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  • Shriram Finance Case Study: Business Model, Financials, and SWOT Analysis

    Shriram Finance Case Study: Business Model, Financials, and SWOT Analysis

    How would you go about approaching a bank for funding if you wanted to grow your company and needed some extra cash? Is there any option to obtain financing if the bank rejects your application? Indeed, some businesses are registered with the RBI as non-banking financial companies. 

    In today’s blog, we will be introducing you to a company known as “Shriram Finance Limited”. 

    Overview of Shriram Finance

    The Shriram group, parent company of Shriram Finance, is well-known for its diverse industry expansion, which includes consumer goods, infrastructure, and financial services. Since its founding in 1974, the business has expanded rapidly and made a name for itself as a major force in the non-banking financial institution market. The organization caters to a broad clientele of individuals and businesses by providing tailored financial solutions. R. Thyagarajan, T. Jayaraman, and V.S. Sudarshan started the company’s operations and currently has the headquarters in Chennai. The company has expanded tremendously from a modest loan company to commercial vehicle financing and has emerged as one of India’s top non-banking financial companies (NBFCs). 

    Shriram finance NBFC

    Business Model of Shriram Finance

    The Shriram Finance business model revolves around 3 segments.

    1. Retail Financing – The company provides loans for commercial, passenger, and construction equipment as well as other assets to individuals and corporations, ranging from small business owners to major fleet operators. 

    2. SME Financing – To meet clientele’s operating and working capital requirements, small and medium-sized businesses also look to this corporation for loans. 

    3. Customized Financial Products – Additionally, the business creates tailored financial solutions to meet the needs of individual clients. 

    Competitive Edge

    1. This organization combines innovation and technology through its digital platform, including an online loan application and a digital payment system. 

    2. The organization serves customers from both urban and rural areas with its extensive nationwide network of branches. 

    3. The business is doing its best to manage risk and compliance. It uses a strong risk assessment procedure and an assessment system for credit.

    4. The company’s customer-centric strategy, which emphasizes establishing long-term relationships with clients, is the key to its success.

    Market Details

    52 Week HighINR 2605
    52 Week LowINR 1306
    Face ValueINR 10
    TTM PE Ratio13.8
    Market Capitalization91,697 Crores
    (As on 23rd April 2024)

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

    Financial Highlight of Shriram Finance

    Balance Sheet

    Particulars31st March 202331st March 202231st March 2021
    Current Assets203615140442128368
    Non Current Assets698418261459
    Non Current Liabilities867516811961258
    Current Liabilities805354805446851
    (In Crores)
    BS of Shriram Finance

    From the above table, we can say that the company’s current assets have shown a growth on YoY basis while the non-current assets have stayed consistently low. Correspondingly, the current liabilities witnessed a growth of almost 67%, on a YoY basis.

    Income Statement

    Particulars31st March 202331st March 202231st March 2021
    Total Income305081927417436
    Total Expenses936359905104
    Profit before tax211441328312332
    Profit after tax601127072487
    (In Crores)
    IS of Shriram finance

    The company’s income has increased by almost 58% in the year FY 2023 as compared to FY 2022, although its expenses have increased in the same proportion, leading to a relatively smaller jump in net profit.

    Cash Flow Statement

    Particulars31st March 202331st March 202231st March 2021
    Cash flow from operating activities-17625-8859-4239
    Cash flow from investing activities-193-34-24
    Cash flow from financing activities11819850412225
    (In Crores)
    CFS of Shriram Finance

    The company’s cash flow from operating activities has been negative for the last three fiscal years. This is a major reason of concern regarding the company’s performance. 

    KPIs of Shriram Finance

    Particulars31st March 202331st March 202231st March 2021
    Operating Profit Margin (%)69.3868.9870.79
    Net Profit Margin (%)19.7214.0614.27
    Return on Capital Employed (%)16.2514.0914.86
    Debt to Equity Ratio3.774.394.89
    Current Ratio2.532.922.74

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

    SWOT Analysis of Shriram Finance

    SWOT Analysis of Shriram Finance

    Strengths

    1. The company has a strong brand presence in the country and utilises this strength to its full potential.  

    2. A wide range of services are available from Shriram Finance, such as building loans, auto loans, and financial support for a range of client needs. 

    3. The business combines creativity and technology to ensure that its operational activities function smoothly.

    Weaknesses

    1. The business is heavily exposed to a few distinct industries, such as automotive, real estate, etc. so any downturn in these industries will affect their bottom line.

    2. Strict regulatory requirements apply to the banking industry, and any tightening of RBI banking policies will make the business more difficult and risky. 

    3. The corporation is concentrating heavily on underbanked areas of the country, which may lead to a reduced NPA in the future. 

    Opportunities

    1. They would be able to reach more people in rural India thanks to the government’s financial inclusion plans. 

    2. Strategic partnerships and acquisitions can help them expand their product offerings even further.

    3. By incorporating cutting-edge technology into its online digital products, the corporation may expand its customer base even further. 

    Threats

    1. The financial sector in India is highly competitive, and various companies are offering their services to retailers, hence intense competition could be a major threat for the company.

    2. Any major modification to regulatory requirements will result in higher operating costs and lower profit margins for the business. 

    Conclusion

    Shriram Finance Company is an important player in the Indian financial sector and advances the nation’s economy by giving different societal segments access to financing.

    To promote growth and profitability, the company has made use of its strong brand, a large range of products, a national presence, and a customer-focused philosophy.

    However, before making any investment decisions it is advised that you analyse your risk tolerance. 

    S.NO.Check Out These Interesting Posts You Might Enjoy!
    1Hindustan Unilever Case Study
    2Elcid Investments – India’s Costliest Stock
    3Reliance Power Case Study
    4Burger King Case Study
    5Zara Case Study

    Frequently Asked Questions (FAQs)

    1. How old is Shriram Finance Company?

      Shriram Finance has been in business for more than 50 years and is one of the top NBFCs in India. 

    2. What does Shriram finance do?

      A variety of financial services are offered by the firm, including auto and truck financing.

    3. Who is the owner of Shriram Finance?

      R. Thyagarajan is the founder of the Shriram Group, while Y S Chakravarti serves as the CEO of the business. 

    4. Is Shriram Finance approved by RBI?

      Shriram Finance is an NBFC (Non-Banking Financial Company) established under the Company’s Act 2013 and is registered with RBI.

    5. Which companies merged with Shriram Finance?

      In 2022, Shriram Finance merged with Shriram Transport Finance and Shriram City.

  • What is Securitization? Methodology, Types, Advantages, and Disadvantages

    What is Securitization? Methodology, Types, Advantages, and Disadvantages

    Ever thought about how a car loan can be turned into an investment? Securitization makes it possible for you! This financial process turns loans into tradable securities and offers various opportunities with risks.

    In today’s blog, we will explore the merits, demerits, techniques, and process of securitization.

    What is Securitization?

    In securitization, financial institutions bundle a group of loans or other income-generating assets together and transform them into a security that investors can trade.

    Imagine a bank with a ton of issued car loans. Securitization allows the bank to sell these loans as a bundled security to investors. Investors then earn a return on their investment depending on the interest and principal payments made on the underlying car loans.

    securitization overview

    How Does Securitization Work?

    Origination

    Banks or other institutions originate loans, such as mortgages, car loans, or student loans. These are assets that will be securitized and serve as underlying collateral for the securities to be created.

    Pooling

    Financial institutions group similar loans together into a pool. This diversification spreads the risk in case some borrowers default.

    Transfer of Assets to Special Purpose Vehicle (SPV)

    The selected assets are transferred to a separate legal entity known as a Special Purpose Vehicle (SPV) or Special Purpose Entity (SPE).

    The SPV is generally a bankruptcy-remote entity, which means that the financial health of the originating institution does not affect the assets held within the SPV.

    Creation of Tranches

    The SPV issues securities backed by the cash flows generated from the underlying assets. These securities are then categorized into different tranches, each with different levels of risk and return.

    Tranches are the categorized portions of the overall pool of assets being securitized. They essentially represent different risk-return profiles for investors. Below-mentioned is a breakdown of tranches.

    • Senior Tranches – these tranches have the highest credit ratings, such as AAA or AA, from agencies like CRISIL. This indicates a very low chance of failure. Additionally, senior tranches receive priority on the cash flow from the underlying asset. They receive interest and principal repayments from borrowers before any other tranche.
    • Mezzanine Tranches – these tranches hold a middle ground regarding credit rating, such as A and BBB. They absorb some of the risks after senior tranches are paid. Investors in mezzanine tranches are partially protected in default situations because junior tranches are impacted first. Because of their increased risk profile, mezzanine tranches offer a higher return than senior tranches.
    • Junior Tranches – these tranches have the lowest credit ratings, for example, BB, B, or even unrated. They represent the riskiest portion of the securitization. Junior tranche investors receive payouts only after senior and mezzanine tranches are paid in full. They offer the highest return on investment because of the highest risk borne.

    Credit Enhancement

    To attract investors, especially for lower-rated tranches, credit enhancement mechanisms may be employed to mitigate risks. These mechanisms can include over-collateralization or adding additional assets to the pool, cash reserves or third-party guarantees.

    Issuance and Sale of securities

    The securities, representing claims to the cash flows from the underlying assets, are then sold to investors in the capital markets. Investors buy these securities based on their desired risk-return profile.

    Servicing

    Servicing the underlying assets continues after securitization. A servicer, often the originating institution or a third-party specialist, is responsible for managing the assets on behalf of the investors and handling the day-to-day tasks of collecting principal and interest payments from the original borrowers. The collected funds are then distributed to the tranche holders as per the pre-defined structure. Senior tranches receive payments first, followed by the subordinate tranches.

    Risk Management and Reporting of Securitization

    Throughout the life of securitization, risk management practices are employed to monitor the performance of the underlying assets and ensure compliance with regulatory needs. Regular reporting to investors regarding the performance of the securities and underlying assets is also essential.

    Methodology of securitization

    Types of Securitized Securities

    Some common types of securitized securities include:

    Asset-backed Securities (ABS)

    This is a broad category that includes most securitized securities. A pool of underlying assets backs ABS, typically consisting of cash-generating assets like auto loans, credit card receivables, and student loans. Further sub-categorisation of ABS is possible based on the underlying assets.

    • Mortgage-backed Securities – These are ABS-backed by pools of residential or commercial mortgage loans. Cash flows from the underlying mortgage payments are passed through MBS investors who receive interest and principal payouts.
    • Auto Loan-Backed Securities – a pool of car loans backs these.

    Collateralized Debt Obligations (CDOs)

    CDO is a complex type of security that can bundle together different types of collateralized debt. This creates a layered structure with varying risk-return profiles.

    Credit Linked Notes (CLNs) 

    These are structured debt securities that allow investors to gain exposure to credit risk linked with varied underlying assets such as corporate bonds, loans or other structured finance products.

    Also Read: Collateral

    Credit Enhancement Techniques

    Two main categories of credit enhancement are listed below,

    Internal credit enhancement

    These techniques rely on features built into the structure of the securitization deal itself to improve creditworthiness.

    • Overcollateralization – this involves structuring the deal so that the value of the assets backing the securities is greater than the total value of the securities issued. This excess collateral acts as a buffer in case of defaults, thus protecting senior tranches.
    • Excess Spread – this refers to the difference between the interest earned on the underlying assets and the interest paid to investors on the securities. This excess cash flow can be used to cover shortfalls in principal or interest payments if some borrowers default.
    • Subordination – The securitization structure is divided into multiple classes with varying payment priorities. Senior tranches receive principal and interest payments first, whereas junior tranches get payouts only after senior tranches are fully paid. This hierarchy absorbs losses from defaults.
    • Cash Reserves – these are the funds set aside from the proceeds of the securitization to cover any shortfalls in cash flows from the underlying assets. These reserves provide a buffer to support payments to investors during periods of financial stress

    External Credit Enhancement

    These techniques involve bringing in external guarantees or insurance from third parties to increase the creditworthiness of the securitization.

    1. Letters of credit – Banks or other financial institutions can issue letters of credit assuring repayment of principal and interest on the securities in case of issuer default.
    2. Surety Bonds – insurance companies can act as sureties, guaranteeing to cover losses if there are defaults on the underlying assets.
    3. Third-party Guarantees – Guarantees can be provided by corporations or government entities, strengthening the creditworthiness of the securitization.

    The choice of credit enhancement techniques depends on various factors, like the type of assets being securitized, the desired credit rating for different tranches, and the overall risk profile of the deal.

    advantages of securitization

    Advantages and Disadvantages of Securitization

    Securitization offers various advantages and disadvantages to both financial institutions and investors.

    Advantages

    • Reduces Risk: It allows originators to transfer credit risk linked with the underlying assets to investors. This can improve their overall capital adequacy ratios, making them more attractive to lenders.
    • Diversification: Securitization offers investors access to a wider range of investment opportunities. They can invest in tranches depending on their risk tolerance and desired return.
    • Increased Liquidity: Securitised assets are generally tradable on the secondary market, offering investors greater liquidity compared to some traditional securities like private loans.
    • Frees up capital: By selling off assets like loans, banks can free up capital on their balance sheets. This allows them to originate new loans, stimulating economic activity.

    Disadvantages

    Some significant drawbacks of securitization are as follows

    • Complexity: The process of securitization can be complex and involves multiple parties, intricate legal structures, and complex risk assessments. This complexity can make it difficult for investors to understand the underlying assets and the risks involved fully.
    • Transparency: In some cases, the underlying assets in securitization may need to be fully transparent. This can be because several loans from different borrowers are pooled, making it challenging to analyze the creditworthiness of each loan. This lack of transparency can lead to the mispricing of risk.
    • Increased Costs: The securitization process involves multiple fees linked to legal structuring, credit rating agencies, and investment baking placement. These costs can ultimately reduce investors’ returns.
    • Reduced Accountability: Securitisation involves numerous parties, making it difficult to identify accountability if something goes wrong, which can pose challenges in addressing problems.
    • Systemic Risk: If a large number of borrowers default on the underlying loans in securitization, it can trigger a domino effect. The value of the securitized securities can fall, causing losses for investors. This happened in the 2008 global financial crisis when many mortgage-backed securities (MBS) went bad.

    Conclusion

    Securitization can be a complex financial tool that enables institutions to convert illiquid assets into tradable securities. It plays an important role in modern financial markets by facilitating the efficient allocation of capital, enabling risk transfer and providing investors with a diverse range of investment opportunities. As financial innovation continues, securitization is likely to remain an integral part of the global financial system, albeit with ongoing refinements and regulatory adaptations to address emerging challenges and promote market integrity.

    Frequently Asked Questions (FAQs)

    1. Who benefits from securitization?

      Securitization benefits financial institutions by providing access to capital and reducing risk exposure. It also benefits investors by offering diversified investment opportunities.

    2. How are securitized securities rated?

      Credit rating agencies rate securitized securities based on the credit quality of underlying assets, structural features, and credit enhancement techniques.

    3. What is the role of Special Purpose Vehicle SPV in securitization?

      An SPV is a separate legal entity used to hold and manage the assets being securitized.

    4. What are some drawbacks of securitization?

      The drawbacks of securitization include complexity, lack of transparency, and risk of crisis if mismanaged.

    5. Is securitization good for the economy?

      It depends. It can boost the economy if used well, but poorly structured deals can lead to instability.

  • What are Mergers and Acquisitions (M&A)? Advantages, Disadvantages, and Classifications

    What are Mergers and Acquisitions (M&A)? Advantages, Disadvantages, and Classifications

    Reading newspaper articles about larger companies acquiring smaller ones for strategic purposes is common nowadays. However, have you ever wondered why companies spend millions (or even billions) on acquisitions? 

    Today’s blog aims to explain mergers and acquisitions to you.

    Mergers and Acquisitions Overview

    Although generally used interchangeably, mergers and acquisitions have distinctly different meanings.

    A merger is the process by which two or more companies come together to form a single new company. The combined entity, led by personnel from both organizations, often adopts a new name. Ultimately, the newly formed organization is stronger as both companies decide to merge.

    The term ‘acquisition’ refers to the process of one company acquiring over 51% of another company and becoming its parent. Acquisitions are generally processed as a common decision from both parties, but the output can also be achieved via Hostile takeovers, which are done without the acquiree company’s management approval.

    Advantages

    1. Helps the company in expanding its performance and reach.
    2. The newly formed company will help eliminate market competition.
    3. Since a subsidiary firm’s profit and loss get consolidated at the parent level, mergers and acquisitions can occasionally enable a corporation to receive tax benefits. 
    4. M&A activities help companies diversify their business.
    Benefits of M&A

    Disadvantages

    1. Many firms find it difficult to conduct M&A due to the high cost. Failure to draw out the intended value from the M&A can prove fatal for the company in the long run. 
    2. Acquiree companies may have to experience mass layoffs in order to generate long term efficiency. 
    3. Achieving the intended M&A goals may be challenging if the two merging organizations have different working cultures, which causes coordination issues. 
    4. Financial risk can arise during an M&A because target companies are often overpaid and thus experience difficulties in achieving the intended outcomes. 

    Reasons

    There are various reasons for mergers and acquisitions, a few of which are mentioned below-

    1. Growth – This is the primary driver behind corporate mergers and acquisitions, as increasing client base and market share is the main goal of operations. 
    2. Expertise – In most cases, established companies acquire innovative startups with cutting-edge technology to incorporate into their own products.  
    3. Tax Benefit – M&A between two different companies could potentially help in saving taxes.
    4. Diversification – In order to reduce business risk, companies can diversify their business through mergers.
    5. Competitive Advantage – Businesses engaged in similar types of activities may combine to create a monopoly and drive out competitors. 

    Read Also: Why Tata Motors Share Price is Falling? | Latest Analysis & Market Trends

    Classifications of Mergers

    1. Horizontal Merger – In this type of merger, the businesses belong to the same sector and use a similar supply chain.
    2. Vertical Merger – This kind of merger involves businesses operating at different levels within the same industry. 
    3. Conglomerate Merger – Conglomerate mergers occur when two unconnected businesses unite. An example would be the merger of a software company and a shoe company. 
    4. Congeneric Merger – Two businesses with different customer bases in the same industry merge in a congeneric merger. As an illustration, a congeneric merger occurs when a car manufacturer joins up with a tire manufacturer. 
    5. Statutory Merger – Acquiring firms gain control over the target company, which they manage but operate independently.
    Eliminating competition after M&A

    Classifications of Acquisitions

    1. Asset Acquisition – Instead of purchasing the target company’s shares, the acquiring company purchases its assets, such as buildings, machinery, and intellectual property. 
    2. Share Acquisition – Acquiring firms gain control over the target company, which is managed by them but operates independently.

    Process of M&A

    The process of merger and acquisition in India are as follows-

    1. The corporation must first determine whether or not its Memorandum of Association permits it to do so. If not, the MoA must be amended. 

    2. Listed companies must then notify the stock market of their plans by orders, notices, and resolutions. 

    3. The company must then develop a document for this purpose, and both companies’ boards of directors must ratify it. 

    4. Subsequently, an organization must apply to the National Company Law Tribunal to obtain approval for the merger and acquisition record. 

    5. Following the approval, all shareholders must receive information about the merger and acquisition process within 21 days.

    6. The next step in the process would be to take over the assets of the acquiring company or merge the assets and liabilities of both companies.  

    7. The new company will issue its shares to its shareholders after the M&A activity is completed.

    Read Also: The Risks and Rewards of Investing in Penny Stocks

    Conclusion

    The process of mergers and acquisitions encompasses much more than buying or selling a company; it is complex and multifaceted. While M&A can be a beneficial strategy for some businesses, some find it costly and ineffective. 

    Gaining a deeper comprehension of the idea will help you understand the world of M&A. 

    Frequently Asked Questions (FAQs)

    1. What are the famous mergers and acquisitions in India?

      A few well-known merger and acquisition deals in India include Walmart’s 2018 acquisition of Flipkart, Reliance Industries’ 2020 acquisition of Future Group, and Tata Steel’s 2018 acquisition of Bhushan Steel. 

    2. What will happen to shareholders in case of M&A?

      In the case of M&A, the updated quantity authorized by the ratio will be distributed to the shareholders along with the shares of the new organization. 

    3. Are mergers and acquisitions good for shareholders?

      Yes, if the M&A is successful, the company’s growth will accelerate, which will ultimately raise the share price. 

    4. How long will it take to complete the process of M&A?

      The duration of the M&A process typically ranges from six months to a year, depending on the deal’s complexity. 

    5. What are the major steps involved in an M&A deal?

      The M&A process has a lot of steps including identifying the target company, conducting due diligence, negotiating with the company, obtaining regulatory clearance, and integration with the new parent. 

  • What is T+0 Settlement : Overview And Benefits

    What is T+0 Settlement : Overview And Benefits

    In the evolving world of financial markets, every second counts. From traders seeking to capitalise on fleeting opportunities to investors aiming to swiftly reallocate their portfolio. Efficiency in transaction execution is crucial. This demand has fuelled the evolution of settlement systems in India and the much-awaited T+0 settlement is here, revolutionising the Indian trading landscape with lightning-fast transactions. But is it all sunshine and rainbows?

    In this blog, we will explore its benefits for investors along with some important considerations before you jump in.

    Overview

    T+0 settlement refers to a system where trades in shares are settled on the same day they occur. In simpler terms, when you buy a stock, the shares are transferred to the buyer, i.e., your demat account and the seller receives the money immediately.

    SEBI is launching T+0 in a beta version. This allows brokers to offer it optionally alongside the existing T+1 system in India.

    Did you know?

    As of April 2024, China is the only country with T+0 trade settlement cycle.

    If we look back at history, the settlement cycle in the Indian stock market was shortened from T+5 to T+3 in 2002 and then further to T+2 in 2003. In 2021, Sebi introduced the T+1 settlement cycle in a phased manner, which was fully implemented from January 2023.

    Currently, India operates on a T+1 settlement cycle, where trades are settled on the next business day.

    With the introduction of the T+0 settlement, sellers will receive their money right away, and buyers get the shares they purchase on the same day. This allows for greater liquidity, flexibility, and faster settlement; allowing traders to react to the market movements more quickly.

    It is a pilot program, launched on March 28, 2024, and applies to 25 stocks initially.

    T+0 Settlement will happen in two phases:

    1. In the first phase, an optional T+0 settlement cycle for trades till 1:30 pm is envisaged, with the settlement of funds and securities to be completed on the same day by 4:30 pm.
    2. In the second phase, an optional immediate trade-by-trade settlement will be carried out for trades till 3.30 pm.

    According to SEBI, a shorter settlement cycle can improve efficiency and transparency for investors, while strengthening the risk management for clearing corporations and the entire stock market system.

    Operational Guidelines for T+0 Settlement

    Overview of T+0

    1. Eligible Investors

      All investors can participate if they meet the requirements fixed by the Market Infrastructure Institutions (MIIs) like depositories and exchanges. These requirements could involve factors like risk management capabilities and transaction timelines.

      2. Trade Timings

        Currently, T+0 trading happens in a single session from 9:15 am to 1:30 pm.

        3. Price Band

          To manage volatility, T+0 trades occur within a price range of +/- 100 basis points compared to the T+1 market price for the same security. This range will be adjusted whenever the T+1 market price moves by 50 basis points.

          4. Index Calculation and Settlement Price Computation

            Trades happening within the T+0 settlement won’t influence index calculations or final settlement prices. Additionally, there won’t be a separate closing price specifically for T+0 trades.

            Furthermore, the only method of early payment for T+0 sell obligations will be through the use of a locking mechanism. T+0 will not accept early payment via pool or regular pay-in instructions.

            5. Fees/ Charges

              All the charges/fees like Transaction Charges, STT, and Regulatory Turnover Fees that are applicable for T+1 settled securities will be applicable for T+0 settled securities.

              Other key Points

              • T+0 trades are separate from T+1 trades. There is no netting of obligations between the two cycles.
              • T+0 trade prices will not be reflected in market indices or settlement price calculations, and separate closing prices won’t be determined based solely on T+0 trades.
              • There won’t be any Trading in T+0 settled securities on the following days:
              1. On the Ex-date of any corporate action in the corresponding T+1 settled securities (including the scheme of arrangement).
              2. On the day of the index rebalancing of the corresponding T+1 settled securities.
              3. On the settlement holiday.

              List of Stocks

              As of April 2024, there are a total of 25 stocks available in T+0 settlement cycle:

              Name of the Company
              Ambuja Cements LimitedLIC Housing Finance Limited
              Ashok Leyland LimitedMRF Limited
              Bajaj Auto LimitedNestle India Limited
              Bank of BarodaNmdc Limited
              Bharat Petroleum Corporation LimitedOil & Natural Gas Corporation Limited
              Birlasoft LimitedPetronet Lng Limited
              Cipla LimitedState Bank of India
              Coforge LimitedTata Communications Limited
              Divi’s Laboratories LimitedTrent Limited
              Hindalco Industries LimitedUnion Bank of India
              The Indian Hotels Company LimitedVedanta Limited
              Jsw Steel LimitedLtimindtree Limited
              Samvardhana Motherson International Limited

              Read Also: What is Zero Days to Expiration (0DTE) Options and How Do They Work?

              Benefits for Investors

              Benefits of T+0
              1. With immediate access to funds, investors can react more quickly to market fluctuations. They can sell a stock and use the proceeds to buy another one right away, potentially capturing short-term gains.
              2. The increased ease and speed of transactions under T+0 could lead to higher trading volumes, benefitting investors who enjoy active trading.

              Let us understand the T+0 settlement with the help of an example:

              Consider a scenario where an investor buys 100 shares of company named “Pocket” through an online brokerage platform. With T+0 settlement, the transaction is processed immediately, and the investor’s trading account is debited for the buy amount + transaction charges while the shares are simultaneously credited to the buyer’s demat account.

              Similarly, the seller’s trading account is credited with the proceeds from the sale instantly upon execution, and the shares are debited from the demat account.

              Conclusion

              To sum it up, T+0 settlement offers investors a faster and more dynamic trading experience, particularly those focused on short-term strategies. The quicker access to funds and reduced settlement risk can be beneficial for navigating the volatile markets and capitalising on fleeting opportunities.

              However, investors should also be aware of the potential drawbacks, such as the possibility of increased volatility and the need for stricter discipline to avoid impulsive trades. It is also important to keep in mind that T+0 is a relatively new concept and there may be some unforeseen challenges. Investors should carefully consider the risks before actively trading in a T+0 environment.

              Read Also: What are T2T (Trade to trade) stocks?

              Frequently Asked Questions (FAQs)

              1. Is T+0 suitable for all investors?

                While beneficial for day traders and short-term investors, it might not suit everyone because of higher volatility.

              2. What are some drawbacks of T+0 settlement?

                Some drawbacks are that higher transaction volume might result in increased volatility, and pressure to make decisions more quickly, which can result in impulsive trades and possible technical issues from clearing houses.

              3. How many securities are available for T+0 settlement in the Beta phase?

                A total of 25 securities are available in T+0 settlement as of April 2024.

              4. Who can trade in the T+0 settlement?

                All members eligible to trade in the Capital Market Segment shall be able to trade in T+0 settled securities.

              5. I have traded in T+0; can I change the settlement type?

                No. Orders for T+0 and T+1 settled securities are executed in separate series.

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

            1. Grasim Industries Case Study: Subsidiaries, Products, Financials, and SWOT Analysis

              Grasim Industries Case Study: Subsidiaries, Products, Financials, and SWOT Analysis

              Grasim Industries Limited is a flagship company of the global conglomerate Aditya Birla Group. The company started as a textiles manufacturer in India in 1947 and evolved into a leading diversified player with a strong presence across many sectors. Grasim Industries products include viscose staple fiber, filament yarn, cement (via UltraTech), chemicals like caustic soda and epoxy, textiles, insulators, fertilizers, and financial services. Today’s blog will dive into the company overview, business segments, market data, financial highlights, and SWOT analysis.

              Grasim Industries Overview

              Recognised as ET Sustainable Organization 2023, Grasim Industries has evolved into the true essence of the phrase “World first.” The company draws revenue from its three broad segments: Viscose Fibre and Yarn, Chemicals, and Others. 

              Of the 3 segments, Grasim Industries generates most of the revenue from the Viscose Fiber and Yarn segment. 

              Company Public
              Founded at1947
              HeadquartersMumbai, Maharashtra
              Area servedWorldwide
              Parent Aditya Birla Group

              Recognition & Achievements

              • 2018 – Forbes ranks Grasim Industries as a Growth Champion 2018.
              • 2021 – Attains the 7th position on the Responsible Business Ranking.
              • 2023 – Work Institute certified Grasim’s Domestic Textile Business.

              Subsidiaries

              • UltraTech Cement

              UltraTech Cement holds an iconic position as a major cement manufacturer with an annual production capacity exceeding 100 million tonnes. It has expertise in ready-to-mix concrete, grey cement, and white cement. The business extended its geographical boundaries and expanded its operations to UAE, Bahrain, Bangladesh, and Sri Lanka, making it a global cement manufacturer. 

              • Aditya Birla Capital

              Aditya Birla Capital is a financing and advisory solutions provider and has served more than 3.8 million customers. It provides the services of home loans, personal loans, securities against stocks, and much more. It has become an essential player as over 60% of its lending portfolio caters to SME customers and retailers. Aditya Birla ranks among the nation’s top five private life insurance providers.

              Major Products

              • Linen Yarn and Fabrics

              The company has a strong brand reputation in linen yarn and fabrics for its elegance, quality, and comfort. The business is renowned for its sophisticated standards of clothing.

              • Paints

              The company is aiming to become the biggest player in the fast-growing decorative paints industry. It provides a variety of decorative and industrial paints known for their durability, quality, and eco-friendly attributes.

              • Chlor-alkali and Epoxy Products

              The company has created a strong footprint and brand reputation in the industry. In addition to offering caustic soda, it also produces chlorine derivatives and epoxy products and has become a market leader in the chlor-alkali industry. These products are essential in different sectors, meeting quality standards and demonstrating versatility.

              • Birla Pivot

              Birla Pivot is a thriving e-commerce platform that penetrates the country’s building materials segment. It is a B2B platform and is Grasim’s flagship. The business is expected to undergo rapid growth in the coming years and aims to overcome hurdles while providing seamless integration with other projects. This platform boasts consumer-friendly features and a complete track-and-trace system for every order.

              • Viscose Staple Fiber (VSF)

              VSF is a biodegradable and versatile fiber and is used for home textiles, dress materials, manufacturing apparel, knitted wear, and non-woven applications. Grasim has become the global leader in this industry by providing quality and sustainability.

              Read Also: Ultratech Cement Case Study – Financials Statements, & Swot Analysis

              Market Data

              Market Cap ₹ 1,50,936 Cr.
              TTM P/E 26.84
              ROCE 12.63 % 
              Book Value per share₹ 1,267.63
              ROE 8.67 % 
              Dividend Yield 0.44 % 
              Face Value ₹ 2.00
              (As on 19th April 2024)

              Grasim Industries Financial Highlights

              Income Statement

              ParticularsMar-23Mar-22Mar-21Mar-20
              Operating Revenue 1,17,627.0895,701.1376,404.2975,269.48
              Total Income 1,21,239.1396,522.4777,462.0976,238.29
              Total Expenditure 96,038.0375,269.7657,768.9558,008.38
              Profit before Tax 14,726.7112,626.869,771.436,491.54
              Profit after Tax 11,078.2010,690.556,749.246,575.86
              Consolidated Profit 6,827.267,549.784,304.824,411.74
              (All values are in Crores)
              IS of Grasim

              Operating revenue has seen massive growth over the past years, fueled by a corresponding increase in total expenditure. The income jump, however, did not translate to a similar increase in net profit. 

              Balance Sheet

              ParticularsMar-23Mar-22Mar-21Mar-20
              Non-Current Liabilities 1,44,376.961,15,089.611,12,279.371,06,625.41
              Current Liabilities 69,532.9957,884.4751,921.8446,379.50
              Non-Current Assets 2,69,300.412,32,381.102,07,073.531,92,128.52
              Current Assets 67,504.3456,758.1657,956.4351,445.38
              (All values are in Crores)
              BS of Grasim

              The Balance Sheet saw a massive but continuous increase in non-current assets while maintaining a much lower level of non-current liabilities. Such a consistent increase shows a positive trend for the company. 

              Cash Flow Statement

              ParticularsMar-23Mar-22Mar-21Mar-20
              Cash From Operating Activities-12,685.147,037.6515,075.0816,803.43
              Cash Flow from Investing Activities -13,686.71-3,543.18-9,229.49-11,547.64
              Cash from Financing Activities 26,469.13-6,733.13-8,003.45-3,417.93
              CFS of Grasim

              The Cash Flow Statement signifies a grim state. Operations have consistently declined inflows, with the latest FY witnessing a drastic dive. The investing and financing activities also show a lot of turbulence.  

              Profitability Ratios

              ParticularsMar-23Mar-22Mar-21Mar-20
              ROCE (%)12.6311.9310.979.48
              ROE (%)14.4115.2111.1011.52
              ROA (%) 3.543.842.642.71
              EBIT Margin (%)14.4817.0019.1117.61
              Net Margin (%) 9.1411.088.718.63
              Cash Profit Margin (%) 12.3514.3512.9312.87

              The company’s profitability signifies a healthy state with ROCE seeing a consistent but slow increase in the past 4 years. The company has consistently been able to net a margin of around 9%. 

              Grasim Industries SWOT Analysis

              SWOT of Grasim

              Strengths

              • Grasim enjoys an extensive dealer network that helps the company grow globally and deliver efficient services to its customers. 
              • The company enjoys the benefits of a stable brand value in the construction segment as it has a history of 75 years.
              • The company is currently the largest producer of VSF in the country and is thus able to command significant control over the pricing. 

              Weaknesses

              • Grasim industries operates in a cyclical industry and thus experiences volatility in downturns. 
              • The capex heavy business model can lead to increased leverage in the coming years. 

              Opportunities

              • Grasim industries has forayed into the paints segment and plans to make a foothold in the industry.  
              • The Indian textile industry is estimated to continue growing in the coming years, and the Grasim industries can benefit heavily from this development. 

              Threats

              • The VSF segment generates the majority of the revenue, and demand for this segment is expected to decline in the future. 
              • There is a growing number of global players interested in entering the Indian subcontinent and failure to keep them at bay can result in decreased margins.

              Read Also: Asian Paints Case Study: Business Segments, KPIs, Financials, and SWOT Analysis

              Conclusion

              In the past few decades, Grasim Industries has become a major player in the Indian market. In addition to extensive dealer networks, the company has skilled employees, contributing to its growth and efficiency. Despite this, seasonality in the industry presents challenges.

              S.NO.Check Out These Interesting Posts You Might Enjoy!
              1Sun Pharma Case Study: Business Model And SWOT Analysis
              2LTIMindtree Case Study: Products, Services, Financials, KPIs, and SWOT Analysis
              3Ola Electric Case Study: Business Model, Financials, and SWOT Analysis
              4Varun Beverages Case Study: Business Model, Financials, and SWOT Analysis
              5Hero MotoCorp Case Study: Business Model and SWOT Analysis

              FAQs

              1. What is the full form of GRASIM?

                The full form of GRASIM is Gwalior Rayon Silk Manufacturing (Weaving) Company Limited.

              2. What does Grasim Industries Ltd do?

                The company started as a textile manufacturer in 1947 but is now involved in various business segments, such as the production of Fabrics, Viscose, Diversified Chemicals, and Linen Yarn.

              3. What are the Grasim industry’s products?

                They offer a wide variety of products, such as viscose staple fiber, yarn, pulp, grey cement, white cement, caustic soda, allied chemicals, epoxy, linen, and wool.

              4. What are the major risks faced by Grasim industries?

                The company faces issues due to the capex heavy business and high level of seasonality.

              5. When was the Grasim Industries established?

                The company was established in 1947, in Mumbai, Maharashtra.

              6. What are the products of GRASIM?

                Grasim Industries produces viscose staple fiber, filament yarn, chemicals (caustic soda, epoxy), cement (via UltraTech), and textiles. It also operates in financial services, fertilizers, and power insulators.

            2. What are Candlestick Patterns? Overview and Components

              What are Candlestick Patterns? Overview and Components

              Investing directly in stocks can generate more income, but you’re probably next thinking about how to identify the best stock and make predictions about whether its value will increase or decrease. Candlestick patterns are used by both seasoned and new traders to make such predictions. 

              Use this blog as a beginner’s guide to candlestick patterns.

              Overview

              Candlestick patterns are used by technical analysts to forecast the direction of stock price movement. Every candlestick represents a different time interval, such as a minute, hour, day, etc. 

              Parts of Candlestick

              There are four major components of a candlestick. 

              • Open Price – This is the price at which a security begins trading in a time frame.
              • High Price – This refers to the highest price at which a security has traded in a particular time frame.
              • Low Price – This is the lowest price where the security has traded in a time frame.
              • Close Price – This is the price at which security last traded in a time frame.

              Components of Candlestick

              • Body – The candle’s body refers to the area between the opening and closing price of a particular security over a time frame.
              • Wick –  Also known as the candle’s shadow, the wick is the thin line extending above and below the body. It reflects the highest and lowest stock prices a stock touches over a time frame.
              Parts of Candlestick

              Colors of Candlestick

              Green or White – This coloured candle shows that the close price is higher than the open price and thus reflects an upward or bullish trend in the market.

              Red or Black – This signifies a bearish trend in security as it indicates that the closing price is lower than the opening price.

              Importance of Candlestick Pattern

              1. The candlestick pattern allows us to visually represent price movements.
              2. Candlestick patterns can be used with technical indicators to provide a better insight into the movement of stock.
              3. It assists the traders in managing their portfolio risk by helping them predict their exit.
              4. The size and color of the candle help traders understand the market sentiment.

              Read Also: Introduction to Bullish Candlestick Patterns: Implications and Price Movement Prediction

              Types of Candlestick Patterns

              Candlestick patterns can be divided into 2 parts

              1. Bullish Pattern
              2. Bearish Pattern

              Bullish Candlestick Patterns 

              This pattern indicates that following a stock price correction, the stock price will rebound and begin to trend upward. Traders typically utilize candlestick patterns to enter a stock after it has shown an upward trend.

              Bullish Engulfing Pattern 

              This candlestick pattern indicates the completion of a downward trend and a turnaround. It appears as two candles, the larger of which eats, the smaller bearish candle to become a bullish candle. It illustrates how momentum may shift from negative to positive. 

              Because the body of the bullish candlestick “engulfs” the entire body of the previous bearish candlestick, it is dubbed “engulfing”. This pattern is more likely to appear after a significant decrease in the stock price and when the stock is finding support at its crucial levels. A greater volume also implies that buyers are showing interest in the stock. 

              Bullish engulfing pattern

              Morning Star Candlestick Pattern

              Typically, this three-candle bullish pattern emerges toward the bottom of a downward trend. This pattern will show a lengthy bearish candle as the first candle, indicating that sellers have majority of the power over the stock, and a little body candle as the second candle, indicating that selling pressure may be easing. The last or third candle will be a lengthy bullish candle that closes above the middle of the first candle. This implies that buyers are trying to manipulate the price of the stock entirely. The size of the second small body candle boosts the pattern’s power. This pattern is more consistent when it proceeds in a long-term downward direction. 

              Morning star candlestick pattern

              Three White Soldier

              This bullish reversal candlestick pattern consists of three successive white or green candles. It usually happens close to the end of a declining trend and suggests an impending upward trend. All three white candles open higher than the previous day’s candle body and close at a higher price. All three candles should be free of an upper shadow, signifying continuous buying pressure. Every candle in the pattern should indicate a purchasing suggestion by having a body larger than the previous one. Through this pattern, it is thought that buyers are actively building momentum in the stock. 

              3 white soldiers

              Bearish Candlestick Pattern 

              This pattern typically develops during an advance, when a stock hits its resistance level and the market has a correction in the price of the stock as a result of selling pressure or investor profit-booking. 

              Hanging Man

              This unique candlestick pattern usually appears following an upward trend. It is known as a bearish reversal pattern, indicating that an uptrend is likely to halt and a stock price correction is likely to occur. The candle appears hanging since its top portion is small, its bottom shadow is long, and it reaches beyond the light’s body. On the other hand, there are either very few or no shadows in the upper portion. It emerges following a robust ascent and a rise in sales volume.  

              Hanging Man

              Shooting Star

              The shooting star candlestick pattern, also known as the inverted hammer candlestick pattern, indicates that an upward trend in a stock is about to halt and a negative trend is about to begin. The lone candlestick in this pattern lacks a bottom shadow, albeit a small one is acceptable. It has a small body with a longer top shadow. This candle usually shows that sellers were applying pressure on the price, which prevented buyers from raising the price even if they tried.  

              Shooting Star

              Bearish Engulfing

              It is seen as a strong reversal signal, meaning that the current trend is set to halt and there may be further downward movement. This pattern also consists of two candlesticks; the first is green and has a little body. By encompassing the whole range of the previous day’s candle, the second candle opens above the close and closes below the open price. In order for the pattern to exist, there must be a significant difference in size between the first and second candles.

              Bearish Engulfing Pattern

              Read Also: Chart Patterns All Traders Should Know

              Conclusion

              The candlestick pattern is a valuable tool traders use to analyze market trends and forecast the direction of stock movement. But before making any investment, a trader needs to have a deeper comprehension of the candlestick patterns. Technical and fundamental analysis is also necessary to execute a good trade; thus, it’s important to realize that candlestick patterns are not always accurate.

              Frequently Asked Questions (FAQs)

              1. How do I use candlestick charts to make trading decisions?

                A candlestick chart helps you identify the momentum and direction of the stock, which can help you make your investment decision. However, along with these charts, it is essential to use different technical tools and consider the overall market condition before executing any trade.

              2. Why do candlesticks have different shapes and sizes?

                The size of the candle changes with the price movement of the stock.

              3. How can a beginner learn about the candlestick pattern?

                A beginner’s first step is learning about the candlestick structure and identifying a few basic candlestick patterns. He can do this through books, online tutorials, educational videos, etc.

              4. Who discovered the first candlestick pattern?

                The candlestick pattern was first discovered by a rice trader in Japan, Homma Munesiha, in the 1700s. 

              5. What is a wick in a candlestick?

                Wicks are shadows or lines that indicate where the price of a stock has fluctuated based on its opening and closing prices. A shadow represents the highest and lowest prices at which a security has been traded over time.

            3. HCL Technologies Case Study: Financials, KPIs, And SWOT Analysis

              HCL Technologies Case Study: Financials, KPIs, And SWOT Analysis

              Did you know there is an Indian listed company which is in the list of 2025 World’s Most Ethical Companies?

              We are talking about HCL Technologies Limited, an Indian multinational technology company headquartered in Noida, India, and established by Shiv Nadar in 1991. In this blog, we will cover the company’s overview, market data, financials, balance sheet, and SWOT analysis.

              Overview of HCL Tech

              HCL Technologies is a pioneer company in IT services, powered by a global and diverse team of 224,700+ employees across the globe, providing services in 60+ countries. This company comes under the HCL Enterprise.

              Further, as of April 2024, HCL Tech has 210+ delivery centres and 60+ innovation labs. The company has cumulatively served more than 10,000 clients.

              There are three main business units:

              1. Products & Platforms (P&P)

              2. IT and Business Services (ITBS)

              3. Engineering and R&D Services (ER&D)

              FormerlyHindustan Computers Private Limited
              CompanyPublic
              FounderShiv Nadar
              HeadquartersNoida, Uttar Pradesh, India
              Area servedWorldwide
              Parent CompanyHCL Group

              Did you know?

              As of January 2024, Shiv Nadar, the founder of HCL Tech, is the 9th richest person in Asia.

              HCL Technologies Business Model

              HCL provides a broad array of business lines, products, and services. The company engages in different segments:

              Application Services

              The company provides the services industrialized delivery model sets and brings exceptional value to its customers. It includes:

              •  Oracle Services
              •  Quality Assurance & Testing Services
              •  SAP Services
              •  Microsoft Services.

              Business Process Services

              HCL understands the business priorities and is helping organizations transition from operational excellence.

              • Automated Product Support
              • Cognitive Automation
              • Finance & Accounting
              • Supply Chain Management
              • Digital and Content

              Engineering & R&D Services

              HCL partners with a majority of the global top research and development corporations. The services offered in this segment are:

              •  Mechanical Engineering
              •  Experience in Design and Engineering (EDGE)
              •  VLSI Design Services
              •  Product Lifecycle Management
              •  Product Testing and Verification
              •  DevOps
              • Systems & Hardware Engineering
              •  Embedded Engineering
              •  Digital Engineering
              •  Software Engineering

              IT Infrastructure Management Services

              •  Cloud-Native Services
              •  Cyber Security Services & GRC Services
              •  Service Integration & Management
              •  Application Operations
              • Next-Generation Data Center Services
              •  Digital Workplace services
              •  Next Generation Network Services

              DRYiCE

              HCL Technologies is also focusing on establishing AI-powered products and platforms for the digital world. It is simplifying and transforming enterprise IT and business operations. The company enables enterprises to operate in a faster, and cost-efficient manner while ensuring superior business outcomes.

              Key Performance Indicators (As of April 2024)

              Market Cap₹ 4,00,890 Cr.
              Stock P/E25.7
              ROCE28.3 %
              Current Price₹ 1,477
              Book Value  ₹ 242
              ROE23.0 %
              Dividend Yield3.52 %

              Financial Statement Analysis

              Let’s analyse the financial statement, key ratios and peer analysis of HCL Tech.

              Income Statement

              Particulars (INR Cr)Mar-23Mar-22Mar-21Mar-20
              Operating Revenue1,01,45685,65175,37970,676
              Operating Expenditure78,83265,12555,35453,390
              Profit before Tax19,48816,95115,85313,980
              Net Profit14,85113,49911,14511,057

              Balance Sheet

              Particulars (INR Cr)Mar-23Mar-22Mar-21Mar-20
              Non-Current Liabilities5,3307,0767,5485,438
              Current Liabilities21,43118,77517,38323,730
              Non-Current Assets38,58239,81641,96242,169
              Current Assets53,57748,04143,05138,420

              Cash Flow

              Particulars (INR Cr)Mar-23Mar-22Mar-21Mar-20
              Cash From Operating Activities18,00916,90019,61813,359
              Cash Flow from Investing Activities-3,9311,477-5,730-12,374
              Cash from Financing Activities-15,881-14,508-11,192-3,168

              Financials Ratios

              ParticularsMar-23Mar-22Mar-21Mar-20
              ROCE (%)29.7126.6327.2328.42
              ROE (%)23.4122.2220.0923.87
              ROA (%)16.4915.6513.4916.18
              EBIT Margin (%)18.2118.9120.4519.62
              Net Margin (%)14.4415.5914.6315.51
              Cash Profit Margin (%)18.7220.8420.9320.48

              Peer Comparison (As of March 2023)

              ParticularsHCL TechnologiesTata Consultancy ServicesInfosysWiproLTIMindtree
              Market Cap (As of April 24 in ₹ Cr)4,14,67514,04,7596,15,6572,51,4341,45,139
              Revenue (₹ Cr)1,08,0202,38,8181,53,18990,74235,315
              Net Profit (₹ Cr)15,69645,03324,40711,3504,598
              Net Margin (%)14.3318.5115.6612.1612.82
              RoE (%)23.9547.7031.2415.3426.52

              Read Also: Mahindra & Mahindra Case Study: Products, Financials, KPIs, and SWOT Analysis

              HCL Technologies SWOT Analysis

              SWOT analysis of HCL Tech

              Strengths

              • HCL Technologies enjoys a high-grade research team to understand the market and create innovative products.
              • The company is the third-largest listed Indian technology service provider in terms of revenue.
              • The company has a global presence and offers a diverse set of IT services.

              Weakness

              • The multinational corporation in IT space such as Wipro, Infosys, and Tata Consultancy have direct competition with HCL Tech, and the company has to maintain the brand value for the upcoming stakes in the future.
              • HCL is facing issues in retaining customers because the company is unable to assist in providing cross services to the customers.

              Opportunities

              • The company can focus on eliminating the overutilization of subcontractors, which will improve the cutting out expenses and eventually improving the profitability.
              • The company has a great Research & Development department that can take the business to the next level.
              • The company develops end-to-end customer segment strategies, further development in this area will improve in revenue generation.

              Threats

              • HCL Technology has a global presence and generates a healthy part of the revenue outside India. Any kind of depreciation in domestic currency, i.e., INR can significantly affect the revenue of the company.
              • The company engages with high-risk investments and intense competition from its peers such as Wipro, Infosys, TCS, and global players such as Accenture, IBM, and many more.

              Read Also: LTIMindtree Case Study: Products, Services, Financials, KPIs, and SWOT Analysis

              Conclusion

              In summation, HCL Technologies, with its robust research & development capabilities, is a leading IT services company with a global presence and a diverse range of products and services.

              The company’s recent growth and cost optimization contribute to its market success, which may further help the company to experience momentum in revenue and market growth in the coming years.

              Frequently Asked Questions

              1. Who is the founder of HCL Technologies?

                Shiv Nadar laid the foundation of the HCL Tech in 1991.

              2. Who is the CEO of HCL?

                As of April 2024, Mr. C Vijay Kumar holds the CEO position in HCL.

              3. What is the business operation of HCL Technologies?

                HCL Technologies with clients across multiple verticals, offers solutions for Technology and Services, Telecom and Media, Retail and CPG, Public Services, Financial Services, etc.

              4. Where is the headquarters of HCL?

                HCL has its headquarters in Noida, Uttar Pradesh.

              5. What is the full form of HCL?

                The full form of HCL is Hindustan Computers Limited.

            4. What is IEPF? Introduction, Reasons for Transfer, and Process of Claiming Explained

              What is IEPF? Introduction, Reasons for Transfer, and Process of Claiming Explained

              Shares are often bought, but many are never claimed or forgotten about. Money in these situations remains unclaimed for a long time. The Investor Education and Protection Fund (IEPF) was established by the Ministry of Corporate Affairs (MCA) to ensure that these unclaimed shares are transferred to and received by the appropriate individuals.

              The purpose of this blog post is to explain why shares are transferred to the IEPF and how they can be claimed.

              Introduction

              The Investor Education and Protection Fund, or IEPF, was created on January 13, 2016, by the Central Government under Section 125 of the Companies Act 2013 to protect and educate investors. Contributions to the IEPF come from various sources, including unclaimed dividends, matured deposits, and other business assets. These funds are then used to support investors who have lost money due to dishonest business practices. 

              Why are shares transferred to IEPF?

              Many businesses that turn a profit pay dividends to their owners. Shares that have not been claimed by the holder for seven years get transferred to the IEPF. Owing to this inactivity, the company’s legislation requires it to transfer the shares to the IEPF, along with any outstanding interest. 

              This transfer protects their interests by preventing the investor from losing shares due to inactivity in their account. The shareholder has full right to reclaim their share from the authorities.

              Reasons why the holder may not claim dividends

              1.  It is not possible for you to receive the dividend if you misplace the shares you own or forget the details of your ownership. 

              2.  Legal hires cannot claim assets in the event of a holder’s death if the nominees are unaware of them. 

              3.  You will not be entitled to the dividend the firm declares if your investment records are incomplete. 

              4.  The company will not be able to transfer the dividend to the shareholder if the shareholder’s registered bank account has changed over time and has not been updated with the firm.

              Who can claim shares from IEPF?

              Any shareholder whose unclaimed dividends and shares have been transferred to IEPF can claim their shares from IEPF. There is a limit of one consolidated claim per corporation per fiscal year. Before filing the claim with IEPF, the claimant must make sure the company has completed the share transmission procedure and issued an entitlement letter.

              Amounts credited to IEPF

              1.  If not claimed by the holder, the unpaid dividend amount is transferred to IEPF.

              2.  The interest and other income received from investments are transferred to IEPF.

              3.  The redemption amount received from the preference shares remained unclaimed for more than 7 years.

              4.  The proceeds received by the IEPF from fractional shares sold as part of bonuses, mergers, and acquisitions.

              Utilization of IEPF Amount

              The IEPF authority can only utilize the amount lying with them for the below-mentioned purposes.

              1.  The fund can be utilized towards promoting investor awareness programs.

              2.  Making refunds regarding matured deposits, debentures, and unclaimed dividends to their holders.

              3.  The National Company Law Tribunal has sanctioned the reimbursement of legal expenses incurred in suits against debenture holders, members, or depositors.

              4.  Any other purpose incidental to the purpose mentioned above.

              Read Also: KYC Regulations Update: Comprehensive Guide

              Process to get shares from IEPF

              The process to claim the shares from IEPF authorities is as follows:

              1.  Online Application – First, you must fill out an online application form known as IEPF 5, which is available on the company’s official website, www.iepf.gov.in, under the head claimants. The form will ask you for your information, company details, etc.

              2.  After completing and submitting the form, you will receive acknowledgement slips and the reference number.

              3.  Physical Submission—Submit the acknowledgement slips along with essential documents such as the Indemnity Bond, Advance Stamped receipt, original shares, debt certificate, proof of entitlement, and Aadhaar card to the relevant authorities.

              4.  Send all the documents to the Nodal Officer of the company at their registered office.

              5.  The nodal officer will then verify your claim and send a verification report to IEPF within 15 days.

              6.  Your claim will be processed once IEPF receives the verification report.

              7.  After the company processes the claim, the stock will be transferred to the holder’s Demat account.

              Conclusion

              The Investor Education and Protection Fund (IEPF) is crucial for advancing financial literacy in India and protecting investors’ interests. In addition to distributing shares and unclaimed dividends to investor education and safety initiatives, the fund fosters a more transparent and accountable environment. 

              S.NO.Check Out These Interesting Posts You Might Enjoy!
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              4What exactly happened to Paytm Payments Bank & why has the RBI banned it?
              5Tech Titans of India: A Comprehensive Guide to India’s Top IT Stocks

              Frequently Asked Questions (FAQs)

              1. Why are shares transferred to IEPF?

                Shares are transferred to IEPF because the shareholder failed to claim the company’s income and shares.

              2. How can I check if I have any unclaimed dividends or shares lying with the IEPF?

                You can search for unclaimed sums on the IEPF website by entering your name and PAN card information. 

              3. How long does it take to get the shares back from IEPF?

                It generally takes 30 to 60 days after completing the verification claim.

              4. What does IEPF stand for?

                IEPF stands for “Investor Education and Protection Fund”.

              5. Which form needs to be filled to claim shares from IEPF?

                To claim shares from IEPF, you must first fill out the IEPF 5 form. Once completed, print the acknowledgement receipt and send it to the company’s nodal officer. 

            5. What is PSU Index? Performance, Comparison, Benefits, and Risks Explained

              What is PSU Index? Performance, Comparison, Benefits, and Risks Explained

              The Indian stock market boasts a diverse range of indices, each catering to specific investor preferences. PSU index is one such index.

              This index tracks the performance of some of India’s most reliable and established PSU companies. The index consists of giants like Coal India, NTPC, and SBI.

              The PSU index is known to hold the capability to generate decent returns as PSU firms come with a sense of security because of government backing.

              In today’s blog, we will be exploring the benefits, risks and performance of the PSU funds.

              PSU Index Background

              Before we dig deeper into the PSU Index, let us have a quick overview of what PSUs are.

              PSUs stand for Public Sector Undertakings that are owned and operated by the government of India, either at the central or state level. PSUs play a major role in the Indian economy, contributing to multiple sectors and can be established through various means such as nationalisation, special enactments, mergers, and acquisitions.

              Types of PSUs

              • CPSEs (Central Public Sector Enterprises) – Companies where the direct holding of the Central Government or other CPSEs is 51% or more
              • PSBs (Public Sector Banks) – Banks where the direct holding of the Central/State Government or other PSBs is 51% or more
              • SLPEs (State Level Public Enterprises) – Companies where the direct holding of the State Government or other SLPEs is 51% or more

              Public sector enterprise offers a wide range of products which include steel, heavy machinery, fertilisers, drugs and pharmaceuticals, petrochemicals, textiles, cement etc.

              PSU companies types

              Overview

              The PSU Index was launched on February 1, 1999, and tracks the performance of the Public Sector Undertakings (PSUs) listed on the Bombay Stock Exchange (BSE) in India. It measures the combined performance of some of the companies classified as PSUs by the BSE and serves as a benchmark for funds and portfolios focusing on PSUs.

              The S&P BSE PSU is calculated using the float-adjusted, market-cap-weighted methodology. PSUs are recognised for their dividend payouts and offer a source of regular income for investors. Additionally, the PSU Index can be a relevant investment option for investors seeking exposure to the Indian public sector.

              Did You Know?

              The first disinvestment by way of public offer took place in 1995-96. Since then, Rs. 2,90,489.62 crore has been raised through PSU disinvestments from capital markets.

              Top 10 Constituents

              State Bank of India, NTPC, Power Grid Corp, Coal India, Bharat Electronics, Indian Oil Corp, Power Finance Corp, Bharat Petroleum Corp, and Hindustan Aeronautics Ltd.

              S&P BSE PSU vs. S&P BSE 500

              The table below shows a comparison between the annualised returns of S&P BSE PSU and S&P BSE 500.

              202320222021
              S&P BSE PSU61.48%28.3%47.95%
              S&P BSE 50026.55%4.77%31.63%

              While S&P BSE PSU has demonstrated an unexpected return of 61% and 47% during the shorter periods of one year and three years, respectively, S&P BSE 500 has stayed somewhat consistent over the longer term. This indicates that thematic investing brings a lot of risk due to lack of diversification. 

              Read Also: List Of Best PSU Stocks in India

              Categories

              PSU Funds can be categorized into two main types, Equity PSU Funds and Debt PSU Funds,

              Equity PSU Funds primarily invest in the equity shares of PSUs and debt PSU Funds invest in the bonds issued by the PSU.

              Equity PSU Funds

              Fund Name2023202220212020
              SBI PSU Fund Reg Gr54.0329.0132.41-9.98
              Invesco India PSU Equity Gr54.4820.5431.056.07
              ABSL PSU Equity Reg Gr59.2828.5537.1–
              NIFTY 100 TRI21.244.9426.4516.08

              The table above showcases some of the top-performing Equity PSU Funds and their returns relative to the benchmark, Nifty 100.

              Inferences that can be drawn from the above data are as follows,

              PSU funds have been on a roll for a past few years due to several factors and PSU stocks witnessed a significant surge in the year 2023 which lead to exceptional returns for these funds. Funds like Aditya Birla Sunlife PSU and SBI PSU Equity funds delivered blockbuster returns of more than 50% 

              While 2023 stands out, PSU funds have not offered consistently higher returns every year. The performance of these funds can vary depending on the market conditions and the specific PSU stocks they hold. 

              Debt PSU Funds

              Fund Name2023202220212020
              Axis Banking & PSU Debt Reg Gr6.533.753.399.59
              Tata Banking & PSU Debt Reg Gr6.62.93.4210.75
              ABSL Banking & PSU Debt Reg Gr6.863.653.5910.91
              Franklin India Banking & PSU Debt Gr6.843.273.699.13
              SBI Banking & PSU Fund Reg Gr6.562.872.5810.47
              Kotak Banking and PSU Debt Gr6.773.63.9110.51
              Nippon India Banking & PSU Debt Gr 6.83.173.8610.93

              The table above shows the returns of multiple debt PSU Funds over the past few years.

              Year-wise returns of debt PSU funds are likely to be less volatile when compared to equity PSU funds. They show a gradual increase over time, with some fluctuations. 

              Over the past three years, the average return for the Banking and PSU Debt Funds hover around 5.5%. However, specific fund performance can vary. 

              Therefore, debt PSU funds are suitable for investors seeking relatively stable returns with lower risk and want regular income through coupon payments.

              Should I Invest in PSU Funds?

              Investing in PSU funds is a personal decision that should be taken after considering all of the risks. Hence, the benefits and risks stated below might help you in making an informed decision.

              Benefits of Investing in PSU Funds

              1. PSU Funds primarily offer capital preservation and regular income with moderate growth potential.
              2. These funds are considered low-risk compared to other investment options since they invest in PSUs. This provides a degree of safety and security to your investment.
              3. Many consider investing in PSUs because of government backing to the companies. 

              Risks of Investing in PSU Funds

              1. PSUs are backed by the government, which makes them susceptible to government policies and decisions. These policies can impact their performance, profitability and growth prospects and expose investors to uncertain risks.
              2. The government uses OFS to divest its stake in PSUs. This increased supply of shares can put downward pressure on the prices, leading to losses for investors.
              3. While some PSUs perform well, others might struggle with bureaucratic inefficiencies and slower growth compared to private companies. This can hinder the overall performance of the PSU index.
              4. The PSU index is concentrated in specific sectors like energy, banking etc. This lack of diversification across different sectors can expose investors to greater risk.
              PSU Index Benefits

              Read Also: Why Are PSU Stocks Falling? Key Insights and Considerations

              Conclusion

              Investors need to keep in mind that though short-term returns of PSU funds have outperformed the Sensex, the risk of investing in PSU funds still exists. Therefore, it is important to perform your own analysis before investing in PSU Funds.

              Frequently Asked Questions (FAQs)

              1. What is the PSU Index?

                Think of the PSU Index as a shopping cart filled with public sector undertakings of the country.

              2. Are there any downsides in investing in PSU Index Funds?

                Investment is not risk-free and the PSU index might not be as high-flying as some other options. Also, these companies are sensitive to interest rate changes by the government and thus affect their stock returns.

              3. How can I invest in the PSU Index?

                You cannot invest directly in the PSU Index. However, you can invest through PSU mutual funds and individual PSU stocks.

              4. What are the benefits of investing in PSU funds?

                PSU funds offer a lot of benefits to the investors such as regular income and low-risk.

              5. Do all PSU funds give dividends?

                While several PSU funds offer consistent dividends, many don’t. 

            6. Varun Beverages Case Study: Business Model, Financials, and SWOT Analysis

              Varun Beverages Case Study: Business Model, Financials, and SWOT Analysis

              Summer is knocking on the door, and the scorching heat is followed by the never-ending craving for soft drinks like Mountain Dew, 7up, Tropicana, etc.

              While these brands belong to Pepsi, only some know their manufacturer, Varun Beverages. Today, we will explore VBL’s case study and analyze its business model and SWOT analysis.

              Varun Beverages Company Overview

              Varun Beverages Limited was established in 1995 by Ravi Jaipuria, the chairman of RJ Corp. The company primarily makes and distributes beverage bottles. The corporation was the first to set up bottling facilities in India for PepsiCo products. Outside of the United States, VBL is the second-biggest PepsiCo beverage bottling company globally. In 2016, the company conducted its initial public offering (IPO).

              Business Model of Varun Beverages

              The company’s primary activities include bottle manufacture and distribution of PepsiCo’s product line, which includes bottled water, juices, and other non-carbonated drinks in addition to carbonated soft drinks like Pepsi and Mountain Dew. The company and PepsiCo have a franchisee agreement that grants them the authority to manufacture and market PepsiCo beverages within their designated regions.

              Based on PepsiCo’s stated framework, the company has limited flexibility in terms of marketing techniques and product advancements.

              Revenue Model

              VBL’s revenue strategy is pretty concentrated because it primarily makes money through a franchisee relationship with PepsiCo, for which it pays royalties and franchise fees. They supply wholesalers, distributors, and retailers with their final goods. In addition, it provides distribution services to PepsiCo and other beverage businesses, charging fees for shipping, warehousing, and logistics. 

              The company also earns a small portion of revenue from sponsorships, promotions, and advertisements. 

              Business Model of Varun Beverages

              Market Details of Varun Beverages

              Book ValueINR 49.94
              52 Week HighINR 1561.95
              52 Week LowINR 687.5
              Face ValueINR 5
              TTM PE 88.75
              Market Capitalization182,429 Crores
              (As of 16th April 2024)

              Read Also: Amul Case Study, Business Model, And Marketing Strategy

              Financial Highlights of Varun Beverages

              Balance Sheet

              Particulars31st Dec 202331st Dec 202231st Dec 2021
              Non-Current Asset10951.5538214.2137035.777
              Current Asset4235.6303404.0302546.113
              Total Asset15187.18311618.2439581.890
              Equity7084.6535215.4874196.697
              Long Term Liability3949.3182434.0022364.947
              Current Liability4153.2123968.7543020.246
              (In INR Crores)

              According to the data in the above table, the company’s long-term and short-term assets are growing year over year, but its long-term liabilities have also risen from 2,434 Crores in FY2022 to 3,949.32 Crores in FY2023.

              Income Statement

              Particulars31st Dec 202331st Dec 202231st Dec 2021
              Revenue from operations16321.06313390.5588958.291
              Total Income16400.42213429.4079026.216
              Total Expenses13660.58311405.7648019.608
              Profit before tax2739.3602023.6371006.68
              Profit after tax2101.8131550.114746.052
              (In INR Crores)

              The preceding table clearly shows that the company’s earnings and revenue are growing steadily. The company’s net profit has also increased by 35% year over year.

              Cash Flow Statement

              Particulars31st Dec 202331st Dec 202231st Dec 2021
              Cash flow from operating activities2390.7781790.0291231.422
              Cash flow from investing activities(3289.867)(1704.598)(1010.639)
              Cash flow from financing activities984.9(17.942)(177.682)
              (In INR Crores)

              The cash flow from financing activities exhibits massive growth, with inflows posting a positive figure of 984.9 Crores for FY 2023, whereas the cash flow from operating activities shows a steady rise.

              KPIs

              Particulars31st March 202331st March 202231st March 2021
              Operating Profit Margin (%)18.7416.7713.5
              Net Profit Margin (%)13.1011.768.45
              Return on Capital Employed (%)27.2628.8818.15
              Inventory Turnover3.393.733.09
              Current Ratio1.020.860.84
              Debt to Equity Ratio0.750.720.60

              We can infer from the aforementioned KPIs that the company’s operational profit margins are increasing year over year, while their ROCE indicates steady growth. Additionally, their current ratio, a liquidity indicator, indicates a significant jump in liquidity when compared to FY 2022.  

              Read Also: Coca-Cola Case Study and Marketing Strategy

              SWOT Analysis of Varun Beverages

              SWOT Analysis of Varun Beverages

              Strengths

              • They have an advantage over other market competitors because they are licensed to manufacture, distribute, and market well-known brands of PepsiCo.
              • Due to its extensive geographic reach, they are less vulnerable to the economic fluctuations of any one region.
              • They offer cost-effective products and have competitive pricing strategies because their management properly manages the production costs.

              Weaknesses

              • Since the business depends on PepsiCo for its products, any modifications to the agreement between the two will raise concerns for the business. 
              • PepsiCo’s product portfolio is restricted to carbonated drinks, which will raise their business risk. As a result, they must diversify their offerings.
              • VBL’s beverages are a seasonal product, with summertime demand being the peak, which causes uneven revenue for the business in winters.

              Opportunities

              • The company can expand its business internationally by asking for new geographical licenses.
              • The business must attract new customers by asking PepsiCo to change or modify their packaging of products.
              • Companies can use the faster-growing e-commerce market to expand their online sales channel.

              Threats

              • The beverage industry is extremely competitive, with several well-known competitors like Coca-Cola and others.
              • The organization must adapt to the changing consumer preference for healthy products and adjust its business strategies accordingly.
              • The cost of raw materials, including sugar and plastics, is highly variable, and any change in pricing could have a detrimental effect on their profit margins.
              • VBL’s product sales are entirely dependent on its supply chain and distribution network; any interruptions to these will result in a decline in sales.

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

              Conclusion

              With its stronghold in the beverage business, Varun Beverages has made a name for itself. The company is positioned for long-term success thanks to its dedication to innovation, strategic growth, and customer satisfaction. Our never-ending desire for refreshing beverages will continue to be satiated because Varun Beverages regularly explores new product categories.

              In addition, the business has increased its profits year over year and reported profits for the previous three years in a row. However, it is advisable to check your risk profile with your investment advisor and seek advice before making any investment decisions.

              S.NO.Check Out These Interesting Posts You Might Enjoy!
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              Frequently Asked Questions (FAQs)

              1. How is Varun Beverages affiliated with PepsiCo?

                PepsiCo has partnered with Varun Beverages to sell and distribute its products in the Indian Market.

              2. How many Varun Beverages plants are there in India?

                VBL has 31 manufacturing plants in India and 6 within international boundaries.

              3. What famous products do Varun Beverages include?

                VBL produces brands like Pepsi, Pepsi Black, Mountain Dew, Sting, 7-Up, Mirinda, etc.

              4. Who owns Varun Beverages?

                RJ Corp Limited owns Varun Beverages.

              5. Who is Varun Beverages’ CEO?

                Kapil Agarwal is the current CEO of Varun Beverages.

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