Need help?? Your guide on Gratuity

Success for the article on PF withdrawal has inspired me to write an article about Gratuity. And obviously this is really important to know as many companies provide this benefit under the umbrella of CTC, but the employee is not aware of, how to get benefit of gratuity.

This article is an attempt to provide insight about Gratuity to those individuals.

“Gratuity” is a reward for the long term service. It’s the benefit that employee gets for sustained loyalty towards the organization and employer.

Eligibility for an Employee:
An “Employee” who has rendered continuous service for more than five years is eligible for “Gratuity” benefit.

Benefit:
Gratuity rewards an employee in a big way. The amount of gratuity will be 15 days pay for every completed year of service. Yes it’s completed years which counts here. So if the person is leaving the company after 6 years and 7 months then he’ll get gratuity for 7 Years and the employee leaving company after 6 years ad 5 months would receive gratuity for 6 years. So keep this thing in mind and then put down your resignation at appropriate time.

The amount is calculated on the Basic Salary + DA , the employee is drawing at the time of exit.

Below is the simple calculation to gauge the amount that you should receive as gratuity.

How to find multibagger ideas in Stock Market?

The recent downfall in the stock market has created opportunity for the investors to start looking into Equity. Often people come up with the question on how to find the multibagger stock which would create wealth for them?

Today I’ll provide tips and tricks of finding hidden gems from the stock market.

Business you understand:

Ask yourself one question, if you would have got enough money, time, and skills to start on the business which business you would have picked to become next Narayan Murthy?

Identify all such businesses which you understands, which you would like to do or would have done, if given a chance. This is really important, because it’s about achieving your dreams.

Companies in your business:

Once you identify these businesses that you want to start with, identify companies having presence in the same sector/business. Make a list of such companies based on their size. i.e. largecaps, midcaps, smallcaps. Now start comparing these companies based on different parameters like,

- Management:

o       Check management skills by reviewing their interviews, their confidence in the company, how they started the company?, Ownership in the company. Do they love their business?

-    Last 3-5 years results :

o       Check past performance of all these companies. (EBITA , Profit)

-   Corporate Governance:

o       Try to figure out the strength of the company by checking obligations made against it. It at all that is true then how they are dealing with it?

-    Future growth, Scalability :

o       Make sure that the management is right on track with expansions and they have vision to take the company to the next level.

You can add your own parameters as well, which you would try to meet for your own business. Once you find answer for all these parameter you’ll get true hidden gems for your self.

Own a stock or business:

I know it’s not possible for everyone to start business not that they don’t have skills but there are constraints like, personal commitment, finance, family, good job, risk and many other things. But, Is it stopping you from executing your idea? I don’t think so. Now with this exercise you’ve ignited the energy to live your dream. Now you’ve found the same company/business which you would have established, if given the opportunity. More over, these companies have decent experience, growth prospects and management who are equally passionate about the business as you are. In other word, it’s basically you own part of the company, doing the same business and still not sacrificing on your current commitments.

Sounds like excellent deal? Yes it is.

It makes sense to mention here, “Warren Buffet owns stake in many companies/business. He is having CEO and MD of different company reporting to him. But guess what, He is still able to sleep in the afternoon? “Yes that’s correct.

Hope this would help all the readers in finding their own hidden gems !!

Please click here to become expert in riding investor behavior in stock market.

Happy Investing !!

Learn investor behavior - How to ride stock market sentiment?

As there's lot of pessimism prevailing in the stock market, I’m forced to right this article which will guide and help retail investors in selecting best investment course for themselves.

No matter how expert are you? But you tend to take emotional decisions to pick right investment for your self and today’s article would help in understanding investor behaviour in stock market.

Investor Behavior

As depicted in the above fig. , it’s the “Optimism” which drives every investment that you do. Be it stock market, reality, fixed deposit, ULIP, it’s your optimism which leads you to invest in any of the financial instruments.

Once your decision pays off and becomes reality then excitement, thrill and euphoria takes over and drives the investor sentiment. At that point of time investor shows overconfidence due to the success he has made using his investment decision, stock market is at it’s pick and making quick money for the investors. He starts believing every research report, news that he understand and starts taking larger investment exposure. This situation is largely driven by the Euphoria in the market and it’s the “Point of Maximum Financial Risk” for the individual.

Once the rally is over, soaring market calms down and tries to level off that is to balance out the premium at which market was trading due to euphoria VS actual valuation based on earnings. This leads to Anxiety, Denial and Fear in the Investors which was totally bullish and riding through market sentiments. At that point of time investor feels that “I’m a long tem Investor”.

As the market continues to fall, the same investor starts feeling desperation, panic, capitulation, despondency. This is time when investor feels that, “This is not for me.” He tries to sell his holding in the stock market even at enormous loss as he has suffered huge erosion of the wealth. Investors become depressed about the stock market and there’s lot of negative news floating around which keeps them away from the stock market. But dear investor, this is the “Point of Maximum Financial Opportunity.”

When I look at the current situation, there’ fear prevailing in the stock market due to U.S. downgrade, U.K. nations hanging bankruptcy issue, U.S. double dip recession worries, inflation in emerging markets and local political issues in India. It has turned into panic selling globally but despondency and depression is yet to come. Does this mean it’s not the right time to buy? Well, no one can time the market, as we’re in bottom cycle of the stock market, I would advice to start accumulating stocks/businesses in your portfolio from the longer term point of view with the knowledge that it could go down more.

Hope this article would help lot of investor and guide through this turbulent time. You can also check my article on "Risk VS Stock Market" to understand are we at risk by not investing in the stock market?

Happy Investing!!

Larsen & Toubro Finance Holding IPO - Should you subscribe?

L&T Finance Holdings - As the name suggest, it’s a financial holding company promoted by Larsen & Toubro Ltd.

Business:

It offers variety of financial products and services for the corporate, retail and infrastructure finance sectors, mutual fund and investment management.

L&T Finance Holdings is registered with the RBI as a Systemically Important Non-Deposit Taking Non-Banking Financial Company and has applied for registration as a Core Investment Company.

Operations:

- The Infrastructure Finance Group,

- The Retail Finance Group,

- The Corporate Finance Group and

- The Investment Management Group.       

Customer:

Company’s customer includes individual retail customers as well as large companies, banks, multinational companies and small- and medium-enterprises. LTF offers a spectrum of financial products and services for trade, industry and agriculture.The company's focus segments are corporate products, construction equipment, CVs and tractors.

Objects of the Issue:

1. Repayment of inter corporate deposit issued by Promoter to the Company;

2. To augment the capital base of L&T Finance and L&T Infra, to meet the capital adequacy requirements to support the future growth in their business;

3. To achieve the benefits of listing on the Stock Exchanges; and

4. General corporate purposes including meeting the expenses of the Issue.

Issue Detail:

  Issue Open: Jul 27, 2011 - Jul 29, 2011

  Issue Type: 100% Book Built Issue IPO

  Issue Size: Equity Shares of Rs. 10

  Issue Size: Rs. 1,245.00 Crore

  Face Value: Rs. 10 Per Equity Share

  Issue Price: Rs. 51 - Rs. 59 Per Equity Share

Grading:

CARE has assigned an IPO Grade 5 to L&T Finance IPO. This means as per CARE, company has 'Strong Fundamentals'. CARE assigns IPO grading on a scale of 5 to 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.

Subscribe:

I recommend “subscribe” for the IPO with following reasons.

- L&T group has strong brand value and history of creating wealth for the investors.

- L&T group is planning to restructure and come up with different IPO’s of it’s non listed companies and L&T Finance Holdings amongst the first to hit the market would attract investors.

- The company is going to raise Rs. 161 crore via anchor investors in the IPO, which should be one day before the IPO opens for subscription. There is going to be great demand from the Anchor investors for the IPO and would cascade into the IPO by institutional investors.

- “Strong Fundamental” IPO with grade of 5 have done really good in past. Like, Coal India, MOIL. L&T Finance Holding is likely to repeat the same.

Happy Investing!!