant is better suited for you.

                2. Gift City Case Study: Timeline, Management, and Development

                  Gift City Case Study: Timeline, Management, and Development

                  Have you ever heard of a city specifically created to function as a financial tech city? Yes, you read correctly; a city in India is known as Gujarat International Financial Tech City or Gift City. The world’s financial, tech and other businesses will establish offices in this city.

                  So, let’s explore Gift City in more detail and save you time.

                  Gift City Overview

                  Gujarat International Financial Tech City, commonly referred to as Gift City, is established as a special economic zone. The city aims to give corporate houses access to top-notch infrastructure and amenities. With these, they hope to draw domestic and foreign businesses, particularly those in the financial industry. 

                  A joint venture between the Gujarat state government and Infrastructure Leasing and Financial Services Ltd (IL&FS) created Gift City. 

                  To foster a positive atmosphere for technology companies, the city offers tax breaks and simplified regulatory procedures as unique incentives for businesses relocating to Gift City. 

                  Did you know?

                  Special Economic Zones are areas designated by the government where business establishments are granted certain privileges, such as single-window clearance, tax rebates, and other concessions, intending to promote development in the area and its nearby area.

                  Gift City tower

                  Timeline 

                  2007 – The Indian government announced the establishment of The International Financial Service Center (IFSC) in Gujarat. 

                  2010 – Then, Gujarat International Financial Tech City Company Limited (GIFTCL) was incorporated to oversee the establishment of Gift City.

                  2015 – The inauguration of this city was done this year.

                  2017 – The International Financial Service Center Authority (IFSCA) was founded to control financial activity in the city.

                  2023 – The SGX Nifty is now called Gift Nifty and has moved from Singapore to Gift City.

                  2024 – A metro station connecting Ahmedabad to Gift City was completed in March.

                  Current Status 

                  There are a lot of high-rise apartments in the city, as well as a lot of schools and hospitals, to supply all kinds of infrastructure facilities. The 78,000 crore plan is regarded as the prime minister’s pet project. Over 26,000 people work in this high-rise tower, which houses about 400 workplaces. 

                  Management 

                  Mr. Tapan Ray, IAS, is the managing director and group CEO of Gift City, whereas Mr. Hasmukh Adhia is the chairman of the city.

                  Area Covered

                  Spread across 359 hectares or 886 acres; the gift city has two sections in the area: 

                  1. Special Economic Zone – The region primarily draws in foreign financial institutions and corporate houses.
                  1. Domestic Tariff Area – The area of this section is spread over the remaining area and focuses on domestic companies that function in the Indian regulatory framework.

                  Did you know?

                  The tallest building in the Gift City is called “The Gift One Tower” and is 122 meters tall and has 29 floors.

                  Developers

                  Hiranandani Group, Mumbai, is developing Signature Tower.

                  Brigade Group, Bangalore, is developing BIFC Tower.

                  Savvy Group, Ahmedabad, is developing Pragya Tower.

                  Advantages

                  1.  It is estimated to create 5,00,000 direct jobs and a much higher number of indirect jobs.

                  2.  The city will provide infrastructure facilities and connectivity across the globe.

                  3.  There is a strong dedication to environmental preservation and integrated technology that safeguards the ecosystem.

                  4.  It offers financial incentives and regulatory independence to companies.

                  Stakeholders

                  In Gift City, there are three primary stakeholders.

                  1. Gujarat Urban Development Company Limited (GUDCL) – It helps the government create policies and secure funding from international organizations. 
                  2. Gujarat Maritime Board (GMB) – It was founded to develop India’s ports, privatize them, and provide specialized cargo handling.  
                  3. Gujarat Industrial Development Corporation (GIDC) – The government of Gujarat founded this organization to supply industrial infrastructure at a reasonable cost with a prompt and transparent delivery system. 

                  Read Also: Case Study of Petrol & Diesel Price History in India

                  Highlights

                  1.  On average, over 20 billion dollars are exchanged daily in foreign currency. 

                  2.  More than 360+ units licensed.

                  3.  As of now, more than 16000+ employment generated in Gift City.

                  4.  Around 33 billion dollars of total assets are held by the IFSC banking unit in Gift City.

                  5.  Reinsurance premiums worth over 297 million dollars were reserved in the Gift City.

                  Buildings in Gift City

                  Companies Operating

                  The companies operating in the gift city can be divided into different sector

                  1.  Banking Sector – The leading businesses in this industry that have set up their offices in the Gift City include Standard Charter, Citibank, JP Morgan, Yes Bank, Indian Bank, Federal Bank, RBL Bank, ICICI Bank, SBI, and HSBC.

                  2.  Insurance Sector – Life Insurance Corporation of India, The New India Assurance Company Limited, HDFC Life Insurance, etc. are operating from the insurance sector in the city.

                  3.  Financial Services – The companies operating in Gift City from the financial services sector are National Securities Depository Limited (NSDL), BSE, India International Exchange (IFSC) Ltd., Clearing Corporation of India Limited (CCIL), etc.

                  4.  IT and Technology – TCS, Infosys, Accenture, Wipro, etc. are the companies operating in Gift City.

                  5.  Other – Adani group, reliance industries, etc.

                  Read Also: Yes Bank Case Study: Business Model, Financial Statement, SWOT Analysis

                  Conclusion

                  The Gujarat government decided to establish Gift City, which will encourage foreign companies to enter the Indian market and ultimately boost the country’s GDP and per capita income. This would enhance India’s reputation around the world. 

                  Things are moving forward rather nicely in Gift City, and eventually, we will be able to compete with the global financial hubs in places like London and New York. 

                  Frequently Asked Questions (FAQs)

                  1. Is Gift City tax-free?

                    Companies in Gift City will enjoy tax exemption benefits for 10 years out of a total of 15 consecutive years.

                  2. Is Gift City also known as a smart city?

                    Yes, Gift City is India’s first operational smart city, spread across 886 acres and has world-class infrastructure.

                  3. Did the government establish Gift City?

                    The government of Gujarat is developing Gift City through various undertakings.

                  4. Is Gift City operational?

                    Yes, Gift City is operational now, but the project’s first phase is expected to be completed in 2025.

                  5. What is an IFSC?

                    IFSC stands for International Financial Services Center (IFSC), which caters to customers outside of India’s jurisdiction. Its major objective is to provide financial services to residents and non-residents in foreign currencies.

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