Optima Restore
- Family floater is better due to the Restore Benefit option
- Can avail a separate Critical Illness policy
- The Multiplier Benefit is good and not provided by other plans
- Better than the Easy Health
Wednesday, June 18, 2014
Apollo Munich
Friday, November 1, 2013
Bank jargons
QWhat is repo rate and
reverse repo rate?
A
Repo or repurchase
option is a means of short-term borrowing, wherein banks sell approved
government securities to RBI and get funds in exchange. In other words, in a
repo transaction, RBI repurchases government securities from banks, depending
on the level of money supply it decides to maintain in the country's monetary
system.
Repo rate is the discount rate at which banks borrow from RBI. Reduction in repo rate will help banks to get money at a cheaper rate, while increase in repo rate will make bank borrowings from RBI more expensive. If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate. Similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.
Reverse repo is the exact opposite of repo. In a reverse repo transaction, banks purchase government securities form RBI and lend money to the banking regulator, thus earning interest. Reverse repo rate is the rate at which RBI borrows money from banks. Banks are always happy to lend money to RBI since their money is in safe hands with a good interest.
Thus, repo rate is always higher than the reverse repo rate.
Source: sptulsian.com
Repo rate is the discount rate at which banks borrow from RBI. Reduction in repo rate will help banks to get money at a cheaper rate, while increase in repo rate will make bank borrowings from RBI more expensive. If RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate. Similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.
Reverse repo is the exact opposite of repo. In a reverse repo transaction, banks purchase government securities form RBI and lend money to the banking regulator, thus earning interest. Reverse repo rate is the rate at which RBI borrows money from banks. Banks are always happy to lend money to RBI since their money is in safe hands with a good interest.
Thus, repo rate is always higher than the reverse repo rate.
Source: sptulsian.com
QWhat are CRR and SLR
with respect to banks?
A
CRR or cash reserve
ratio is the minimum proportion / percentage of a bank’s deposits to be held in
the form of cash. Banks actually don’t hold these as cash with themselves, but
deposit the same with RBI / currency chests, which is considered equivalent to
holding cash with themselves.
When a bank’s deposits increase by Rs. 100 crore, and considering the present cash reserve ratio of 6%, bank will have to hold additional Rs. 6 crore with RBI and will be able to use only Rs. 94 crore for investments and lending. Therefore, higher the CRR, lower the amount that banks can lend. Thus RBI can control the liquidity by changing the CRR i.e. increase CRR to reduce the lendable amount and vice-versa.
SLR or statutory liquidity ratio is the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities. It is the ratio of liquid assets (cash and approved securities) to the demand and term liabilities / deposits.
RBI is empowered to increase this ratio up to 40%. An increase in SLR restricts the bank’s leverage position to pump more money into the economy, thereby regulating credit growth.
Source: sptulsian.com
When a bank’s deposits increase by Rs. 100 crore, and considering the present cash reserve ratio of 6%, bank will have to hold additional Rs. 6 crore with RBI and will be able to use only Rs. 94 crore for investments and lending. Therefore, higher the CRR, lower the amount that banks can lend. Thus RBI can control the liquidity by changing the CRR i.e. increase CRR to reduce the lendable amount and vice-versa.
SLR or statutory liquidity ratio is the minimum percentage of deposits that a bank has to maintain in form of gold, cash or other approved securities. It is the ratio of liquid assets (cash and approved securities) to the demand and term liabilities / deposits.
RBI is empowered to increase this ratio up to 40%. An increase in SLR restricts the bank’s leverage position to pump more money into the economy, thereby regulating credit growth.
Source: sptulsian.com
Basics - Part 3
QWhat is debt-equity
ratio?
A
Debt-equity ratio is a
measure of leverage, indicating proportion of company's total capital
contributed by secured and unsecured debt. A high debt-equity ratio, generally
2:1 and above, is not considered favourable for companies. Also, this ratio
varies from industry to industry.
Debt-equity ratio = Secured + Unsecured debt
Shareholders Funds
E.g.: As on 31st March 2010, company had secured loan of Rs. 70 crore, unsecured loan of Rs. 30 crore, shareholders funds (equity and reserves) of Rs. 200 crore.
Debt-equity ratio = 70 + 30
200
Debt-equity ratio = 0.5:1
Source: sptulsian.com
Debt-equity ratio = Secured + Unsecured debt
Shareholders Funds
E.g.: As on 31st March 2010, company had secured loan of Rs. 70 crore, unsecured loan of Rs. 30 crore, shareholders funds (equity and reserves) of Rs. 200 crore.
Debt-equity ratio = 70 + 30
200
Debt-equity ratio = 0.5:1
Source: sptulsian.com
QWhat is EPS?
A
EPS or Earnings per
share, is the net profit earned by the company divided by the number of
outstanding equity shares. If any preference dividend is declared, it is
subtracted from the net profit.
Eg: A company earned net profit of Rs. 100 crore for FY10. It has 5 crore outstanding equity shares. No fresh issue of equity shares was made during the year, implying that the weighted average number of equity shares outstanding during the period is 5 crore.
EPS = Net profit earned during the period
Weighted average number of equity shares outstanding during the period
EPS = 100 / 5
EPS = Rs. 20
Source: sptulsian.com
Eg: A company earned net profit of Rs. 100 crore for FY10. It has 5 crore outstanding equity shares. No fresh issue of equity shares was made during the year, implying that the weighted average number of equity shares outstanding during the period is 5 crore.
EPS = Net profit earned during the period
Weighted average number of equity shares outstanding during the period
EPS = 100 / 5
EPS = Rs. 20
Source: sptulsian.com
QWhat does ‘pari passu’
mean?
A
Pari passu is a Latin
term commonly used in legal documents meaning ‘equal in all respects’ or ‘in
the same degree or proportion’.
For example, if issue of new shares is said to rank pari passu with the existing shares, then the rights associated with both the existing as well as the new shares are exactly the same.
Source: sptulsian.com
For example, if issue of new shares is said to rank pari passu with the existing shares, then the rights associated with both the existing as well as the new shares are exactly the same.
Source: sptulsian.com
QWhat is meant by ‘Right
of first refusal’?
A
Right of first refusal,
abbreviated as ROFR, is the right of a person (investor) or company to purchase
something before the offering is made available to others. If an investor /PE
fund plans to exit the company, it is obliged to give the promoters or existing
shareholders, an opportunity to buy the shares held by the PE before selling
the same to a third party.
There are other rights for minority shareholders, such as:
Tag along right - contractual obligation which protects a minority shareholder in case the majority / promoter is selling out. Minority shareholder can compel stake sale of his stake along with the majority / promoter.
Drag along right – contractual right with minority shareholder to force the majority shareholder / promoter to join in the sale of the company. If minority shareholder is selling-out, it can compel majority shareholder / promoter to compulsorily offer their stake as well.
Source: sptulsian.com
There are other rights for minority shareholders, such as:
Tag along right - contractual obligation which protects a minority shareholder in case the majority / promoter is selling out. Minority shareholder can compel stake sale of his stake along with the majority / promoter.
Drag along right – contractual right with minority shareholder to force the majority shareholder / promoter to join in the sale of the company. If minority shareholder is selling-out, it can compel majority shareholder / promoter to compulsorily offer their stake as well.
Source: sptulsian.com
QWhat is Commercial
Paper?
A
Commercial paper is a
money market instrument issued normally for tenure of 90 days. It is a short
term promise to repay a fixed amount that is placed on the market either
directly or through a specialized intermediary. It is usually issued by
companies with a high credit standing in the form of a promissory note
redeemable at par to the holder on maturity and therefore, doesn’t require any
guarantee.
IPO
QWhat is an Initial
Public Offering?
A
Initial Public Offering
(IPO) is when an unlisted company makes either a fresh issue of securities or
an offer for sale of its existing securities or both for the first time to the
public. This paves way for listing and trading of the issuer’s securities.
QWhat is an IPO?
A
An Initial Public Offer
(IPO) is a means of collecting money from the public by a company for the first
time in the market to fund its projects. In return, the company gives the share
to the investors in the company.
QWhat is a Follow on
Public Offering?
A
A follow on public
offering (FPO) is when an already listed company makes either a fresh issue of
securities to the public or an offer for sale to the public, through an offer
document. An offer for sale in such scenario is allowed only if it is made to
satisfy listing or continuous listing obligations.
QWhat is ASBA, with
respect to IPOs?
A
ASBA stands for
Application Supported by Blocked Amount. The facility was introduced by SEBI in
July 2008 to help retail investors apply in IPOs, FPOs and rights issue of
companies, with ease.
Earlier while making an application in an IPO, an investor had to pay full application money at the time of submission of the application form. In ASBA, one can make an application for shares without actually parting with the money immediately.
The amount for application money is only blocked in the account of the applicant. The money is debited from the bank account only when the basis of allotment is finalised and also only for number of shares that are finally allotted to the investor. Money blocked under ASBA is unblocked fully or partly as and when the shares are allotted or the issue is withdrawn.
Thus ASBA eliminates problems associated with delay or non-receipt of refunds. Moreover, banks continue to give interest on account as also the money blocked in the account is considered for calculating the average daily / quarterly balances. Thus, investors are saved of hassles on refund deposits while continuing to earn interest on the application money.
Source: sptulsian.com
Earlier while making an application in an IPO, an investor had to pay full application money at the time of submission of the application form. In ASBA, one can make an application for shares without actually parting with the money immediately.
The amount for application money is only blocked in the account of the applicant. The money is debited from the bank account only when the basis of allotment is finalised and also only for number of shares that are finally allotted to the investor. Money blocked under ASBA is unblocked fully or partly as and when the shares are allotted or the issue is withdrawn.
Thus ASBA eliminates problems associated with delay or non-receipt of refunds. Moreover, banks continue to give interest on account as also the money blocked in the account is considered for calculating the average daily / quarterly balances. Thus, investors are saved of hassles on refund deposits while continuing to earn interest on the application money.
Source: sptulsian.com
QWhat is ‘IPO Grading’?
A
IPO grading is the grade
assigned by a Credit Rating Agency registered with SEBI, to the initial public
offering (IPO) of equity shares or any other security which may be converted
into or exchanged with equity shares at a later date. The grade represents a
relative assessment of the fundamentals of that issue in relation to the other
listed equity securities in India. Such grading is generally assigned on a
five-point point scale with a higher score indicating stronger fundamentals and
vice versa as below.
IPO grade 1: Poor fundamentals
IPO grade 2: Below-average fundamentals
IPO grade 3: Average fundamentals
IPO grade 4: Above-average fundamentals
IPO grade 5: Strong fundamentals
IPO grading has been introduced as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO
IPO grade 1: Poor fundamentals
IPO grade 2: Below-average fundamentals
IPO grade 3: Average fundamentals
IPO grade 4: Above-average fundamentals
IPO grade 5: Strong fundamentals
IPO grading has been introduced as an endeavor to make additional information available for the investors in order to facilitate their assessment of equity issues offered through an IPO
QWho is eligible for
reservation and how much? (QIBs, NIIs, etc.,)?
A
In a book built issue
allocation to Retail Individual Investors (RIIs), Non Institutional Investors
(NIIs) and Qualified Institutional Buyers (QIBs) is in the ratio of 35: 15: 50
respectively. In case the book built issues are made pursuant to the
requirement of mandatory allocation of 60% to QIBs in terms of Rule 19(2)(b) of
SCRR, the respective figures are 30% for RIIs and 10% for NIIs. This is a
transitory provision pending harmonization of the QIB allocation in terms of
the aforesaid Rule with that specified in the guidelines.
QWho is Qualified
Institutional Buyer (QIBs)?
A
Qualified Institutional
Buyers are those institutional investors who are generally perceived to possess
expertise and the financial muscle to evaluate and invest in the capital
markets. In terms of clause 2.2.2B (v) of DIP Guidelines, a ‘Qualified
Institutional Buyer’ shall mean:
a. Public financial institution as defined in section 4A of theCompanies Act, 1956;
b. Scheduled commercial banks;
c. Mutual funds;
d. Foreign institutional investor registered with SEBI;
e. Multilateral and bilateral development financial institutions;
f. Venture capital funds registered with SEBI.
g. Foreign Venture capital investors registered with SEBI.
h. State Industrial Development Corporations.
i. Insurance Companies registered with the Insurance Regulatoryand Development Authority (IRDA).
j. Provident Funds with minimum corpus of Rs.25 crores
k. Pension Funds with minimum corpus of Rs. 25 crores)
These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.
a. Public financial institution as defined in section 4A of theCompanies Act, 1956;
b. Scheduled commercial banks;
c. Mutual funds;
d. Foreign institutional investor registered with SEBI;
e. Multilateral and bilateral development financial institutions;
f. Venture capital funds registered with SEBI.
g. Foreign Venture capital investors registered with SEBI.
h. State Industrial Development Corporations.
i. Insurance Companies registered with the Insurance Regulatoryand Development Authority (IRDA).
j. Provident Funds with minimum corpus of Rs.25 crores
k. Pension Funds with minimum corpus of Rs. 25 crores)
These entities are not required to be registered with SEBI as QIBs. Any entities falling under the categories specified above are considered as QIBs for the purpose of participating in primary issuance process.
Basics - Part 2
QWhat is the difference
between ‘Block deal’ and ‘Bulk deal’?
A
Block deal is a trade,
with a minimum quantity of 5,00,000 shares or minimum value of Rs. 5 crores,
executed through a single transaction, on the special “Block Deal window”.
Bulk deal is a trade, where total quantity bought or sold is more than 0.5% of the number of equity shares of the company.
The orders in a block deal are not shown to the people who trade from normal trade window. Bulk orders, on the other hand, are visible to everyone.
Source: sptulsian.com
Bulk deal is a trade, where total quantity bought or sold is more than 0.5% of the number of equity shares of the company.
The orders in a block deal are not shown to the people who trade from normal trade window. Bulk orders, on the other hand, are visible to everyone.
Source: sptulsian.com
QWhat is the pay-in day
and pay- out day?
A
Pay in day is the day
when the brokers shall make payment or delivery of securities to the exchange.
Pay out day is the day when the exchange makes payment or delivery of securities
to the broker. Settlement cycle is on T+2 rolling settlement basis w.e.f. April
01, 2003. The exchanges have to ensure that the pay out of funds and securities
to the clients is done by the broker within 24 hours of the payout. The
Exchanges will have to issue press release immediately after pay out.
QHow is the Retail
Investor defined as?
A
‘Retail individual
investor’ means an investor who applies or bids for securities of or for a
value of not more than Rs.2,00,000.
QWhat is Record Date?
A
Date set by a company on
which the investor must own shares, to be eligible for dividend, share split,
bonus, rights issue or other capital gains as declared / announced by the
company. It is the date established by the company for determining the
shareholders who are entitled to receive dividend, bonus or rights shares of
the company.
In this case, it is also important to know what an ex-date is. Ex-date is the date on which the seller, and not the buyer, of a stock will be entitled to a recently announced dividend, bonus or other corporate action. The ex-date is usually a business day prior to the record date, since T+2 trading cycle is followed for clearing and settlement of trades in India.
Example:
If record date for dividend is set by a company as 4th March, then those investors, whose names appear on the shareholder list of 4th March, as received by the company form the depository will be entitled to the dividend. Doing a back-calculation, for an investors name to feature in the 4th March shareholder list, he should be holding the shares two days prior to that date i.e. on 2nd March (due to T+2 cycle). Thus, those shareholders holding shares at end of day 2nd March, will be entitled to the dividend. The ex-date, in this case, will be 3rd March, a date on which the buyer will not be entitled to the dividend declared.
Source: sptulsian.com
In this case, it is also important to know what an ex-date is. Ex-date is the date on which the seller, and not the buyer, of a stock will be entitled to a recently announced dividend, bonus or other corporate action. The ex-date is usually a business day prior to the record date, since T+2 trading cycle is followed for clearing and settlement of trades in India.
Example:
If record date for dividend is set by a company as 4th March, then those investors, whose names appear on the shareholder list of 4th March, as received by the company form the depository will be entitled to the dividend. Doing a back-calculation, for an investors name to feature in the 4th March shareholder list, he should be holding the shares two days prior to that date i.e. on 2nd March (due to T+2 cycle). Thus, those shareholders holding shares at end of day 2nd March, will be entitled to the dividend. The ex-date, in this case, will be 3rd March, a date on which the buyer will not be entitled to the dividend declared.
Source: sptulsian.com
Basics
QWhat is a Capital
Market?
A
Capital market is a
market for buying and selling of long-term debt and equity shares. In this
market, the capital funds comprising of both equity and debt are issued and
traded. This also includes private placement sources of debt and equity as well
as organized markets like stock exchanges. Capital market can be further
divided into primary and secondary markets.
QWhat is a Money
Market?
A
Money market is a market
for debt securities that pay off in the short term usually less than one year,
for example the market for 90-days treasury bills. This market encompasses the
trading and issuance of short term non equity debt instruments including
treasury bills, commercial papers, bankers acceptance, certificates of
deposits, etc.
QWhat does Secondary
Market mean?
A
Secondary Market refers
to a market where securities are traded after being initially offered to the
public in the primary market via an IPO and/or listed on the Stock Exchange.
Majority of the trading is done in the secondary market. Secondary market
comprises of equity markets and the debt markets.
For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduit—by facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.
For the general investor, the secondary market provides an efficient platform for trading of his securities. For the management of the company, Secondary equity markets serve as a monitoring and control conduit—by facilitating value-enhancing control activities, enabling implementation of incentive-based management contracts, and aggregating information (via price discovery) that guides management decisions.
QWhat is the difference
between the primary market and the secondary market?
A
In the primary market,
securities are offered to public for subscription for the purpose of raising
capital or fund. Secondary market is an equity trading avenue in which already
existing/pre- issued securities are traded amongst investors. Secondary market
could be either auction or dealer market. While stock exchange is the part of
an auction market, Over-the-Counter (OTC) is a part of the dealer market.
QWho is a broker?
A
A broker is a member of
a recognized stock exchange, who is permitted to do trades on the screen-based
trading system of different stock exchanges. He is enrolled as a member with
the concerned exchange and is registered with SEBI.
QWho is a sub broker?
A
A sub broker is a person
who is registered with SEBI as such and is affiliated to a member of a
recognized stock exchange.
QWhat does ISIN stand
for wrt securities?
A
ISIN stands for
International Securities Identification Number (ISIN). It is an international
numbering system set up by the International Organization for Standardization
(ISO) to number specific securities, such as stocks (equity and preference
shares), bonds, options and futures.
ISIN contains 12 characters in total, which comprise of both alphabets and numbers. The first two digits stand for the country code, next nine digits are the unique identification number for the security while the last digit is a check digit to prevent errors.
E.g.: ISIN for State Bank of India (SBI) is INE062A01012.
Source: sptulsian.com
ISIN contains 12 characters in total, which comprise of both alphabets and numbers. The first two digits stand for the country code, next nine digits are the unique identification number for the security while the last digit is a check digit to prevent errors.
E.g.: ISIN for State Bank of India (SBI) is INE062A01012.
Source: sptulsian.com
QWhat is free-float?
A
Free-float refers to
those shares which are readily available for trading in the stock market. It
generally excludes promoters\' holding, government / strategic holding and
other locked-in shares, which will not come to the market for trading in the
normal course.
E.g.: MMTC has Rs. 5 crore outstanding shares, of which 4.97 crore shares are held by the Government under promoter category. Only the balance 3.34 lakh shares comprise the free float of the company.
Source: sptulsian.com
E.g.: MMTC has Rs. 5 crore outstanding shares, of which 4.97 crore shares are held by the Government under promoter category. Only the balance 3.34 lakh shares comprise the free float of the company.
Source: sptulsian.com
QWhat are DVR shares?
A
What are DVR shares? 29
May 2012 at 11:00 am DVR or differential voting rights shares are like ordinary
equity shares but with differential voting rights. Shares can have higher or
lower voting rights as compared to the ordinary equity shares. However, Indian
regulations do not permit companies to issue equity shares with higher voting
rights. Hence, Indian DVR shares provide for lower voting rights as compared to
ordinary equity shares.
Companies issue DVRs for several reasons such as prevention of a hostile takeover, bringing in a passive strategic investor or dilution of voting rights. DVR investors are generally compensated with a higher dividend rate. This makes the DVRs attractive for retail investors who do not want control in the company, but are looking at the long-term growth prospects.
DVR shares are listed on the stock exchanges and are traded in the same manner as ordinary equity shares, but they mostly trade at a discount, sometimes as high as 30%, due to fewer voting rights.
Tata Motors, Gujarat NRE Coke, Pantaloon Retail, Jain Irrigation are some of the Indian companies that have issued DVR shares.
E.g.: Tata Motors’ DVR shares carry voting rights which are one-tenth of the ordinary equity shares. The DVR shareholders are entitled to an additional 5% dividend, over and above the ordinary equity shareholders. Tata Motors DVR are trading at 800 or 36% discount to the ordinary shares, which are at trading at Rs 1,245 (as of 23rd November 2010).
Source: sptulsian.com
Companies issue DVRs for several reasons such as prevention of a hostile takeover, bringing in a passive strategic investor or dilution of voting rights. DVR investors are generally compensated with a higher dividend rate. This makes the DVRs attractive for retail investors who do not want control in the company, but are looking at the long-term growth prospects.
DVR shares are listed on the stock exchanges and are traded in the same manner as ordinary equity shares, but they mostly trade at a discount, sometimes as high as 30%, due to fewer voting rights.
Tata Motors, Gujarat NRE Coke, Pantaloon Retail, Jain Irrigation are some of the Indian companies that have issued DVR shares.
E.g.: Tata Motors’ DVR shares carry voting rights which are one-tenth of the ordinary equity shares. The DVR shareholders are entitled to an additional 5% dividend, over and above the ordinary equity shareholders. Tata Motors DVR are trading at 800 or 36% discount to the ordinary shares, which are at trading at Rs 1,245 (as of 23rd November 2010).
Source: sptulsian.com
QWhat are preferece
shares?
A
Preference shares are
shares in which the owners of the shares are entitled to a fixed dividend or
dividend calculated at a fixed rate to be paid regularly before dividend can be
paid in respect of equity share. They also enjoy priority over the equity
shareholders in payment of surplus. But in the event of liquidation, their
claims rank below the claims of the company’s creditors, bondholders /
debenture holders. In short they get preference over equity shareholders in
case of payment of dividends on in case of winding up of the company.
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