Investment Valuation in India

Hi, Do read my article on Independent Directors as mentioned in the Companies Bill 2011 (passed in Lok Sabha as of Dec 2012) Accountants' Adda | Companies Bill 2011 - Independent Directors

Accountants' Adda | Deduction at a lower rate or non-deduction of tax in case of salaries As per Section 192 of the Income Tax Act, an employer is required to deduct tax at source on the amount payable to the employee at the average rate of income tax. Unlike other payments, in case of salary, TDS is deducted only at the time of PAYMENT of salary.  This is to be computed on the basis of rates in force for the financial year in which payment is made. Section 197 enables a tax payer to make an application to his Assessing Officer for deduction of tax at a lower rate or non deduction of tax. The application has to be made in   Form No.13  (vide Rule 28(1)).    If the Assessing Officer is satisfied that the total income of a tax payer justifies the deduction of income tax at any lower rate or no deduction of income tax, he may issue a certificate in   Form No. 15AA   (relevant Rule 28AA) providing for deduc...

TIPS FOR CRACKING GROUP DISCUSSIONS (GDs)   Companies and Institutes are increasingly resorting to Group Discussions (GDs) as important screening criteria for selection of students / personnel.   What is GD? Group discussion is a process where a small group of people (usually between 6 – 10) debate upon a given topic and exchange ideas and share their opinions. The process involves a tester / observer who observes the participants and accordingly decides who should be selected among the group. Remember, it is possible that none or multiple participants are selected. GD helps the tester evaluate the communication skills, interpersonal skills and leadership skills of the participants at a glance. It also helps in mass screening of participants. Points to take care of while appearing for GD: General Professionalism Dress appropriately (formally) Arrive in time Sit straight, avoid leaning back on to the chair or tapping the table with pen or your fingers A...

Growth Investing vs Value Investing                                                          There are a myriad different ways to assess and select stocks and other investment opportunities, two most important strategies are Growth and Value Investing. Growth Investing Growth investing involves picking and investing in stocks that have good growth potential. Usually a growth stock is one whose revenues, cash flows and earnings (profits) are expected to grow at a rate which is higher than the industry or overall market. Growth stocks usually do not pay dividends and concentrate on reinvesting the profits as they expect to generate higher returns. Growth stock investing typically does not put much...

It is nearly impossible to document all ideas, issues, terms and techniques that an investment analysis professional encompasses during his or her work. Analysts often use one or more of the strategies while analysing a potential investment opportunity. Personally I believe that no literature can be complete and authoritative on this subject, though many authors, including myself, have attempted to cover as much as possible. This article only aims at stimulating and imaginative and holistic approach to dealing with investment matters and what questions one should be asking while analysing a company. What is the size of the firm (large, small)? What stage is the company and industry in (new, mature, declining)? Who are the customers of the company (individuals, industry, institutions)? Is the company project oriented (drugs, mining, oil & gas producers, construction)? How is the company socially responsible (is it a source of pollution, land contamination)...

Growth vs Dividend Option in a Mutual Fund When we select the fund for investing, often, the funds offer you the option of Growth Plan or the Dividend Option. It is important to understand the difference between the two and to select the option best suiting the needs and taxability aspects for an individual. Regular Income: The dividend option helps you get regular income (for example, for senior citizens). The growth option does not help you get regular income. Building Wealth: Since the dividend option gets you money at regular intervals, you cannot get the benefit of compounding. It is not suitable for building wealth. The growth option, instead, helps you build wealth over time and income gets compounded. Growth option is suitable for people wanting to save for future (example, child’s marriage, higher education etc) Tax Treatment: While dividends from equity oriented funds are tax free, if the fund is a non-equity fund, there is a Dividend Distribution Tax (...

Mutual Fund investment is common and is often advised as one of the safest options for investments by individuals. But these individuals are loaded with questions given the large number of funds available. We try and answer some of the questions that investors have. Should one invest in an Actively Managed fund or a Passively managed Fund Actively managed funds are more popular among investors, but carry a higher risk than passive index funds. Fund managers often use a benchmark (say Nifty, BSE 200 and so on) to measure their performance. A fund manager trying to beat the benchmark is forced to take positions that would give his fund an edge over the benchmarked index. It is not uncommon that in most cases, they fail to beat the benchmark and the fund - consequently the investors - suffer. So picking the right fund becomes an important decision for the investor. “Past performance is not an indicator for future performance”. So even if you buy consistent outperforming funds, the...

The last few days has seen some significant policy announcements by the government the absence of which, for long, was coined as the government’s policy paralysis. - Diesel prices have been increased by close to 12% - Allowed 51 per cent foreign investment in multi-brand retail (remember, this was allowed last year as well, but could not be implemented due to political opposition) - Allowed 49 per cent investment by foreign airlines in aviation - Raised the FDI cap in broadcasting from 49 per cent to 74 per cent - Capped subsidised LPG cylinders by a household to 6 cylinders in a year, more cylinders if required will have to be purchased at market rate that is approximately Rs 750. While most of the above are being seen as extremely positive moves in order to avoid a credit rating cut that’s being threatened by rating agencies, these cannot be termed as big-ticket reforms. A lot more needs to be done in order to bring the economy back on the growth track. Perhaps, it is th...

India has been able to withstand some of the biggest global financial meltdowns in recent times. This was attributed to a very strong regulatory environment (particular credits to the Reserve bank of India) and the Great Indian Consumption story.  These two factors have led to the world expecting a lot from us. The last couple of years have shown that we have under delivered, badly. The global investors are shying away from investing in India given the government indifference to the industry requirements.  Who's responsible for the mess around? The opposition succeeding in keeping the government's attention away from more core issues by highlighting one issue or the other (read 2G and then Coalgate). They worsened this themselves by trying to override the Supreme Court's judgment on Vodafone case. Unnecessary!  Consequently, the world has been able to blame the government for policy paralysis and lack of judiciary relevance. Only the government is responsible for...

Imagine a situation where you grow old and have managed to buy a house. However, you could not save enough for your retirement. You certainly need money to manage your day to day finances since you are retired and have no fixed source of income or your income is not enough to meet your finances. Reverse Mortgage is the answer for you. Reverse Mortgage is a type of mortgage available to senior citizens in which a home-owner can borrow money against the value of his/her home. No repayment of the mortgage (principal or interest) is required until the borrower dies or the home is sold. After accounting for the initial mortgage amount, the rate at which interest accrues, the length of the loan and rate of home price appreciation, the transaction is structured so that the loan amount will not exceed the value of the home over the life of the loan. [1] How does it work? Reverse Mortgage in India Realising the potential benefits of Reverse Mortgage, the Union Budget 2007-...

Notification No. 29/2012- Service Tax ( New Delhi, the 20 th June, 2012) Under notification No. 29/2012 - Service Tax, the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of renting of an immovable property, from so much of the service tax leviable thereon under section 66B of the said Finance Act, as is in excess of the service tax calculated on a value which is equivalent to the gross amount charged for renting of such immovable property less taxes on such property, namely property tax levied and collected by local bodies : Notes:  1) Any amount such as interest, penalty paid to the local authority by the service provider on account of delayed payment of property tax or any other reasons shall not be treated as property tax for the purposes of deduction from the gross amount charged. 2) Wherever the period for which property tax paid is different from the period fo...

Having an Online profile on a networking site is almost mandatory today for professionals looking for (changing) jobs. Almost every potential employer ensures to check your online presence before short-listing you for the job. What they’re looking for is your online professional presence. And in today’s world, you need to have one out there for them to find. For most professions, an online professional profile will only help you. And the best place to go to build one is LinkedIn. (While they would surely go through your Facebook pages as well, they may not conclude much from it given it’s more of a social networking site than professional networking). LinkedIn is the most common site that the employers would screen through as part of their evaluation of whether to hire you or not. Here are some important tips of what to take care of while designing and maintaining your online professional presence on Linked In. 1.        Complete your profile...

How many times have you seen that while you are presenting a topic, your audience doesn't seem to be interested in listening to you? Or when you are the audience, you just didn't feel like listening to this speaker?  Here are some tips (well, they are the obvious ones) that will help you keep the audience rooted and motivated to watch you when you stand to make a presentation. 1. Eye contact. Maintaining eye contact with the audience is very important. Look at your audience at all times when you speak. You’ll look more honest and will be liked. You want the audience to believe what you are saying. Can you ever believe someone speaking to you without looking at you in the eyes? 2. Have fun. Watching you should not be a punishment - neither for you nor for the audience. A presenter with a sense of humour, fun and energy tells audiences there’s something worth listening to. But don't over do. You're the presenter, not the clown! 3. Smile. " Smile, ...

DERIVATIVES Overview - Session 1 WHAT IS A DERIVATIVE?   A derivative is an instrument whose value is "derived" from the price of some underlying instrument, reference amount or index. It generally represents a contractual relationship between two parties. Cash flows are exchanged between parties based on price/index movements. The terms of the agreements may be customized or they may be standardized to facilitate exchange clearance. Customized agreements are usually referred to as Over The Counter Transactions. (OTC) Generally doesn’t require physical delivery of the reference asset. WHAT ARE DERIVATIVES USED FOR? Trading -  Speculation (e.g., bet on movements in an underlying security, index, interest rate, commodity, currency or other financial instruments).  -  Arbitrage (utilized by many fund managers to take advantage of expected market movements or arbitrage opportunities, hoping to decrease financing costs or increase yields on exis...