July 26, 2016

Q1 results analysis: maintenance work for IbHF

Maintenance work in Q1 for IbHF

Profit growth rates were sustained but net profit margin took a hit

Average  operating profit growth rate of previous four quarters was
sustained by Indiabulls Housing Finance, one of the largest three housing
finance companies in the country, in the first  quarter of current
financial year 2016-17 (Q1 of FY17).

IbHF announced its consolidated financials for Q1 on Monday which, as per
Capitaline database, showed  a 35.0 per cent year-on-year (YoY) rise in its
operating profit to Rs 1,028 crore. The Q1 growth rate was a little higher
than the average growth rate of 32.0 per cent in the preceding four

But in absolute value terms the operating profit came off the all-time high
operating profit level of Rs 1,112 crore recorded in the preceding quarter
of Q4 of FY16.

The housing finance company said in a earnings update statement that it had
sold loans worth Rs 1,114 crore in Q1 of FY17, more than double that of Rs
522 crore in the same quarter of previous year.  Its loan book stood at Rs
82,070 crore at the end of June, compared to Rs 59,960 crore a year prior
to that.

The incremental disbursals in Q1 of FY17 was driven by non-corporate and
mostly-retail housing loans which contributed 77 per cent, 100 basis points
more than the year-ago quarter's share.

Corporate mortgage loans share also went up by 100 basis points to 23 per
cent, while the share of commercial vehicle loans went from 2.0 per  cent
last to almost nil. IbHF noted that the housing loan disbursal in Q1 was at
an average ticket size of Rs 25 lakh with an average loan-to-value ratio of
71 per cent at origination.

The consolidated net profit of IbHF in Q1 increased by 23.2 per cent, YoY,
to Rs 630 crore, which was the third  highest rate of growth in the last 10
quarter. It also equalled the 23.3 per cent average growth rate in the
immediately-preceding four quarters of FY16.

The profit margin, however, took a bit of hit in Q1. Capitaline data placed
IbHF's profit after tax margin (PATM) at 28.1 per cent, which was the worst
PATM in the last 10 quarters. It was lower than the average PATM of 30.0
per cent in the preceding four quarters of FY16.

In Q1 of FY17, the housing finance company earned a yield of 12.43 per cent
while its cost of funds was 9.25 per cent. The loan book growth of IbHF was
at a spread of 3.18 per cent in Q1, the same rate as in the previous two
quarters of Q4 and Q3 of FY16.

The gross non performing assets (NPA), as a percentage of total loan
assets, of IbHF stayed flattish at 0.84 per cent at the end of June this
year, compared to 0.85 per cent at the end of June last year. The net NPA
too remained unchanged at 0.36 per cent.

July 25, 2016

#ThisDayThatYear circa 2013-July-25


#ThisDayThatYear  25July2013  Story analysing stock exchanges' own financials

algo trading, direct market access trading analysis

Algo trading in check, DMA (direct market access) trading goes up on the NSE.
The regulatory scanner in recent months has managed to keep algorithmic (algo) trading under check as is indicated from the flat growth in its share of total turnover on the National Stock Exchange. This is seen in an analysis done by us on the share of different modes of trading on NSE's cash market and equity derivatives segment (see chart). In the last six months, from end of last year to the end of June this year, algo trades's share of gross turnover has come down marginally from 17.8 per cent to 17.5 per cent in the cash market and from 4.2 per cent to 4.1 per cent in the equity derivatives segment.
Notable changes are, however, seen in the share of direct market access (DMA) mode of trading on NSE's equity derivatives segment. It has gone up from 4.0 per cent at the end of last year to 6.6 per cent currently. This mode of trading which is used only by the institutional investors who are allowed to log in to the stock exchange's trading system through trading terminals in their offices rather than route it through their brokers trading terminals. The trades, however, still go under the name of a broker or a clearing member. 
Around a year ago, in September 2015, the share of DMA on NSE's equity derivatives segment was further lower at 3.7 per cent. DMA share is not significant on the cash market of NSE, however,  where it is just 0.6 per cent currently and which has not changed since six months ago. 
Trades under the co-location facility offered by stock exchanges to their member-brokers, have also seen a rise, with the share in total turnover going up from 32.1 per cent to 34.9 per cent on the equity derivatives segment and from 21.4 per cent to 22.9 per cent in the cash market. Internet-based, and mobile-based, trading's share has been steadily going up over the last few years and in the last six months as well. 
In the equity derivatives segment, internet-based trading's share rose from 13.1 per cent to 13.8 per cent, while mobile-based trading's share went up from 1.2 per cent to 1.6 per cent. In the cash market, internet trading's share increased from 11.8 per cent to 12.3 per cent, but the rise in mobile trading's share was much higher from 2.5 per cent to 3.2 per cent. 
Although DMA and co-location facility has seen its fair share of concerns among retail investors, regulatory attention has been mostly focussed on algo trading. Algo trading, or high frequency trading, are essentially pre-programmed technical trading strategies which exploit live market prices and technical trends emerging from it. 
The strategies can be highly diverse encompassing momentum trading strategy, cash-futures arbitrage, cross-market pricing inefficiencies and many more. In the developed markets such as the US equity markets, algo trading accounts for half or more of the total turnover. 
In the domestic equity markets on NSE and BSE, and as per the norms of Securities and Exchange Board of India (Sebi), algo trading carries higher restrictions than in international markets. Any brokerage firm who wishes to apply algos on trades done by it or any of its clients have to disclose the strategies to the exchanges. 
The exchanges have to scrutinise the strategies in order to ensure there are no potentially market-disruptive ones, and only then the brokerage firm's software programs are allowed to reside in the brokers' trading system to execute algo trades in the split of a second. A couple of months back, a Sebi technical committee was reported to be examining concerns on algo trading and had sought details regarding the same from the NSE.


July 23, 2016

Decoding a Nifty Next 50 ETF

June 10-11, 2016.  http://www.mydigitalfc.com/opinion/bdecodedb-gs-junior-bees-nifty-next-50-index-594


GS Junior BeES

GS Junior BeES (GSJB) is a 13-year old index ETF tracking Nifty Next 50 (earlier called Junior Nifty) index.


Capital appreciation is what GSC500F aims for through corpus
deployment in the 50 companies of Nifty Next 50 index in the same proportion as they officially weigh in the index.



Any index fund or index ETF is best-suited for all those equity exposure-seeking investors who do not have the time or the wherewithal to analyse the fundamentals of various listed stocks and who prefer not to go by the recommendations from their stockbrokers or other sources.



Since it is an ETF, you can buy and sell only through your stock broker on the NSE


Nifty Next 50 index, which GSJB is committed to mimic, has the second lot of largest 50 large cap stocks  after the 50 companies of Nifty 50. There are several ETFs on Nifty 50. There are also a few on Nifty 100  index which is made up of stocks of both--Nifty 50 and Nifty Next 50.

Should you simply invest in Nifty 100 ETF to get a large-cap equity exposure, or should you invest in one ETF each on Nifty 50 and Nifty Next 50?

For one, portfolio concentration (and therefore the returns) would vry in all the three cases. As of May 31, Nifty 100 had top 10-weighted stocks making up for 46 per cent of the total, while the corresponding top 10 weighted stocks concentration of Nifty 50 and Nifty Next 50 were 54 per cent and 34 per cent respectively. The 1-year return, as of Friday, was 0.7 per cent in Nifty 50, 4.4 per cent in Nifty Next 50 and 1.1 percent in Nifty 100.

It is better to taken an exposure to top 100 large-cap stocks by investing separately in ETFs on Nifty 50 and Nifty Next 50, instead of in Nifty 100 ETF.



Performance-wise, tracking efficiency is what matters to an index investor. The returns by an index fund or ETF should mimic the index as closely as possible.

The only comparable fund to  GSJB is ICICI Prudential MF's Nifty Next 50 Index Fund. The latter is an index fund which can be bought and sold directly with the AMC like any regular MF scheme.

As of March 31, the Nifty Next 50 Total Returns Index delivered a 1-year return of -2.2 per cent, as GSJB's latest factsheet. GSJB's 1-year return was -3.1 per cent while ICICI Pru's index fund's 1-year return was -3.2 per cent. With returns being almost same, choose whether you prefer an ETF or an index fund.

​​ Share price fall in Vedanta drives revision in Cairn-Vedanta merger terms?

July 22-23, 2016

Share price fall in Vedanta drives revision in Cairn-Vedanta merger terms?

The revision in the terms for the merger of Cairn India with Vedanta,
announced by the two companies on Friday, will have a marginal effect
on the shareholders of Cairn India.

On Friday, the boards of the two companies and their UK-based parent
Vedanta Plc approved the new terms under which a Cairn India public
shareholder will get one equity share of Vedanta for each equity share
held, and received four redeemable preference shares in Vedanta.

The change from June last year, when the merger deal was announced, is
only in the preference shares number. Last year's term had the Cairn
shareholder receiving just one preference share in Vedanta for every
share held. Now, a shareholder will get four preference shares.
Additionally, the preference shares will get redeemed after 18 months
and carry a dividend rate of 7.5 per cent per annum till then.

The merger, which as per the June 2015 announcement was  expected to
be completed by March this year, got delayed, and as per Friday's
announcement it is now estimated to be completed by March next year.

What emerged from a conference call the Vedanta and Cairn India
management had with analysts on Friday evening was that the companies
had over the last one year engaged with their respective minority
shareholders. Reports had suggested that the terms of the deal were
found to be un-attractive by some minority shareholders.

The oil price recovery in recent months was also a consideration
behind the revision, the two companies said in the conference call.

The companies have yet to get minority shareholder approvals and as
per the merger terms, they have to get a majority vote from the
minority shareholders of all the three companies which are parties to
the deal. In Friday's announcement the companies announced the
shareholder meeting dates to be September 8 for Vedanta and September
12 for Cairn India. Post shareholder approvals, the merger deal will
require approvals of high court, foreign investment board and the
petroleum ministry in the government.

Vedanta said that the new terms implied a premium of 20 per cent to
one month average price of Cairn India. At end of June last year,
Cairn India shares traded at Rs 182 while Vedanta traded at Rs 174.
The share price fell in both the companies and at the end of February
this year, Cairn was quoting at Rs 118 while Vedanta was quoting at Rs
71. By end of last month, the two stocks  had recovered to levels of
Rs 141 and Rs 132 respectively. On Friday, Cairn closed at Rs 191.90
while Vedanta closed at Rs 169.30.

The share price trajectory seemed to indicate that the drastic fall in
Vedanta's share price in the one year period from average of Rs 185 in
May-June of last year to an average of Rs 120 in May-June this year,
was a consideration in increasing the number of preference shares from
one to four. In value terms, it adds Rs 30 per share to a Cairn
shareholder as the preference shares will have a face value of Rs 10.

The companies did not expect the ongoing tax-related arbitration cases
pertaining to Cairn India to affect the Cairn-Vedanta merger.

Forest cover area trends in India & around the planet...

Forest cover area trends in India & around the planet... https://t.co/jFL1YBRpdE