Investment Valuation in India

The Companies Bill has been passed by the Lok Sabha and Rajya Sabha as well. The bill is seeing light after decades of discussions and debates. All credits to the Minister of Corporate Affairs for taking the bill through the lower house soon after assuming office. Key highlights of the bill are: Class Action suits introduced for the benefit of investors One Person Company (OPC) introduced Certain class of companies are required to spend at 2% of their average Net profits on Corporate Social Responsibility. Severe punishment for fraud against investors National Financial Regulatory Authority (NFRA) to be set up - this has curbed some rights and powers of Chartered Accountants with respect to setting up of Accounting and Auditing standards. A CA can have maximum 20 companies as audit clients. Every company to have a single financial year end - 31st-March. Certain exceptions apply. A Private company can have 200 members (up from 50) Concept of Dormant company in...

LIBOR LIBOR stands for London Interbank Offered Rate is the average interest rate estimated by leading banks in London that they would be charged while borrowing from other banks. It is the primary benchmark, along with the Euribor, for short term interest rates around the world. As a popular benchmark, it is used for US Dollar, GB Pound, Euro, Swiss Franc, Canadian Dollar and Japanese Yen. Libor rates are calculated for ten currencies and 15 borrowing periods ranging from overnight to one year and are published daily at 11:30 am (London time) by Thomson Reuters. The British Bankers Association (BBA) collects data from 16 banks to calculate LIBOR for each maturity and for each currency. It weeds out the best four and the worst four and then calculates the average of remaining 8 rates which is published as LIBOR. Many financial institutions, mortgage lenders and credit card agencies set their own rates relative to it. At least $350 trillion in derivatives and other financia...

Accountants' Adda: 1% TDS on Purchase of Immovable Property : The new provision of Income Tax will come in effect from June 1, 2013 after which sale of immovable property will be subjected to 1% per...

When the two of the 10 richest people joined hands to start The Giving Pledge, they had a tough time convincing billionaires across the world to contribute most of their wealth for philanthropic causes. The Indian government took a leaf out of the concept and made it mandatory for specific class of companies to ensure they spend on Corporate Social Responsibility (CSR) through the new Companies Bill that has been passed in the Lok Sabha in November 2012. Although some European countries require companies to report their CSR information in their Annual Reports, India is arguably the only country in the world that has made CSR mandatory through an Act. What is CSR? CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members who may also be considered as stakeholders. A firm's implementation of CSR may go b...

One of the most important aspect of starting your own firm is to have enough funds to finance the business. You may not always have the capital to start a business, but fortunately there are other alternatives to finance the business. Loans from Banks / NBFCs Most banks and non banking finance companies (NBFCs) provide loans to small and medium enterprises (SMEs). The tenure ranges from 6 months to 5 years while the interest rates range between 10% and 15%. In most cases, banks and NBFCs expect you to show continuity of the business for a couple of years before funding it. Venture Debt Venture Debts are medium term loans offered by venture capital firms and do not require collateral. A start up is evaluated based on its ability to grow, fundamental enterprise value. The venture capital firms peg the value of the firm to its future cash flows and the ability to repay the loans. Leverage is not a great way to start a business so this option is better avoided or should be consid...

Hedging through Futures / Forward contracts With the business environment getting increasing complex, profitability often depends on factors that are beyond the control of an organisation like commodity prices, stock prices, interest rates, exchanges rates, etc. As a result, modern business has been subjected to more complexity, uncertainty and risk. Futures markets often permit managers to reduce or control risks through hedging strategies. In other words, futures markets can provide the managers certain tools to reduce and control their risks.  Simply put Hedging means reducing risk. It is the process of investment into securities (usually a derivative) with the objective of reducing or controlling risk. Examples of Hedging: E.g. 1. Firm A is a manufacturer of automobile cars in India and they import auto parts from USA. Firm views that parts may increase in future and thereby increase the cost of cars and this may significantly affect the profitability of the...

SUCCESS IS A JOURNEY, NOT A DESTINATION: Some Useful Websites for Commerce Professionals : Some useful links for Commerce Professionals: www.icai.org – The Institute of Chartered Accountants of India www.nfcgindia.org ...