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IMPORTANT! Please read disclaimer..before proceeding

The author of this blog isn't a certified financial advisor or a certified financial planner. Please consult a qualified financial planner / certified financial advisor before taking any actual investment decisions. Views expressed on investments is purely authors own opinion / experience and shouldn't be construed as an investment advice. All information on this blog is just a point of view from authors perspective merely for educational and informational purpose only.

There is no guarantee / certainty of profits or windfall gains to be made on the basis of data or information on this blog. The author accepts no liability for any interpretation of articles or comments on this blog being used for actual investments.

Monday, August 31, 2009

FI - Simple Cash Flow

Simple cash flow example for a person earning net 40000 INR per month who is of 29 year of age and plans to retire at 55. I have created a simple cash flow where in the said person has a loan period of 2 years remaining and has  bank  balance of  200000 INR earning 7.5 % interest per annum.The sample below show initial couple of years and last 2 year projections.


Head Monthly
2009 2010 2011 2032 2033
Income Salary 40000
480000 480000 480000 480000 480000
Surplus from Preceding Year


120000 240000 6540000 6840000








HH Expenses 12000
144000 144000 144000 144000 144000
Loan 15000
180000 180000 0 0 0
Insurance 3000
36000 36000 36000 36000 36000








Surplus carried to next year 10000
120000 240000 540000 6840000 7140000
Current balance @7.5% p.a. 200000
215000 231125 248459 1134575 1219668
Special Expenses






Corpus






8359668

For sake of simplicity I haven't used any mumbo-jumbo that usual Financial Planner do i.e. to bring in financial jargon's like rate of inflation etc. (which will up the expenses considerably over period of time). This becomes valid assumption as I haven't considered hike in salary / income as well, which I believe usually more often than not beats rate of inflation. Thus have kept all the figure like like Income, Expenses and Surplus constant over next 26 years (thus surpassing rate of inflation etc.. in plan) . I  have also not factored in rate of return on additional savings annually in the calculation so that we get a conservative estimate of wealth created over next 26 years to retirement

So first step for you would be to calculate average income / expenses per month under major heads. Then fill iut the row for special expenses expected to be incurred in respective year as per financial goals we have set out as per my earlier post. This will give you the feel of how you stack up financially over period of time. Having got the hang of financial outlook over next few years then we can start the financial plan to suit our needs.


Now we have put in place our financial standing as on date, financial goals and Cash flow over next few year thus a financial plan structure is in place/ remember a good financial plan or any plan for that matter needs over hauling or fine tuning at regular intervals. I would suggest reviewing and updating financial plan once a year. For e.g. our expenses may increase when we get married or become parents or any significant mile stones may change our income or financial goals hence need to revisit plan every year.

In my next post will try to cover some important terms / concepts of investment like magic of compounding, rule of 72 etc. May be briefly touch upon ideal asset allocations etc. till then have a good time. 
By the way just in case you need my assistance please feel free to post your queries or comments or mail me. 

Cheers!

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XPRO India

Xpro India Limited is a diversified multi-divisional, multi-locational company with a strong commitment to the polymer processing industry. Established as a separate entity as recently as 1998, the units comprising Xpro India Limited have long been in existence. 
Xpro India Limited forms an integral part of India's largest and most reputed Industrial House with a global presence in manufacturing and trading activities - the BIRLA Group, a conglomerate comprising of many divisions, each consisting of a number of publicly-listed Companies and headed by a member of the Birla Family.
 

Current cash & bank balance is around 32 cr. on Equity of 11 cr. (face value: Rs. 10) that around Rs. 29 available at current market price of Rs. 24. Price t book Value of 0.25 thus screaming cheap valuation. The only negative for the stock is its low liquidity. I would recommend a buy as a potential multi bagger. In the mean while its dividend yield as on date is 4% plus thus a good stock to have in ones portfolio.



Some Ratio and valuation numbers as below:


MCap.(Rs. in Cr.) 
26


YTD Sales Growth
10 - 20 %
BV (Rs.) 
97.65


YTD Profit Growth
50%
P/E (x) TTM 
32


Liquidity
Low
Div. Yield (%) 
4.16


Share Capital  
11 Cr
EPS (Rs.)
0.75


Reserves and Surplus 
96.41 Cr
P/BV
0.25


CMP
24


In comparison to EPS for past year company has already done EPS of 0.91 in June quarter this year. This is a hidden gem and hasn't caught the market frenzy thus a good buy before it gets discovered.


NOTE: It is safe to assume I have vested interest in the stock and standard disclaimers apply

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Sunday, August 30, 2009

Electrosteel Castings Ltd.

Electrosteel Castings Limited (ECL) is a water infrastructure company providing techno-economic solutions for water supply and sewerage systems. The Company is India’s largest manufacturer, and one of the few manufacturers in the world, of ductile iron (“DI”) spun pipes. Lack of safe drinking water and proper sanitation is a major problem in India, and the demand for safe drinking water is increasing at a rapid pace. In order to transport sufficient quantities of water from different sources, i.e. rivers, lakes or wells, to a treatment plant with minimal loss and then transport the treated water to the end-user, a reliable pipe material is required that is strong, long-lasting, corrosion resistant and reduces the risk of contamination. DI pipes possess these qualities and are currently the single most widely used type of pipe for the transportation of water and sewage.. The company is headquartered at Kolkata and having their manufacturing facilities at Elavur in Tamilnadu, Khardah and Haldia in West Bengal.Electrosteel Castings Ltd was incorporated in the year 1955.


Website : http://www.electrosteel.com


Recently 2,54,50,414 equity shares were allotted on preferential basis to two foreign investors @ Rs.38/- per share. This company at current market price has dividend yield of 3% available at Price to book value of 0.94. Given the government thrust on rural spend and increased budget allocation on various schemes like NREGS.
Overall looking at key financial ratio this is a good value pick in midcap and theme on rural infrastructure. In the long run 2 years it would be a multibagger.



NOTE: It is safe to assume I have vested interest in the stock and standard disclaimers apply


Key Financial Ratios
Rs. in Cr.
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Share Capital 
28.73
28.05
20.76
20.76
16.19
Reserves & Surplus 
1,372.27
1,166.22
801.56
752.02
536.28
Face Value
1.00
1.00
10.00
10.00
10.00
Equity Dividend (%) 
136
125
125
125
125
Earning Per Share (Rs.) 
4.48
1.77
48.69
35.76
52.96
Book Value 
44.21
41.38
396.11
372.24
341.24



Q on Q Sales Growth (%) 
-26.53


Q on Q Net Profit Growth (%) 
27.64
3 Yr CAGR Sales (%) 
24.66


3 Yr CAGR Profit (%) 
24.6
Debt to Equity Ratio (x) 
0.75


Net Profit Margin (%) 
6.95
Promoter Shareholding (%) 
45.57


FII Shareholding (%) 
3.41
Return on Equity (%) 
9.83


EV to EBITDA (x) 
6.23



CMP
41.5


* P/E
7.09
* EPS (TTM)  
5.85


Industry P/E 
9.01
* Price/Book 
0.94


Div Yield(%) 
3.01

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ICSA India Ltd.

ICSA (India) Ltd is a unique combination off the EPC business in the space of T&D infrastructure creation and embedded solutions and services. The company is providing technology solutions to the Indian power sector and telecommunication sector with the objective to identify transmission and distribution losses and monitor power consumption. They also provide rural electrification, construction of sub stations and conversion of LT line to HT lines.The Company operates through two segments: Software Division and Power Division. They are headquartered in Hyderabad, India with their operating location across the world. The company shares are listed on the Bombay and National stock exchanges.

The governments renewed focus on providing electricity to all households in the country augurs well for ICSA India's growth prospects, but problems in cash generation make it bit dicey, ideal for those with risk appetite. Besides focus on Power as a growth sector is also a definitive plus for the stock. The company earns over 90% of its revenues from public sector entities.

Website: http://www.icsa-india.com

Financials:
ICSA has grown at break-neck speed in last few years. In the two years ended March 09, the company's revenue jumped four fold to Rs 1,111 crore. Net profit trebled during the period to Rs 168 crore. The company has maintained its operating margin between 25-27 % during this period. In recent quarters, while the top line growth has remained robust, its bottom line has been impacted due to rising interest expense. The interest charge is rising since the company has to borrow to meet its working capital requirement due to poor cash generation from operations.


CMP 195


MCap.(Rs. in Cr.) 926


BV (Rs.) 125.9
3 Yr CAGR Sales (%) 214.79
P/E (x) TTM 5.57
3 Yr CAGR Profit (%) 207.97
EPS (Rs.) TTM 35
Promoter Shareholding (%) 20.64
FV (Rs.) 2
FII 39.32
YTD Sales Growth 20 - 50 %
Liquidity High


Risks:
The company has to fund its operations through external financing since its operations are not generating enough cash. This is on account of very high level of receivables. This can prove to be a major concern for ICSA especially during tough economic situations when external funding comes at a higher cost.

Valuations and investment rationale:
At the current price level of around Rs 195, ICSAs stock is traded at a trailing twelve month price earnings (P/E) multiple of 5.57. Since there is no other listed player of ICSAs size that can match its business operations, it is difficult to build a comparative scenario. Many of the frequently traded small-cap technology companies are traded at a P/E of more than 9. The company has Rs 2,000 crore strong order book to be executed within next two years. Of this, the infrastructure services account for Rs 1,400 crore. With R-APDRP now in place, ICSA is likely to see buoyancy in its embedded solutions revenue. This is a good sign since the division earns better margins compared to the infrastructure business.

In view of its future prospects and the risk attached with it, investors with higher risk appetite can consider ICSA with a horizon of two years. ICSA is a potential multibagger in the long run

Source: Economic times, Moneycontrol and other sites

NOTE: It is safe to assume I have vested interest in the stock and standard disclaimers apply

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Financial Independence First Step

Before we embark upon any journey we need to plan.

We need to break up our journey into identifying various destinations where we need to be at different point of time during our travel. Time to reach those destination and how much money we would need for a particular milestone. Thus we need to break up our goal to reach Financial Independence in terms of Financial goals with duration when substantial finance is needed. For e.g. see below for a person aged 39:


High level financial Goal
Year Years to Goal Corpus Needed
1st Child's Higher Education 2017 8 5,00,000
2nd Child's Higher Education 2019 10 5,00,000
Retire at 55 2025 16 1,50,00,000
Graduation 1st Child 2022 13 5,00,000
Graduation 2nd Child 2024 15 5,00,000
Marriage 1st Child 2025 16 10,00,000
Marriage 2nd Child 2027 18 10,00,000

Once we have identified all our high level financial goals / significant expenses during various stage of our life and money needed then. Next vital step is to ascertain what is our current status with respect to financial health. In short how much we have now and how much we owe  to others ver a period of time. Hence next is to prepare our Asset and Liability status on date. See sample Assets & Liabilities
InstrumentsAmount
Real Estate (Self Occupied Property)45,00,000
Equity9,00,000
Gold - ETF*37,000
Index - ETF*17,000
Mutual Funds - Equity2,60,000
Mutual Fund - Debts3,00,000
Cash in Bank / FD3,00,000
Total Asset63,14,000
InstrumentsE.M.I.*Remaining Term yearsAmount
Housing Loan2,40,00010.024,00,000
Personal Loan60,0001.590,000
Car Loan12,00,0001.518,00,000
Total Liability42,90,000

Having identified our major financial milestones and current asset and liabilities. Next step is to determine cash flows. So lets continue our preparation for this lovely journey to financial independence. Next post would contain how to prepare simple cash flow.
....*Disclaimer for all writing on the blog as well as some short forms used
ETF : Exchange Traded Fund
EMI: Equated Monthly Installment
Amount in INR
Amount and target quoted above are indicative only to highlight example and not actual corpus one may need to achieve his financial goals. Various head used under sample table aren't exhaustive and can be of different kind and types based on individuals goals.

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Saturday, August 29, 2009

Financial Independence

What is Financial Independence?

Well the definition may differ from person to person and how a person perceives it. My own perception of Financial Independence is to have steady stream of income such that one can lead a comfortable life without much ado about finances. Thus achieve financial independence.
Most of us strive to create wealth for self to have a comfortable and tension free life. But we know for the fact that human by nature is very much materialistic and derives happiness with material ownership one has. Being human we tend to be more comparative in terms of our own wealth as compared to what others have (benchmarking peers probably). And thus end up being unsatisfied with whatever amount we have collected. Remember what Gautama Buddha said “Desire is root cause of sorrow”

All of us would like to lead a comfortable pre and post retired life, provide the best education to our children, own a comfortable house and have a few other things that could facilitate a particular lifestyle. Needless to say, only financial independence can help us achieve all these objectives.
Thus to achieve financial independence could be and should be one of our primary goals in life. To achieve this primary goal its best started as early as possible. It’s never too early to start if you haven't started your journey toward financial independence today is the day rather the moment you read this you should start your voyage.

Please keep looking up my blog to enjoy your journey with me by sharing your thoughts, comments, views and opinions.

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My First Blog

This is my first blog ever!

I always thought of blogging but never ever really started. Guess its never too late to start.

I would like to use blog as a means of penning down my thoughts and passion. I am most passionate about financial world. I am not a trained person on financial matters. But my passion drives me towards it. So thought this is where I can capture my thought, get your feedback, comment etc. to help grow my understanding of underlying concepts of finance.

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