Outlook_money_-_may_2018.pdf

Make Market Volatility Your Friend pg 46

Life Planning For Seniors pg 54

M ay 2 0 18 , `5 0

o u t lo o k m o ne y.c o m

Teach Them

Young

Money lessons should start early in life because what children learn in the formative years will determine their future behaviour. From running chocolate banks to delaying gratification, there are plenty of things parents can do to impart financial literacy

pg 82

Bharti Singh’S Money WiSdoM

Contents May 2018 ■ VoluMe 17 ■ Issue 5

Money Lessons For Kids If children are taught the importance of savings early on, they will handle money better as adults

pg

24

Regulars

6 Letter 12 Queries 18 News Roll Cover Design: Vinay dominic, Cover photograph: s kumar Head Office AB-10, S.J. Enclave, New Delhi 110 029; Tel: (011) 33505500, Fax: (011) 26191420 OtHer Offices Bangalore: (080) 43715021 Kolkata: (033) 46004506, Fax: (033) 46004506; Chennai: (044) 42615225, 42615224; Fax: (044) 42615095; Mumbai: (022) 33545000, Fax: (022) 33545100. Printed and published by Vinayak Aggarwal on behalf of Outlook Publishing (India) Pvt. Ltd. Editor: Malini Bhupta. Printed at Kalajyothi Process Pvt. Ltd., Plot No. W-17 & W-18, MIDC, Taloja - 410208, Navi Mumbai and published from AB-10 Safdarjung Enclave, New Delhi 110029 For Subscription queries, please call: 011-33505562, 33505500 or email: [email protected] Published for the month of May 2018; Release on 1 May 2018. Total no. of pages 84 Outlook Money does not accept responsibility for any investment decision taken by readers on the basis of information provided herein. The objective is to keep readers better informed and help them decide for themselves.

www.outlookmoney.com May 2018 Outlook Money

3

Contents pg

Small Banks, Big

50 Benefits

Small banks offer higher interest rates on deposits. Should you consider it?

46 Market Special: What to

Expect From Equities in the New Fiscal

pg

68

Fintech Watch

Finzy: A new platform for borrowers and lenders

The markets could witness some volatility, but it will throw up opportunities too

52 PWC Column

Myths about filing income tax returns

54 Life Planning For

Senior Citizens

As people live longer, financial needs of seniors also need special attention

58 Morningstar Fund Review UTI Dynamic Bond Fund & Reliance Equity Opportunities Fund in focus

62 My Plan

Investing for a healthy and financially sound tomorrow

64 Financial Planning

pg

82 Smart Money Bharti Singh’s Money Mantra

4

Outlook Money May 2018 www.outlookmoney.com

Review your investments in the new financial year

66 Column: New ITR Forms How it will affect tax payers

76 Insurance For

Chronic Illnesses

Health insurance for those with pre-existing conditions may be tough, but there are customised plans too

79 Spend: Hotels By

The Hour

Now pay only for the number of hours you spend in a hotel room

Editor’s Letter

Money Lessons Early

M Exposing kids to the purchasing power of money, we are leaving them with half-knowledge

Malini Bhupta [email protected]

6

oney is a complex subject and so is our relationship with it. For some, money is merely a means to an end, while for others it is often an end in itself. A couple of months ago, I was sitting with Gaurav Mashruwala, financial advisor and author of Yogic Wealth, and discussing how our behaviour and biases impact our financial health. What Mashruwala said was very interesting. He believes that our relationship with money is determined at a very early age. Just as children tend to learn from their parents – all things good and bad – they also tend to pick up money habits from them. And habits formed back in our childhood are hard to break as adults. Interestingly, parents believe that children are too young to discuss or learn money management. In fact, a former landlord of mine kept his assets and investments a secret from his son because he believed his son did not have any ‘money sense’ and would spend it all on frivolous things if he knew just how rich his father was. Someday these ‘children’ will inherit their parents’ money and then they will find it challenging to deal with the inherited wealth. Even today, most people don’t believe in paying for professional guidance and prefer to rely on friends and family for advice. It is for this reason that our cover story for this month addresses the importance of financial literacy among children. By exposing kids to the purchasing power of money, we are leaving them with half-knowledge, which can be very dangerous. It is essential for children to learn the importance of saving, earning, and spending. And this can be done in fun ways too, say the experts. We also have interesting case studies of parents and the money lessons they give their

Outlook Money May 2018 www.outlookmoney.com

children. Priya Nair, who put the cover story together, says, “While it’s important to teach children about saving and spending money wisely, there are no fixed rules or methods. However, parents should follow a balanced and systematic approach.” Some parents feel that instead of giving money to children, setting an example by leading a disciplined and frugal life is the right way to teach them the value of money. Yet other parents reward their children with cash or treats for good behaviour to teach them concepts like earning and saving. Indeed, such life lessons have to be taught. What route parents choose to follow would depend on their comfort levels and individual preferences. Anagh Pal has compiled a list of investment options available for parents looking to save for their children’s future. From bank accounts to insurance and mutual funds, these days there are specific products catering to children’s future needs such as higher education or marriage. And as always, the advice from experts is to start early. While talking of money wisdom, stand-up comedian and television personality Bharti Singh has lots to offer. She claims she treats money like a guest in her life. “Just as guests come and go unannounced, flow of money too cannot be predicted – and therefore, one must never take it for granted,” she says. In this issue, we also have an entire package on stocks and how investors can battle volatility. Suyash Desai spoke to market experts to decode how markets would fare in the new fiscal, and explains how investors can tide over turbulent times.

www.capitalfirst.com

BUSINESS GROWTH DEPENDS ON FINDING THE RIGHT PARTNERS. LET US BE YOURS. Business expansion loans.

nc

c ust

om

50 LAKH

ed

t More han

e r s fi n a

CAPITAL FIRST BUSINESS LOANS. However small your business requirement is, we’ll finance them. Thanks to our minimal documentation, attractive interest rates and fast disbursals, we have helped entrepreneurs fulfil their aspirations.

HOME LOANS

PRE-OWNED CAR LOANS

LOAN AGAINST PROPERTY

DURABLE LOANS

Terms and conditions apply. Credit at sole discretion of Capital First Ltd.

Call: 1800 103 2791 | Download the app now

TWO WHEELER LOANS

MICRO LOANS

Talk Back

I

More travel stories please

read Outlook Money’s recent edition where the cover story was on travel. Being an avid traveler, I must say that it was a very detailed story covering almost all aspects that affect /influence travel-related decisions, be it budgeting, planning, finance options, destinations, and other tips. My husband, 8-year old daughter and I look forward to our annual trip, and start planning and booking months in advance. I could relate to almost all points on how one should budget a holiday, as that is exactly what we do too. Look forward to more travel-related stories. Chaitali Raval, Mumbai

Editor

Malini Bhupta SEnior ASSiStAnt Editor

Priya Nair

ASSiStAnt EditorS

Anagh Pal, Preeti Kulkarni SEnior CorrESPondEnt

Himali Patel

CorrESPondEnt

Suyash Desai Art

Praveen Kumar. G, Vinay Dominic (Senior Designers) Rohit Kumar Rai (Designer) Girish Chand (DTP Operator) PhotogrAPhy

Gireesh. GV (Picture Editor) Soumik Kar, R.A. Chandroo (Photographers) tECh tEAm

Raman Awasthi, Suraj Wadhwa

Business Office ChiEf ExECutivE offiCEr

Indranil Roy

PubliShEr

Vidya Menon ASSiStAnt viCE PrESidEnt

I

have started reading Outlook Money from the past few months and I am thoroughly impressed by the kind of articles you and your team churn out every month on various aspects related to personal finance and investment. Outlook Money has not only helped me on a professional front, but also Arup Choudhury, personally to understand the nittyKolkata gritty of finance. Finance is not tough to understand and your style of writing proves that. Sections on Life Planning and Morning Star Mutual Fund Guide are really helpful. I believe personal finance should be a part of our school curriculum as learning the tricks of trade when young will help every individual to take critical financial decisions and be disciplined with money, so essential for addressing various life goals. Keep up the good work and looking forward to more interesting articles.

Tushar Kanti Ghosh nAtionAl hEAd

Santosh Nair SR. GEN MANAGER: Mohan Sahasranaman

Digital Team Amit Mishra Sumit Srivastava

Circulation & Subscriptions Raj Kumar Mitra, Anindya Banerjee Vinod Kumar (North), G Ramesh (South) Arun Kumar Jha (East) Shekhar Suvarna

Production gEnErAl mAnAgEr

Shashank Dixit ChiEf mAnAgEr

Shekhar Kumar Pandey mAnAgEr

Sudha Sharma dEPuty mAnAgEr

Ganesh Sah ASSiStAnt mAnAgEr

Gaurav Shrivas

Accounts ASSiStAnt gEnErAl mAnAgEr

Diwan Singh Bisht

Letters must be addressed to: The Editor, Outlook Money, AB-10, Safdarjung Enclave, New Delhi 110029, or [email protected]. Please mention your full name and residential address.

8

Outlook Money May 2018 www.outlookmoney.com

ComPAny SECrEtAry & lAw offiCEr

Ankit Mangal

Talk Back The April issue of OM was a big shocking experience for the readers. It was too hard to decide if you are going through the pages of Outlook Traveller or Outlook Money. All the pages seem to be sponsored by travel agencies. All the agencies were advertising their discounted travel packages. It was just spending, spending... Nothing to save and invest. Remaining pages were wasted on ‘Buisness Leading Edge’. This was another Sponsored event by Outlook Group. I didn’t find anything new and innovative write ups. I missed my regular features and tits bits of investing and saving. I think OM wasted the whole issue on useless write-up.

Sandeep Kumar, Amritsar

With summer vacations approaching, I was in the positive mood for a trip. Your travelogue “North Sikkim: Nature at its Pristine Best” just helped me decide where shall I spend my 1-week trip. Best part was that I got an estimate of the budget too. Amit Pal, New Delhi

Planning and executing an international trip is not an easy task as it sounds. “How to Fund your Dream Holiday” just tells you how to make it an easy task. Travellers should invest accordingly rather than cracking the piggy banks or taking a loan. Krishna Mohan Singh, Delhi

Pravin Bhushan

A passion to observe, examine and disseminate the information based on such efforts has always been useful to arrive at a conclusion, if we are in dilemma. Your article under the title “Off --------” published in Outlook Money in April 2018 edition is well placed under such passion. I am overwhelmed and appreciate your views that the real pleasure of travel lies in exploring the unexplored destinations which signifies the true spirit of travelling.

The travel issue of Outlook Money was fabulous, the content and deatails were well chosen. Especially where you covered various types of tours -- eco tours, adventure tours, world tours , domestic etc...the information provided was quite handy. But we were trying to contact Doreen of Doe’s Ecotours, but the details obtained from net is faulty. So requesting you to share her contact details or kindly send our contact details to her. As our family wants to travel through her, (if possible) as her style is different then others -- as you have aptly noted. Chandresh Mamtora

10

Outlook Money May 2018 www.outlookmoney.com

Queries Rajnath BIRaj, Noida Satya Ranjan BiSwaS, Noida

I’d like to invest a lumpsum amount of `10 lakh in mutual funds for a five-year time horizon. Please suggest some good mutual funds.

I am a retired person from the defence service. I work as an engineering consultant. I sold my property at another station. I get pension. What should be my financial plan? This is a very subjective question. I suggest you consult a financial planner locally and share with him your assets, cost of living, expenses and insurance details. The financial planner would be able to examine your situation based on the submitted facts and recommend a plan of action that works for you and meets all your financial requirements.

amit Kukreja Founder, WealthBeing Advisors

B SRInIvaS, Nizamabad

I am a 42-year-old central government railway employee. I have taken a `35 lakh home loan from State Bank of India for 30 years. I am going to get `5 lakh from Sri Ram Chit Fund, which is in my mother’s name. Shall I repay the loan or invest this amount? There is no data about you. Normally, we need to look at your risk profile, goals, liquidity requirements, past investments, asset allocations etc. before suggesting anything. Assuming that you have the risk appetite to invest in equity, your asset allocations allow you to invest in it provided you don’t need this money and have a time horizon of over five years. You may look at a large-cap fund like Aditya Birla Frontline Equity Fund and a multi-cap fund like ICICI Pru Nifty Next Fifty Fund. You can invest in them in equal proportion. Suresh Sadagopan Founder, Ladder7 Financial Advisories

Manoj Dutta, Jalpaiguri

I invested a lumpsum `60,000 in utI Mid Cap Fund in january 2017 and in February 2018. Its valuation is `65,000 and I want to invest for 18 years. Can I continue the plan? Which is the best alternative fund? UTI Mid Cap Fund was launched in April 2004. Since its inception, it has been delivering over 19 per cent compounded annual growth. Since the fund is performing well, you can continue your SIP.

Pankaj Mathpal Founder, Optima Money Managers

12

Outlook Money May 2018 www.outlookmoney.com

Home loan generally comes at a low interest rate. Currently, it would be about 8.5 per cent. Over this, you also get deductions on interest upto `2 lakh. This makes the effective interest rate even lower. Hence, it is a good idea to keep the home loan intact and invest the `5 lakh which you are getting back. Where to invest is something that you can decide based on your risk appetite and goals.

Suresh Sadagopan Founder, Ladder7 Financial Advisories

vIjay S DeSaI, Bangalore

how is LtCG taxed on GoI/RBI gold bonds and gold etFs. Should my broker deduct the Securities transaction tax (Stt)? What are the holding periods and LtCG taxes for gold bonds and etFs? Capital gains tax is calculated based on the holding period for the capital asset sold. In case of gold ETF, a holding period of less than three years is considered as short-term. More than three years is considered as longterm. Short-term capital gains tax on gold ETF is based on the slab rates applicable to individuals and long-term capital gains is taxable at 20 per cent with the benefit of cost inflation index. STT is not applicable for trading in gold ETF. The capital gains tax arising on redemption of Sovereign Gold Bond at the time of maturity has been exempted. The indexation benefits will be provided to LTGC on transfer of such bonds before maturity.

Pankaj Mathpal Founder, Optima Money Managers

aRun MISRa, Varanasi

how does one save capital gains against sale of residential property? There are two ways to do this. One can buy another residential property at least to the extent of capital gains, or invest to the extent of capital gains in capital gains bond (subject to a maximum amount of `50 lakh).

Suresh Sadagopan Founder, Ladder7 Financial Advisories

naRayana BooRGuLa, Karimnagar

What is a hedge fund? how can I invest in it? A hedge fund is a pool of money just like mutual

funds, but uses alternate investment approaches to manage the investment risks against market volatility. In India, these funds are classified under AIF (Alternative Investments Funds) category III, and a minimum `1 crore investment is required. Derivatives strategies are extensively used in their portfolios and both long and short positions are taken in stocks, bonds, currencies and commodities, as per the objectives laid down in a specific fund. Players like Edelweiss, Avendus Capital and Motilal Oswal have such funds in their portfolio.

Manikaran Singal Founder, Good Moneying Financial Solutions

Vinod MehRa, New Delhi

I have been investing in mutual funds (regular plan) for the past five years through SIPs. Most of my funds are not performing well and a few of them are sectoral funds. I’ve decided to restructure my porfolio. I plan to buy direct funds for the long-term (15-20 years) with a moderate risk appetite and select a few funds from my existing portfolio. the selected funds are: Kotak Select Focus Fund Direct Plan (`2,000), Reliance Small Cap Fund Direct Growth (`2,000), Motilal oswal Most Focused Multicap 35 Direct Fund (`2,000), Mirae asset emerging Bluechip Direct Fund (`2,000), Principal emerging Bluechip Direct Fund (`2,000), hDFC Balance Direct Fund (`2,000), Birla tax 96 - Relief Direct Growth (`2,000). Please let me know if any modification is required. Two things I could not understand from your query. What was there in your previous portfolio which made you believe that they were not performing well? Second, what does moderate risk appetite mean to you? If good performance in a mutual fund means better than others, then you can never make a good portfolio. Star performers keep changing, but your portfolio should not change that quickly. Be it direct fund or regular fund, the first thing you need to understand is that you should always start with a goal in mind. What is the 15-20 years time horizon for? Is it because you have some goal around that time or is it because this time-frame is normal to be called long-term. Is this plan for 15 or 20 years? I do not see any debt fund in your moderately designed portfolio. It has a mix of large-cap, small-cap, mid-cap, multi-cap, balanced and ELSS funds. Covering all the fund categories does not mean that the portfolio is well-diversified. What matters is what is in the funds. More importantly, they should suit your clearly defined and understandable risk profile. The funds that you’ve shared are all good in themselves. But whether they will suit your requirements is something that is difficult to comment on. Manikaran Singal Good Moneying Financial Solutions

www.outlookmoney.com May 2018 Outlook Money

13

Queries Cd SolanKi

Since january 2001 I have invested `5000 every month in utI’s Retirement Benefit Fund (RBF), which is a debt fund. I’m going to withdraw the maturity amount very soon on completion of 58 years. Please tell me how to calculate long-term capital gains (LtCG) since the investment is not a lumpsum but a SIP. how to apply indexation formula for this? In case of equity funds (SIPs) how does one calculate LtCG? I’ll appreciate it if you can offer an illustration as well. As you’re going to withdraw the money from the fund in which you have been investing through SIP, first identify the total number of UNITS to be sold. For every unit sold, find out its cost of acquisition/purchase price as per the FIFO (First In, First Out) method – that is, units that were purchased first will be sold first, and units purchased later will be sold later for the purpose of calculation. In case of Debt-Based Mutual Funds, any units held for more than 36 months from the date of sale would be treated as long-term capital. Long-term capital gains are taxed at 20 per cent with indexation as shown below. Where indexed cost of acquisition is calculated as: Actual Purchase Price x (Index of year of sale/ Index of year of purchase or 2001-02; whichever is later) LTCG Tax = [(Selling Price of long-term units x no. of units held in the long term) – (Indexed cost of acquisition)] x 20% Units held for less than 36 months are considered as short-term capital, and are taxed as per the slab rate shown below: STCG = (Selling Price of short-term units x no. of units held in short term) – (Actual Cost of Purchase) This amount of STCG is then added to your total taxable income for that financial year and taxed as per your tax slab rate. Please keep in mind three most important points. (1)When it comes to direct equity, while calculating capital gains tax we focus on the number of shares and not their value. The exact same principal should be applicable

14

Outlook Money May 2018 www.outlookmoney.com

Retirement

Benefit Fund

when it comes to calculating capital gains tax on mutual fund units. Focus should be on the number of units and not the amount. Calculate capital gains or loss and longterm and short-term for each unit. (2)Secondly, there will be instances of capital loss, please remember to set them off against gains. This will reduce your tax burden. (3)Since debt funds are subject to capital gains tax, you also have the option to invest in long-term capital gains in various bonds which qualify u/s 54 E/C In the case of Equity Mutual Funds, as per the revised regulations of Budget 2018: (1) Units held for less than 12 months are considered as short-term. The gains on these units are taxed at 15 per cent. (2) Units held for more than 12 months are considered as long-term. The gains on these units are taxed at 10 per cent if total gains for that financial year exceeds 1 lakh. (3) Cost of acquisition to be considered for calculating LTCG tax is either actual NAV at which they were purchased or NAV as on 31 Jan 2018, whichever is higher. Gaurav Mashruwala Financial Planner and Author of Yogic Wealth

Kv Manjunath, Bengaluru

I have a PnB MetLife Met Smart policy for sum assured of `15 lakh purchased in 2006. the present fund value of this scheme is around `6 lakh. the sales manager of PnB MetLife is advising me to take out say `1 lakh or `2 lakh and use this money to purchase PnB MetLife Pure term Plan which gives insurance cover till the age of 99. Is it advisable to do so? I’m not aware of your age but pure term plan premiums are not high when compared to investment-based insurance plans. The premium for a 40-year-old for `1 crore cover till age 99 will be `25,000 approximately, so you may not need to withdraw a large amount from your Met Smart Policy. You need to evaluate your insurance requirements and then decide if you need additional cover. A pure term insurance is nevertheless the best insurance plan you can take. You can also use the opportunity to evaluate if your MetLife Smart plan has performed well over the last 12 years.

Steven Fernandes Founder - Proficient Financial Planners

Zeya aLaM, Varanasi

a classmate of mine wants to know if it’s necessary for an nRI to convert his savings account from Resident status if he is showing his received interest in the saving account in his Income tax return while filing it as nRI? As per FEMA regulations, if your residential status changes to NRI, your savings account will have to be re-designated as an NRO account. Continuing to hold a savings account without converting the same even after acquiring an NRI status will be considered illegal.

Interest from an NRO account is similar to interest from a savings account and hence taxable. It is to be offered in the return of income filed in India.

archit Gupta Founder & CEO - ClearTax

`10,000 per annum that’s available for residents. You would need to file your returns in India as a consequence, and if your overall income from India is below the taxable limit you can get a refund of the amount deducted.

anil Rego, Founder and CEO - Right Horizons

anIta KuMaRI, Sahebganj

What is the insurance available for a person whose annual income is `3 lakh? Insurance companies are careful not to over-insure since it creates the risk of misuse. It also creates a potential threat on the life assured by the nominee/beneficiary. The quantum of life cover is assessed by the insurance company based on the age, income, liabilities, and the state of health. On an average, the sum assured can be 10 to 25 times your earning capacity based on your age and other factors. Ideally the insurance you take needs to be based on the Human Life Value (HLV) which in simple terms is the earning capacity of an individual over one’s work life.

anil Rego Founder and CEO - Right Horizons

RaMeSh MathuR, Denver, USA

I am a PIo over the age of 60 (but not yet 80) living in the uS as a uS citizen. I had some interest income generated on a bank account that I maintain in India. I have no other income there. I understand that senior citizens with income less than `2.5 lakh in India do not need to file taxes there. Does this rule apply to me? every quarter the bank automatically deducts taxes from my deposit; am I eligible for getting that money back? Banks are required to deduct tax on interest income for NRIs and PIOs at the highest tax rate. NRIs are not eligible for the exemption of

[email protected]

Currently I have `1.2 crore worth of FCnR FDs earning an interest of 3%. I want to invest this in the market or some other kind of investment for three or more years and earn at least 12% interest/income annually. Kindly advise me of any suitable investment area, and their merits and demerits. I would also like to know if it is worth investing in FD of PMC Cooperative bank, which is offering 8% interest for 24 months duration. As per your time horizon and return expectations, you should consider investing in mutual funds. A good mix of debt and equity MFs in keeping with your risk profile should help you get better returns than the FCNR deposit. The equity MFs can be large and multicap funds while the debt investment can be a combination of ultra-short and short-term funds. Note that equity MFs will not give you an annual return like FDs as returns are not guaranteed. A time horizon of more than three years should help you get decent returns. There could be times when your equity investment value will give you negative returns in the short term; only if you stay invested for the longer term will you be suitably rewarded. Interest earned on FD is taxable, so evaluate your taxable income and then decide if you want to invest in FDs.

Steven Fernandes Founder - Proficient Financial Planners

www.outlookmoney.com May 2018 Outlook Money

15

MDRT - Million Dollar Round Table, COT - Court of the Table, TOT - Top of the Table, LIMRA - Life Insurance and Market Research Association

Focal Point

News Roll

Choices galore for IPO investors

The primary equity market in 2017-18 has seen a growth of over 100 per cent over the previous record high in FY 2009-10

P

ublic equity markets witnessed an all-time high of `1,77,116 crore being raised in FY 2017-18, a growth of more than 100 per cent over the previous high of `86,710 crore in FY 2009-10. According to Pranav Haldea, Managing Director of PRIME Database (a database provider on the Indian primary capital market), the figure for FY 2017-18 was 3.46 times that raised in the previous year. In 2016-17 the amount raised was `51,120 crore. According to Haldea, 45 mainboard IPOs came to the market collectively raising `82,109 crore, while 52 already listed companies used the QIP route to mobilise `62,358 crore in FY 201718. The amount raised through both IPOs and QIPs was an all-time high. The previous high for the IPO

18

market was `41,323 crore in 200708, while the previous high for QIPs was `39,768 in FY 2009-10. (For number of IPOs raised since 2012 and QIPs since 2006, please refer to the tables.)

The largest IPO raised was from General Insurance Corp. for `11,257 crore, while the largest QIP raised was from SBI for `15,000 crore, accounting for 24 per cent of the total QIP amount. According to

Some companies that have received IPO approval for 2018-19: ■ GANDHAR OIL REFINERY (INDIA) LTD: `195.00 ■ PRINCE PIPES & FITTINGS LTD: `800.00 ■ SEVEN ISLANDS SHIPPING LTD: `450.00 ■ RELIANCE GENERAL INSURANCE CO.LTD: `1600.00 ■ CMS INFO SYSTEMS LTD: `1300.00 ■ ACME SOLAR HOLDINGS LTD: `2200.00 ■ BARBEQUE-NATION HOSPITALITY LTD: `700.00 ■ INDIAN RENEWABLE ENERGY DEVELOPMENT AGENCY LTD: `900.00 ■ RITES LTD: `600.00 ■ PATEL INFRASTRUCTURE LTD: `400.00 ■ KRISHNA INSTITUTE OF MEDICAL SCIENCES LTD: `600.00

Outlook Money May 2018 www.outlookmoney.com

Some companies awaiting IPO approval for 2018-19: ■ NATIONAL STOCK EXCHANGE OF INDIA LTD: `10000.00 ■ SREI EQUIPMENT FINANCE LTD: `2000.00 ■ VISHWARAJ SUGAR INDUSTRIES LTD: `374.00 ■ ROUTE MOBILE LTD: `600.00 ■ CREDIT ACCESS GRAMEEN LTD: `90.00 ■ NAZARA TECHNOLOGIES LTD: `1000.00 ■ CAPRICORN FOOD PRODUCTS INDIA LTD: `500.00 ■ INDOSTAR CAPITAL FINANCE LTD: `700.00 ■ FLEMINGO TRAVEL RETAIL LTD: `2423.00. ■ JOHN ENERGY LTD: `300.00 ■ SEMBCORP ENERGY INDIA LTD: `4095.00 ■ SANDHYA MARINES LTD: `600.00 ■ TCNS CLOTHING CO.LTD: `750.00 ■ DEVI SEA FOODS LTD: `900.00 ■ NEKKANTI SEA FOODS LTD: `750.00 ■ HDFC ASSET MANAGEMENT CO.LTD: `4000.00 ■ K.P.R.AGROCHEM LTD: `210.00 ■ ATRIA CONVERGENCE TECHNOLOGIES PVT.LTD: `1500.00 All the amount is in Rs Crore and the source for it is PRIME database.

Haldea, QIPs were dominated by banks, with their contribution being 53 per cent (`33,248 crore) of the overall amount.Out of 45 IPOs that were raised in the market, 17 had a prior PE/VC investment. Offers for sale (OFS) by such PE/VC investors accounted for 13 per cent of the total IPO amount and stood at `10,831 crore, while offers for sale by promoters accounted for a further 64 per cent of the IPO amount at `52,340 crore. According to Haldea, 17 out of 45 IPOs got a mega-response of more than ten times while eight IPOs were oversubscribed by more than three times. While 14 IPOs were oversubscribed between one and three times, data for six IPOs was not yet available. Haldea also highlighted that FY 2017-18 witnessed an all-time high for SME IPOs and

divestments as well. According to him, there were 155 SME IPOs with the highest ever amount collected (`2247 crore), while the divestments target was overachieved as the Government raised `98,965 crore in FY 201718. Apart from this, offers for sale through stock exchanges, which is for dilution of promoters’ holdings, saw an increase from `8,390 crore last year to `18,438 crore raised in this year. Outlook for 2018-19, according to Haldea, is likely to see more volatility in the secondary market, and this is expected to have an impact on companies’ fundraising plans. While there are 12 companies holding SEBI approval and wanting to raise over `10,395 crore, another 18 await SEBI approval for raising around `29,282 crore.

By Suyash Desai

Air travel may cost more if crude oil prices rise

Air travellers may have to pay more for their travel as airlines grapple with higher ATF prices. With prices of crude oil firming up, an ATF price rise is inevitable. A 20 per cent rise in crude oil prices from the current $65-70 per barrel could bring down operating margins to 4-6 per cent. Airlines may have to pass on the increased fuel cost to consumers, which could affect demand, according to a report by CARE Ratings. The report says that the combined passenger traffic is expected to double in the next five years with a growth rate of 14-15 per cent annually. It adds that the ratio of domestic vis-à-vis international passengers is expected to narrow further as airlines offer tickets priced at par with train tickets between select destinations. Two new major airports at Navi Mumbai (Mumbai region) and Noida (NCR) are expected to add sizeable capacity.

Domestic traffic growth is expected to emanate from the smaller and UDAN cities which were untapped and unserved till now, says the report. Addition of up to 100 million passenger capacity is expected at UDAN scheme airports over the next 3-5 years. With the expected rise in capacity, airlines expect to add 500-600 aircraft over the next 5-7 years to meet the increased demand.

www.outlookmoney.com May 2018 Outlook Money

19

News Roll SBI Card partners with IMA to launch Doctor`s Card

S

BI Card, has partnered with Indian Medical Association (IMA) to launch ‘Doctor’s SBI Card’, an exclusive credit card for doctors. This card will offer facility of indemnity insurance of `10 lakh, The Credit Card offers an indemnity insurance cover of `10 lakh to protect doctors against professional risks and liabilities form of unforeseen events such as claims from patients or related parties. This includes legal and defence costs and the facility is also extended to out of court settlements and court awards. Besides, the card drives maximum value for doctors through accelerated rewards on spend categories such as medical supplies, travel and international spends. The card has been launched on the Visa Signature platform and the cardholders can choose to avail EMI facility, either at point of purchase or convert unpaid balances to EMIs, at attractive rates of interest. Speaking on the occasion, Mr. Hardayal Prasad, MD and CEO, SBI Card said, “Based on research and insights into the unique lifestyles and requirements of doctors, the Doctor`s SBI Card integrates industry first features such as professional indemnity insurance cover and accelerated 5X rewards on medical supplies purchase for the benefit of doctors running private clinics.” Doctor’s SBI Card is the only credit card in partnership with IMA.Each card will be personalized with ‘Dr.’ embossed on the card front against the name of the cardholder together with qualification degrees of the medical practitioner, making it an exclusive product.

20

Outlook Money May 2018 www.outlookmoney.com

Drop in motor insurance premium for small cars

O

wners of small cars and two-wheelers stand to benefit from lower motor insurance premiums following a reduction in thirdparty premium rates by the Insurance Regulatory and Development Authority of India (IRDAI). Third-party insurance is mandatory for every vehicle owner, both private and commercial. This component covers damage to other people’s vehicles and property in case of an accident. This, along with the own-damage component, makes up the total or comprehensive motor insurance premium. Every year in April, the regulator announces third-party premium rates. This decides the motor premium rates for the year. This year IRDAI has reduced third-party premium rates for small cars with engines not exceeding 1000cc, such as Alto and Kwid, and bikes not exceeding 75cc[S1] . The rates remain mostly unchanged for other cars, but third-party premium rates for bikes with engines of over 350cc have seen a significant hike. “Premium rates for small cars have been lowered to `1850 from `2055, a reduction of 10 per cent. For two-wheelers under 75cc it’s been reduced to `427 from the current `569. This works out to a saving of `205 and `142 respectively, in case of small cars and twowheelers of lower engine capacity,” said Devendra Rane, Founder and CTO, Coverfox.com, an insurance broking firm. However, in case of bikes with engines of over 350cc capacity, the regulator has more than doubled the third-party premium to `2323 from the earlier `1019.According to Rajiv Kumar, MD and CEO, Universal Sompo General Insurance Company, “First-time owners of four-wheeled vehicles come from tier-2 and tier-3 cities and rural pockets, For these customers, any mandatory added cost becomes a deterrent towards purchase of their dream vehicle.” he said. The reduction in third-party premium rates will also offer insurers a chance to bring down premiums for comprehensive insurance policies. This should motivate vehicle owners who were previously hesitant in renewing motor insurance, said Rane. Third-party rates were increased for bikes above 150cc because of higher claims in this segment, said Animesh Das, Head – Product Strategy, Acko General Insurance.

By Priya Nair

Four Wheeler Vehicle not exceeding 1000 Cubic Capacity (CC): Bank

Hyundai Eon Maruti alto

Old rates

New Rates

Own Damage Premium

Third Party Premium

Net Premium

Own Damage Premium

Third Party Premium

Net Premium

11970

2055

14025

11970

1850

13820

9401

2055

11456

9401

1850

11251

Source: Universal Sompo General Insurance, *Rates are in rupees and can vary depending on the city

News Roll SBI makes Cash withdrawal free from POS Machines

HDFC Hikes Home Loan Rates by up to 20 bps

S

H

DFC, one of India’s largest mortgage financiers, recently increased its retail prime lending rate (PLR). The raise, effective from April 1, is the first since December 2013. Mortgage rates for loans above `30 lakh have been raised by up to 20 basis points while those below `30 lakh – which includes priority sector loans – have been increased by 5 basis points. One basis point is 0.01 percentage point. Loans under `30 lakh for women will now be available at 8.40 per cent, while for other borrowers it will be available for 8.45 per cent. Loans between `30 lakh to `75 lakh for women borrowers will be available at 8.55 per cent while others will get it for 8.60 per cent. Loans above `75 lakh will be 8.65 per cent for women and 8.70 per cent for others. Jaikishan Parmar, Senior Equity Research Analyst at Angel Broking , says, “HDFC has raised its home loan rate by 20 basis points for loans exceeding `30 lakh. However, rate for home loans under `30 lakh was hiked by just 5 basis points. For loans between `30 lakh and `75 lakh the rate of interest was hiked from 8.40 per cent to 8.60 per cent, while for loans above `75 lakh the rate was hiked from 8.50 per cent to 8.70 per cent. In all these cases, women home loan borrowers will get a rebate of 5 basis points.” Parmar adds that the rate hike has come at a time when the RBI has not exactly hiked its repo rates. “This rate hike by HDFC can also be attributed to liquidity tightness in the last few weeks. In practice, mortgage lenders do not increase the EMI of borrowers but extend the tenure accordingly,” he says. The regime of raising interest rates on home loans started with private sector lenders such as Axis Bank, Yes Bank and Kotak Mahindra Bank, who set the trend by hiking their marginal cost of funding-based lending rates. It was followed by all the banks in the system, including the largest lender – State Bank of India.

By Suyash Desai

Here is a comparison of home loan interest rates charged by major banks in India: Up to `30 lakh

`30-75 lakh

Above `75 lakh

Axis Bank

8.35

8.65

8.7

ICICI Bank

8.5

8.8

8.85

8.40-8.50

8.55-8.65

8.65-8.75

8.45

8.6

8.7

Bank

State Bank of India* HDFC Bank

All figures in percentage. Source: Bank websites

*Interest rate will vary as per the risk score of the customer and rates are also based on LTV of the Customer

22

Outlook Money May 2018 www.outlookmoney.com

tate Bank of India (SBI) debit card holders can now withdraw cash, free of cost, from PoS machines installed by SBI and other banks across various locations. This move comes after the cash crunch recently seen many parts of the country. As per the current Reserve Bank of India guidelines, customers can withdraw `1000 in Tier I and Tier II cities and `2000 in Tier III to Tier IV cities per day per card. Customer charges, if any, levied on cash withdrawals shall not exceed 1% of the transaction amount at all centres irrespective of the limit of `1000 / `2000. SBI is urging customers to use the POS for the withdrawal of cash and has decided not to charge fees for the customers availing this facility for the time being. Neeraj Vyas, DMD (chief operating officer) of SBI in a tweet said: “For withdrawals up to `2000, @ TheOfficialSBI has cash@POS facility @ 4.78 lakh POS machines. Customer can use SBI and any other bank debit card to withdraw cash up to `2000 in Tier 3 to 6 & up to `1000 in Tier 1 & 2 cities per card per day presently without any charges”. SBI has a total of 6.08 lakh PoS machines of which 4.78 lakh PoS machines are enabled to dispense cash to customers. Previously, after demonetization, RBI had increased the cash withdrawals at Point of Sales (POS) up to `2000 for all Tier I to VI cities and had also for some time waived off the withdrawal charge. India witnessed a cash crunch in the third week of April 2018. Regions like Andhra Pradesh, Telangana, Karnataka, northern Bihar, parts of Uttar Pradesh, parts of Punjab, the border areas of Gujarat and Madhya Pradesh and some parts of interior Maharashtra were severally affected by this cash crunch.

Cover story

O

ld habits die hard. And when it comes to money, what we learn about it in childhood has a deep bearing on our relationship with it in our adult life. Most parents today unflinchingly expose their children to the power of spending, but keep other important aspects like earning and

24

Outlook Money May 2018 www.outlookmoney.com

saving for adulthood. This creates an unrealistic impression in the minds of young children, who believe that money is something that magically comes out of ATMs. Financially savvy parents tend to teach their children important aspects of money – including earning and saving from an early age – using innovative techniques. For instance, renowned financial advisor Gaurav Mashruwala

CATCH THEM YOUNG While it’s important to teach children about saving and spending money wisely, there are no fixed rules or methods. However, parents should follow a balanced and systematic approach, says Priya Nair

Amrit rAi (6) Money Lessons: Amrit gets rewarded

in cash or by way of treats for doing well in studies and for helping his mother with household chores. If he misbehaves or does not finish his food, money is taken away. He uses the money to buy toys and gifts for friends. there’s a fixed budget – if he likes an expensive toy, he has to wait till he saves more.

Photos: S Kumar

started inculcating financial awareness in his daughter Sanaa when she was very young. He helped her understand the power of saving and building a corpus through a transparent chocolate bank – each time Sanaa took chocolates out of the ‘bank’, she saw the stock deplete. Today, as a 16-yearold, she’s the family bookkeeper when they travel. She maintains an expense diary

How it Helps: the age is right to introduce the concept of saving using a piggy bank. setting a budget, encouraging him to stick to it, and saving up money if it’s falling short are all good lessons for him to learn. What Needs to be Done: the line between

normal behaviour (which need not be rewarded) and good behaviour (which will be rewarded) should be made clear.

www.outlookmoney.com May 2018 Outlook Money

25

Cover Story

How you handle cash, how you make payments when you go out for eating or shopping, how you decide what to buy and what to leave, the discussions between you and your spouse – all these will definitely impact the minds of children who will be listening.

MANIKARAN SINGAL

Founder and Chief Financial Planner, Good Moneying Financial Solutions

that helps her track her outflows and inflows (pocket money). Most of us had a piggy bank while growing up and the financial discipline (or the lack of it) that we displayed then shows up even in our adult life. It is for this reason that some people like to live on borrowed money while others are more prudent. Outlook Money spoke to some families to see what they are doing right and what they can do differently. Some parents feel that instead of giving money to children, setting an example by leading a disciplined and frugal life is the right way to teach them the value of money. Some parents reward children with cash or treats for good behaviour to teach them concepts like earning and saving. However, as the psychologist we spoke to says, there is no one right or wrong. These life lessons have to be taught. What route parents choose to follow would depend on their comfort and individual preferences.

The Carrot-and-Stick Approach

Parents’ attitudes towards money inevitably have a deep influence on their children. But there are questions galore – would a tightfisted parent end up raising a mean child? Will someone who spends money lavishly raise a spendthrift child? Most people tend to leave important money lessons for much later, but specialists believe that need not be the case.

26

Outlook Money May 2018 www.outlookmoney.com

If parents keep relating everything to money, that message will travel to the child, points out Dr Niranjana Gokarn, a family and child welfare counsellor and retired professor from Tata Institute of Social Sciences. “The child sees what is happening and then does, rather than being told what to do. Some kind of discipline, for wanting things, must develop from a very young age. And that can develop only if parents live like that,” she says. Most financial institutions claim that millennials and young adults only believe in spending and are not at all interested in saving, largely because the focus today is on living the good life. We live in a world of instant gratification and people are not averse to enjoying life on borrowed money. It is for this reason that financial literacy should start very early on. Amrit Rai, a six-year-old boy in Mumbai, gets rewarded for his good behaviour and is currently saving to buy a remotecontrolled rocket. His piggy bank is a ‘special box’ where he collects money. He has over `2000 in it but wants to save more because he does not know how much his rocket will cost. Amrit’s ‘good behaviour’ includes helping his mother tidy up the house, completing his homework and doing lessons by himself, or at times just behaving himself in public. Money is deducted if Amrit misbehaves – for instance, if he doesn’t finish his food or refuses to obey his mother. It is to build a sense of independence in Amrit that his mother Anuradha Rai started rewarding him for good behaviour. And taking away money is to let him know that it’s the result of his bad behaviour. “I reward him when he does things on his own without our prompting. This encourages him to do things better than he normally does. He knows that only then will he get rewarded. I’m building up his expectations, but he should realise that this is how it will be when he grows up. He should do work exceptionally well in order to get rewarded,” says Rai. The family is saving for Amrit’s higher studies based on his current school fees. They also save for their annual vacations. Rai is also particular about saving for buying anything expensive, such as an iPhone. “We don’t pay any EMIs, other than on our home. I don’t allow my husband to use his credit card recklessly. I insist that he saves money to upgrade his iPhone,” she says.

Photos: aPoorva SalKade

Leading By Example

According to Manikaran Singal, founder and Chief Financial Planner at Good Moneying Financial Solutions, children learn by observation and imitation. So parents need to be careful how they behave with money. “How you handle cash, how you make payments when you go out for eating or shopping, how you decide what to buy and what to leave, the discussions between you and your spouse – all these will definitely impact the minds of children who will be listening. They will indirectly imbibe that in their own money behaviour,” he says. Teaching children about money can start early, even at ages as young as six or seven. Give them a money box or piggy bank and encourage them to start collecting small amounts over a period of time in order to buy something later, because this can also be a lesson in saving and investing. Later, when they are 12 years or older, parents could open independent bank accounts for them. Referring to Amrit’s special money box, Singal says, “It looks like a good arrangement. However, there’s a probability that the child

SwArAj rAvirAj (17) & ShrAvyAA rAvirAj (13) Money Lessons: swaraj and shravya get

money for eating out or going to movies with friends, so long as they tell their mother how and where they spend the money. they are encouraged to take the bus instead of a cab. they often prepare snacks at home and this saves money. While shopping shravya chooses her clothes, but sticks to the expense limit set by her mother. Next year swaraj will get his own bank account and AtM card when he moves to a hostel. Both children have been told briefly about the family’s business and other investments.

How it Helps: setting a budget and

keeping track of their spending will help the siblings manage their finances later in life. Informing them about the family business is also a good practice.

What Needs to be Done: Given the age

of the children, they need to be made more independent. While encouraging kids to spend sensibly, parents should also instil in them the importance of earning and saving.

www.outlookmoney.com May 2018 Outlook Money

27

Cover Story

Somin ShAh (14) Money Lessons: somin only gets money

for travelling to his tuition class and occasionally for buying snacks in the school canteen. His mother buys everything he needs, including gifts for his friends. He is allowed to purchase only one new video game a year.

How it Helps: Controlling his expenses and restricting video game purchases discourages him from wasting money on non-essentials. What Needs to be Done: Give the child more freedom to spend money in order to help build his financial independence. teach him about banks, deposits, withdrawals, transactions, interest, etc to impart practical knowledge.

28

Outlook Money May 2018 www.outlookmoney.com

Photos: rajineeSh

might start expecting a reward for every good deed he does. A lot of things for which he’s getting rewarded are part of standard expected behaviour in Indian society. So rewarding him with money for these might entail a small chance of developing the wrong mindset. Saving money for buying things later is a good way to teach. It can also be taken from his pocket money. He can use savings from his pocket money to buy toys or other small things that he wants.”

Teach the Art of Saving, Not Stinginess

Just like Amrit saves money in his special box, 14-year-old Abhishek Bhosale used to save money in his mother’s old purse till recently. While some parents are overgenerous with their children out of a sense of guilt, others go to the other extreme when it comes to saving and cutting back on treats. Abhishek’s mother shows him how much

he’s earned for his good behaviour and what’s deducted for bad behaviour or for doing badly in school. Recently his parents opened a bank account for him. Now the money gets deposited in his account and Abhishek regularly checks the balance in his passbook. The family is saving for his higher education through mutual funds, and also encourages him to invest any extra money in his account in mutual funds. “By opening his account we wanted to show him how the value of money can increase when it is invested, which doesn’t happen when it’s kept at home,” says his mother Kalaivani Atul. Parents typically give Abhishek `500 for good behaviour. He also gets money from his grandparents when he visits them during holidays. He spends the money on football shoes and other sports equipment. Since his parents will not let him splurge on expensive brands, he goes online to check for good deals and also visits several stores till he gets the best pair he can afford. “I save for two to three months and then buy. If I go to McDonald’s I don’t spend more than `500. I’m not allowed to spend more than `6000-7000 for a pair of shoes. Recently I saw a pair of Adidas shoes online. But I also found a similar pair in a local store that I got for a good price. Next I want an electronic skateboard and I’m saving for that,” he says. Similaly, he also helped his father get a good deal on the latest iPhone. For his birthday, his parents took him and his friends out to lunch. At that time Abhishek had insisted they eat at McDonald’s and not at the Chinese restaurant his mother had in mind, to save money. “He’s quite conscious about spending. I had to explain that since we invited his friends we should consider what everyone would like to eat. In fact, I’ve decided I will give him my money only after my death. I’m worried he may not take care of me,” says his mother. But she agrees that Abhishek is ready to donate to charities run by their housing society and willing to pay from his pocket. So, her fears of him being money-minded may not be entirely valid. Dr Gokarn says, “Valuing a thing because it is useful to you, therefore spending more money on it and less on another is a good thing. It is a good value to learn. But constantly looking for cheaper things is eventually a very tiring thing to live with as you grow up. Only if parents make children stingy will they grow up to be stingy.”

Ho w t o Tea ch Chi ld r e n Go od Mo n e y Hab it s

Parents should start by taking kids with them when they go shopping so that they can observe how transactions take place; how money is given in exchange for goods. When the children are slightly older, give them small amounts of money to buy something from the store and tell them to bring back the balance. this should start when children learn counting, say at six or seven years. older children over the age of 10 years should be introduced to concepts like value of money and gratification. For instance, if the child wants something expensive, suggest a cheaper option and explain why. or if the child has already bought one item, explain why another can be purchased only the following month. teach children to share by allowing them to buy snacks for their friends from the canteen. or encourage them to share toys and chocolates with their friends.

www.outlookmoney.com May 2018 Outlook Money

29

Cover Story Importance of Earning and Saving

AbhiShek bhoSAle (14) Photos: aPoorva SalKade

Money Lessons: Abhishek gets pocket money if he does well at school, and as gift from grandparents. Money is deducted if he does badly in studies. He has a bank account and saves money to buy football shoes (within a set budget). He also donates money to charities from his savings and looks for deals and offers online while buying shoes.

How it Helps: He’s learning to save, spend, and keep track of his money, while also learning to give back to society. What Needs to be Done: restrict using the

reward-punishment regime with money for things that are normal or standard behaviour as it might have a negative psychological impact.

30

Outlook Money May 2018 www.outlookmoney.com

Parents need to lay the foundation of a value system about money. Helping children learn the importance of earning money (through chores given to them), tracking money earned, and outgoing expenses (for their wish list items) is a good way to lay the foundation. Seventeen-year-old Swaraj Raviraj and his 13-year-old sister Shravyaa do not get regular pocket money. But they do get money for going out with friends to lunch or dinner or to the movies. They also get some money during Christmas to spend on gifts either for themselves or for friends. While they are allowed to go the restaurant or movie of their choice, they have to give their mother Mini Raviraj details of how much they spend and on what. Raviraj says, “I don’t stop them from spending money, but they must tell me where and how much they spend. I also encourage them to save money by taking the bus instead of hailing a cab. At times they have been late for school and I have refused to call for a cab, instead telling them to go by bus,” she says. As a result, if Swaraj takes the cab to school because he’s running late, he makes it a point to take the bus back home. Another saving tip the kids follow is to try out recipes of food they eat outside with friends. “Sometimes a restaurant we go to has good food, but is very expensive. So we try to make the same food at home. In fact I make lot of milkshakes at home,” says Swaraj. “Usually I get `600-700 if I’m going to a small restaurant and `1000 if it’s a high-end place. I try not to exceed this. Since I like going to Comic Con, I get `2000-3000 for that. And I bring back a gift for my mother.” Shravyaa loves shopping for clothes and accessories, but only goes with her mother. She selects clothes of her choice, but is careful not to exceed `1000-1500 at one go. There have been instances when she has left clothing items at the cash counter because she overshot her budget. Mini Raviraj’s biggest concern about giving money to her kids is that they may misuse it. “I don’t want them to be influenced by their peers and overspend. That’s why I haven’t given them an ATM

card yet. But next year when Swaraj shifts to hostel I shall open an account and put a limited amount in it for his use,” she says. Amit Kukreja, Founder, WealthBeing Advisors, feels that while Raviraj’s fears are valid, in this case neither party is inculcating the sense of saving and delaying gratification. Ideally, Raviraj should involve the children in household activities to build life skills and reward them financially for their contribution. However, he cautions, “They must watch out for one pattern; that not every activity or task given to the kids will earn money, otherwise kids will become too focused on money to do the tasks at home.”

Too Much Discipline Isn’t Healthy

A disciplined and frugal lifestyle is a good way to teach children the value of money, but it’s possible to overdo it. This kind of behaviour will not help build financial independence. Fourteen-year-old Somin Shah loves to play video games, but his mother Poonam Shah permits him to buy only one new game a year – that too, costing not more than `1000. He gets money only to go to his tuition classes or to eat in the school canteen occasionally. Other than that he gets no pocket money. The family restricts going to the movies and eating

Tips to teach money lessons: Set a goal

Tell your child to set a goal and work towards it. They can be rewarded for the actions they take in working towards the goal as well as when they finally achieve it.

Teach them banking operations

Take children to the bank and show them how to deposit cheques, withdraw money, how cheque books are balanced and so on. Show them how an ATM functions and how to do internet banking.

Teach them not to hoard

Before buying your child a new toy or clothes ask them to donate their old articles to a local orphanage, provided they are in usable condition

Our school curricula unfortunately do not cover any topics on personal finance – earning, saving, spending, investing, inflation, rate of interest etc. So the onus lies more on parents to teach them early based on their capacity to understand and follow the advice.

AMIT KUKREJA

Founder, WealthBeing Advisors

out to once a month. So far Somin has never gone to a bank by himself or operated his own bank account. But Shah plans to introduce him to banking soon and teach him how to use an ATM.

Teaching Children to Handle Money

To an extent it’s important to teach kids about handling money as it imparts a sense of independence. As children develop their reading, writing, and mathematical skills, money management tasks can be handed to them to track their expenses, say experts. “They need not be involved in the household financial planning until they are at least 16. Our school curricula unfortunately do not cover any topics on personal finance – earning, saving, spending, investing, inflation, rate of interest etc. So the onus lies more on parents to teach them early based on their capacity to understand and follow the advice,” says Kukreja. Dr Gokarn says, “What kind of pleasure you seek out of money will depend on how you have learned to use it; where you will use it more and where you will use it less – more on movies or clothes for someone who does not have it, and so on. Parents have to introduce these values gradually.” [email protected]

www.outlookmoney.com May 2018 Outlook Money

31

Cover Story

Paving The Way For Your Child’s Future

Education costs are rising rapidly and would be a substantial amount by the time your kid is 18 years. Planning early is key, says Anagh Pal Start early As with any other investment, time is a key factor. The longer you put off planning for college (maybe because of other reasons like investing in a house, or a car, or a foreign trip) the more difficult it becomes. “Today, one needs to start planning for the educational needs of the child just after the child is born. Only then will one be able to build a corpus sufficient to properly fund their education,” says Suresh Sadagopan, Founder, Ladder 7 Financial Advisories.

T

he first day of college will be one of the most memorable days of your child’s life. But as a parent you will obviously not want to worry about how to fund the expense. In a worst-case scenario, your child may not be able to take up a course of their choice owing to lack of funds. Education costs are rising rapidly and estimates indicate that at 10 per cent it is higher than general inflation. Under these conditions an engineering degree that costs `10 lakh today could cost you over `40 lakh 15 years from now, and a MBA course that costs `20 lakh today could cost over `80 lakh. And this would be just the course fees. For parents, their children’s future – especially planning their higher education – is a very important financial goal to which a lot of emotion is attached. “Many would put their retirement plans behind and focus on creating a sizeable corpus for their children. In our country, one’s future mostly rests on what

32

Invest in equities they study, which is why parents feel it is very important that they save for their child’s future,” says Amit Suri, Director and CEO, AUM Wealth Management. Rather than putting away money with no clear idea of the goal in mind, it is crucial that parents have a plan in place to meet their children’s educational expenses.

Knowing how much to save “A big challenge when planning for an education corpus is the difficulty of arriving at a fixed sum that one would need,” says Suri. Since every child is different, so is their desire to study and pursue education of their choice later in life. Given these unique individual needs, most parents will find it difficult to calculate how much they need to save. “My advice is to make a start, even if it is with small sums. You can then add to the investments over time as your child grows and there’s some clarity on the field that they may end up choosing,” Suri adds. This said, parents can calculate a ballpark figure and start investing diligently.

Outlook Money May 2018 www.outlookmoney.com

With a long investment horizon of over 10 years, investing mostly in equities is crucial as market volatilities balance out over a period of time. Investing only in debt products will not give the returns required to create a desired corpus. “Mutual funds offer a wide variety of funds to choose from – equity, debt, hybrid. One can invest mostly in equity funds if one is starting early on with investments for the education of the child. If the parents are risk-averse, they can tone down the equity exposure somewhat,” says Sadagopan. The good news is that education loans are available and parents should encourage their children to take loans to fund a part of their education. “This inculcates responsibility in the child and also takes away some pressure from the parent. Also, the child can take advantage of the interest amount of the education loan and deduct that and get a tax advantage when they start earning,” says Sadagopan. So plan ahead. Your child’s future is in your hands.

A Bank Account For Juniors Banks offer specially designed children’s savings accounts that give them a head start on the concept of saving and managing money. Anagh Pal takes a look at what’s on offer

Y

ou might have had a piggy bank when you were little, and so would your kid. As she grew up you would have asked her to save some of her pocket money and also put any cash she received as gifts into her piggy bank so she could buy something later. These simple exercises would hopefully have introduced your child to the concept of money and the importance of savings from a very early age.

Kids’ Own Bank Account When your child turns ten it’s the right time to open a bank account for her. Though savings accounts for children can be opened for anyone below 18, banks allow self-operated accounts for minors from the early age of ten.

A children’s bank account works like any other, but with some unique features. Children over the age of 10 are given a personalised debit card, which they can use to withdraw money at different ATMs. The debit card and cheque book are issued in the name of the child, which not only gives her a sense of financial responsibility but also teaches her the basics of banking. Parents can transfer the pocket money every month to their child’s bank account through standing

Minimum Monthly Average Balance

Withdrawal Limit

Savings Features

HDFC Kid's Advantage Fund

`5,000

` 2,500 a day at ATMs ,`10,000 a day at merhant establishments

Kotak Bank Junior Account

`5,000

Withdrawal limit of `5,000

ICICI Young Stars Savings Account

`2,500

Choose between `2,500/ ` 5,000

SBI Pehla Kadam

Nil

IDFC Bank Minior's Savings Account

Nil, but standing instruction of `2,000 per month mandatory

Option of automatically transferring money into a FD when balance reaches a certian amount Option of investing in a recurring deposit / systematic investment plan with little sums Money Multiplier faclity by linking savings account to fixed deposit Option for setting up standing instructions for recurring depoists Option of automatically transferring money into a FD when balance reaches a certian amount

`5,000 withdrawal and spending limit Cash withdrawal and daily purchase limits of ` 10,000

Any kid between 0-18 years of age is eligible for a kid’s bank account. But a child gets operating rights only after he or she turns 10. Source: Bank Websites

instructions. “Our experience has shown us that when children have their own bank account, it gives them first-hand exposure to money and instils the savings habit in them early in life,” says Ambuj Chandna, Senior Executive Vice President and Head – Retail Liabilities, Investment & Payment Products, Kotak Mahindra Bank.

Encouraging Kids to Save Even small amounts of money invested on a regular basis would encourage kids to save. “An early introduction to the benefits of savings and investment will help kids in managing their finances better,” says Chandna. Many banks have the option of converting excess funds into a fixed deposit once the balance in an account crosses a certain amount. Banks will also allow you to contribute a certain amount every month, starting from sums as small as `1,000, to recurring deposit accounts or for SIPs in mutual fund investments. “The child can watch her pocket money grow and allocate the savings towards achieving different goals. Setting goals teaches kids the value of money and encourages them to budget for things they want. This gives them a reason to save,” says S Sampathkumar, Senior Executive Vice President, HDFC Bank. What’s more, banks waive minimum balance requirements when savings or investments are made through such an account. It’s time your child learned the basics of financial planning. This will surely help her manage money better in the future

www.outlookmoney.com May 2018 Outlook Money

33

Cover Story

Mutual Funds: The Way To Go

Mutual fund companies offer specifically designed child plans to meet future financial requirements for your child. Outlook Money takes a look at what’s on offer

W

hen creating a corpus to fulfil the financial needs of education and marriage of your child, mutual funds are the best bet. “Mutual funds indeed emerge as an excellent choice for the fulfilment of your financial goals of education and marriage of kids as they enable you to save consistently through Systematic Investment Plans (SIPs) and come with a potential of higher returns as professional fund managers manage the funds,” says Sundeep Sikka, ED and CEO, Reliance Nippon Life Asset Management Limited. There are several child plans in the market which are specifically designed for investors who want to set aside money to meet the future needs of their children. Here is how

they work.

Investment mix These funds would invest in a mix of equity and fixed returns.. “The ICICI Prudential Child Care fund uses in-house asset allocation model to maintain an effective equity investment level, which would endeavour to be in the range of 65-100 per cent. The scheme looks to invest in a blend

Return (%) Scheme Name 3 Month 6 Month

1 Year

3 Year

5 Year

Axis Children’s Gift Regular Plan

-0.16

4.54

13.48

-

-

HDFC Children’s Gift Fund

-2.40

5.95

13.57

10.75

18.76

ICICI Prudential Child Care Plan - Gift Plan

-1.50

6.15

5.96

9.14

17.51

ICICI Prudential Child Care Plan - Study Plan

0.39

1.74

6.84

9.25

14.82

LIC MF Children’s Gift Fund

-7.02

-2.48

-2.06

4.00

10.43

SBI Magnum Children’s Benefit Plan

-0.32

6.70

16.72

14.63

15.98

Equity: Large Cap

-2.62

3.79

11.59

7.72

15.44

Equity: Mid Cap

-5.60

6.11

15.38

12.91

24.98

Equity: Multi Cap

-4.34

4.49

13.99

10.59

18.78

Equity: Small Cap

-6.90

10.45

21.45

18.61

31.27

Category

Source: Value Research, Returns as on 03rd April 2018

34

Outlook Money May 2018 www.outlookmoney.com

of large, mid and small-cap stocks while the debt component will be invested in debt securities and money market instruments.,” says Raghav Iyengar, EVP & Head - Retail & Institutional Business, ICICI Prudential AMC.

Lock-in period These funds also come with a lock-in period which ensures that the parents have a discipline in investing in the fund and the child has access to it for his or her needs when required. Says Chandresh Nigam, MD & CEO, Axis Mutual Fund , “The Axis Children’s Gift Fund has a lock-in such that the money that is set aside will only be available for redemption at the end of 3 years or when the minor crosses the age of 18 - whichever is later. This lock in period will further extend to 5 years to align with SEBI guidelines.” Further being an open ended fund, it is not necessary that the corpus that is accumulated in this fund be spent only at age 18 but rather there is a flexibility that it can be used as per the actual needs at any later date.

Should you invest These mutual fund schemes are no different in design than any other mutual fund scheme and generic openended mutual funds can be used for the same purpose too. “Somehow the mere mention to the word ‘child’ in a financial instrument drives people to stay disciplined with investments and also check their habit of redemptions on flimsy grounds. The performance of some of these funds has also been good to suit first-time investors,” says Amit Suri, director and CEO, AUM Wealth Management. Invest regularly to secure your child’s future.

Protect Your Child’s Future Child-specific plans offered by life insurance companies not only help build a corpus for children’s future needs, they also come with protection features that will cover parents

L

ife goals such as children’s education and marriage will be foremost on every parent’s mind. There are several investment avenues to choose from for this purpose. A child life insurance plan is one of them. “While such a plan ensures a constant growth in your investment over a chosen period, it also provides financial security through life insurance coverage for your children’s goals, even if you are not around,” says Kshitij Jain, MD and CEO, Exide Life Insurance. These plans also come with a ‘waiver of premium’ feature. “If a parent is setting aside some money for the future of the child and has opted for a child Unit Linked Insurance Plan (ULIP), product, which usually comes with a waiver of premium feature, the insurance company will continue to fund the future premium towards meeting the goal in case of death of the parent.” says Subhrajit Mukhopadhyay, Chief & Appointed Actuary, Edelweiss Tokio Life Insurance.

Traditional Plans and ULIPs Life insurance companies provide both traditional and ULIPs. The former come with guaranteed payouts, where you can either opt for a lump sum payout at maturity or periodic payouts based on a percentage of the sum assured. However, considering the low returns, such a plan may not be sufficient to build the required corpus for your child. In case of ULIPs, returns are market-linked. “ULIPs offer an opportunity to build wealth over the long term by benefiting from the growing

market potential. They also offer a choice of fund options ranging from equity to debt, keeping in mind different risk appetites,” says Jain. While some life insurance companies offer child-specific ULIP plans, many offer ULIP plans where the parent can opt for a specific ‘child’ benefit.

Plan Ahead To determine the premium to be paid to create an amount required to fulfil your child’s education goal, you should have an idea of the amount required (keeping inflation in mind), be aware after how many years the money is required, and know the expected rate of return. “By keeping the above-mentioned points in mind and doing a reverse calculation, one can determine the approximate amount required to be invested either monthly or annually,” says Jain. Websites of life insurance companies will have calculators to help you do this.

Opt or Not? Benefits of a child ULIP can be achieved by a term insurance and investing appropriately in mutual funds and other investment options. “However, if someone wants an all-in-one product that manages all these, a child ULIP can be considered,” says Suresh Sadagopan, founder, Ladder 7 Financial Advisories. “One of the advantages is that one need not be very financially savvy to navigate his investments. In case of unbundling, one has to ensure that the fund is managed exactly the way it should be and earmarked for each and every goal and one has to keep on adjusting and rebalancing. In case of a ULIP, one can opt for passive investment strategy” says Mukhopadhyay. As a parent, it is your duty to invest in and protect your child’s future. Proper planning will always stand you in good stead.

www.outlookmoney.com May 2018 Outlook Money

35

Cover Story GauRav MaShRuwala

Financial Planner and Author of Yogic Wealth

Gaurav Mashruwala with wife Pranati and daughter Sanaa Photo: soumik kar

Raising Money-Savvy Kids Ideally we should be telling our bank how much money we have, instead of the bank informing us of the account balance

W

ealth creation is a habit and, therefore, it needs to be inculcated in children from an early age. The faster it is ingrained, the easier it is to make it a way of life. We don’t have to wait for kids to become adults to teach them money lessons. The later you do it, the more difficult it will be to form good financial habits. My daughter Sanaa is 16 now and she tracks her expenses and saves money for future purchases from her pocket money. She also handles her own banking. She has started writing her bank passbook more recently but we ensured that she

36

went to the bank to get the family’s bank passbooks updated from the time she was 12 years of age. Most of us don’t know how much money we have in the bank. It is the bank that tells us how much money we have, in the form of statements and text messages. However, in reality it is us who should be telling the bank how much money we have. Keeping a parallel track on debits and credits is of crucial importance. Over a longer period of time, this will help in knowing the cashflows throughout the year. What this would do is to make us more aware of inflows

Outlook Money May 2018 www.outlookmoney.com

and outflows, such that in case of something going amiss, we would notice it. So, from a very early age, my daughter has been conscious of her priorities and focused on optimum utilisation of her resources, which is her pocket money. For example, there have been instances when she would go out for coffee with friends but skip the coffee just to save money. Last year we had planned a trip to England, and she walked in scorching April heat while returning from her tuitions just to save money. She saved `17,500 over eight months. She

had decided what she wanted to purchase while abroad and had started dreaming about it. The moment we start dreaming about something, we start getting inner happiness. The longer we do it the more prolonged will be the happiness. If we decide to travel to Switzerland after six months, we start planning for the trip by talking to friends and visiting websites. All this gives us a thrill. Even when we sacrifice immediate expenses, it doesn’t pinch us at all. This is because we have a future materialistic desire fulfilled. It is like giving a bribe to our own self. Therefore, without spending on a trip to Switzerland, we get excited, which is prolonged gratification. Any kind of saving or investing with a financial goal in mind gives prolonged gratification, unlike a random goal or savings. Sanaa’s money training started the day she was given money to spend in school. When she asked us for money that she could spend at the school canteen, she was asked to make a note of it. Now, whenever the family goes on vacation, she’s the official book keeper. Parents today are exposing children to the power of spending money but are failing in their responsibility towards giving a complete picture – which includes earning, saving, and investing. As an only child, Sanaa has been told that she can pursue a career of her choice. But she will have to learn book-keeping, accounts, and concepts of capital markets if she wants to inherit wealth. Alternatively, she has been told that the basic needs of food, clothing, and shelter would be taken care of and rest of the wealth would be returned back to society from where it has come. There are a few things we have been practising with our daughter from an early age. When she was

A transparent piggy bank can help your child see chocolates or coins piling up very young, we made her sow seeds in a pot and she was expected to water the plant regularly. Over a period of time she saw the seeds sprouting into plants. Firstly, this is a good habit in all aspects. From the perspective of money training it will help explain the concept of nurturing wealth. Other than this, we also gave her a chocolate bank when she was younger. It was akin to a piggy

TEN COMMANDMENTS Keep track of debits and credits in bank accounts Monitor cashflows regularly Let the piggy bank be transparent to help monitor accumulation of money Let children learn the pleasure of delayed gratification and prolonged gratification Help children set financial goals early like a special gift and let them save for it Teach children financial discipline through personal example Let children sacrifice smaller treats for a larger gift Children will imitate parents Important to teach children power of saving and not just spending Teach children to tend to plants everyday. It will teach them to take care of wealth too

bank. She learned to deposit the chocolates in the bank, from which she could eat chocolates twice a week. Each time a chocolate was deposited in the bank she saw the pile build up – and reduce in number whenever she withdrew. This helped her learn the importance of inflows and outflows. We also gave her two piggy banks. In one bank she deposited currency notes that she received from elders on auspicious occasions. This piggy bank was shaped like a bus. The logic was that the bus was going to the bank. Therefore, all currency notes in her piggy bank would eventually go to her bank account. Another piggy bank was a transparent glass jar. She deposited her coins in it. Next to the jar there was a picture of an object – usually a toy that she wanted to purchase out of her savings. This was to help her set financial goals. Since the piggy bank was transparent, she could see the pile of coins increase when she deposited money, and see it reduce when she took money out of it. She was born on December 18th. Therefore, every month on the 18th she got to purchase a gift of her choice. There was no other buying throughout the month. This brought in discipline. In case she wanted a larger gift, she had to miss her regular gifts for a couple of months. This taught her the concept of delayed gratification. All kids wish to imitate their parents, so it is of crucial importance how adults behave. She has over the years observed me and my wife write our daily expenses, and she does the same. We must practise what we preach, or else conflicting messages are sent out. If you’re not financially disciplined, don’t expect your children to be money-savvy. Therefore if you do not write the family budget or stay disciplined with savings, your child will not develop the habit.

www.outlookmoney.com May 2018 Outlook Money

37

Cover Story DEEpali SEn

Founder, Srujan Financial Advisers LLP Author of Why Greed is Great

Teaching Kids how to Spend and Save Effectively Kids must learn to strike a balance regarding money and reach an understanding between its use and conservation

F

or me, the following three quotes sum up the essence of making kids moneyconscious.

“Within the child lies the fate of our future.” –Maria Montessori “What we instil in our children will be the foundation upon which they build their future.” –Steve Maraboli “If a person gets his attitude towards money straight, it will help straighten out almost every other area in his life.” –Billy Graham Money is a powerful tool. It’s power in its most raw form — one that needs to be understood and, eventually, used effectively for self and society. The respect for money, its value in our lives, and the right attitude towards it has to be inculcated in kids sooner rather than later. While we may not want our kids to become bean counters, moneyminded, or overcautious, we would definitely want them to be aware of the cons of spending – or saving – too much. It’s vital that they learn to strike a balance regarding money and reach an understanding between its use and conservation, and this would call for appropriate nurturing. The good news is that kids are far more perceptive and intelligent than we may want to give them credit for. They witness the

38

acquisition and use of money from the day they are born. We work and get paid; spend the money for our needs (goods and services); invest for tomorrow (generate money from money); take loans; and help others financially as and when needed. Then, isn’t educating kids about money just a case of joining the dots? Decoding the dynamics of money, its sources, and its uses provide kids with a perspective on the cycle of karma early in life. It helps them understand that money is not an entitlement; it’s something one gets in lieu of giving something in return. Ideally, we should create our own informal curriculum for kids of various age groups. The objective should be to emphasise on the intuitive part when they are really young, and move to the mathematical, ethical, and practical parts as they grow older.

Kids under five How do we earn money? The fact that when we give something we get something in return. x Dignity of labour – While various jobs may pay differently, each has an equally important role to play and we need to respect people from all strata of society. Kids will imbibe all this better if narrated in the form of stories. x

Kids aged 6-10 Uses of money – What can it buy? Money can’t buy everything – Love, respect, and trust need

x x

Outlook Money May 2018 www.outlookmoney.com

to be earned. x Contingency funds – We need to keep money aside for a rainy day. x Budgeting pocket money – Money comes in like a tortoise and goes away like a hare.

Kids above 10 Role of banks. How money fuels growth and development. x Importance of loans and charity, and the difference between the two. x How inflation erodes our wealth and, therefore, time value of money. x Why savings are needed, and how they are different from investments. x The need to have money for today as well as tomorrow. x The importance of investing right; of striking the right balance between risk and returns. No pain, no gain. The RBI recently allowed 10-yearolds to open and operate bank accounts on their own. This has helped provide an institutional framework for the popular practice of pocket money. It’s equally important for kids to understand the spiritual aspects of money. Why do we have both wealth and poverty? Or the fact that wealth lies in ideas, and that we can attract it through our thoughts. We become in life what we see ourselves as. Havenots may never become haves if they stay preconditioned to their current reality, and keep lacking the belief, the gumption, the aspiration, and the execution skills needed to make it work. x x

[email protected]

Cover Story laTa DyaRaM, PhD Associate Professor, Department of Management Studies, IIT Chennai

Shaping the Right attitude Towards Money We can’t ignore the fact that we are a product of our parents’ approach towards money, in either embracing or rejecting it

A

ll of us would love to teach our kids the value of money and ways to save and invest, but how many of us hold money as a topic of conversation with our kids? As we all have to deal with money throughout our lives, parents must give their children a head start in money lessons. In the times we live in, where kids have more ways of spending money than saving it, it may be necessary for parents, schools, and banks to step into a more proactive role. Here, we shall highlight some perspectives keeping the role of parents as the focal point.

an emotional approach Most money matters are attitudinal and emotional than financial. If we start pondering on where our attitudes come from, we can learn to deal logically with money than emotionally. While some can’t cling on to money and trap themselves in deep debt, others compulsively wrestle over every rupee they need to spend. We can’t ignore the fact that we are a product of our parents’ approach towards money, in either embracing or rejecting it. Most parents knowingly or unknowingly pass on their functional or dysfunctional money habits to their children. Most hesitate to talk to their kids about money simply because they do not want their kids to worry about it. However, being realistic about the financial situation will only help

40

save them from discontentment in the long run. Children learn a great deal on how to handle money by watching their parents.

Starting early Regardless of a family’s economic situation, it’s important that children understand the value of money from an early age. While it is fine to incentivise children’s achievements (good grades, doing chores, etc.), pocket money must be offered with necessary guidance and their expenses must be monitored. It is also important to allow them to waste a little; as such mistakes will help them to learn budgeting. Treating money as a commodity will help combat indulgence. Make them aware that, just like food, money doesn’t have to be consumed all at once – they should use some and save some. It’s also crucial to understand money from a temporal angle to stay relevant in these modern times. While our parents might have hung on to every rupee, it’s important to realise that not all spending is irresponsible in these days of instant gratification. For example, at one end, gifting is a known expression of love and care

Children learn a great deal on how to handle money by watching parents

Outlook Money May 2018 www.outlookmoney.com

for family and friends. However, there are many who expend monetarily to express their love. Soon, this may make kids equate money with love. Conversely, there are cases where we do not spend money but choose to spend quality time in making some things from scratch for kids and forego opportunities to bond. These often send confusing messages to children. To the extent that it acts as an exchange for what we need today and tomorrow, money becomes valuable. Once this is learnt, it becomes easy to invest in/exchange what we truly need today and figure out ways to meet our future needs.

Exposure to reality Wealthy parents can expose their children to the have-nots and the harsh realities of life in some form or the other to nurture the value of giving, sharing, and a sense of responsibility. Involving kids in the process of giving will work well. They will not only learn the importance of giving, but also understand how to do some due diligence before giving money away. As children get older, gradually involving them more in financial decisions will prepare them for their lives ahead. This signals to them what can be achieved through a combination of investing, earning, and saving. No matter how much we are taught as kids, there is much about money and its handling that we have to understand on our own. [email protected]

Land Area: ’’”‘šǤͳǡʹͻʹƒ…”‡• ȋͷǤʹ‹ŽŽ‹‘•“Ǥ–”Ȍ

Pre-bid meeting: ͵ͲƘƌ’”‹ŽǡʹͲͳͺ

Design, plan & build Market and sell developed plots Land use : †—•–”‹ƒŽ‡•‹†‡–‹ƒŽ‘‡”…‹ƒŽ

Location: ‹•–”‹…–—Šǡƒ”›ƒƒǡ   ͵ͷˆ”‘ƒŒ‹˜Š‘™ǡ —”—‰”ƒ ͷͲˆ”‘ –‡”ƒ–‹‘ƒŽ‹”’‘”–ǡ‡ŽŠ‹

Regd. Office: C 13 & 14, Sector-6, Panchkula. www.hsiidcesewa.org.in e-mail: [email protected]

Website: www.hsiidc.org.in, CIN: U29199HR1967SGC034545

HARYANA STATE INDUSTRIAL AND INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED

‘”ˆ—”–Š‡”†‡–ƒ‹Ž• ǣMr. Vijay Singh GodaaraȁǣΪͻͳͺ͵ͻͺͻͲͲͲ͹ʹȁ‡Ǧƒ‹ŽǣŠ•‹‹†…—˜‰—”‰ƒ‘̷‰ƒ‹ŽǤ…‘

–‡”‡•–‡†’ƒ”–‹‡•ƒ›˜‹•‹––Š‡™‡„•‹–‡www.hsiidc.org.inǡ ƒ† www.hsiidcesewa.org.in ˆ‘”‡Ž‹‰‹„‹Ž‹–›…”‹–‡”‹ƒǡ’ƒ”–‹…‹’ƒ–‹‘ǡ’ƒ›‡–’”‘…‡†—”‡ƒ†‘–Š‡”–‡”•Ƭ…‘†‹–‹‘•‘ˆ ‡Ǧƒ—…–‹‘Ǥ

HSIIDC OFFERS APPROX. 1,292 ACRES (5.2 MILLION SQ.MTR) OF LAND IN NATIONAL CAPITAL REGION OF INDIA FOR INDUSTRIAL MODEL TOWNSHIP UNDER JOINT DEVELOPMENT MODEL (PPP MODE)

In National Capital Region, INDIA 1,292 acresȋ’’”‘šǤͷǤʹ‹ŽŽ‹‘•“Ǥ–”Ȍ

Industrial Model Township

GLOBAL SUCCESS

 

LANDMARK

 

*Reference image only

Stocks

Mid-cap Stocks To Watch Out For In 2018 Catch them young and watch them grow is an adage that best describes small and mid-cap stocks. Deepika Asthana puts some of them under the scanner

S

mall and midcaps remind one of Sri Lankan cricketer Marvan Atapattu. Now considered a stylish batsman, he had a really poor start. He scored only one run in his first six test innings. Nobody predicted during that tumultuous time that the same batsman would go on to score 16 test centuries and amass 5000+ runs in test cricket. Most mid-cap stocks have a similar journey. They tend to start out in anonymity and then grow to become giants.

42

Midcaps offer nonlinear wealth creation opportunities and are a good option for investors with a longer term investment horizon.

Nitin Bhasin

Head of Research, Ambit Capital

Outlook Money May 2018 www.outlookmoney.com

When investors begin their investment journey, they naturally gravitate towards large-cap stocks. These are stocks of wellestablished companies that provide our portfolios with the necessary stability. However, since these stocks are mostly on top of their game, they provide little or no opportunity for aggressive growth. This is where mid-cap stocks come in. These are stocks of upand-coming companies that are likely to experience aggressive growth – and thus provide a

greater return potential, although with relatively higher risk. Says Nitin Bhasin, Head of Research at Ambit Capital, “Midcaps, over longer periods in the past, have outperformed largecaps and created a lot of wealth for investors. They offer non-linear wealth creation opportunities and are hence a good investment option for investors with a longer-term investment horizon. These companies are creating new businesses, consumption brands, and service models, capitalising on developing India and providing investors with a wider spectrum of investment choices.” According to Janakiraman Rengaraju, Vice President and Portfolio Manager - Equities, Franklin Templeton Investments, there are some potent reasons for investors to consider midcap stocks. For starters, midcap companies offer better growth opportunities. Smaller size is a key reason for this advantage. In the current cycle, the relatively larger exposure to domestic demand has also helped growth. A drawback is that midcaps are characterised by a higher degree of volatility in their operating performance, which leads to commensurate volatility in their asset prices as well. Secondly, relative to largecaps, the mid-cap universe has a higher degree of variation in the quality of the business. This leads to a higher risk in stock selection. A long-term investment horizon helps you absorb this higher volatility and reap the potentially higher

Midcaps are characterised by a higher degree of volatility in their operating performance, which leads to commensurate volatility in their asset prices as well.

Janakiraman Rengaraju Vice President and Portfolio Manager-Equities, Franklin Templeton Inevstments

return. A disciplined and consistent investment philosophy helps in better exploiting this combination of better growth, higher volatility and a more heterogeneous mix. Investors in a mid-cap fund should be well aware of this interplay between returns, volatility, and required timeframes. “Our advice would be to invest in line with one’s financial

Stock Selection Methodology

ROE >20 % ROA >12.5 % EPS CAGR >20 %* *An exception has been made for IGL as the company enjoys a monopoly in its key market.

goals and risk appetite. Investing through the systematic route and diversifying across asset classes is the best way to deal with market volatility and benefit from it,” says Rengaraju. The market has been in a buoyant phase over the last few years. The Nifty Free Float Midcap 100 in CY17 outperformed large-cap Nifty 50 by about 19 per cent. In the current calendar year (2018) the market has been subdued, with the Nifty index down 5.06 per cent whereas the Nifty Free Float Midcap 100 is down by 12.58 per cent. Nonetheless, investors with a longer-term horizon and the requisite risk appetite can choose to invest in quality mid-cap stocks. This sentiment is echoed by Harshad Patwardhan, CIO Equities at Edelweiss Mutual Fund, “We believe that a high-quality mid-cap portfolio will continue to outperform a high quality large-cap portfolio over the medium- to longterm,” he says As macroeconomic parameters align and the various government initiatives fructify, opportunities are likely to emerge in various sectors of the economy. Quality mid-cap stocks are well positioned to capitalise on emerging opportunities. “Elements of over-valuation are definitely there amongst the midcaps. While some midcap companies are more expensive than largecap companies, there are select companies that have a sustainable or unique business proposition. In such cases, the relatively higher valuation may be justifiable as these companies are in a strong competitive position to allocate capital and grow profitably,” observes Bhasin. After applying some key filters, some interesting stocks have come up from a returns-and-valuation perspective. While selecting the stocks, returns on assets and returns on equity have been factored in, as has the compounded annual growth rate (CAGR) of earnings.

www.outlookmoney.com May 2018 Outlook Money

43

Stocks

Century Ply Century Plyboards Nifty Free Float Midcap 100

250

Indraprastha Gas Indraprastha Gas Nifty Free Float Midcap 100

191.96

200 150 100 50

146.41 1 Jan 2015

400 350 300 250 200 150 100 50

146.41 1 Jan 2015

C

Investment Argument Medium density fibre (MDF) penetration in India is very low. However, with growing preference for readymade furniture, MDF is now gaining acceptance. Import substitution coupled with the opportunity to replace low-end plywood (which has a similar price point) should lead to faster domestic growth. Century recently set up a plant in Punjab, and production commenced in 3QFY18. The company also plans to focus on setting up regional plants to mitigate high logistics costs. Investment Risks 1) Raw material accessibility and a sharp rise in raw material costs; 2) A continuing housing-led slowdown in demand.

I

ndraprastha Gas Ltd (IGL) is a leading natural gas distribution company in India. It primarily operates in the National Capital Region and as of December 2017 supplied piped natural gas to over 9,00,000 homes, 2000 commercial establishments, and 1150 industrial outfits in the region.

Investment Argument IGL is well-positioned to gain from an ongoing drive against polluting fuels such as petcoke/furnace oil in and around Delhi. Also, its foray into new markets in Haryana is likely to boost volumes. Higher crude price may take the discount of PNG/CNG to competing fuels (diesel/petrol/LPG) even higher. A widening discount will not only encourage users to shift and boost volumes but will also give the company pricing power and a cushion on margins. Investment Risks Change in government stance on taxes on competing fuels or interference to control CNG/PNG prices could prove to be a downer.

Jubilant FoodWorks

J

FL is one of the largest QSR companies in India and is also one of the fastest growing multinational fast-food chains. The company commands 72 per cent market share in the organised Indian pizza market (as per Euromonitor). The master franchise agreement with Dominos is valid till 2024 and is renewable for another ten years. The company also has exclusive rights for developing and operating Dunkin’ Donuts restaurants in India. Investment Argument In Q3FY18, Jubilant Foods trumped expectations to achieve same-store-sales growth (SSG) of 17.8 per cent year-on-year. This gave a fillip to margins, which rose to a multi-quarter high. The sharp increase in SSG also allowed the power of operating leverage to play out. EBITDA more than doubled while net earnings

Outlook Money May 2018 www.outlookmoney.com

23 Mar 2018

23 Mar 2018

entury Plyboards (India) Ltd. sells and exports plywood and veneers. The company offers products under the brand name Century Ply and exports its range of products to over 20 countries.

44

313.12

Jubilant FoodWorks Nifty Free Float Midcap 100

200

166.83

150 100

146.41 50

1 Jan 2015

23 Mar 2018

more than tripled. Urban recovery and increasing incomes are likely to create a stronger food service opportunity. Investment Risks 1) Subdued urban consumer sentiment impacting SSG growth; 2) Increasing input costs due to inflation.

Astral Poly Technik Astral Poly Technik Nifty Free Float Midcap 100

223.18

Crompton Greaves Consumer Electrical Crompton Nifty Free Float Midcap 100

250 200

250

150

200

100 50

150

146.41 1 Jan 2015

50

T

Investment Argument The company has expanded its pipe manufacturing capacity around threefold over FY09-16, mainly to serve the increasing demand from the housing and agriculture sectors. It plans to increase its piping capacity to 1.7 lakh tonnes by FY19E and also double the capacity of its adhesive segment. With demand intact, these expansions should boost revenues for the firm. The launch of new products like silicon tape in the domestic market should result in a gradual improvement in profitability. The government’s focus on its social housing programme, together with increasing housing affordability, is expected to provide multi-year demand growth visibility for building material companies. Investment Risks 1) Slowing ramp-up in the adhesives business coupled with poor demand for new launches; 2) Increasing competitive intensity in the pipes segment; 3) Any sharp fall in crude prices leading to margin pressure; 4) Sustained slowdown in the housing market.

140.69

100

23 Mar 2018

he company is a leading manufacturer of CPVC plumbing systems for both residential and industrial applications, and also of ASTM solvent weld lead free PVC plumbing system. It is equipped with production facilities Gujarat and Tamil Nadu.

181.84

13 May 2016

23 Mar 2018

I

n October 2015, the electrical and lighting business of Crompton Greaves was demerged into Crompton Greaves Consumer Electricals. The company has four business segments – fans, lightings, pumps, and electrical appliances. It is a market leader in the fans and residential pumps segments, with over 25 per cent market share in each.

Investment Argument Higher share of premium offerings and new launches are likely to spur profitability. Crompton’s products are positioned in the premium segment, which coupled with a robust distribution network allows the company to maintain margins and profitability. It can leverage on its strong brand to improve its value market share in lighting and agri-pumps. The company has been able to rejuvenate its brands, address product gaps, and achieve significant operating efficiency. It is expected to generate large free cash flows over the next three years and become debt-free by FY20CL. Investment Risks 1) Waning demand growth environment and a slowdown in housing construction; 2) Increasing competitive intensity impacting negatively on margins. Deepika asthana, CFA - Strategic Consultant in Financial Markets

ReStart now

make sure you are on track with

www.outlookmoney.com May 2018 Outlook Money

45

Stocks

A Survival Kit for Market Volatility Dire predictions notwithstanding, there’s hope for the markets if one looks at long-term prospects – plus there’s a silver lining in the form of earnings growth, finds Suyash Desai A Word of Caution Says Rajesh Palviya, Head Technical & Derivatives Analyst at Axis Securities, “The Nifty will not go much higher and be around 10,500-10,600 points. If we take the retracement theory, 50 per cent retracement of the recent fall is coming around 10,560, which is likely to act as stiff hurdle.” Retracement is based on the idea that the markets will retrace a predictable portion of a move, after which they will continue to go in the original direction. Palviya adds that the derivative data is not looking encouraging and lot of

International events coupled with domestic developments have got investors worried

M

arkets have corrected over 10 per cent from their high over the past few weeks, and experts feel equities may remain volatile for some more time. While no big crash is imminent yet, international events such as a rise in oil prices, concern over emerging trade wars, and an expected hike from the US Federal Reserve System have got investors worried – especially when coupled with developments closer home, such as uncertainty over domestic elections, deteriorating macroeconomic data, and the scams plaguing the banking sector.

46

Rajesh Palaviya

Head - Technical & Derivatives Analyst at Axis Securities

“Nifty will not go much higher than 10,500-10,600 points. On the lower side, Nifty could form a bottom around 10,000, which is a psychological level.”

Outlook Money May 2018 www.outlookmoney.com

call writing is happening at 10,500 strike price, indicating that upside is capped. “On the lower side, Nifty forms a bottom around 10,000, which is a psychological level. The recent bounce in April does not look strong enough to take it past the abovementioned levels,” he says. Similarly, Aneesh Srivastava, CIO of IDBI Federal Life Insurance cautions investors to moderate their expectations compared to the previous year. “Since the markets have had a long bull run in the last year, it doesn’t mean they will give the same amount of returns this year. The smart investor should play it correctly by choosing the

Neelesh Surana

CIO - Equities, Mirae Asset AMC

“While the volatility might continue for small and midcap segments for some more time, we haven’t seen any change in the underlying fundamentals – in fact, there are early signs of macroindicators and earnings picking up.”

right amount in investments, remain patient, and moderate their expectations in the short run,” he says. Srivastava believes that the markets have a long cycle. So while stocks provide returns over the long run, during the short term they may underperform or provide low returns. “Since the year ahead is looking volatile, investors should not look to invest 100 per cent in equities,” he says adding that investors with smart investments have nothing to worry about.

valuations offer enough bottom-up stock-picking opportunities.” Surana recommends a mix of about 70:30 allocation between multi-caps and midcaps from the 3-5 year viewpoint. “While the volatility might continue for small and midcap segments for some more time, we haven’t seen any change in the underlying fundamentals – in fact, there are early signs of macro-indicators and earnings picking up,” he adds.

Invest for Longer Duration Though volatility in the markets have investors worried, EA Sundaram, Executive Director and CIO - Equities at DHFL Pramerica Asset Management believes that investing for the long term is the solution. “The two-month period is not a big period in the economic history of the country. The big picture is that capital market products are still much smaller as compared to bank fixed deposits in India, and this is where the potential is. Let us not worry about the shorter-term dips and instead focus on long-term trends, which have much brighter prospects for the future,” he says. He adds that since there has been a sharp rise – especially in midcap and small-cap shares in the last 2-3 months – the

Silver Lining In spite of uncertainty and volatility over these domestic and international factors, Neelesh Surana, CIO - Equities, Mirae Asset AMC believes that earnings growth could prove to be a silver lining. He says, “FY19 will kickstart the much delayed corporate earnings recovery, which was muted for the last three years. Earnings growth will help stabilise the ongoing volatility. After the recent correction in the markets and softening of bond yields, the

Aneesh Srivastava

CIO of IDBI Federal Life Insurance

“Since the markets have had a long bull run, it doesn’t mean they will give the same amount of returns this year.”

EA Sundaram

Executive Director and CIO Equities at DHFL Pramerica Asset Management

“The capital market products are still much smaller as compared to bank fixed deposits in India, and this is where the potential is. Let us not worry about the shorterterm dips and instead focus on long-term trends, which have much brighter prospects for the future.”

correction that takes place will affect the flow for a temporary period.

Research Before Investing According to Sundaram, the drop is a cause for concern because people have purchased stocks and mutual funds without proper research. “If proper research is done before investing, a fall in the market really doesn’t lead to panic. If an investor pays a little attention why they’re investing in the fund and as long as the purpose is fulfilled, volatility shouldn’t matter much.” While all four experts looked up to consumption with a longterm potential, caution was expressed regarding the IT and pharma sectors. “Metal can show potential in the short term, while corrective action is seen in the banking sector,” says Palviya. Apart from these, infrastructure and automobiles are some themes that got notable mentions. [email protected]

www.outlookmoney.com May 2018 Outlook Money

47

Interview Arun ThukrAl

MD & CEO of Axis Securities

Opportunities Ahead For Equity Investors With markets looking volatile at the start of new financial year, Arun Thukral, MD and CEO of Axis Securities advises investors to look at opportunities. In an interview with Suyash Desai, he suggests ways to tide over the volatility What’s in store for the markets in the new fiscal year? This could be a volatile year [for markets]. Global events such as excessive liquidity mop-up by the US, tariff wars, rise in oil prices and expected hike of interest rates by the US Federal Reserve will all have a say in deciding the market direction. On the domestic front, upcoming state elections will fuel volatility in markets. On the other hand, domestic earnings have reverted to the positive side. In the first quarter of FY18, earnings were minus four per cent, in the second quarter it was 10 per cent and in the third quarter it grew by 22 per cent year-on-year. So, earnings for the March quarter should be better. The monsoon forecast is normal. Thus, the markets will be volatile. It will consolidate but there will be a downward bias because of these events.

What should be investors’ approach to deal with the volatility? The market either gives you returns or it gives you opportunities. We got returns last year and we are getting opportunities

48

this year. Whenever there is volatility, we should look at it as an opportunity. Investors have a list of stocks that they were unable to buy when prices were high. But there is an opportunity now. The correction from the top in January 2018 to the bottom in March 2018 was around 10 per cent. One should go and buy the bluechips – that’s where investors make money. This can help them create a strong portfolio from a long-term point of view. If an investor is not able to understand and handle this volatility, the next

Markets will consolidate with a downward bias

Outlook Money May 2018 www.outlookmoney.com

best thing is to go for a systematic investment plan in Mutual Funds.

How are corporate earnings expected to be this year? There have been growth factors that reflected in good results in the last two-three quarters. Also, there are underperforming sectors. Banking and telecom sectors are under pressure and there may not be an upside for these. But automobiles, commodities, consumer goods, retail and engineering companies are giving good numbers in the last two or three quarters. So earnings momentum will continue in these sectors.

How will large caps fare over small and midcaps?

During volatility, people favour large caps. Large caps are defensive value picks because of the high degree of revenue and profit certainty. Besides, these are safer bets. Small and midcaps are volatile because they are growth stocks with relatively high operational risks, which leads to volatility in earnings. Thus, in this phase, investors will favour large caps but from a longterm view of 5-10 years, there are some quality midcaps to be picked up in the market.

Which sectors would you look at from a longterm point of view? If an investor is thinking of the long term, the entry point is important. People should use these corrections as an opportunity. Auto and ancillary companies, FMCG and consumer durable companies, infrastructure companies with execution capability and light balance sheets, housing and related themes, and niche NBFC and private banks with retail focus are some sectors with opportunities. If the global economy does well, even textile and chemical will perform.

®

Banking

Small Banks, Big Benefits Small banks offer interest rates higher than their larger pers, but depositors should also look at the flip side. Preeti Kulkarni and Suyash Desai tell you more

S

avers looking for higher returns on bank deposits can now look at small banks as an option. Bank fixed deposit rates have shrunk to 6-6.75 per cent, depending on the tenure, leaving a large section of Indian investors – particularly senior citizens – distressed. “They have the option of investing in mutual funds and earning dividends, which may make up for the loss of interest on bank deposits. But a majority of them still feel comfortable with banks,” says independent financial counsellor VN Kulkarni. While the interest rate cycle now seems to be turning around, with some banks such as SBI and Axis Bank hiking interest rates, depositors continue to look for more lucrative fixed return options.

50

When small is big From a risk-averse depositor’s point of view, small banks offer the best of both worlds: a fixed interest rate and the comfort of parking their money with a bank. Also, small banks now offer interest rates that are higher by 25-150 basis points (see table). “The customer today is seeking a personalised banking experience, and values this as much or even more than the monetary transaction he does. In fact, ‘take what you get’ is no longer true as customers are a lot more aware of their needs than before,” says R Baskar Babu, cofounder and CEO, Suryoday Small Finance Bank. “Most small finance banks were erstwhile microfinance institutions, and their connection with the customer is on a one-to-one basis

Outlook Money May 2018 www.outlookmoney.com

as most of the transactions happen at the customer’s place. Therefore, from a customer’s point of view, high interest rates coupled with doorstep banking are key differentiators,” Babu points out. He adds that there are other factors too behind the shift in preference: “In our experience as a bank, over the last one year we have observed that high interest rate isn’t the only reason why a customer banks with us. The convenience, doorstep service, simplicity, and transparency we offer are all big differentiators.” These banks also rely heavily on technology to service their customers.

Making the right choice Clearly, smaller banks offer a more remunerative alternative to investors

Small Wonders Bank

Interest Rates (%) Savings Account

Fixed Deposit 1 year

3 years 5 years

Suryoday Small Finance Bank

8.5

8.75

7.75

6.25

Equitas Bank

7.25

7.25

7

6

Yes Bank

7

7

7

5

RBL Bank

7.25

7.25

7.15

5.5

Kotak Mahindra Bank

6.8

6.5

6.25

5.5

Federal Bank

6.7

6.5

6.5

3.5

Bandhan Bank

7

7.1

6.4

4

IDFC Bank

7

7.2

7.2

4

Deposit rates are for amounts under `1 crore; Savings account interest rates are for balance under `1 lakh; Source: Banks’ websites

seeking a low-risk instrument that offers guaranteed returns. However, consumer rights activist Jehangir Gai has a word of caution: “Even though well-established banks can go bust, it is necessary to minimise the risk, especially keeping in mind that the insurance coverage is minimal. So, opt for well-established and timetested banks, even private sector banks with a sound management,” he says, pointing out that a higher interest rate also coincides with higher risk. Given that smaller banks are relatively newer entities, depositors are bound to be concerned over the safety of their money. “Small finance banks are definitely offering better rates. What’s a concern for a majority of people – senior citizens in particular – is whether it’s safe to keep deposits with such banks,” says Kulkarni. Nevertheless, he’s in favour of giving these banks a chance. “It will be wise to look at small finance banks. The rates of interest offered by them matches the rates depositors of bigger banks were getting two or three years ago. To start with they can deposit up to v

`1 lakh,” he advises. Deposits of up to `1 lakh are insured under Deposit Insurance and Credit Guarantee Corporation (DICGC) and thus the amount is completely safe. “Apprehension about what will happen if the bank collapses should not be there at this nascent stage as all small finance banks are just a year old, and depositors should understand that they are offering higher interest rates as a strategy to replace high-cost loans, which they have availed of from financial institutions for undertaking activities as microfinance institutions,” he explains. Of course, before switching banks to avail of a higher interest rate, one must evaluate the pros and cons. According to Kulkarni, it is worth making the move if the rate difference is more than, say, 100/200 basis points. Before taking the call, refer to market reports on the functioning of the bank. You could also study the bank’s balance sheets to understand the reserves and capital position vis-à-vis its non-performing assets (NPAs). [email protected]

Take The guesswork ouT of your finances Ge t i t a n a ly sed t o achie v e your dre a ms

Write in to us wit h your contac t de tail s at e dito r@outlo o k mo ney.c om

Myths About Filing Income

Tax Returns

KulDIp Kumar Partner, PricewaterhouseCoopers

D

o you see tax filing as a moral duty or merely as a compliance step? The recent data points and the mass communication from the authorities last year through SMS, email, and even advertisements seem to indicate that this is mostly taken as a compliance obligation. According to a recent Press Information Bureau release, the number of new IT return filers has increased to 99.49 lakh (as on 30 March 2018) during financial year (FY) 2017-18. Many of them could be wondering if they needed to file tax returns at all.In this article, the author offers some practical advice related to tax filing which may raise an eyebrow or two.

Do I really need to file an IT return? This is one of the first things people ask. Individuals whose taxes have been deducted at source and

52

who owe no tax to the authorities generally think that no filing is needed. But this is not true. In fact, there are circumstances where, even if you do not have any income, you’re still required to file a tax return. Under Section 139 of the Income Tax Act, 1961 (‘Act’), you are required to file a return if your total income exceeds the basic exemption limit of `2.5 lakh a year. For resident individuals who are over 60 (senior citizens) or over 80 (very senior citizens), the limit is `3 lakh and `5 lakh respectively. Generally, total income for this purpose includes your gross income earned/received after giving effect of all eligible deductions/exemptions. However, where you are having exempt longterm capital gains from listed shares or equity-oriented mutual funds under Section 10(38) of the Act, the same would need to be considered to determine your total income. If you ordinarily qualify to be a resident of India and hold any foreign asset, you’re required to file an income tax return with ‘nil’ income. A common oversight in such a category is the case of an employee who is working (or has worked) outside India and has an overseas bank account where a spouse is the joint signatory. Although the spouse may not be working or/and may not have any income to report, there is still an obligation for them to file a return of income wherein the overseas bank account should be disclosed. Another typical situation of filing obligation could arise if you are the

Outlook Money May 2018 www.outlookmoney.com

legal heir of a deceased person and the deceased had a taxable income exceeding the basic exemption limit whereas your own income is below the threshold. For example, let’s assume the individual passed away on 31 December 2017, and until that day, his total income was (say) `10 lakh accruing from interest on fixed deposits. If you are the legal heir, any income accruing for the period 1 January 2018 till 31 March 2018 (last quarter) will be taxed in your hands as your income. This may trigger a filing obligation where your income exceeds the basic exemption limit, after including the above interest income from the last quarter. Although you will have to separately file returns as legal heir for the income of the deceased up to 31 December 2017, you cannot include the last quarter interest income in the return of deceased to avoid your filing where your own income is below the basic exemption limit.

Why do I need to bother to file before the due date? If you have paid all the taxes and nothing is due, why do you still need to file a tax return before the due date? While the obvious answer could be “to avoid receiving constant reminders from the tax authorities”, there are good enough reasons why you need to file your tax return within the due date. This year, if you do not file the return for FY 2017-18 by the due date, you will end up paying late fees resulting in a financial loss! Section 234F of the Act was introduced last

year, which mandates the levy of fees of `5000 if the return is filed after the due date but before 31 December 2018, and `10,000 if filed afterwards (fee amount is restricted to `1000 if the total income does not exceed `5 lakh). These are mandatory payments if you miss the deadline. But after having missed the due date if you do not file the return by 31 March 2019, you will never be able to file the return thereafter as per the amended provisions. Until last year you used to get one more year to file your return but this relaxation is not available any longer. You will not be able to carry forward any loss (except loss from house property) if you do not file returns within the timeline. If you claim a refund in your belated return, you will lose interest on such refund for the period you delayed to file the return, starting from April 1 of the assessment year immediately succeeding the financial year of which the return is filed. In extreme cases, tax authorities can even invoke prosecution provisions under Section 276CC of the Act where there’s a default in filing the return, subject to conditions contained therein.

I missed claiming Hra/lTa exemption from my employer. Is there a remedy? So you’re a salaried employee and couldn’t declare details/supports of exemption you intended to avail of in relation to LTA, HRA etc. No worries, you can still claim these exemptions when you file your returns and can claim refund of excess taxes that the employer would have deducted ignoring these exemptions. You should carefully preserve the supporting documents as the tax authorities may want to verify the exemption claims later.

What if I have two selfoccupied properties – one where I stay and another where my parents live? If you have two houses – one in which you stay and another where your parents stay – only one house (of your choice) is allowed to be considered as self-occupied where annual value is considered to be nil. For the other house you will still need to pay tax on a notional basis, as it is deemed to be let out.

What if I have only one house that’s partly let out? If you have only one house that’s

partly let out and partly self-occupied, you’re obligated to pay tax on notional rent even for the period you stayed in your own house. It may sound crazy, but it’s the law. For example, if you’re a salaried employee and stayed in your own house until 31 December 2017, but were transferred to another city and accordingly let out your house from 1 January 2018 onward. Besides the actual rent received for the period 1 January 2018 to 31 March 2018, you will also be required to pay tax on notional rent for the period 1 April 2017 to 31 December 2017, while you stayed in your house. Does it make sense to NOT let out your house for a part of the year? Well, this does merit consideration until the law is changed.

What if there’s a mismatch between my TDS and Form 26aS? Before you file your tax return, it is important that you reconcile your taxes paid/TDS with what is reflected in Form 26AS. A mismatch is quite possible in certain situations – say, if you have fixed deposits and the bank deducted the tax but inadvertently the same does not reflect in your Form 26AS due to wrong quoting of PAN or otherwise. It can be a real challenge when such deposits are for a period of more than a year and you have opted for the ‘interest on maturity’ option. In such cases, you may forget to account for accrued interest since you did not receive any credit in your bank account. Therefore, it’s prudent to carefully track your financial transactions and keep a proper and accurate record. A little error in reconciling or recalling your financial transactions may trigger a notice from the authorities. Moreover, if your taxable income exceeds `50 lakh, you will need to provide the details of your assets and liabilities, so it pays to be organised. Disclaimer: The views expressed in the article are personal

www.outlookmoney.com May 2018 Outlook Money

53

Life Planning

P lanning

for the Ret emeMedical rgen cies

Hobb

ies

irem

Golden

ent

Ho expuesehold nses

Vaca

tions

Ins preumrance iums

Years

They say 60 is the new 40, and with good reason. As people live longer thanks to advances in medical care and technology, their cost of living rises proportionately. Anagh Pal takes a look at how some couples are managing their retirement finances, as they adapt to the changing reality of building a nest egg to see them through their golden years

C

eline Mary Dash, 66, and her husband Hubert Anthony Dash, 68, stay in Borivali, a tree-lined Mumbai suburb full of churches, bakeries, and parks. Hubert plays cricket every morning and is keenly involved in church activities, while Celine keeps herself busy cooking, writing, and praying. After working in Dubai for 26 years, the couple returned to Mumbai in 2007. One of their daughters stays with them, and the other is based in Argentina. The family’s regular expenses are met from the interest they earn from their savings invested in fixed deposits, and rent from a couple of properties they own. “We never specifically planned for life

54

Outlook Money May 2018 www.outlookmoney.com

after retirement as we’ve always been more focused on providing for our daughters. Now they’re both settled,” says Celine proudly. Virendra Kumar Jain, 67, and his wife Deepti, 61, are a Delhi-based couple who have benefited from the guidance of a financial consultant who advised them to plan for retirement by investing in mutual funds and shares. Jain also earns an income from his role as a mentor in his son’s business, and is also involved in several philanthropic activities through Rotary International. The Jains are proud grandparents to six grandchildren. “I’m having the best time of my life playing with my grandchildren,” he says with a smile.

Chandran Nair, 82, lives with his wife Lakshmi Nair, 71, in Mumbai. They had moved to Saudi Arabia in 1995 after his retirement, where he worked for five years as a quality control manager. The stint turned out to be a lucky break for the Nairs. “The money I earned in Saudi Arabia helped us in our retirement years,” says Nair. “I used to get the entire salary without any tax deductions. In India my superannuation and provident fund amounted to only `1 lakh, and it would have been very difficult to manage with that. Getting a job at 60 was a blessing.” He invested in bank FDs, company FDs, and mutual funds after taking advice from his son’s friend who is a financial planner. The income from these sources is enough to meet the couple’s expenses. While the basic principles of retirement remain the same, the realities of retirement planning have changed a lot compared to what it was in the past.

Lifestyle Inflation Inflation is a key factor in retirement planning. But Nanal says that in the last 10-15 years one has to deal with a new aspect to it – lifestyle inflation, which is more than normal inflation and has got to do with our changing lifestyles. Hina Shah, proprietor and

owner, LUHEM Comprehensive Financial Planner, agrees, “Among earlier generations, when a person turned 55 they would consider their professional lives and responsibilities to be over and switch to a more domesticated life of taking care of their children and grandchildren and helping with household chores.”

Core Principles The basics of retirement planning are simple. The idea is that at some point you will not be working anymore. “So you need to create cash flows that are not dependent on you,” says Niraj R Nanal, founder, NR Financial Consultants. “This could mean investing in equities to create wealth, or in real estate to earn rent.” However, this goal of creating a passive income gets complicated because of inflation. If you’re 15 years away from retirement and want `50,000 every month for expenses, you would require `1,37,952 to maintain the current level of expenses then. “So if you’re still investing in FDs and PPFs, your retirement is going to be in great danger. Make sure your retirement investments are efficient and able to beat inflation,” he cautions. Creating the right amount of corpus after taking inflation into consideration should therefore be the key component of a retirement plan. “Further, one needs to consider one’s lifestyle and medical requirements when planning for the same. Taking the right amount of medical insurance with critical riders at an early age can be a key component,” says Balvir Chawla, Director, Finnovators Solutions. A few decades ago, the realities of retirement were different. A lot has changed since then. So planning for retirement has become more crucial than ever before.

Virendra Kumar Jain (67) and Deepti Jain (61), New Delhi Source of Income: Jain draws a salary from a company where he is a mentor. Additionally, there are returns from investments in MFs, FDs, and PPF. How Did They Plan: Jain has been a regular investor. Apart from MFs, FDs, and PPF, he has also bought endowment policies and ULIPs, and invested in IPOs. Current Concern: Falling interest rates and insufficient incentives for senior citizens in the budget. CFP Says: The couple should calculate the amount of required household expenses till 85 years of age and quantify short, medium, and long-term goals. If the goal is 7-10 years they could think of diverting more funds from PPF and FD to equity MFs. They can also invest in balanced MFs and take a systematic withdrawal plan (SWP) for basic household expenses. Even after 10 per cent capital gains tax it’s a good idea. –Hina Shah, proprietor and owner, LUHEM Comprehensive Financial Planner Photo: Gireesh. GV

www.outlookmoney.com May 2018 Outlook Money

55

Life Planning Nuclear Families Earlier, most couples would save some money for retirement and trust their offspring to take care of a large part of their expenses, as retired couples mostly stayed with their children. “Gone are the days when children used to take care of their parents,” says Nanal. “Not that everyone from the new generation will refuse the responsibility, but even if they are ready to take care of them how many parents of today’s generation would want to be dependent on their children financially?” Celine is a case in point. “Life’s good,” she says. “We live within our means and do not spend on things we don’t need. We’re not dependent on our daughters; we have the ability and the capacity to manage on our own.” Photo: aPoorVa salkade

Retired couples now want to lead a good life, travel, spend on gadgets, and pursue their hobbies. Nair, a member of the Chembur Gymkhana Club, used to play badminton and table tennis and go swimming to keep himself fit. After a blackout his doctor advised him to stop strenuous activity. He now does yoga to keep fit, and is also the chairman of his housing society.

Reduced Employment Benefits and Falling Interest Rates Government or private employees can no longer depend on their employer or employment benefits to take care of their expenses after retirement. Defined benefits for all government employees who joined after 1 January 2004 have been stopped. Private employees have also been hit by a falling public provident fund rate – from 11 per cent in 2000-2001 to 7.9 per cent in 2017-18 – and also a diminishing employee provident fund rate.

Rising Medical Expenses

Chandran Nair (82) and Lakshmi Nair (71) Mumbai Source of Income: Interest earned from bank FDs and company FDs; also have some investments in MFs. How Did They Plan: Invested in bank FDs, company FDs, and MFs through a son’s friend who is a financial advisor. A five-year stint in Saudi Arabia (1995-2000) helped Nair a lot with his finances. Current Concern: They do not have the services of a CA for their tax purposes. CFP Says: A qualified chartered accountant would charge individuals a maximum fee of ₹1000-2000 per return. But the couple should make sure they take advice from a qualified CA in person and not from tax consultants (who are not CAs). –Niraj R. Nanal, founder, NR Financial Consultants

56

Outlook Money May 2018 www.outlookmoney.com

Advancements in medical science have led to longer life expectancies and prolonged retirement years. “A focus on healthcare will mean increased longevity, thereby increasing the size of the corpus needed,” says Chawla. “We have medical insurance because we know it can be a major expense,” says Nair. “We took a `3 lakh insurance cover as soon we returned from Saudi Arabia. The amount we were required to pay for our insurance premium got doubled about six months back but we had no option but to pay the higher premium.” Jain, on his part, has a medical cover of `10 lakh for him and his wife. His wife underwent a major surgery a few years ago, which demanded regular treatment. Most of it was covered thanks to insurance.

Photo: soumik kar

The realities mentioned above mean that one needs to approach retirement planning in a more aggressive manner. Here are some pointers: Working post-retirement: “Nowadays, retirement does not mean the end of your working years,” says Chawla. “You could work on a consultancy basis, or maybe spend time with an NGO, or take up a teaching assignment. One needs to plan this carefully as it would keep you busy and also provide some financial support.” Starting early: “Keeping in mind all the above factors, one should start planning for retired life as early as possible, starting from your first pay cheque,” says Shah. “Rising inflation is the biggest factor to be considered. Also, one can enjoy the biggest advantage of power of compounding by investing early.” Taking professional help: Managing one’s finances takes a lot of planning and effort. It is best to seek expert help. “Hire a qualified advisor who can help you plan according to your requirements and give you unbiased advice,” says Nanal. Jain has always consulted a financial consultant before investing in shares and mutual funds. Investing in equity: Falling interest rates mean that living on interest income is no longer viable. “Some part has to be in assets that can beat inflation. In the falling interest rate scenario, the only option is equity for the long term, either through mutual funds or direct equity with the proper guidance of a qualified financial advisor,” says Shah. Adds Chawla, “While planning for retirement, one should take calculated risks in investments. Even post-retirement, one should invest in products that can beat inflation.” Building a medical corpus: Medical emergencies can wreak havoc on your retirement finances. Illnesses like cancer or organ failure can prove to be very expensive to treat. So, in spite of high premiums, one needs to have substantial medical cover. “If the person can afford it, I suggest they also keep aside a medical corpus,” says Shah. “Based on your family history, you can find

Hubert Anthony Dash (68) and Celine Dash (66), Mumbai Source of Income: Interest from FDs, rent from two properties How Did They Plan: Celine had invested in a couple of properties before marriage. Both were based in Dubai and they invested surplus income in FDs. Did not plan for retirement as such but focused on the education of their two daughters. Current Concern: They do not have any medical insurance, but daughters will take care of the same. CFP Says: The daughters can get medical insurance for their parents but the premiums will be slightly heavy. However, if they are employed they could check if their employers can add the parents in their health plan – this will be more cost-effective and hassle-free than taking a standalone policy for the parents. Also the couple should keep aside a contingency fund for medical emergencies. –Balvir Chawla, Director, Finnovators Solutions out the probability of diseases that can strike you, and get to know the standard cost of treatment. Then, after adjusting for inflation, you can work out the exact size of the corpus that needs to be built.” The golden years of retirement are a time to sit back and enjoy life. Remember those feel-good TV ads showing an old couple sipping beverages on a sunny beach and playing with their grandchildren? Well, it could be you in that pleasant scenario if you plan now and plan well. [email protected]

www.outlookmoney.com May 2018 Outlook Money

57

Morningstar Mutual Fund Guide UTI Dynamic Bond Fund Fixed-Income Stats

Investment Strategy

P

ortfolio manager Amandeep Singh Chopra, has over 22 years of experience with UTI. He heads the fixed income desk at UTI and has been managing this fund since 2012. The investment approach is primarily driven based on a top down macro approach and duration views are based on the interest rate directional movements. Allocation towards G-Sec’s, Corporate bonds and SDL’s on the other hand are based on their relative spreads. The manager aims to invest in the most liquid corporate bonds and the most traded G-Sec papers with a view to minimize portfolio risks. The fund is run with a lot of focus on risk management measures. The fund’s average maturity can tend to fluctuate significantly based on the manager’s views of the interest rate

Calendar Year Returns

14.9

14.7 11.7 6.9

Return

Calculation Benchmark: None 10.0 8.0 6.0 4.2 4.0 3.1 2.0 1.7 0.5 0.0 YTD 2017 UTI Dynamic Bond Gr

directional movements. The fund can go down to about 2 years on the lower side, resembling a short term fund and up to about 20 years at the longer end of the curve. Issuer selection is based on fundamental analysis of the risk/ return profile. The credit team works closely with the in-house equity team to leverage research on aspects like the company’s strategy and its financial data (balance sheet strength, cash flow generation, and so on). The internal credit ratings process is based on the credit team’s evaluation of an issuer for its creditworthiness and ability to meet their debt obligations. Investors who are looking to take exposure to interest rate views and don’t mind some interim volatility can look to invest in this fund.

2016

12.9 7.6 5.0

5.5

2015 2014 India Fund Dynamic Bond

2013

High Ltd 4.0 8.0 AAA

Fixed Inc Style Box (Long) Average Eff Duration Average Eff Maturity Average Coupon Average Price Average Credit Quality

Fixed Income Style Box High Med Low Ltd

Mod

Ext

Top Holdings 6.79% Govt Stock 2027 National Bank For Agriculture And Rural Development 7.68% Govt Stock 2023 Reliance Utilities And Power Private Limited Rural Electrification Corporation Limited Idea Cellular Limited 8.33% Govt Stock 2026 Jorabat Shillong Expressway Limited 7.17% Govt Stock 2028 Jorabat Shillong Expressway Limited

Portfolio Weighting (%) 14.90 8.97 7.07 7.07 6.89 4.08 3.63 3.21 3.09 3.00

Fund Snapshot Morningstar Category

Trailing Returns Data Point: Return Calculation Benchmark: None YTD 1 Year 3 Years 5 Years 10 Years UTI Dynamic Bond Gr

1.72

4.49

8.30

9.44

—

India Fund Dynamic Bond

0.74

3.61

6.13

7.21

7.00

India Fund Dynamic Bond Fund Size (`) 14.3 billion Inception Date 16/6/2010 Annual Report Net Expense Ratio 1.74 Morningstar Rating Overall ***** Manager Name Amandeep Chopra Minimum Investment (`) 10,000 Morningstar Analyst Rating Bronze

Disclaimer @2017. All rights reserved. The Morningstar name and logo are registered marks of Morningstar, Inc. This Report is issued by Morningstar Investment Adviser India Private Limited (“Morningstar”), which is registered with SEBI (Registration number INA000001357) and provides investment advice and research. Please visit http://www.outlookindia.com/outlookmoney/invest/picking-the-right-mutual-funds-2542 and read important statutory disclosures, as mandated by SEBI, regarding the information, data, analyses and opinions given in this report.

58

Outlook Money May 2018 www.outlookmoney.com

Reliance Equity Opportunities Fund Manager Biography & Fund Strategy

S

hailesh Raj Bhan has over 20 years of experience in research and portfolio management. He joined Reliance AMC in 2003 and has been managed this fund for over 13 years. Bhan adopts a free-flowing and multi-pronged approach to stock selection, which gels well with his skillset. He scouts for issues that exhibit strong growth prospects and have healthy or rising ROEs. He invests in stocks from across market capitalization with allocation to large-caps hovering in the range of 40-60%. Bhan has a penchant for emerging/niche themes and sunshine sectors and invests roughly 20% in them as he believes they have significant upside potential. Another 10% is invested in value propositions to balance the portfolio’s growth bias with a value tilt. Taking big sector/thematic bets also forms an

integral part of the strategy. Bhan’s investment strategy is flexible in nature and encompasses multiple aspects. He plies a growth at a reasonable price approach to selecting stocks. He is conscious of valuations but does not mind paying more for a company if he believes it has sustainable advantages over its peers and good growth prospects. However, the strategy has some inherent risks. Investing in emerging/niche themes, which largely have untested business models and value propositions, is a risky affair. Bhan’s large sector/ thematic bets are also not without risks. We draw comfort from the fact that the process is robust with research at its core. This fund is suitable for investors who have the ability to take on slightly higher risk in order to generate greater returns over the long term.

Calendar Year Returns

Return

Calculation Benchmark: S&P BSE 100 India TR INR 60 50 40.9 37.6 40 30 20 10 0.0 -10

-8.3 -5.5

YTD 2017 Reliance Equity Opportunites Gr

-6.4

5.2

2016

59.7 38.9

0.5

4.6

0.4

2015 2014 S&P BSE 500 India TR INR

4.9

2013

Trailing Returns

Equity Sectors

Portfolio Date: 31/3/2018

Basic Materials Consumer Cyclical Financial Services Real Estate Consumer Defensive Healthcare Utilities Communication Services Energy Industrials Technology Total

Top Holdings State Bank of India Indian Hotels Co Ltd Divi's Laboratories Ltd HDFC Bank Ltd Infosys Ltd GE T&D India Ltd ICICI Bank Ltd Larsen & Toubro Ltd Axis Bank Ltd Bharat Forge Ltd

5.9 22.5 23.8 0.0 0.8 8.7 0.7 0.9 1.1 28.1 7.5 100.0 Portfolio Weighting (%) 6.02 5.09 5.08 4.74 4.50 4.26 4.08 3.98 3.37 2.78

Fund Snapshot

Data Point: Return Calculation Benchmark: S&P BSE Midcap INR YTD 1 Year 3 Years 5 Years 10 Years Reliance Equity Opportunities Gr

-8.30

12.35

5.92

16.85

15.16

S&P BSE 500 India TR INR

-5.54

13.21

9.97

16.41

10.19

Average

-5.48

10.36

7.53

15.18

9.55

Morningstar Category India Fund flexicap Fund Size (`) 96 billion Inception Date 28/3/2005 Annual Report Net Expense Ratio 2.27 Morningstar Rating Overall *** Manager Name Sailesh Raj Bhan Minimum Investment (`) 5,000 Morningstar Analyst Rating Silver Data Source: Morningstar India

www.outlookmoney.com May 2018 Outlook Money

59

Morningstar Mutual Fund Guide Aditya BSL Mid Cap Fund Manager Biography and Fund Strategy

J

ayesh Gandhi has been managing this fund since January 2015; however this is not his first stint at managing this fund. He also helmed the fund during the years 2005-2007. Gandhi is a reasonably tenured manager in the Small/Mid-Cap space and has over 15 years of experience in investment management. Gandhi plies a growth-oriented strategy that uses a combination of a top-down and bottom-up approach. While top-down views are used to scout for investment themes and take sector bets, a sentiment overlay is also incorporated to steer the portfolio across market conditions. Gandhi relies on relative valuation techniques to pick stocks that he perceives to be reasonably priced. He prefers companies that are cheaper than the sector and the broader market, but offer sustainable growth prospects.

However, the fund’s mandate allows the manager enough flexibility to play to his strengths. Although Gandhi is mindful of the benchmark, he can tend to take significant off-benchmark exposure as a part of the strategy. His portfolio reflects his long term views and he tends to stay invested over 18-36 months. Having said that, Gandhi can tend to trim or add positions based on valuations. Gandhi runs this fund as a highly diversified portfolio of around 50-70 holdings. Individual stocks don’t exceed 3% of assets and less-liquid stocks are capped at lower limits. Though he aims to remain fully invested, cash levels on the fund can tend to fluctuate based on the manager’s views. This fund is suitable for investors looking to build long term wealth by investing into mid caps.

Return

Calculation Benchmark: S&P BSE 100 India INR 120.0 100.0 80.0 60.0 44.8 49.9 40.0 20.0 5.7 9.3 -10.1 -10.3 00.0 -20.0 YTD 2017 2016 Aditya BSL Mid Cap Gr

72.6

10.4

56.9

8.7

-2.0 -4.0

2015 2014 S&P BSE Midcap TR INR

2013

Trailing Returns

TeamLease Services Ltd TI Financial Holdings Ltd Mahindra CIE Automotive Ltd L&T Finance Holdings Ltd Bharat Electronics Ltd Gujarat State Petronet Ltd Petronet LNG Ltd Yes Bank Ltd PNB Housing Finance Ltd MRF Ltd

14.0 19.9 21.1 0.0 2.5 8.5 6.3 0.0 5.1 14.0 8.5 100.0

Portfolio Weighting (%) 3.10 2.92 2.89 2.86 2.86 2.72 2.71 2.67 2.65 2.60

Fund Snapshot

Data Point: Return Calculation Benchmark: S&P BSE 100 India INR YTD 1 Year 3 Years 5 Years 10 Years Aditya BSL Mid Cap Gr

-10.14

10.34

12.95

23.16

14.38

S&P BSE Midcap TR INR

-10.29

14.31

16.04

22.70

11.08

-5.48

10.36

7.53

15.18

9.55

Average

% Basic Materials Consumer Cyclical Financial Services Real Estate Consumer Defensive Healthcare Utilities Communication Services Energy Industrials Technology Total

Top Holdings

Calendar Year Returns

Portfolio Date: 31/3/2018

Equity Sectors

Morningstar Category India Fund Small /Mid-Cap Fund Size (`) 22 billion Inception Date 10/3/2002 Annual Report Net Expense Ratio 2.47 Morningstar Rating Overall *** Manager Name Jayesh Gandhi Minimum Investment (`) 1,000 Morningstar Analyst Rating Bronze Data Source: Morningstar India

60

Outlook Money May 2018 www.outlookmoney.com

My Plan

Investing for a healthy and financially sound tomorrow The young CEO of a digital company has his goals spelt out as clearly as the algorithm. Peeush has a consultant life partner and two young boys with lots of dreams.

H

is financial plan is focused on quality education of his two sons, early financial independence and giving back to the society through philanthropy. The first step for a financial plan is clear definition of goals and the Mahajan family has clearly laid down these goals. They have made clear buckets and parked savings in mutual funds, FDs, Life insurance policies and have a higher weightage to real estate as well. The asset allocation is more tilted towards real estate and debt. The meticulous planner has also some short-term plans for vacations with family and spending time on leisure. The savings rate of 15 per cent is

Other Assets 1

Three Real Estate Assets

2

Liquid Assets

Value 6,00,00,000 25,00,000 6,25,00,000

Total

S No.

Investment vehivle

Existing Corpus Current SIP

1

FMP

40,00,000

0

2

FMP

35,00,000

0

3

Large Cap Fund

6,58,000

35,000

decent to begin with, but has to be increased gradually for the long term goals taking into account the inflation and need for early retirement. Apart from his healthy take home, the

Goal

Goal time

Goal value

Son 1 Education

2022

1 crore

4

Multicap Fund

40,000

40,000

Son 2 Education

2025

1 crore

5

Multicap Fund

70,000

35,000

Son 1 Marriage

2030

60 lakh

6

Multicap Fund

7,35,600

40,000

Son 2 marriage

2033

60 lakh

7

Large Cap Fund

72,40,000

0

Reitrement

2030

8

Multicap fund

6,33,000

0

9

FDs

Total

1,00,00,000 2,68,76,600

1,50,000 * All values are in `

Disclaimer Financial Planning of Frank Immanueldino Sterling is based on the “personal opinion and experience” of Fincart, and that it should not be considered professional financial investment advice. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.

62

Outlook Money May 2018 www.outlookmoney.com

Bucket 1 Bucket 2 Bucket 3 Bucket 4 Bucket 5

Nature Of Goal

Goal

Year

Ayush's education

1 cr

2022

Current Sip

1.2 cr

2025

`40,000

50 lakh

2030

Bucket 6

keep it same

Add sip for `25,000 in (Multicap fund)

0 0

Multi cap

keep it same

0

Multi cap

keep it same

Multicap -35,000, midcap30,000. balance fund-35,000

Add sip for `1,00,000 in (Value strategy)

`35,000 60 lakh

2033

`40,000 `40,000

8 cr

2030

0

TOTAl

Estate plannig

`7,00,000 Muticap fund

`25,000

`35,000

TOTAl

Retirement plan

`75,00,000- fmp Large cap

Suggestion

`65,000

TOTAl Aarnav's Marriage

Scheme Name

`35,000

TOTAl Ayush's Marriage

Existing Investment 0

`35,000

TOTAl Aarnav's education

Add

1 cr FDs and 14 lakh in equity mf (large cap) + `1,00,000 liquidity from existing real estate

`10,00,000

Will

Immediate

family income is also boosted through consulting income of his better half, Anjali.

Streamlining the Financial Plan As a prudent investor, Peeush has made some lump sum investments in Mutual funds through FMP route, initiated SIPs in Equity funds and also has a life and a health cover for any contingencies. My role as a planner is to streamline the plan through1. Increasing the monthly SIP contribution from `1.50 lakh to `2.75 lakh. The portfolio needs to be complimented by adding some Balanced funds for medium term goals, diversified and mid cap funds for long term goals. 2. A contingency fund to be built

through annual bonus or any sudden lump sum gains. He has `25 lakh FDs maturing in june. An ultra-short term/ arbitrage fund can be considered. 3. Over exposure in real estate to be trimmed as the family has multiple residential properties with very low rental yield. 4. A nicely drafted will covering all tangible and financial assets to be made for succession planning and asset protection. 5. Proceeds from real estate liquidation to be parked for a retirement fund for meeting post retirement finances and philanthropy goals. A more Balanced asset allocation, increase in equity weightage through SIPs complimenting his direct equity exposure and stepping up the monthly contribution to SIPs

will carve out the path for financial independence. Periodic review of portfolio, fund performance and moving to safer buckets as he starts approaching the goals is equally important.

Way forward 1. We have assumed overall inflation at 6 per cent 2. Return from equity is assumed at 12 per cent and from hybrid at 10 per cent 3. Goal planning –Peeush has a good saving rate and is all geared up to meet his goals. We wish peeush and family a very healthy and prosperous life. KSHITIZ MAHAJAN Co-Founder of Complete Circle Consultants Private Ltd

www.outlookmoney.com May 2018 Outlook Money

63

Review Your Investments In The New Financial Year

ArviNd A rAo Founder of Arvind Rao & Associates

A

new year is considered a good time to make new resolutions, and a new financial year is an especially great time to look over one’s finances and start making some solid resolutions towards better financial security. With Budget 2018 presented in the month of February itself, this financial year has given investors additional time to incorporate the changes in the income tax regime into their new financial plans. This article focuses on the top three financial habits that investors in different age groups should prioritise.

Group A: Young Couples with No Kids A.1 Prioritise savings for own home: The real estate sector has not been going through the best of times, and a host of regulatory changes in the last 15-18 months has not made things any easier. Many experts in the sector believe

64

the housing market is slowly turning into a buyer’s market and, hence, couples with the goal to buy a house in the next 2-3 years may get lucky in terms of price and may even get an opportunity to prepone the big-ticket acquisition. Therefore, these couples should not only up the priority for their home but also increase the allocation for the same. A.2 No positive impact on disposable income: While the Budget announced a standard deduction of `40,000 for salaried individuals, the exemption of transport allowances (`19,200) and medical reimbursements (`15,000) totalling to `34,200 stands withdrawn. This implies no major change in the monthly posttax salary receivable in hand, and salaried individuals should refrain from considering a higher disposable income on account of this newly introduced standard deduction. A.3 Focus on retirement corpus: Equity markets have seen significant correction post the Budget announcement, and this gives the perfect opportunity for long-term

investors to start and/or increase their exposure to equities. Couples in this age group can look at equities for their retirement nest-egg and increase exposure to this sector.

Group B: Couples with Young Kids and Home Loans B.1 Align interest rates to market rates: Home loan interest rates offered by banks/institutions have been quite dynamic over the last 15-18 months, especially with rates being pegged to the bank’s MCLR rather than the base rate. Borrowers who have loan tenures of more than 4-5 years should look at opportunities to refinance their existing loans with the same lender or look for alternative options at cheaper rates. B.2 Focus on reducing loans on second homes: Budget 2017 had made leveraged second home buyouts unfavourable by extending the restriction on deduction for interest paid on home loans to `2 lakh per annum. Couples in this profile should plan for accelerating repay-

rule-of-thumb asset allocation that can be targeted for FY 2018-19 debt

risk assets (Equity/ Property)

Gold

Young couple with no kids

25

70

5

Couple with kids

30

60

10

50-60

40-30

10

80

20

–

Age group

Couples approaching retirement Senior citizens All figures in percentage

Outlook Money May 2018 www.outlookmoney.com

ment of this loan during this new financial year to cut down on the interest cost. This strategy assumes even higher importance if the loan is towards a property which is under construction. B.3 Close unnecessary accounts: Whether linking of Aadhaar to bank accounts becomes mandatory or not, couples in this profile should utilise this opportunity to review the list of bank accounts and close the ones which are no longer operative, such as former salary accounts, old address bank accounts, etc. It has been observed that non-maintenance of minimum monthly/quarterly balance attracts modestly high charges for account holders, which can be avoided if such accounts are closed.

Group C: Couples Approaching retirement C.1 Focus on tracking and trimming down investment portfolio: Couples in this profile should make sure they keep track of their various investment accounts on a periodic basis. For this purpose, they can plan on using a personal finance software in the new year. Regular tracking will enable you to trim down non-performing accounts and consolidate investments from time to time. C.2 Review health insurance coverage: The last financial year saw renewal health insurance premiums being increased anywhere between 10 and 35 per cent by the public sector general Insurers. With retirement not too far away for the couples in this profile, they have to review their medical coverage independent of the coverage they may be having with their companies. Beyond retirement, these individuals/couples may find it difficult to increase their coverage and shield away exclusions. A new financial year is the perfect time to relook at this very crucial risk and its coverage.

Things to do: refinance home loans, review health insurance coverage, increase equity exposure C.3 Review nominations: Couples should focus on this mundane activity at the start of the new financial year to check if the nominations across various investments done over the past as well as in the preceding year are not obsolete. Investment/bank accounts with joint holding should also have appropriate nominations, and if minors are appointed, a sanity check on their appointed guardians should be done. Reviewing nominations becomes the first stepping stone to getting one’s will made.

Group d: Senior retired Couples D.1 Increased tax benefits due to budget: Senior citizens have got dual tax benefits under the new Budget. Higher deduction up to `50,000 for medical premium paid and enhancement of deduction limits to `50,000 from `10,000 for

interest earned on banks and postoffice schemes. Senior citizens can accordingly brace for lower tax-cost in this financial year and may accordingly plan their allocation to taxable fixed-income investments. D.2 Review ease of management of portfolio: Senior citizens should ensure that their investment portfolio should be simple and easy to manage in the new financial year. Increasing the folio count of various investments under the guise of diversification is not going to help. Easy management also includes ease of review and decision-taking ability with regard to the portfolio. D.3 Diversify debt portfolio: Yields on government securities (and the resulting interest rates) have witnessed lot of volatility in the last 4-5 months and this is expected to continue in the near future. These events have had an impact on debt mutual funds in the short term. Senior citizens need to consider a bit more dynamic management of their debt portfolio, and risk-averse senior citizens can even look to move away from debt mutual funds and park their money in short-term bank deposits to keep volatility at bay in the new financial year. Disclaimer: The views expressed in the article are personal

www.outlookmoney.com May 2018 Outlook Money

65

Tax Returns ARChIT GupTA

Founder & CEO, ClearTax

All You Need to Know About New ITR Forms

Tax Authorities have introduced important changes in ITR Forms for the filing of returns this year. Here’s how it will impact tax payers

T

he Income Tax department has once again been very prompt in releasing Income Tax Returns (ITR) forms for Financial Year (FY) 2017-18. Here are some of the significant changes that have been introduced in the ITR forms this year for Assessment Year (AY) 2018-19:

ITR 1: Similar to AY 2017-18, a one-page simplified ITR Form 1 (Sahaj) has been notified for AY 2018-19, but with certain modifications. ITR 1 for AY 2018-19 can be filed only by a resident Indian with an income of up to `50 lakh (salary and other sources such as property or interest). Nonresidents cannot file this form for reporting income in FY 2017-18. Details of salary breakup have been called for, which is easily available in Form 16. Such information can be autopopulated by using platforms such as ClearTax. Earlier there was no requirement to furnish these details. Further, parts relating to house property have been rationalised and call for a little more detail pertaining to income from house property. The Finance Act 2017 introduced the mandatory levy of a fee under Section 234F for a delay in filing IT returns. To accommodate this,

66

an additional field for entering the fee has been added to the form. The Finance Act 2017 also introduced TDS on rent paid in excess of `50,000. Therefore, to claim credit for such TDS, a field has been introduced to disclose this in the return.

ITR 2: Since non-residents cannot file returns in ITR 1 for AY 2018-19, they will have to file ITR 2 or other forms as the case may be. This form, for AY 2018-19, would be applicable for individuals or HUFs for reporting their income other than income from ‘Profits and Gains from Business or Profession’. Therefore, this form does not have a Schedule for ‘business or profession’. Further, the field for interest held in the assets of a firm or association of person in Schedule AL (Assets and Liabilities) has been removed as well. Accordingly, partners of firms who could file ITR 2 earlier can no longer do so.

ITR 3: This form can be used by individuals and HUFs receiving income under the head ‘Profits and Gains from Business or Profession” in FY 2017-18. In the General Information tab, an option to select Section

Outlook Money May 2018 www.outlookmoney.com

115H (a non-resident Indian in any previous year becomes assessable as resident in India in respect of the total income of any subsequent year) has been added. The depreciation rate has been limited to 40 per cent in all depreciation-related schedules, follwing the notification by the CBDT restricting the rate of depreciation on plant and machinery.

ITR 4 (Sugam): This return is meant for presumptive tax payers i.e., those who can declare income as a specific percentage of their gross receipts or turnover and pay taxes accordingly. For presumptive taxpayers, furnishing of GST-related details is now mandatory, viz., GST Registration number, GST Turnover etc. In the tab for financial particulars the assessee has to declare the following additional information: a) Partner/Member Capital b) Secured Loan c) Unsecured Loan d) Advances e) Fixed Assets

Common to All Forms This year there’s no requirement to furnish details of cash deposits for a specific period as was provided for

Select the right ITR form to file Income Tax return Income Tax Form

Applicability for FY 2016-17

Applicability for FY 2017-18

ITR 1 (Sahaj)

Individuals having income from salary, one house property, other sources, and total income up to `50 lakh.

Resident individuals having income from salary, one house property, other sources, and total income up to `50 lakh.

Breakup of salary income Breakup of house property income New field for section 234F TDS details as per Form 26QC

Individuals and HUFs not carrying out business or profession under any proprietorship. (Earlier partners of firms could file ITR 2)

Individuals and HUFs not having income from profits and gains of business or profession. (Partners of firms cannot file ITR 2 anymore.)

Schedule BP is removed. The field for ‘interest held in the assets of a firm or association of person’ in Schedule AL has been removed.

Individuals and HUFs having income from a proprietary business or profession.

Individuals and HUFs having income from profits and gains of business or profession.

In the General Information tab, an option to select Section 115H has been added. The depreciation rate has been limited to 40 per cent in all depreciation-related Schedules.

ITR 2

ITR 3

This form is therefore exclusively meant for income from business or profession.

ITR 4 (Sugam)

For presumptive income from business and profession.

in ITR Form for AY 2017-18. These returns are due by 31 July 2018. Even though there’s time, make sure you file by the due date. Unlike in previous FYs, you will be levied a mandatory penalty of `5000 if you file by 31 December of the AY or `10,000 if you file it anytime after that. A specific field for this has been provided. The method of filing your tax returns remains the same. You must file electronically, with the only exceptions being the following taxpayers filing ITR 1 or ITR 4. (i) A taxpayer who is of age 80 and above at any time during the previous year; or (ii) A person or HUF whose annual income is not more than `5 lakh, and who has not claimed any refund in the return of income so far.

For presumptive income from business and profession (no change in applicability here.)

Other changes introduced for FY 2017-18

GST number and turnover details to be provided. Under ‘financial particulars’ the following additional information is to be provided: a) Partner/Member Capital b) Secured Loan c) Unsecured Loan d) Advances e) Fixed Assets

Summing up First and foremost, the applicability of the ITR for various taxpayers has been clarified. There’s no more room for confusion. Further, most of the changes in the ITR forms this time have been made more in line with (and to accommodate) the various amendments brought about in Finance Budget 2017. These include the introduction of a new field for Section 234F for mandatory payment of fees on late filing of returns, restriction of maximum depreciation to 40 per cent etc. A few more details have been sought from the salaried class in ITR 1, which should be readily available in their Form 16. Therefore, filling up ITR 1 should not pose a big challenge. In fact, tax-filing platforms will come to the rescue inasmuch as they would auto-populate most of the

details from Form 16 into the ITR. There would be a little challenge for non-residents who cannot file the simple ITR 1 anymore. They will have to necessarily report their income in ITR 2 or other forms as applicable. Presumptive taxpayers – who generally report a percentage of their turnover as income and get away without maintaining books – have an additional compliance in terms of reporting their GST number, turnover etc. This has probably been done with an objective to link the direct and indirect tax numbers. The revised forms no doubt call for additional reporting but the exercise of such revisions has been carried out in a bid to check tax evasion. In our view, the revision has not added to the complexity of filing returns.

www.outlookmoney.com May 2018 Outlook Money

67

Fintech Watch

A New Platform for Borrowers and Lenders Peer-to-peer newbie Finzy offers higher returns to lenders than other asset classes, while borrowers get loans within minutes, creating a win-win for both, says Suyash Desai

68

Outlook Money May 2018 www.outlookmoney.com

Photos: DeePak g Pawar

L

oans and investments constitute a major part of an individual’s financial activity. Loan requirements can vary from a desire for luxury to an emergency while investments are essential for returns and wealth creation. Borrowing from banks and non-banking finance companies (NBFCs) can often be a time-intensive process, but now individuals have alternative platforms that seek to bring lenders and borrowers together. One such platform is Finzy, a peer-to-peer (P2P) lending platform that seeks to make personal finance easy. “Finzy is a digital lending platform that connects qualified borrowers to investors looking to invest in a new asset class that provides monthly returns,” says Abhinandan Sangam, co-founder and CTO of Finzy. Formed in October 2016 under the parent company Bridge Fintech Solutions, this startup provides borrowers with hassle-free loans. “On Finzy you can apply for a loan in four or five minutes. It happens through a digital platform and, unlike banks, the process is not time-consuming,” he says. Apart from loans, Finzy provides investors with an optimised investment option that comes with a higher rate of return. “The rate of return for investing in Finzy is 15.5 per cent, which is much higher than any other asset class such as equity, mutual funds, bonds, gold, or fixed deposits,” Sangam points out. Till date, more than 2000 customers have engaged with Finzy, of which over 1500 were borrowers and the rest lenders.

From Left To Right: Vishwas Dixit, Co-Founder & CMO, Abhinandan Sangam, Co-Founder & CTO, Amit More, Founder & CEO, Apoorv Gawde, CIO & Head of Product

How It Works Finzy, through its digital platform connects the borrower with the investor (lender). Interest rates begin at 10.99 per cent and there’s no prepayment charge. “We at Finzy have developed a specialised proprietary credit algorithm that helps us rate borrowers in three categories: A (A1-A6), B (B1-B6), and C (C1-C6). The level of risk increases as we go from A to C,” explains Amit More, founder and CEO of Finzy. The average rate of interest for borrowing from Finzy is 15-16 per cent and the quantum of loan that can be taken using the platform ranges from `50,000 to `500,000. The lender’s investment is diversified across three groups to reduce risk, and the earnings through interest are credited back to the creditor’s account or re-invested as per their preference. The rate of returns starts from

10.99 per cent, if the investor wishes to give a loan to an A1 category (modest risk) borrower and it can go up to 27.99 per cent for a C6 category (risky) borrower. “Since investments are diversified across multiple borrowers, investors can get returns across this range, based on their risk appetite. We recommend that investors focus on a moderate portfolio to optimise risks, which will help them earn returns averaging 15.5 per cent to 16.5 per cent per annum,” adds More. An investor can invest up to `10 lakh. The minimum amount for a first-time investor is `50,000. Subsequently, tranches can be reduced to `10,000. “We believe in transparency. An investor can track his or her portfolio performance on their Finzy dashboard and also receive detailed portfolio performance emails to track their investments. We only make money when the investor

receives their EMI, by taking a very small fee of 1 per cent of their EMI after completion of the entire transaction,” says Vishwas Dixit, co-founder and CMO at Finzy. The convergence of borrowers and investors takes place via the Finzy mobile application. An investor has the option of choosing borrowers, either manually (Finzy Manual) or automatically (Finzy Pro).

Faster than Banks On being compared with banks and NBFCs, Dixit says that Finzy’s USP is quick service – the process of getting a loan should not take more than five minutes. “The loan application happens on our digital platform, which is a responsive website that can even be accessed on your phone. The borrower is asked to upload soft copies of KYC documents, bank statement, salary slip, Aadhaar,

www.outlookmoney.com May 2018 Outlook Money

69

Fintech Watch previous year’s Income Tax returns, PAN card, and a passportsize photo. Unlike banks, we do not accept any physical documents for loan application, thus, maintaining privacy, avoiding fraud, and improving turnaround times,” he says. There are no registration, prepayment, or foreclosure fees, and only a nominal processing fee that’s charged on loan disbursal. The screening process for selecting appropriate borrowers is unique and different from what banks and NBFCs follow, claims Apoorv Gawde, CIO and Head of Product at Finzy. “Finzy assigns credit ratings to loan applicants based on 130 parameters to ascertain their creditworthiness. This ensures that we do not gauge applicants on the basis of the company they work for or their credit score alone. The parameters assessed by our credit algorithm include capability, intent, track record, willingness, past payment history, database checks, social media activity, saving and investment patterns, and many more, before the loan is disbursed. This due diligence helps us to select the right kind of risk-free borrowers, which has thus far resulted in zero EMI defaults on the platform in 10 months of operations,” says Gawde. In case of investments, the value proposition that Finzy claims to give on returns is 15.5 per cent, higher than other asset classes. “Over last decade, returns on gold is 11.6 percent, government bonds, debt and equity mutual funds have yielded 7-10 percent, fixed deposit account around 6.5 percent, which are much lower than possible returns on Finzy,” says Sangam. Besides, in case of delayed EMIs, Finzy

Name: Uma Maheshwari, 36 Occupation: Assistant Manager, Vodafone Relationship with Finzy: Borrower

“On sharing my requirements, I got a loan of `5 lakh from Finzy in two working days. I used it for doing up the interiors of my flat.”

Graphics: Praveen Kumar .G

4.45%

Savings Account

Value Proposition: Returns

7.41% 7.46% Gold*

Fixed Deposit

8.43%

Governmnet Bond

 

8.92% Debt MF ^

10.41% 11.70% 15.38% Equity **

Equity MF ^^

Finzy ***

returns on all asset classes over a period of april 1,2008 to March 31, 2018 on Cagr basis * Interest income on gold had been assumed at 2.50% per annum ** Dividend yield on actual basis for the period has been considered at 1.32% per annum ^ Debt MF considered here is ICICI Prudential Liquid Plan - growth ^^ equity MF considered here is HDFC Top 200 - growth

70

Outlook Money May 2018 www.outlookmoney.com

Source: AMFI, NSE, banks’ websites, www.investing.com, tradingeconomics.com

Name: Nittish Veeraputhirasamy, 28

Name: Cecil Premi, 43

Occupation: Consultant, Thoughtworks

Occupation: Director - Strategic Alliance, Evineon Technologies

Relationship with Finzy: Borrower

“I wanted a loan of `50,000 for my honeymoon flight tickets. Finzy gave me a loan at 10.9 per cent interest with a flexible repayment rate, and the money was credited in my account in two working days.”

Relationship with Finzy: Lender/investor

Name: Amit Sethi, 41 Occupation: VP - Customer Service (Motor), ICICI Lombard General Insurance Co. Relationship with Finzy: Lender/investor

“I started with an initial investment of `50,000 in Finzy and now I have almost reached the upper ceiling for investing.”

“I got returns of 17-18 per cent in a one-year time period through Finzy in the form of regular monthly returns, and reinvesting it in mutual funds gave me 30-32 per cent due to the compounding effect.”

follows up with borrowers and tries to regularise the delay. Uma Maheshwari, an assistant manager at Vodafone, Bengaluru, had a personal and a car loan, and wanted an additional personal loan of `5 lakh. “The EMI for the car loan is paid by my husband. The banks, both private and public, were unwilling to understand this and denied me a loan. This is when my research led me to Finzy,” she says. On sharing her requirement with Finzy, she got her loan sanctioned in two working days, which she spent on redoing the interiors of her apartment. Nittish Veeraputhirasamy, a consultant at Thoughtworks, Bengaluru, wanted a modest loan of `50,000 for his honeymoon flight tickets. He was willing to pay back the next month. Banks and NBFCs were offering a loan at not less than 13-14 per cent interest – and with a prepayment penalty. “Finzy gave me a loan at 10.9 per cent with a flexible repayment rate. The money was credited in my account in two working days,” he says. In FY2017-18, the total loan amount disbursed by Finzy (which began operations in June 2017) was `5 crore, while the total applications for loans received in the same period stood at `25 crore. “We have been very selective and thus the disbursed amount is only

`5 crore. Due to this we don’t have NPAs through our platform,” says More. What about investor experience? Amit Sethi, VP Customer Service (Motor) at ICICI Lombard General Insurance Company, Gurgaon, has this to say: “Though I was comfortable investing in mutual funds, the high returns claimed by Finzy attracted me. My initial investment was `1 Lakh and the manner in which Finzy distributed the risks was reassuring. I got returns of 1718 per cent and reinvesting the returns in mutual funds gave me 30-32 per cent due to the compounding effect.” Likewise, Cecil Premi, Director - Strategic Alliance at Evineon Technologies, Bengaluru, recommends Finzy for high-end assured returns. “I started by investing `50,000 and now I have almost reached the upper ceiling,” he says. So far, Finzy has confined its borrowers to eight major cities of India – Mumbai, Delhi, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, and Ahmedabad. Investment option, however, is available across the country. “We have plans to expand to other cities and we target to disburse `35 crores for the financial year 2018-19,” says Dixit. [email protected]

www.outlookmoney.com May 2018 Outlook Money

71

THE PCJ OSM AWARDS GALA NIGHT

72

Outlook Money May 2018 www.outlookmoney.com

(Clockwise from top left) HI! Shilpa Shetty (standing) greets Athiya Shetty while Rajkummar Rao looks on. BOTH EYES OPEN Priya Prakash Varrier poses for a selfie. OUTSPOKEN Rana Ayyub receives her award from Harsh Mander. HASH BLUE Rina Dhaka presents Sanjay Thumma with his prize. HUMBLE Danish Sait gets his trophy from OSM project editor Vaibhav Vishal. MUTUAL ADMIRATION Vinod Dua presents Rajkummar Rao with his award.

www.outlookmoney.com May 2018 Outlook Money

73

Title Partner

Our Sponsors:

74

Outlook Money May 2018 www.outlookmoney.com

Red Carpet Partner

(Clockwise from top left) I SEE An attentive Rajkummar Rao watches events. ROCK, GOLD & SPLENDOUR (above) Models showcase the latest collection of PC Jewellers at the OSM awards. TETE-A-TETE Sunil Sethi, president, FDCI, (right) gets comfy for a chat with Sudhakar Pai, MD, Kurl-On. EARNEST A student from Sathyabhama Institute of Science and Technology speaks about social media. GADGETS & HUSTLE Rapper Divine gets his award from Rajiv and Ruchitra Makhni. PROXY Actor Ramesh Aravind receives the Supernova award on Kamalahaasan’s behalf from Indranil Roy. GLAMOUR OVERLOAD Malini Agarwal and Shahnaz Hussain present Santoshi Shetty with her award.

Knowledge Partner

Initiative By

Radio Partner

Hospitality Partner

Digital Partner

Celebration Partner

DISCERNING. BE RESPONSIBLE

www.outlookmoney.com May 2018 Outlook Money

75

Insurance

Suffering From A Chronic Illness? You Can Still Get Insurance! A pre-existing condition such as diabetes or hypertension could impact the purchase or renewal of a regular health insurance plan. But a specific health cover can bail you out, explains Priya Nair

M

inakshi Sharma, a 48-year-old housewife from Delhi, has been suffering from diabetes for the past decade. For most of that time her sugar levels and medications have only increased. But over the last few months Sharma’s sugar levels have shown an encouraging dip, and her doctor has reduced the dosage of her medicines. All this thanks to the monitoring app her health insurer gave her. When she was first diagnosed with diabetes, Sharma had been advised by her doctor to follow a certain diet and exercise plan. But try as she might, she was not able to stick to it. Then two years ago she purchased Apollo Munich Health

76

Insurance’s Energy Insurance Plan, a diabetes-specific health policy. As part of the insurance, she was initially given an app, which helped her monitor her food intake on a real-time basis. She used the app for few months. Also, Apollo Munich’s wellness portal, myapollomunich. com, enabled her to manage health goals with the help of a health coach. “Using the app, l used to log what I ate during the day and I got to know the nutritional value of each food. It also told me the quantity of various food items I should be consuming. For instance, 50 per cent of my diet should comprise vegetables, either cooked or raw such as salad, about 25 per cent should be carbohydrates, and so on,” she says.

Outlook Money May 2018 www.outlookmoney.com

The policy includes two free health checkups a year. Sharma gets reminders from the insurance company and her results are monitored too. This helps her contain the illness and manage it better. She’s also able to get a discount on the premiums as her blood sugar levels are better now. “I spend about `2000-3000 per month on my medicines and glucometer strips. If it weren’t for the app and the constant monitoring of my food intake and exercise, my sugar levels would not have been under control,” she says.

A Tough Call for Diabetics It is not easy for diabetics to get health insurance. In case of

hospitalisation, diabetics may be required to spend 10-15 per cent more time in hospital for their treatment than regular patients. Besides, chances of complications tend to be higher when diabetes is involved. These are some reasons why patients find it difficult to get insurance cover, says Dr Rajiv Kovil, Medical Director, Dr Kovil Diabetic Centre, and consultant with Nanavati and SL Raheja Hospitals in Mumbai.“Today, diabetics just do not get insurance. Even if they do, the coverage will start only three to four years after getting insured. So people try to mask their diabetic status while taking insurance. But this does not help the insurance company or the patient. When the patient gets admitted to hospital doctors write everything in the report. And that does not help the patient at the time of claims. It is high time insurance companies provide cover based on the risk factor and charge a higher premium based on that,” says Dr Kovil.

Policies for chronic illnesses are costlier

Sum Insured – `10 lakh, Age – 45 years Price-annualised premium inclusive of taxes

Apollo Munich’s Energy Variant

With 20% Co-pay

Without Co-pay

`20,521

`25,623

`26,074

`31,176

Silver Gold

Apollo Munich’s Optima Restore Individual `12,724 Source: Company

The Downside of Data Limitation

Star Diabetes Safe

By and large it’s true that relative to healthier individuals it is difficult for diabetics to get insurance cover, admits Antony Jacob, CEO, Apollo Munich Health Insurance. Other than the perception that diabetics are worse off in health than healthy individuals – and the associated complications that could arise in the long run – another reason is data limitation. “Companies want to offer insurance to diabetics because

Variant

` `25,565

Plan A (offline) Plan B (online plan)*

`34,834

* offers discounts on services which is not available in offline plan

Star Comprehensive Plan `13,895 Source: Company

they are a huge population. India is the diabetic capital of the world. But somehow longitudinal data is absent – that is, credible studies on

Pradeep Malhotra, 56 years

Minakshi Sharma, 48 years,

Plan-Apollo Energy Health Insurance -Gold

Plan-Apollo Energy Health Insurance –Silver

Policy issued-January 2014

Policy-February 2016

Sum assured `10 lakh

Sum assured `3 lakh

Annual Premium `47,506.65

Annual Premium `17,318 www.outlookmoney.com May 2018 Outlook Money

77

Insurance reasonably large populations over a period of 10, 15, or 20 years. So that is a big limitation. If that kind of data were available it would be possible to price the product more accurately, which is difficult in India. Pricing actuarial science operates a lot on data, so we have some limitation on data as well,” Jacob explains.

Paying a Higher Premium According to Dr S Prakash, COO, Star Health and Allied Insurance, insurance companies will not refuse insurance cover to a diabetic person solely for that reason. “Diabetics can get insurance but the insurance company may charge an extra premium if it is known that the individual is a diabetic on a longterm basis and under treatment. The amount of premium on account of diabetes will vary from company to company. Uncomplicated diabetes will not be refused insurance cover. But diabetics with target organ damage may be refused insurance cover,” he says. The higher premium for diabetics could be in the range of 10-20 per cent. In most cases the cover is available only for Type 2 diabetes, says Kapil Mehta , co-founder and CEO, SecureNow Insurance Broker. “If you look at the rejection rate of people who apply for health insurance, the biggest reasons are diabetes and hypertension. Unfortunately, most companies do not offer plans for those suffering from Type 1 diabetes. Such persons have no option but to take group insurance,” he says. Pooja Malhotra from Delhi is only too aware of this. A diabetic herself, she was refused a plan from Apollo. But her husband Pradeep Malhotra, who is 56 and suffering from high BP, is a customer of the Apollo Energy plan. “My husband has been taking medicines for BP for the last few years. The policy ensured that he continued with his diet and exercise routine. We get regular calls from

78

Features of Diabetes-specific Plans Apollo Munich’s Energy Health Insurance Plan Offers coverage only to those suffering from Type 2 diabetes Medical checkup is mandatory before purchasing the policy Two variants offered – Gold (cost of wellness test included) and Silver (cost of wellness test excluded), both available with/without the co-payment option of 20 per cent Offers a Stay Healthy programme, which includes online health assessment, customised diet and exercise plan, discounts on health products and services, alerts on doctor’s appointments and medicine intake Offers discounts based on whether the customer attends regular checkups, is controlling BP, BMI, sugar level, etc. Customers earn points based on these parameters. The points can be used for getting discounts on the renewal premium or for OPD expenses and at pharmacies Every customer is assigned a health coach, who is a certified diabetes educator. The health coach publishes a calendar with details of diet, exercise, etc to be followed

Star Health’s Diabetes Safe Insurance Covers both Type 1 and Type 2 diabetes, other than complications of diabetes Two versions available; version one requires a medical test where complications arising out of diabetes is covered from day one The other version involves a 15-month waiting period Includes coverage for artificial limbs due to amputation, donor transplant, and expenses for diagnostics and consultation Compensation for accidental death of the insured person Automatic restoration of entire sum insured

Outlook Money May 2018 www.outlookmoney.com

the company to remind us of his checkups. We also get discounts on the premium since his BP is under control. That’s the biggest attraction. The checkups are free and we have to pay only if we want a physical copy of the report,” she says.

Diabetes-specific Insurance Plans These are specialised insurance plans providing coverage for treatments or expenses for people who suffer from diabetes. These could be standalone plans specifically covering the disease, or part of a regular health insurance policy after paying extra premium. Varistha Mediclaim from National Insurance and Care Freedom from Religare Health Insurance are two such plans, but they cater only to senior citizens, says Mehta. However, ‘Diabetes Safe’ from Star Health Insurance and ‘Energy’ from Apollo Munich Health Insurance are two exclusive diabetes insurance plans that anyone in the eligible age bracket can buy. The advantages of these two plans are that any diabetic patient aged between 18 and 65 is eligible and there’s no waiting period. Coverage for diabetes and hypertension is offered from day one.

To Buy or Not To Buy If you already have a health insurance policy and have finished the waiting period for pre-existing diseases (which could go up to four years) you need not buy a diabetes-specific cover. Your existing policy will meet all your needs. But if you are suffering from diabetes and don’t have any health insurance cover, such a plan could be suitable for you. These plans are about 30 per cent more expensive than a regular health plan and often have restrictions such as the amount of waiting period for specific ailments. But at least the person will have a health insurance policy, says Mehta. [email protected]

SPEND

Book Hotels By The Hour

Hotel booking platforms are allowing customers to pay only for the number of hours a room is used. Anagh Pal explains how it works

I

magine you’ve just landed in a city and wish to freshen up before a meeting or a conference. Or, maybe, you’re in transit and wish to relax a bit before catching a connecting flight. Or, you have wrapped up a pilgrimage itinerary and have a few hours to kill before your train departs. Typically, in such situations, you’d be compelled to book into a hotel and pay a full day’s tariff, even though you wouldn’t be occupying the room for more than a few hours. The alternative — wander around the city or hang out at a mall — can be tiresome, if you’ve had a long day. Not anymore. A slew of online hotel booking platforms have now stepped in to give you your money’s (and your time’s) worth. These platforms tie up with hotels and let you book a room for as long as you

need — which could be as little as a couple of hours. “We want to bring about a culture among people to use the hourly check-in-check-out format, which makes their life easy and efficient,” says Mohamed Arif Nariampully, CEO & co-founder, Hora Rooms. “We are particularly targeting customers, such as, trainers, backpackers, marketing executives, couples, bikers, and so on,” he says, adding that, the format also works well with students who may be visiting a city to sit for an exam.

How it works Let us assume a hotel’s daily room rental is `3,000. When you book this for shorter time slots, you pay much less. So you might be charged `1,800, if you use the room for 12 hours,`1,000 for six hours, or `600

for three hours. Some platforms are flexible in other ways — for instance, if you want to book a hotel for a day, and then for three hours the next day, you may be required to pay `3,000 plus the tariff for three hours, and not `6,000, as you would have paid otherwise. This means considerable savings and increased flexibility while planning trips. Hotels find this an attractive proposition, too. Says Prateek Singh, founder and CEO, Brevistay: “Recent research shows that during the daytime, hotels have an occupancy rate of less than 50 per cent, and most check-ins happen during nights. A majority of check-outs also happens either in the evenings or early mornings. So we are trying to give hotels extra income by reselling their rooms multiple times in a day.” So a hotel that offers a room with a

www.outlookmoney.com May 2018 Outlook Money

79

SPEND who might not have booked into a hotel room otherwise, which hotels can tap into to increase their occupancy,” says Sandeep Jaiswal, co-founder, MiStay. A hotel that charges `5,000 a day cannot charge `2,000 a day because it needs to keep its brand value intact. But it can sell the room for `2,000 for a certain time slot, and earn an income from a commodity that would otherwise be lying idle.

Pay for what you use

Photo: gireesh gv

BreviSTAy Prateek Singh, CEO and Co-Founder, 24 Location: Delhi NCR, Mumbai, Kolkata, Chennai, Hyderabad, Mysore, Bengaluru, Lucknow, Jaipur, Hardwar and Neemrana Accommodation type: All kinds, though most belong to the budget segment Booking options: 3, 6 and 12 hours with the flexibility to decide check-in time Prices: The 3-hour slot starts from `399, and 25-35 per cent of the daily rate. The 6-hour rate is 45-55 per cent, and the 12-hour rate, 70-80 per cent daily tariff of `3,000 can split a day between two or more bookings to earn much more than `3,000. This works out to be a great deal for properties that do not have

high occupancy. “The average occupancy rate of hotels in India is less than 60 per cent. With this model, we are creating a new segment of customers

Each booking platform has its own unique offering. Through Brevistay, a traveller can book hotels for 3, 6 or 12 hours with the flexibility to decide their check-in time. MiStay has divided a day into three slots: morning (8 am–11 am), day (12 noon–7 pm) and night (8 pm–7 am). Travellers can book rooms for any slot, or a combination of slots. Hora Rooms, which currently operates out of 14 places in Kerala, offers hotel bookings based on a per-hour rate and not in terms of time slots. “We provide hourly booking facility from three to 12 hours as required by the customers,” says Nariampully. “For example, instead of slots or blocks of hours, if a customer requires three hours, four hours or five hours, he or she can avail of that service through us.” Another platform, Frotels (which incidentally gets its name from ‘Freshen-up Hotels’), is present in 150 cities and lets customers book a

FroTeLS Priyanka Kothmire, COO and Co-Founder, 31 Location: Across 50+ cities covering almost 800+ hotels Accommodation type: Homestays, lodge, star category Booking options: 2 hours to 10 hours, 24x7 Prices: `300 for 2 hours and `1,800 for 10 hours 80

Outlook Money May 2018 www.outlookmoney.com

MiStay Sandeep Jaiswal, Co-Founder, 26 Location: 35 cities, which include all metro cities and several Tier-2 cities Accommodation type: Budget, mid-level and luxury Booking options: Three slots: morning, day, night, and a combination of these slots Prices: Starts at `400 for some budget hotels and goes over `5,000 for luxury hotels room for anything from two hours to 10 hours, round the clock.

Cost savings The innovative practice translates directly into savings. “Brevistay

Photo: DeePak g Pawar

offers three slots. A three-hour slot could cost between 25-35 per cent of the 24-hour rate of that hotel. Similarly, a six-hour rate varies between 45-55 per cent and a 12-hour rate between 70-80 per

HorA rooMS Mohamed Arif Nariampully, CEO and Co-Founder, 44 Location: Currently covering 14 places in Kerala. Plan to expand in the south, followed by Mumbai Accommodation type: Budget, mid-level and luxury Booking options: Hourly booking facility from 3 to 12 hours Prices: Basic hourly booking starts from a range between `80 /hour and over `200 /hour

cent,” says Singh. At Frotels, the hotel owners have the flexibility to play around with the percentage of total tariffs they want to charge for a certain time. “As a reference point, hotels generally charge 30-40-45 per cent of a full-day tariff for two hours for two people, and every hour afterwards they might increase it by five per cent or so,” says Priyanka Kothmire, co-founder and CEO, Frotels. So a traveller could end up with savings of up to 70 per cent. What’s more, these platforms offer a wide choice of rooms across budget to midlevel to luxury hotels. For budget hotels, the amount you pay per hour could be as low as `300 for two hours.

Sheer convenience Whenever you need a room for less than a whole day, these platforms can come in handy. “People looking for short stays should stick with the timings they choose. However, they can ask us for extensions or late check-ins but that’s subject to availability,” says Singh. Just as you do while booking a room through an online portal, it is advisable to check hotel ratings and reviews before you ‘book by the hour’. Photo: akhil aPPukuttan

[email protected]

www.outlookmoney.com May 2018 Outlook Money

81

Smart Money

Treat Money Like A Guest

M

oney tends to evoke very strong feelings in most people because it’s perceived to be a means to happiness. But comedian and television personality Bharti Singh says she treats money like a guest in her life. In a heart-to-heart interview with Malini Bhupta, Singh explains: “Like guests come into our homes for a certain duration, the flow of money too changes with time. Just as we welcome guests, I welcome money too, but the quantum of money has never altered my life.” Many women marry money instead of people, she says, but the real wealth is not the amount we have in our banks but the people we have in our lives. She recalls the birth of her little niece (sister’s daughter) and how she brought immense joy into the family. “I think she’s Lakshmi as I got my first large cheque when she was born. Even though my sister’s in-laws didn’t stand by her, my niece is very precious to me.”

First Big Purchase: “After I finished Laughter Challenge, I did not get work for a few months. Then one day I got a call for a live show and I was paid `1.5 lakh for it. With the money I bought my mother a pair of earrings and bangles. She’d had to sell hers when I was younger due to a financial crisis. I still remember the look on her face that day because she was so overwhelmed.” But this doesn’t mean Singh doesn’t indulge at all – last year she gifted herself a Mercedes Benz GL. Next Big Purchase: After having bought her mother jewellery, she wants to gift her a farmhouse in Karjat or Lonavla. Money Mistake: Singh has a word of caution for shopping freaks. She ends up buying too many clothes when she goes shopping. She says: “I end up buying more than I use. I have scores of dresses which have tags on them still.” Money Mantra: A family friend advises Singh on all her investments. She invests mostly in real estate and gold, but claims that she and her family are adequately insured as a medical calamity can strike any time. A fan of spreading money across asset classes, Singh makes sure she invests in things other than purely physical assets. While she does park some money in mutual funds, she’s also invested in a mineral water factory in Amritsar and her brand – Kelby – is very popular all over Punjab. She says, “I wanted a source of income for my family, so I invested in the factory.”

RNI NO. DELENG/2002/08292