Author Archives: Aditi Maheshwari

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What are liquid funds? Find more

What are liquid funds? Find more

Liquid funds are also debt funds that lend for a period of up to 91 days. These are the safest funds among all other schemes, being short-term. It is appropriate for putting money aside for emergencies. There is negligible risk of loss if one invests for minimum one month. These are known for giving up to 50% and at times even 100% higher returns than the savings bank account. These have low annual fee ranging from 0.30%- 0.70%


Portfolio with liquid funds fetches:

No Lock-in Period – By the name, it suggests they have no lock-in period and give quick access to cash by redemption.

Quick Withdrawals – Liquid fund withdrawals can be made within 24 hours.

Lowest Interest Rate Risk – These funds mainly invest in fixed income securities which have a short maturity period, hence have one of the lowest rate risk as compared to others.

Tax Benefits – Liquid Funds offer valuable tax benefits.

Comparatively Good Returns – Liquid funds offer an average return of about 8% per annum.

For instance,

Franklin India Liquid Fund is presently giving a return of +7.04% p.a.

Tata Liquid Fund is presently giving a return of +6.91% p.a.

Edelweiss Liquid Fund is presently giving a return of +6.86% p.a.



Comparing and Contrasting:

Current Fixed Deposit Rates are ranging from 3.00%-6.75% p.a. covering all classes of investors.

Comparing these with the previously mentioned Credit Risk Fund and Liquid Fund, we can learn that these funds give more returns as compared to the Bank FDs.



Credit risk funds. Should you invest?



Equity Right

Credit risk funds. Should you invest?

Credit risk funds. Should you invest?

Credit risk funds are debt funds that lend not less than 65% of their portfolio in the lower rated instruments (less than AA rated papers). The borrowers have to shell out higher interest charges to compensate for their lower credit rating, which translates into a higher risk for the lender due to an increased possibility of default. Although, these funds lend mostly for short duration. They are still one of the riskiest in the category.

These funds are ideal for an investment horizon of at least 3-5 years. There is a high probability of incurring losses if held for short term.These funds tend to deliver higher returns than Bank Fixed Deposits thereby involving higher risk.


Portfolio with Credit Risk Funds fetches:

Higher Return : These funds take high risks and invest that money in the low risk instruments and the returns generated are higher as compared to other funds.

Tax Benefits: These funds are tax-efficient as the Long Term Capital Gains (LTCG) is flat 20% where as if the assessee is in 30% slab still LTCG will be taxable at 20%.

Extended Supervision: In these funds, fund managers play a very significant role in obtaining remarkable returns. Credit rating alone is not the only basis of decision making. There are various parameters such as the company’s scope of expansion, its potential and business model.

For instance,

ICICI Prudential Credit Risk Fund is presently giving return of +8.64% p.a.

Kotak Credit Risk Fund is presently giving return of +7.44% p.a

HDFC Credit Risk Fund is presently giving return of +7.55% p.a



Debt, hybrid mutual funds see large outflows in April

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Startups offer Esops to help employees

Startups offer Esops to help employees

Incidental to economic distress invited by COVID-19, some of India’s top startups are rendering additional stock options to their employees in order to retain them even after having performed reduction in salaries mandatorily or voluntarily both. Among others, one is Zomato, a well known food delivery chain. Other is “On Your Own Rooms” popularly known as the Oyo Rooms, next is Grofers, the grocery delivery startup, Bounce, known for offering dock-less scooters enhancing mobility, Paytm an e-commerce payment and shopping application.

Zomato was seen initiating a voluntary salary reduction scheme in April, offering those employees add on stocks in order to compensate their decreased pay cheques. According to the estimates, around 2,700 employees undertook voluntary pay cuts empathizing with the company’s situation.


Why Esops?

This decision is a rational one. Companies resorting to pay cuts will not remain appealing to employees who previously worked on high salaries, retaining the talent is a skill, during these tough situations, Esop can be the best possible option to engage employees if not for life but at least for a fixed tenure. According to the sources, Zomato is already having pool of untouched shares with it which they can now use to offer its employees. While others are managing from their founder’s holding in the organizations.

Grofers is backed by Soft Bank, helping it to increase the Esop pool. It is planning to enhance pool by an addition of $25 million, summing up to make it raise $60-70 million. Further, Paytm, Zomato and Oyo are known to have Esop pools ranging around 2.6% – 5.5% of their overall shareholding.

The companies are still deciding as to what ratio of compensation will be granted and what can be the best articulated Esop plan that they can come up with, for instance lower price or shorter lock-in periods since they are being issued in compensation to liquid cash. Paytm, has earlier announced that it is willing to offer Esop linked appraisal scheme this year. For which, it will keep aside Rs 250 crore in Esops to be offered to the target achievers, sincere and honest employees, high performers and fresh joinees of their organization.



SBI CARDS Q4FY20 Result Highlights

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Franklin Templeton receives prepayments from bond issuers

Franklin Templeton receives prepayments from bond issuers

On April 23, Franklin Templeton India’s 6 debt funds, which closed due to illiquidity and redemption pressure amid the COVID-19 turmoil, have received around ₹2,000 crore in repayments/prepayments from underlying bonds. Investors who have contributed are Xander Financial  and Hero Solar Energy. Some energy sector and renewable sector organizations have also contributed in the same.


The recent scenario:

Franklin Templeton has borrowed capital from banks to manage the remittance pressure for these 6 schemes that we are talking about. Hence, the total amount received has been directed towards settling these bank liabilities. Recovery can be seen in the dynamic accrual fund and the amount of ₹100 crore received from Hero Solar Energy has been received under this fund only. Soon the ultrashort term fund will also become cash positive.

According to Franklin Templeton, they will be receiving such continuous inflow regularly and all maturities and other commitments will be met by their portfolio securities, as per predefined timeline. Adding, they are optimistic with respect to further decrease in borrowing levels throughout these funds. They will be receiving funds through coupons, scheduled maturities and prepayments.

The funds that wound up had total assets under management (AUM) amounting ₹25,856 crore. While few investors have made payments and/or advances with Franklin, the matter of concern is that many of the debt funds are still lacking enormous liquidity. Around 88-100 percent of the portfolio ranks below “AA-” along with no or low trading. As per the guidelines laid by Securities and Exchange Board of India (SEBI), before any repayment to unit holders, every scheme must clear its total liabilities. Once the liabilities are cleared, Franklin plans to reach out to investors for their approval via electronic mode.


Clearing the misconception:

There is a misguided judgment that the borrowing decreases the AUM of the respective scheme and that on repayment of the same it takes away value from the investors. Whereas, in the beginning only the borrowing is regarded as a liability and its adjustments are taken care of while computing AUM. Viably, the portfolio value is kept much higher than the AUM that is revealed. Therefore, repayment of borrowing keeps the AUM intact.


The second reason for shutdown of Franklin’s 6 debt funds:

Another cause for closing down these schemes is the recent SEBI guideline, which forbids funds from investing more than 10% of their assets in unlisted bonds. In India, anything rated below AAA- is considered non-venture grade since high return market is extremely immature in these categories. Franklin’s six funds had a lot of similar kind of private debt. In October 2019, when SEBI announced the new rule saying that any investments in unlisted instruments should be less than 10%, this gave a double blow to these 6 schemes of Franklin. As a result, it could not hold more than 10% nor it could be traded as there were not many buyers and the guideline was not allowing exchanging. This stranded around 33% of its assets.



SEBI turns down proposal on easing QIP pricing norms

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SEBI turns down proposal on easing QIP pricing norms

SEBI turns down proposal on easing QIP pricing norms

The Securities and Exchange Board of India (SEBI) scrapped the proposal requesting loosening of pricing norms for the Qualified Institutional Placement (QIP). Relaxing the pricing norms would have made it easier for companies to raise capital amid turmoil caused by the pandemic. Therefore, a plea was made to SEBI by merchant banks to permit companies to offer a 10% discount on the floor price.

The present market fluctuation is forbidding the companies under existing norms to price their offerings more alluringly. Therefore, they are facing acute shortage of funds. As per prevailing rules, it is mandatory that the issue price in a QIP to not be less than the average of weekly high and low for 2 weeks preceding the relevant date. Bankers have now requested a discount to be increased from 5% to up to 10%. This will offer a great relief to the companies and will aid institutional investors to raise money.


The market scenario:

The capital markets regulator said that the share prices are already at their lowest and demand of further discounting is not justifiable. As compared to previous years, market is already at its low. From the day the news of corona virus was out in February till present, there has been huge declines. Nifty went down by 24%. Similarly, mid cap and small cap witnessed a decline by 27% and 26%. The losses could have been further high if the markets would not have recovered in the past weeks.

Money raised from QIPs between 2015 to 2019 by corporate India amounts to ₹1.31 trillion. To emphasize further, organizations have raised around Rs 51,216 crore through QIPs in FY20. According to 2020 data, capital amounting to ₹20,360 crore has been raised from QIPs.


SEBI proactively extending relaxations amidst pandemic:

Since the beginning of the lock down, SEBI has been proactively giving genuinely necessary relaxations to help listed entities and indirectly to the public shareholders supporting them to face the economic turmoil invited by the pandemic. In March, RBI proposed to relax the compliance of the compulsory 6 months gap between 2 back to back QIP issues. This was after the requests of companies wanting a waiver on the requirement of the cooling off period between two back to back QIP issues. Further, raising funds via rights issues and initial public offerings have already been made easier for companies. The recent request is much in line with relaxations. The regulator has granted relaxations for making ways easier for the companies to raise money from the market.


How will this relaxation help companies?

Investment bankers mention that lower floor prices in QIP issues will provide better access to capital by the companies. Moreover, QIP provides a fast track way that allows organizations that are listed to raise funds through equity or equity-linked instruments. Changes in QIP norms will improvise access to equity capital. Increasing the discount on floor rate to 10% will provide a larger stretch to companies to raise equity capital in a highly volatile and risky market scenario. This may lead to higher dilution, but the capital may be critical for survival and supporting business.

Undoubtedly, this will concern the capital markets regulator. According to bankers, there is not much scope of malpractices. The issue of QIPs does not allow promoters to take part. In case of dilution, it will affect not only shareholders but promoters too, hence keeping a natural check on pricing and sizing of a QIP issue.


Post lock down Scenario:

When the economy and markets begin recouping post the lock down, QIPs could rise as a significant raising support for organizations. So a relaxation on the pricing norm as discussed earlier will have a great positive impact.



States impose higher taxes to raise revenue

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Cryptocurrency EOS dips by 11%

Cryptocurrency EOS dips by 11%

EOS token, the digital money of the EOS network, faces a critical fall. Digital money EOS, on 4th May 2020, was seen trading at a cost of $26,993, down by 10.50%. This was the most critical fall in the estimation of cryptographic forms of money since March 12. The fall incited a decrease of the market capitalization of EOS to $25,750 B, or 0.00% of the complete capitalization of all cryptographic forms of money. While prior pinnacles capitalization of EOS was $175,290 B.


In the previous 24 hours, the EOS was exchanging between $26,956 to $28,443. Over the most recent 7 days, digital money EOS felt the stagnation rate as it only got displaced by 1.25%. The EOS measure of cash exchanged in the recent 24 hours was $41,130 B. The course was differed in the range from $26,900 to $31,138 over the most recent 7 days.


Right now EOS is still underneath 88, 25% from their pinnacle esteems, adding up to $22.98, which was arrived at April 29, 2018.



News regarding other digital forms of money:

Bitcoin was last exchanging at $8.671,4, showing a fall of 5.16% during the day. The Ethereum exchanged $20,354 , dropping 6.71%. The market capitalization of Bitcoin – $1,613,378 B or 0.00% of the all out capitalization of digital money, while showcase capitalization of the Ethereum – $231,391 B or 0.00% of the complete capitalization of the financial exchange.




Jio Platforms acquire investment from Silver Lake