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On April 23rd, Franklin Templeton India announced the winding up of six of its debt funds. The common thread among all these funds was that they were all debt funds. These six funds would entail the winding up of 14 segregated fund portfolios. The total AUM of these 6 funds is a little over Rs.28,000 crore and accounts for 25% of the total AUM of the Franklin Templeton AMC in India.

     Templeton Funds Invest in Mutual funds Online Mutual fund Schemes in India Mutual Funds Price and Performance

FT has added a new dimension of risk to Indian debt funds

On April 23rd, Franklin Templeton India announced the winding up of six of its debt funds. The common thread among all these funds was that they were all debt funds. These six funds would entail the winding up of 14 segregated fund portfolios. The total AUM of these 6 funds is a little over Rs.28,000 crore and accounts for 25% of the total AUM of the Franklin Templeton AMC in India.

What this winding up entails?

The winding up of the 6 funds by the FT group is like any other liquidation of assets. All the debt instruments owned by these six funds would be gradually and systematically sold by the trustees who are appointed as administrators of these funds. Once a winding up notice is given by the fund, then effective from 24th of April all fresh purchases and redemptions in these six funds have automatically come to a halt. Also, the payout to the unit holders will not be immediate but will happen over a period of time on a proportionate basis. That means if the fund is able to realize a value of just 40% of the value of the bonds from the issuers, then that is what the debt fund investors will get. The urgency with which the funds were wound down points to a larger capital risk! This also means that any SIPs on these funds would automatically be cancelled and the same would apply to any SWPs on these funds. The fund house is yet to clarify on time lines but that will await unit holder approval.

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We are pleased to announce a new product offering called smallcases. A smallcase is a basket of stocks/ETFs selected & weighted intelligently to reflect an objective, theme, or a strategy.

   Introducing Smallcases On Trustline smallcase Archives smallcases on Trustline

Introducing smallcases on Trustline

We are pleased to announce a new product offering called smallcases. A smallcase is a basket of stocks/ETFs selected & weighted intelligently to reflect an objective, theme, or a strategy.

Thematic smallcases reflect a specific market theme or idea, like Rising Rural Demand smallcase. It consists of companies that stand to benefit from increasing rural consumption

Objective/model-based smallcases are based on a particular fundamental or technical investment ratio such as dividends, zero debt, earnings growth, etc. The Safe Haven smallcase includes less volatile stocks to help protect against market volatility

Smart Beta smallcases are based on smart beta strategies. These smallcases are large cap-focused, selected & weighted to beat the markets in the long term. The Quality – Smart Beta smallcase allows you to invest in high-quality, large-cap companies for passive long term investing

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Recently, the press has been rife about banks scouting for a buyer for the Future Group. The group floated by Kishor Biyani has run into a mountain of debt and the retail lockdown has only worsened matters for the Future group. To understand what went wrong, it is essential to see how they got there.

      Future Group Future Retail Limited future group careers

What exactly has gone wrong with the Future Group

Recently, the press has been rife about banks scouting for a buyer for the Future Group. The group floated by Kishor Biyani has run into a mountain of debt and the retail lockdown has only worsened matters for the Future group. To understand what went wrong, it is essential to see how they got there.

It happened in India

Just before the Lehman crisis blew up in the US, Kishor Biyani, the promoter of Future Group, had authored a book “It happened in India”. The analogy was hard to miss. In many ways, Biyani was considered the Indian equivalent of Sam Walton, founder of Wal-Mart, world’s largest retail group. It was always Biyani’s dream to create an Indian version of Wal-Mart and the book was Biyani’s tribute to the man and the company he wanted to replicate. The title was clearly based on Sam Walton’s original book, “It happened in America” a literal treatise on the US retail growth story and the consumption boom. Biyani fancied the Indian economy and himself on the same cusp as the US was 50 years ago. Between 2000 and 2007, the valuation of the Future group had grown geometrically. Even the Lehman crisis did not really perturb the group. By late 2011, the Future group was back in action and its valuations had started growing. The group also got investors interested as it consciously adopted a sum-of-total-parts (SOTP) approach to unleash the real value of the stock.

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In the first week of May 2020, Jio Platforms, RIL’s digital property, got two big PE funds to invest in their business. The deals happened at healthy valuations and give RIL the currency to monetize their stake in the digital business. What exactly were these deals and what is driving valuations for Jio?

Jio Valuations Reliance Jio valuation Reliance Jio Valuation Analysis jio platforms valuation

What made Jio Platforms worth more than 50% of Reliance value?

In the first week of May 2020, Jio Platforms, RIL’s digital property, got two big PE funds to invest in their business. The deals happened at healthy valuations and give RIL the currency to monetize their stake in the digital business. What exactly were these deals and what is driving valuations for Jio?

Silver Lakes and Vista Equity

During the week, two large global PE funds; Silver Lakes and Vista Equity agreed to invest in Jio. Silver Lakes has bought a 1.15% stake in Jio Platforms for Rs.5656 crore while Vista Equity took a 2.32% stake in Jio Platforms for a sum of Rs.11,367 crore. Unlike Facebook, which had a natural synergy with the Jio Platform, for Silver Lakes and Vista, this was purely a private equity investment. Both the above deals valued Jio digital property at nearly $65 billion. That is a 12% premium to the valuation assigned to Jio Platforms by Facebook. What is more interesting is that these deals have put the digital business of Reliance in a new perspective vis-à-vis the group. With an overall valuation of $65 billion, the digital business of Reliance accounts for more than 50% of the overall value of the group. This entire story happened in less than 4 years when Jio was first launched in India in September 2016. Mukesh Ambani loves to call data the new oil in its business model. The way the value of digital has grown in the last four years; Ambani may be bang on target. But what is driving valuations?

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On Friday 08th March, the government announced a revised borrowing calendar for the fiscal year 2020-21. Due to the COVID-19 allocations and lower revenue flows, the government opted to hike the annual borrowing level from Rs.7.80 trillion to Rs.12 trillion. That is a spike of over 50%. The first half is likely to see borrowings to the tune of Rs.6 trillion. This is likely to have multiple macro implications for the Indian economy.

Borrowing Calendar India Raises Borrowing Limit  RBI to finalise borrowing calendar Government finalises borrowing plan

Spike in borrowings is not great news for the Indian economy

On Friday 08th March, the government announced a revised borrowing calendar for the fiscal year 2020-21. Due to the COVID-19 allocations and lower revenue flows, the government opted to hike the annual borrowing level from Rs.7.80 trillion to Rs.12 trillion. That is a spike of over 50%. The first half is likely to see borrowings to the tune of Rs.6 trillion. This is likely to have multiple macro implications for the Indian economy.

Risk of rating downgrade

When Moody’s downgraded India’s outlook earlier, it had warned that any rating upgrades for India were virtually ruled out. In the last few weeks, Moody’s has consistently warned that any spike in debt levels combined with COVID-19 could result in India’s sovereign rating being downgraded. Currently, India is above Speculative grade and any downgrade from here would push Indian bonds to Junk status. The key parameter would be the fiscal deficit. For FY21, the fiscal deficit has already been hiked from 3% to 3.5% in the last Union budget. However, with borrowings up by over 50%, we could see the fiscal deficit spiking to above the 5% of GDP mark. Moody’s and even Fitch have warned that such an event would be the trigger for a rating down grade. While, these may be emergency measures, rating agencies are unlikely to be impressed by the fact that India has allowed the entire concept of fiscal prudence to go for a virtual toss.

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During the week, Reliance sold the fifth tranche stake in Jio Platforms to KKR for a consideration of Rs.11,367 crore. The 2.32% stake was sold at valuations similar to Silver Lakes. Where does that leave RIL in its zero debt plans?

 Reliance Jio Platforms jio platforms investment jio company Jio Platforms

How soon can Jio Platforms help RIL become zero net-debt?

During the week, Reliance sold the fifth tranche stake in Jio Platforms to KKR for a consideration of Rs.11,367 crore. The 2.32% stake was sold at valuations similar to Silver Lakes. Where does that leave RIL in its zero debt plans?

Monetizing Jio Platforms

With the big digital shift, RIL managed to monetize its Jio Platforms property quite easily. After selling a 9.99% stake to Facebook, RIL followed it up with stake sale to Silver Lakes, Vista Equity, General Atlantic and KKR. Overall, RIL has managed to monetize 17.2% stake in Jio Platforms for Rs.78,500 crore which gives an overall valuation of $63 billion to Jio Platforms. That is proving to be the real value generator for RIL even as the core refining and petchem business has shown weakness  

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The telecom voice and data business is all about the average revenue per user (ARPU). The future belongs to telecom players that can maximize ARPU without compromising on growth.

     ARPU Game Mobile Gaming Benchmarks ARPPU in top performing games

How Bharti Airtel is winning the ARPU game against Reliance Jio

The telecom voice and data business is all about the average revenue per user (ARPU). The future belongs to telecom players that can maximize ARPU without compromising on growth.

How Bharti Airtel gained

In early October, the Supreme Court rejected the plea of telecom companies and instructed them to pay up the AGR. Bharti had to pay up Rs.33,000 crore. Interestingly, that was the day, Bharti stock price bottomed as the uncertainty surrounding the issue was put to rest. Not only has Bharti been one of the top gainers, but it has also been the most preferred buying pick for mutual fund managers in April. How did Bharti Airtel manage the ARPU game so effectively as to stand up to the challenge posed by Reliance Jio in the data space.

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On 22 May, the RBI once again had an early meeting of the Monetary Policy Committee (MPC). The stance clearly was dovish but the million dollar query is whether these measures can help?

RBI Rate Cut, RBI Repo Rate Cut 2020, RBI's rate cut means for loan EMIs

Monetary push is unlikely to be really effective in these markets

On 22 May, the RBI once again had an early meeting of the Monetary Policy Committee (MPC). The stance clearly was dovish but the million dollar query is whether these measures can help?

Another monetary push

After cutting repo rates by 75 bps in March, the MPC has cut repo rates by another 40 bps. This takes the total rate cut to 115 bps since the pandemic first reared its head. The last rate cut takes the repo rates to an all-time low level of 4%. That is not all. MPC also cut the reverse repo rates down to 3.35% in order to make it absolutely unattractive for banks to park funds with the RBI. It is expected that this could give a boost to commercial lending by the banks. Since Sep-18, repo rates have been cut by 250 bps while reverse repo rates have been cut by 290 basis points. But credit demand continues to lag.

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The GDP announcement for the fourth quarter ended Mar-20 had few surprises as the fall was factored in. However, Q4 GDP at 3.1% was not as bad as was originally anticipated by the street.

         GDP is sharply lower in Q4 but focus must shift to growth recovery

The GDP announcement for the fourth quarter ended Mar-20 had few surprises as the fall was factored in. However, Q4 GDP at 3.1% was not as bad as was originally anticipated by the street.

How did the GDP compare?

In a way, the GDP for Q4 marked the continuation of the trend of routinely lower GDP. The trend started in mid- 2018 from a level of 7.7% and over the last 8 quarters the GDP has consistently fallen by over 450 bps. The March quarter may not have seen the full impact of the lockdown since it only accounted for a week. The real impact may be felt only in the first two quarters of FY21. However, it must be admitted that the actual GDP growth for Q4 at 3.1% and for the full year at 4.2% was surely better than most estimates.

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After the much talked about delisting of Vedanta, it is now Adani Power that is planning to delist from the bourses. The final call will be taken in its board meeting on June 03 next month.

                        Adani Power Limited, India's Largest Private Power Company, Adani Power from bourses

What could be the drivers for delisting Adani Power from bourses? After the much talked about delisting of Vedanta, it is now Adani Power that is planning to delist from the bourses. The final call will be taken in its board meeting on June 03 next month. Low valuations hold the key If you look at Vedanta and Adani Power, they are present in sectors which tend to get tepid valuations in the market. The reasons are nor far to seek. Metals are hard to differentiate and power has its problem with PPAs and coal supply flows. All this has led to depressed valuations of these stocks. For Adani Power, the value addition from being listed on the bourses is reducing by the day. Adani group, perhaps, believes that for such complex sectors, valuations from PE funds would be easier than the market. That could explain the delisting. READ MORE...Best Online Stock Trading, Financial Services & Mutual Funds Investment Solution provider India

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The Madras High Court has sent notice to Franklin Templeton Fund for closure of its six funds in April 2020 resulting in nearly Rs.30,000 crore being locked up. Notwithstanding the legal outcomes, there are four areas where Franklin Templeton MF has grossly failed.

              Templeton Funds, Invest in Mutual funds Online,Templeton mutual funds, Mutual Fund Investment Company

Templeton needs to take responsibility for making a hash of it The Madras High Court has sent notice to Franklin Templeton Fund for closure of its six funds in April 2020 resulting in nearly Rs.30,000 crore being locked up. Notwithstanding the legal outcomes, there are four areas where Franklin Templeton MF has grossly failed. What were trustees doing? This is question that is going to haunt Templeton Fund for a long time to come. The trustees are supposed to be independent watchdogs that put the interest of unit holders above the AMC. Clearly, that has not been adhered to. It is hard to imagine how the trustees could have approved such a one-sided decision which was clearly loaded in favor of the AMC and against the unit holders. They should have raised red flags and even called for SEBI action. That will go down as a gross disfavor to the unit holders of the fund. READ MORE...Best Online Stock Trading, Financial Services & Mutual Funds Investment Solution provider India - Trustline

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In the last few days, there have been a slew of reports about a likely deal where Reliance Retail could buy a controlling stake in Future Retail. Here is why the deal will add value to the Reliance group as well as bail out the Future Group.

                         Future Group, Future Group Careers, Future Group Brands, Future Group Owner

How the Reliance buyout can help Future Group out of the mess In the last few days, there have been a slew of reports about a likely deal where Reliance Retail could buy a controlling stake in Future Retail. Here is why the deal will add value to the Reliance group as well as bail out the Future Group. Speed is the essence While Reliance may not be the only suitor for Future Group, it is known for its penchant for speed in executing such deals. In the Jio Platforms monetization, RIL showed its capacity to close out mega deals in a short period of time. If RIL is really serious about this deal, it should not take too long for the deal to see the light of day. Among the various suitors, Reliance is the only potential buyer that expressed interest in buying into Future Retail apart from taking a stake in other group companies. That could be the differentiator. READ MORE...Best Online Stock Trading, Financial Services Mutual Funds Investment Solution provider India - Trustline

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The Supreme Court pulled up the DOT and the government for unreasonable demands on non-telecom PSUs forcing the government to retract. But the fight may have just begun for the telcos.

                          Telecom Tangle Tangled state of telecom Best Tangled telecom

It is time for the DOT to be reasonable with telecom companies The Supreme Court pulled up the DOT and the government for unreasonable demands on non-telecom PSUs forcing the government to retract. But the fight may have just begun for the telcos. Non-telecom PSUs are exempt Since September last year, the DOT had conveniently expanded its definition of AGR payees to include all companies that had been allocated spectrum at any point of time. This led to unreasonable demands made to companies like REC, Oil India, GAIL etc. For most of these companies, the spectrum was just a marginal allocation and expecting them to pay AGR dues was preposterous since they were not in the core business of telecom services anyways. Government has now confirmed that 96% of such dues will not be charged. That should put the first issue to rest. READ MORE...Best Online Stock Trading, Financial Services & Mutual Funds Investment Solution provider India

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In the last few weeks, the border scene at Galwan in Ladakh has deteriorated quite rapidly. The casualties were the first such instance since 1975. As India plans an economic blockade of China, there are larger issues that need to be deliberated upon.

            India must avoid China blockade without due deliberation

Yes, China needs India One can argue that Indo-China annual trade at around $88 billion is quite small by what China does with countries like the US, EU and Japan. But that is off the point. The fact is that India runs a $70 billion trade deficit with China and thus constitutes a big chunk of the overall trade surplus of China. With the Sino-US trade already under pressure over the last two years, China needs Indian trade to grow. Despite the saber rattling, the reality is China cannot afford to lose out a trading partner like India. India offers a ready and lucrative consumer market. India needs China too For India, the trade with China is an important link in its supply chain. There are sectors like electronics, pharma and automobiles that rely heavily on China for supply of raw materials. Nearly two- thirds of India’s supply of APIs for the pharma companies comes from China. We have already seen the disruption caused by chinks in the supply chain. With few countries able to match the heft and scale of China, Indian economy does need Chinese trade to flourish. READ MORE...Best Online Stock Trading, Financial Services Mutual Funds Investment Solution provider India

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Recently, the government announced the launch of its floating rate bonds with 7.15% coupon rate. How attractive is the product and should investors really be enthused enough to investing in these floating rate bonds?

                 RBI floating rate bonds Investing in Floating-Rate Bonds Floating Rate Savings Bonds

Is the GOI floating rate bond a good option for investors Recently, the government announced the launch of its floating rate bonds with 7.15% coupon rate. How attractive is the product and should investors really be enthused enough to investing in these floating rate bonds? Replacing the 7.75% bonds In a way the new 7.15% floating rate bonds are a replacement for the 7.75% taxable bonds that were discontinued. However, the 7.15% bonds are a tad more complicated in that they entail payment of floating rates of interest. The rate will be begin with 7.15% for the Jan-21 tranche but every 6 months these rates will be reset based on the prevailing interest rates in the economy. The bonds will have a tenor of 7 years and the interest on these bonds will be entirely taxable. These bonds will have a face value of Rs.1000. READ MORE...Best Online Stock Trading, Financial Services Mutual Funds Investment Solution provider India - Trustline

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The SEBI Board meeting has become an important forum for the regulator to give direction to markets. The last SEBI Board meeting during the week had some important takeaways.

                     SEBI Board Meet Board Meetings SEBI SEBI Board Meet Outcome SEBI Board Decisions

Open offers and insider trading issues addressed The SEBI Board meeting has become an important forum for the regulator to give direction to markets. The last SEBI Board meeting during the week had some important takeaways. Preferential pricingIn the past, floor price for preferential issue was fixed at the average of 2 weeks price and 26 weeks price. Now SEBI has sought to amend that and reduce the time period from 26 weeks to just about 12 weeks. This reduced time frame will ensure that there is a greater weightage to the more recent price and that is a better benchmark at a time when the stock market prices can be so volatile. Of course, the lock-in period of 3 years on such preferential allotments shall continue to apply under the new preferential price formula too. Takeover code changes SEBI has now permitted acquisition of shares via the bulk / block deals mode during the open offer. There are also some changes to indirect acquisition of shares. In such cases, the bidder will have to deposit 100% of the total consideration payable into an escrow account before making the public announcement of the same. This will prevent the practice of playing prices on information flows. Any commission or omission will entail an interest of 10% to shareholders who have tendered their shares in the open offer. READ MORE..Best Online Stock Trading, Financial Services Mutual Funds Investment Solution provider India - Trustline

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In the last few months, we have seen a virtual proliferation of digital lending platforms. Most of them are willing to give away micro loans with digital scrutiny, limited paperwork and almost immediate disbursal. Now RBI has moved in to regulate them.

                               Digital lending, Benefits of Digital lending, Power of Digital Lending

It is good that RBI has moved in early to regulate digital lending In the last few months, we have seen a virtual proliferation of digital lending platforms. Most of them are willing to give away micro loans with digital scrutiny, limited paperwork and almost immediate disbursal. Now RBI has moved in to regulate them. Lockdown brings focus One industry that has come into focus in the current lockdown is digital lending. This entails loans via apps with some basic scrutiny and online paper work. It has also meant that such loans have entailed usurious rates of interest to cover the risk. In addition, the digital lending platforms were known to use strong arm tactics to recover their loans. This has become a lot more prevalent as the recent lockdown resulted in major constraints on economic activity, jobs and income levels. That has given the background to the new RBI norms. READ MORE...Best Online Stock Trading, Financial Services Mutual Funds Investment Solution provider India - Trustline