Our retirement will perhaps be quite · 2019-09-10 · But before you decide the best instruments to invest in for your retirement it is important to actually ascertain how much money

8

Vijay Chandok, MD & CEO, ICICI Securities Ltd.

Our retirement will perhaps be quite different from our parents. In the past there were defined pension schemes and other benefits to fall back on. There was also the additional cushion of a joint family to rely on for support. But with the gradual movement away from defined pension schemes the onus on securing our retirement is ours alone. The move towards nuclear families actually makes planning and securing our retirement that much more critical.

Retirement planning is a two stage process - accumulation and distribution. The accumulation stage is our earning period when we save and invest our income to be able to fulfill our financial needs after retirement which is the distribution stage. The investment choices we make during this accumulating phase are the most crucial ones as we rely heavily on them in the future. The real challenge is to build a retirement portfolio with right balance of fixed income and market-linked investments.

Traditionally, provident funds have been one of the favorite choices for retirement planning due to their safe and stable returns. However, with the current rate of return on Employee's Provident Fund (EPF) being 8.65 per cent and 7.90 per cent on Public Provident Fund (PPF), these schemes are essential but not sufficient to support one's retired life.

Building wealth through National Pension System (NPS) can be one potential way to strategize retirement as its considerable exposure to equity gives higher scope for growth as compared to debt oriented schemes like EPF. Withdrawal restriction up till 60 years keeps you invested in equity for long-term – optimum time to build returns.

One simple advice for a secure retirement is - the longer time you give your retirement fund to grow the more security you add to your life after retirement. But this plan has to be backed by strong yielding instruments. Like equity. Investing in equity for a longer duration has shown a remarkable growth in returns.

ICICIdirect Money Manager August 20191

Although volatile in nature, if started at a young age, long-term growth

potential of equity overrides risks. For more disciplined stock

investments, opt for Systematic Equity Plans (SEP) where you either buy

stocks of fixed amount or fixed number of shares (irrespective of stock

price) at regular intervals. Equity mutual funds are also an excellent way

of taking exposure to equity and can also give tax benefit. However, it is

always recommended to ascertain your asset allocation and determine

the extent of equity exposure you should have in your retirement corpus.

It is also worthwhile to keep having some level of exposure to equity in

your retirement corpus post retirement as well. Equity can possibly be

the only instrument that can help counter the increasing cost of living.

Additionally, one can also consider post-retirement schemes like Senior

Citizen Savings Scheme (SCSS), balanced mutual funds and tax-free

bonds – for those in high tax-bracket. Investing in more than one bank

fixed deposits of different maturities, known as the laddering strategy,

discourages re-investment risk and can be effective retirement saving

instrument.

But before you decide the best instruments to invest in for your

retirement it is important to actually ascertain how much money you will

require for retirement. Here are some of the factors you should consider.

Start with life expectancy, for how many year after you retire will you

need to draw from your retirement fund. The next step is to consider your

expenses today and which of those expenses would rise in the future and

which could potentially cease to exit. For example medical bills could rise

while your home loan EMIs will end. Once you have done this you will

have a fair understanding of the monthly expense you will have to plan

for post-retirement. Alternatively, it is also worthwhile to approach a

Financial Planner to help plan your retirement.

Our message remains the same - 'Keep investing and stay invested for

your l i fe goals ' . Through this magazine and our website

www.icicidirect.com we want to make an earnest attempt to partner with

you in setting and achieving your financial goals. Do walk into any of your

Neighborhood Financial Superstore and talk to us.

Your magazine is now also available on www.magzter.com, a digital newsstand.


Editor & Publisher : Abhishake Mathur, CFA

Editorial Board : Sameer Chavan, CWM®, Pankaj Pandey

Coordinating Editor : Rhea Miranda CMEditorial Team : Nithyakumar VP CFP , Sachin Jain, Research Team

2

Good retirement planning is a combination of money and time management.

Money management, to build diversified portfolio that can secure your wealth;

and time management that can give enough time to grow this wealth. In simple

words, one should save as much as possible and start as early you realize

because financial restraint becomes the major cause of anxiety during

retirement period.

Here's something on diversified portfolio: Predicting future performance of an

asset can be challenging, unnecessarily risky even. And since all asset classes

will not perform equivalently during favourable market times, wiser way is to

pool money in maximum assets. NPS, fixed-income funds, equity, real estate

are tried and tested avenues for retirement income. Depending upon your risk

profile, day-to-day income needs, retirement duration, lifestyle changes and

other essential expenses you can decide asset allocation of your retirement

portfolio.

A research report shows that one in ten people do not know what their source of

income will be after retirement. Mixed responses included- continue working to

fund retirement, reliance on personal pension schemes and income from other

savings or investments; which only shows that many Indians understand the

need and importance to personally prepare for retirement. I believe, awareness

about financial products and professional support can help us construct

substantial corpus and turn into a steady stream of post-retirement income.

Despite believing in 'living for the day' culture, my advice, especially to young

investors, is to take steps towards retirement savings form Today! Longer life

expectancy, lack of family support due to nuclear family system, soaring

medical costs, rising inflation, job-hopping attitude, lack of government

sponsored pension schemes - makes it all the more necessary to plan your

retirement now.

Calculating cost of living after retirement is the most significant figure in your

retirement plan. Our cover story takes you through elements and products to

consider while getting down to that ballpark figure.

So stay updated, plan a happy retirement and keep reading to stay financially fit.

Do write us back at [email protected] any queries or

feedback.


MD Desk ............................................................................................................... 1

Editorial................................................................................................................. 2

Contents................................................................................................................ 3

News.................................................................................................................... 4

Stock ideas: IDFC First Bank and PNC Infratech.................................................. 5

Flavour of the Month: All you need to know about retirement

When you talk about retirement the only question that arises is, have you

collected enough for your living? We are uncertain of the expenses that

will occupy in future, thus planning only before retirement is not sufficient.

Post your retirement there has to be investments that keep an ongoing cash

inflows. Planning for retirement should be such that even if your life

expectancy increases you have that corpus to suffice your requirements.

This article provides you ways to invest, post your retirement. Read

more...................................................................................................................................... 14

Tête-à-tête: It's better to plan rationally!

Is my taken action right for the retirement? No matter how many dreams

you list down it should be fulfilled even post your retirement. This article is

supported by our expert Mr. Abhishake Mathur, SVP and Head - Investment

Advisory and Service, ICICI Securities in bringing out the measures to plan

your financials during retirement....................................................................... 26

Ask Our Planner

Our financial expert answers your personal finance queries ......................... 33

Mutual Fund Analysis

Which are the top performing mutual funds in current market scenario?

Check these top infrastructure funds recommended by our research team... 41

This month on iCommunity

Look out for an extraordinary financial learning platform for traders and

investors.............................................................................................................. 55

Equity Model Portfolio....................................................................................... 56

Quiz Time........................................................................................................ 60

Prime Numbers................................................................................................. 61


Mukesh Ambani unveils Jio Fiber & the mother of all set top boxes

Mukesh Ambani has finally unleashed his triple play of carriage, content and commerce. At the

42nd AGM of Reliance Industries today, he unveiled the Jio Fiber, the much talked-about fiber-

to-the-home (FTTH) service. Jio Giga Fiber will essentially offer lifetime free voice calls from

landline phones and high speed broadband, besides free high definition TV and dish with

minimum subscription of Rs 700 per month. Jio Fiber services will be started on a commercial

basis from 5th September this year, which is the third anniversary of Reliance Jio. The

cheapest data plan is priced at Rs 700 a month, and has speeds up to 100Mbps. The top-end

plan comes at Rs 10,000 a month and provides access to broadband, Jio HomeTV and Jio's IoT.

Courtesy: Economic Times

Consumer Alert! Are you buying online insurance from this fake website?

Insurance Regulatory and Development Authority of India (IRDAI) has issued a notice in public

interest cautioning about a fake website using the name of the authority to sell insurance

products to prospective buyers. The IRDAI in its notice says that a website using the domain

name of www.irdaionline.org is selling insurance to the general public while this domain is not

authorized by the Authority. IRDAI further states that the IRDAI authorized website is having

domain name www.irdaonline.org and which also hosts the Centralized Agency Portal. Earlier

IRDAI had cautioned the public at large that it is had been brought to their notice about people

receiving a lot of spurious calls in the name of officials of IRDAI making fraud related claims and

giving fictitious offers to buy insurance from them. Claiming that IRDA is distributing bonus to

insurance policyholders out of the funds invested by insurance companies with IRDA.

Courtesy: Financial Express

SBI report: 'For faster transmission, link bulk deposits with repo rate’

The best option for faster transmission of repo rate reduction could be linking all incremental

bulk deposits to be linked to the repo rate, State Bank of India said in a report. In India, single

rupee deposits of Rs 2 crore and above are considered as bulk deposits and banks have

discretion to offer differential rate of interest on bulk deposits. The share of bulk deposits in

banks' total deposits could be around 30 per cent after the definitional change. "Needless to

say, most of the bulk deposits are from institutions. It is thus logical that large institutions could

afford to take interest rate risk as this would spare the retail depositors from taking the same,"

the SBI Research report said.

Courtesy: Indian Express

Retirement fund manager may hire new agency to review investments in ETFs

Retirement fund manager, the Employees' Provident Fund Organisation (EPFO), is set to hire a

new agency to help it review and redeem investments in exchange traded funds (ETFs)

whenever required, in the wake of ballooning equity investment. EPFO has so far invested

around ?70,000 crore in stocks through ETFs, but does not have a clear plan for redeeming its

investments or credit to the subscribers account. The hiring of a new agency assumes

significance as the organisation looks to transfer ETF units to subscribers in a separate account

and encash some ETF investments if the market goes down because of a slowdown.

Courtesy: Live Mint

STOCK IDEAS


IDFC First Bank – Retailisation 'FIRST' – new mantra at IDFC First Bank

Company Background

IDFC First Bank has walked a long

path of transformation starting

from infrastructure finance NBFC

to universal bank. To strengthen

retail franchise, IDFC Bank &

Capital First Ltd engaged into a

merger to form IDFC First Bank in

December 2018. The merged

entity is the eighth largest private

bank with funded asset at ~ `112558 crore (retail: wholesale –

40:60) as of March 2019 and wide

customer base of ~70 lakh. It is

being headed by V Vaidyanathan,

who has a proven track record at

Capital First. IDFC First Bank has a

pan India presence with 279

branches, 199 ATMs, 520 BCs &

102 CFL

Investment Rationale

Building retail franchise to shore up

opex; leverage to kick in

IDFC First Bank has been aiming to

build a strong and sustainable

retail franchise for business

growth ahead. In order to build

sustainable deposit base, the

bank plans to adopt aggressive

expansion and frontload branch

addition. Accordingly, ~600

branches are to be added in the

next five to six years taking total

branch count from 242 in FY19 to

~800-900 ahead. Such resource

addit ion is seen increasing

operational expense in the initial

two fiscals (refer exhibit below)

with CI ratio being elevated at

~69% in FY19-21E. With

accre t ion o f bus iness and

transit ion of newly opened

branches towards break even

mark, CI ratio is expected to

moderate gradually to ~56-57%

in FY23E (management guidance

– 50-55%).

Asset quality seen steady; credit cost

at ~1-1.3% in FY19-23E

Erstwhile IDFC Bank has faced

asset quality issues pertaining to

legacy infrastructure book.

H o w e v e r , t h e b a n k h a s

p r o g r e s s i v e l y u n d e r t a k e n

provisions after receiving banking

l i c e n s e . W i t h m a j o r i t y o f

infrastructure stress e i ther

provided or sold to ARC and

adequate provision, the worst in

corporate/ infrastructure book

seems to behind. Going ahead,

the management plans to run

down the erstwhile infra book.

Therefore, risk of bulky slippages

is ruled out. Lower corporate

slippages and granular retail loans

is seen leading to paring down of


STOCK IDEAS

6

GNPA ratio to ~2.2% in FY23E.

However, given the intense

competition in the retail segment

and the bank's plan to increase

proportion of retail book, credit

cost is seen at ~110 – 130 bps in

FY21-23E. However, credit cost

for FY20E is expected to remain

elevated at 190 bps on the back of

exposure towards stressed

companies recognised in the

watch list.

Transition to retail advances; shedding

of erstwhile infra book – accretive for

yields

Erstwhile IDFC Bank advances

were dominated by wholesale

sector while Capital First had a

loan book with high yielding

segment including SME/ LAP, two-

wheeler and consumer durables.

Post-merger, the merged entity

focus shifts towards retail loans.

The new management envisions

itself as a retail lender and intends

t o g r o w t h e r e t a i l b o o k

aggress ive ly compared to

wholesale book. Accordingly, the

retail book is seen growing at a

faster pace at 27.2% CAGR in

FY19-23E, thereby increasing

proportion of retail book to

~65.6% in FY23E. The wholesale

book, on the other hand, is

expected to remain stable in

absolute terms and witness a

decl ine in proport ion f rom

~48.6% in FY19E to ~29% in

FY23E. Corporate book growth is

expected at 7.3% CAGR while

infrastructure book is to rundown

with maturity.

Building liability franchise; retain focus

on retail asset aid valuation; Initiate

BUY

IDFC First Bank, under new

leadership, aims to retain its

ability to grow retail asset base at

healthy pace with an eye on

quality. Building of sustainable

liability franchise would act as

catalyst to support valuation.

Higher capital adequacy rules out

any near term dilution. Recent

recognition of stress coupled with

adequate prov is ions g ives

comfort. With anticipated NIM at

4%, we compare IDFC First Bank

with banks delivering superior

margin (HDFC, IndusInd & Kotak

B a n k ) . I D F C F i r s t B a n k ' s ,

sustainable RoE being relatively

lower at 10% vs. 16-17% of

aforesaid banks, a 50% discount

to their valuation of ~3x P/ABV is

justified for IDFC First Bank.

Consequently, we assign a target

multiple of ~1.5x on FY21E ABV

and arrive at target price of 54 `per share with a BUY rating.


STOCK IDEAS

7

Key Financials

Valuations Summary

Stock Data

` Crore FY18 FY19 FY20E FY21E

NII 1,973 4,287 5,342 6,263

PPP 1,295 1,482 1,673 2,459

PAT 955 (1,641) (247) 712

FY18 FY19 FY20E FY21E

BV (`) 45 38 38 39

ABV (`) 42 36 34 36

P/ABV (x) 1.0 1.2 1.3 1.2

EPS (`) 2.8 (3.4) (0.5) 1.5

P/E (x) 15.5 (12.7) (84.5) 29.3

RoE (%) 6.3 (9.8) (1.4) 3.9

RoA (%) 0.8 (1.1) (0.1) 0.4

Amount

Market Capitalisation ` 20851 crore

Networth ` 17545 crore

52 week H/L 57/33

Equity capital ` 4782 crore

Face value ` 10

DII Holding (%) 3.98

FII Holding (%) 13.75

Key risks include:

Building strong l iabi l i ty

f r a n c h i s e r e m a i n s k e y

challenge

IDFC First Bank has one of the weakest liability profile with greater reliance on borrowings & wholesale deposits. Nearly 89% of the liability constitutes

of wholesale borrowing. This leads to ALM mismatch as well keeps cost of funds higher. Given competition from larger banks & small finance banks is getting intense, company faces challenge of garnering deposits to shore up i ts liabilities franchise. In addition, the bank has to shore up deposit base to replace slew of


STOCK IDEAS

8

infra bonds slated to mature in next two to four years.

Exposure to high yield book of Capital First entails default risk

Being a retail focused lender, erstwhile Capital First had c o n c e n t r a t i o n t o w a r d s SME/LAP at ~40%. Any slowdown in the economy would largely impact the SME/LAP as the sector is closely linked to the economy. This can derail the growth trajectory being factored in our assumptions.

Cost associated with retailisation poses risk on earnings

The new management is

adopting a strategy to focus on

retailisation of both sides of

business i.e. assets as well as

liabilities. Accordingly, the

bank needs to build higher

number of customer touch

points (branches and ATM).

This will lead to frontloading of

opera t ing expenses and

thereby increase CI ratio.

However, incurring of high

expenditure to improve its

presence does not guarantees

robust accretion of deposits.

Failure on garnering healthy

traction in liability franchise

c o u l d i m p a c t e a r n i n g s

trajectory and thereby our

estimates.

ANALYST CERTIFICATION

I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA and Harsh Shah, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited Sebi Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India's largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.

Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports.

Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein.

ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Retail Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Institutional Research.

The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI


STOCK IDEAS

9

Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice.

ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months.

ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.

ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report.

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report.

Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

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We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.


STOCK IDEAS

10

PNC Infratech (PNCINF) – Execution to gain further momentum in H2FY20E…

Company Background

Incorpo ra ted i n 1999 , PNC

Infratech Limited is one of the

leading EPC player with expertise

in execution of major infrastructure

projects, including highways,

b r idges , f l yovers , power

transmission lines, airport

runways, development of industrial

areas and other infrastructure

activit ies. The company has

executed a total of 60 major

Infrastructure projects across 14

states in India and has a strong

foothold in northern India.

Investment RationaleStrong order book position to drive

execution ahead...

PNC's order book (OB) was at `

10,950 crore as of Q1FY20,

3.5x FY19 revenues, providing

strong revenue vis ibi l i ty

ahead. NHAI has 6,000 km road

project lined up for awarding in

FY20E. Also, the government

is set to roll out Bharatmala

Phase-2, wherein it is expected

t o a w a r d 3 , 0 0 0 k m

expressways and 4,000 km

greenfield highways, going

ahead. With such strong

bidding pipeline lined up

ahead, the company is looking

forward to bid for national as

well as state government road

projects and expects order

inflows worth 6,000-7,000 `

crore in FY20E. On the

e x e c u t i o n f r o n t , w i t h

appointed date for two HAM

projects received in Q4FY19,

execution on six out of seven

HAM projects is in full swing.

Additionally, the company

aims to complete six projects

worth total ~ 600 crore in `

FY20E. The management has

maintained its 45-50% revenue

growth in FY20E. Overall, we

expect revenues to grow

27.4% CAGR to 5,028.1 crore `

in FY19-21E.

Equity requirement to be funded

through internal accruals…

P N C h a s a t o t a l e q u i t y requirement of 832 crore for ìts HAM projects, of which, it has already infused 282 crore às of Q1FY20. The balance `550 crore equity will be infused in the next two to three years: `


STOCK IDEAS

11

240 crore in FY20E, 220 crore ìn FY21E & balance in FY22E. The monetisation of Ghaziabad Aligarh road project shall entail cash inflows worth 300 crore ì n FY20E . Second ly, i t s standalone debt was at 452 `crore as of Q1FY20. The management sees limited increase in debt levels to 500 `crore by FY20E end. With strong internal cash accruals, cash in f lows f rom asset monetisation, limited increase in debt expected ahead and lean balance sheet position, PNC should be able to fund its equity requirement easily

Valuation & Outlook…

PNC remains our top pick in the

EPC space given its robust

orderbook & with execution

started on six of the seven

HAM projects. Its prudent WC

management & lean balance

sheet also reinforces our

confidence that PNC is well

p l ac ed to c ap tu r e huge

opportunities ahead. With a

strong ramp up in execution to

continue in FY20E, we expect

revenue growth at a 27.4%

CAGR to 5,028.1 crore in `

FY19-21E. Hence, we maintain

our BUY rating on the stock

wi th a ta rget pr ice o f `

255 /share . We va lue i t s

construction business at `

2 0 7 / s h a r e ( a t 8 x F Y 2 1 E

EV/EBITDA implying 15.2x

FY21 EPS).


STOCK IDEAS

12

Key Financials

Valuations Summary

Stock Data

` Crore FY18 FY19 FY20E FY21ERevenues 1,856.6 3,096.9 4,330.7 5,028.1

EBITDA 318.8 457.3 596.5 697.5

Adjusted PAT 251.0 304.9 319.3 349.6

EPS (`) 9.8 11.9 12.4 13.6

FY18 FY19 FY20E FY21E

PE (x) 17.9 14.7 14.1 12.8

M.Cap/ Revenues (x) 2.4 1.4 1.0 0.9

EV to EBITDA (x) 14.0 10.0 8.1 7.3

P/B (x) 2.5 2.1 1.9 1.6

ROE (%) 13.9 14.4 13.3 12.8

RoCE (%) 13.7 15.6 17.5 17.5

Particulars Amount

Market Capitalisation ` 4489 crore

Debt (FY19) ` 375 crore

Cash (FY19) ` 252 crore

EV ` 4612 crore

52 week H/L ` 195/ ` 123

Equity capital ` 51.3 crore

Face value ` 2

Key risks include:

1. Failure to win new orders; delay in execution

2. Concentration risk towards road sector

3. Addition of new large BOT projects which could stress its balance sheet and restrict its growth


STOCK IDEAS

13

ANALYST CERTIFICATION I/We, Deepak Purswani, CFA, MBA (Finance), Harsh Pathak, MBA (Finance), Research Analysts, authors and the names subscribed to this report, hereby certify

that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our

compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above

mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not

serve as an officer, director or employee of the companies mentioned in the report.

Terms & conditions and other disclosures:ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and

distribution of financial products. ICICI Securities Limited is a Sebi registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities

Limited Sebi Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India's largest private sector bank and has its

various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc.

(“associates”), the details in respect of which are available on www.icicibank.com

ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our

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FLAVOUR OF THE MONTH


Retirement planning is not just about building up an adequate corpus

through savings and investments. The real challenge is managing that

corpus and withdrawing funds from it to meet regular expenses as you

approach and enter retirement. How would you create a regular stream

of income from your accumulated savings in order to pay your bills?

What would be your withdrawal strategy to ensure that your money

lasts lifelong? How much risk should you be taking with your

investment portfolio then? How about managing healthcare costs,

inflation and taxes? These are some of the important questions to

address as you near retirement or are already retired. Here we help you

address these questions and lay a road map for you to have a

comfortable and rewarding retirement. Read on.

Whenever we ta lk about

retirement, people tend to

neglect its importance. They

assume the gratuity, employee

pension plan and a little bank

savings is enough to suffice the

retirement period. But, the

reality is the inflation will eat up

most of your savings, thus one

needs to have a retirement

plan in place.

Even after understanding the

importance of planning your

retirements early, many miss

out on planning for the same

and face issues during their

retirement. Below are listed

issues that a retired individual

could face.

Retirement issues faced by

retirees

At retirement an individual

faces majority issues like

health expenses, rising rates of

resources due to inflation,

unmanaged debts during

earning period, more of cash

outflow than inflow, higher

dependency during retirement

as the family expenses were

prioritize before retirement

planning.

Health Cost increases:

The main issue faced during

retirement begins with health.

As age passes by, the related

health issues arise. Diseases

All you need to know about retirement planning



are uncertain so is the cost of

medical expenses certainly

high. The basic charges for

visiting a doctor itself is Rs. 1,

000 and curing the disease has

its own payment structure that

differs from disease to disease,

not forgetting the rates of the

medicines as well. One needs

to have insurance in support

for your retirement.

Enjoying retirement:

Everyone wishes to enjoy at

their retirement age that is to

travel around the world,

surround themselves with

luxurious items, have a lavish

lifestyle, etc. But as we jot

down this list we don't keep a

track of the budget and the

withdrawal pattern seems to

empty our retirement corpus.

No fixed withdrawal plan:

One should discipline their

withdrawal p lan by only

utilizing the funds required and

keep the remaining money

invested. Especially during the

falling markets one should

avoid withdrawals as that is the

t ime to buy ra ther than

reducing the size of your

p o r t f o l i o . M o s t r e t i r e d

individuals go for systematic

withdrawal plan and withdraw

major portion of their corpus.

Setting a limit to withdrawal

will keep the money save till life

expectancy.

Longer Life Expectancy:

Retirement planning always

considers the life expectancy

of the individual, in case if the

retiree's life rises the extended

life span brings in the expenses

that needs to be managed. One

should have investments to

cover up expenses till the life

expectancy and also could

have a buffer value set in the

corpus in case of emergencies.

Piled up debts:

Taking up debt i.e. loan or credit to accomplish your requirements is good only when you are able to repay. Unnecessary opting for loans could hamper your credit score, so the choice of the loans need to be done wisely. Many individuals compromise on their retirement because they need to pay off debts.



Some end up losing their savings or assets that is own house or vehicle, etc. just to set o f f t h e i r d e b t s . D u r i n g retirement one should avoid taking a debt, this could i n c r e a s e t h e b u r d e n o f increasing the savings and negotiate on investments.

Inflation:

Everyone is fearful of Inflation, as the prices today won't be the same in future. For example, the expenses costing today one lac will be five lakh in the

next 10 years. And to meet those rising prices investors are required to invest in funds that beats inflation.

Taxes:

At retirement, you are not free from taxes. As per the tax slabs, taxes are to be paid by the retirees based on the income earned.

Income tax slabs for senior citizen taxpayers of age more than 60 years but less than 80 years for FY 2019-20 is:

Income range per annum Tax Rate FY 2019-20, AY 2020-21

Up to Rs. 3 lakhs

No Tax

Above Rs. 3 lakh to Rs. 5 lakhs

5% of (total income minus Rs. 3 lakh) + 4% cess

Above Rs. 5 lakhs to Rs. 10 lakhs

Rs. 10,000 + 20% of (total income minus Rs. 5 lakh) + 4% cess

Above Rs. 10 lakhs and above

Rs. 1,10,000 + 30% of (total income minus Rs. 10 lakh) + 4% cess

Income tax slabs for super senior citizen taxpayers above 80 years of age for FY 2019-20 is:

Income range per annum

Tax Rate FY 2019-20, AY 2020-21

Up to Rs. 5 lakhs No Tax Above Rs. 5 lakh to Rs. 10 lakhs

20% of (total income minus Rs. 5 lakh) + 4% cess

Above Rs. 10 lakhs and above

Rs. 1,10,000 + 30% of (total income minus Rs. 10 lakh) + 4% cess



Taxes on capital gains:Taxes implied is common to all the ages and so the taxes implied on the capital gains are:

Type of investment

Equity/ Hybrid

Debt

Less than 1 year

15%

tax applicable

Taxed as per the income slab

1-3 years 10% tax applicable if gains are more than 1 lakh

Taxed as per the income slab

More than 3 years

10% tax applicable if gains are more than 1 lakh

20% tax applicable with indexation

In order to save your income from going in taxes one could avail the effective ways of tax planning and invest in tax saving instruments.

Balance Risk and Returns:

Balance risk and returns states that the asset allocation needs

to be proper ly balanced inc lud ing the cash f low requirements, risk tolerance, return requirements and duration. Post retirement individual need to keep their risk low unless they have surplus funds available.

Housewives don't retire but they should have retirement

planning.

Indian Housewives have tremendous management skills

where they balance the household with corporate life. Many

are entrepreneurs in their own style. Some have to leave work

due to family. Yet there are a few who are managing only

household and the income earned by husband is the only

inflow they receive to manage these expenses, the surplus left

becomes their savings. It is essential that women should have

their retirement plan so that the expenses are taken care off

when there is no income. Usually the housewives who do not

have income or surplus, husbands tend to invest for them



which may or may not be the accurate amount required at the

time of distribution phase.

Homemakers do for themselves based on the savings they

have:

· Purchase gold

· Keep the money in Savings account

Husbands do for their Homemakers:

· Open a savings account on the wife's name or a joint

account under both names.

· Make a fixed deposit on the wife's name.

· Have an insurance plan by having a Family floater insurance

or personal insurance

· Nominee for every asset that the husband owns.

· Invest in Physical goal

Apart from the above investment tools, home makers could

invest into;

· Few SIPs in hybrid funds.

· Specifically invest money into personal insurance covers as

that will be the backbone during a medical emergencies.

Earners could contribute some portion to premiums as

well.

· Could invest in Atal Pension Yojana (APY), where the

minimum investments could be Rs. 100.

· A few schemes to support the women entrepreneurs:

Bharatiya Mahila Bank, Cent Kalyani Scheme, Mahila

Udhyam Nidhi Scheme, Annapurna Scheme, Stree Shakti,

Orient Mahila Vikas Yojana Scheme, Dena Shakti Scheme.



Is it the right time to retire? Or Are

you confident enough about your

retirement age?

When you are nearing your

retirement, ask yourself that the

funds col lected so far is

sufficient enough to fulfill all the

requirements of your family

and self-till the life expectancy?

Even when you know you're not

healthy enough to work more.

It's time to retire. Many retire

assuming their requirements

are fulfilled but the future is

uncer ta in l i ke medica l

expenses could hit your hard

earned money, fami ly or

s p o u s e m a y r e q u i r e

emergency funds and if you

crash into a financial burden

your retirement will not end

happily. One should not fall

under the situation to sell off

their assets just to payoff

expenses/ debt.

Imagine you want to retire at the age of 60 and your life expectancy is what you assume to be 80 years. You should have funds available to manage any medica l expenses and emergencies for those 20 years. But imagine your life expectancy to increase another

10 years, handl ing those expenses won't be easy, thus there is a need to plan properly and have extra cash to handle those buffer years.

Pros of retiring early:

· Your health stays in good condition as there is less stress from work and you get more time to spend with your family members.

· There is immense time to travel the world

· Get time to explore your hobbies and indulge into a new career or start a business (new income stream/ earning from doing things you love)

· Eagerness to increase wealth as your retiring early.

Cons of retiring early:

· No income f low unless investments post retirement

· N o e m p l o y e e b e n e f i t s ( m e d i c a l c o v e r s , H R A ' s , gratuity, etc.)

· Need to make sure your savings will last till your years of living

· Miss dong ongoing activities at work leading you to get bored at home



· Less worr ied about l i fe

e x p e c t a n c y a s y o u r

increasing your savings by

retiring late

Cons of retiring late

· There is less time to explore

the world.

· Many could suffer health

issues during working hours

How much should be the

withdrawal pattern?

Retirees should not withdraw

more than 4-5% of their savings

in the first year itself. Later on

they could balance out the

expenses and accordingly

wi thdraw. Money tha t i s

blocked in mutual funds should

be withdrawn only when

required. One should not end

up in depleting their savings as

it takes years to build it. While

c o n s i d e r i n g w i t h d r a w a l ,

individuals need to consider the

t a x i m p l i c a t i o n s o n t h e

investments too.

The best way to handle your

withdrawal pattern is try to

make a check list of all the

e x p e n s e s t h a t c o u l d b e

incurred in a year. Later try to

a v o i d t h e u n n e c e s s a r y

expenses in the list and check

· Spending less, as the cycle of earning has stopped

· Early withdrawals could reduce your corpus

· Miss out on investment schemes that are eligible only to the age bracket between 55 to 60 and more.

With the above pros and cons on retiring early, retirees need to keep one think in mind and t h a t i s . T h i n k i n g a f t e r retirement is the time to only relax, yes it is but exceeding the limit of relaxation could impact your health and make you sick. In fact, engaging yourself in the activities mentioned above could make your retirement fruitful.

Pros of retiring late

· There is more t ime for earning that will add up your savings.

· As you are working longer

you are entitle to receive the

employee benefits

· Less chances to feel lonely as

your occupied with work that

keeps your mental and

physical health busy.

· Be engaged as your mind

stays active



the required expenses that will

be required to be withdrawn.

This will help you to keep some

cash for any uncertain

situation/ emergency. I t 's

essential that you proportion

your equity and debt

investments as that's your

retirement income that would

be in pace with inflation.

What all things should one

keep in mind during

retirement?

One needs to consider the

financial issues that they could

face in retirement as mentioned

at the start along with that

individual needs to keep a track

of their budget, especially the

cash outflow i.e. spending.

While going for investments,

the amount invested should be

equal to the future goals set by

you. Never forget to make a will

and have an estate plan in

place, this wi l l keep you

assured that all your corpus of

money and assets are legalist to

the right individual. There is a

need to keep an emergency

corpus always even if you have

a lot of savings. Regulate your

investments and proportionate

it whenever required meaning

change the asset allocation of

your funds in time of growing

wealth. Make it a point to keep

the extra money received from

any sources in the retirement

savings corpus.

Either do it yourself or take

advise from an expert. At ICICI

we service you with a well

planned retirement along with

managing other financial goals.

For a better financial plan, you

may write [email protected]. Also

avail our service of financial

planning to know more, follow

this link:

https://www.icicidirect.com/idi

rectcontent/Home/InvAdvSvc.

aspx or visit to

ICICIdirect.com>Advisory

Service>Financial Planning

One of the most important point that

an individual should keep in mind is

never utilize or break the retirement

savings corpus before retiring

without an emergency.

Benefits of planning early

retirement

One of the biggest reason one

should plan for retirement is

p o w e r o f c o m p o u n d i n g .



Everyone wishes to have their

income doubled in time. With

minimum amount invested

today it could enable you to

maximize your wealth for

tomorrow. Planning early keeps

you at ease in advance, that

after retirement there will be a

corpus to handle your goals,

emergency expenses, health

issues and enough cash to

travel places. Additional benefit

that an individual gets is tax

benefit in post as well as pre-

retirement phase. Another

reason of retirement planning is

that it beats inflation so you're

l e s s w o r r i e d a b o u t t h e

fluctuating future prices.

Retirement type: Distribution phase

Distribution is that phase of

retirement where you no longer

build wealth but utilizing the

wea l th to fund fo r your

retirement. It is the time where

you ensure you receive regular

guaranteed income post your

retirement.

Senior Citizen Savings Plan:

It is a government backed

saving instrument for retired

individuals as it is less risky and

offers capital protection. The

Ministry of Finance changes the

returns every quarter, a t

present it is 8.60% for Q2 of FY

2019-20 (July-sept) . This

schemes shares the highest

interest rate as compared to

other small savings schemes.

You can open an account at the

public/ private sector banks and

Indian post offices by applying

in Form A along with the

amount deposit. An individual

can have multiple accounts in

w h i c h t h e y c a n d e p o s i t

minimum amount of Rs. 1,000

or multiple of thousands but

overall his/her deposit should

not exceed maximum limit of

15 lakh. It can be single or a joint

account . Matur i ty o f the

account is 5 years from the date

of account opening but it can be

extended post 3 years from

account opening through Form

B as per SBI.

Eligibility

· The individual entry age

should be 60 or more.

· One can open the SCSS

account between the age

bracket of 55 to 60, given they

retire with a superannuation

benefit or a VRS (Voluntary

retirement scheme).



· NRI's and HUF are not eligible for this schemes.

· Withdrawal is allowed after completion of a year from the account opening date subject to penalties.

Senior citizen savings schemes has section 80C benefit of Income tax act, 1956.

Pre-closure charges are implied as follows:

Withdrawal within 1 to 2 years - 1 .5% deducted f rom the accumulated amount left in the account Withdrawal from 2 y e a r s t i l l m a t u r i t y - 1 % d e d u c t e d f r o m t h e accumulated amount left in the account.

MF- SWP

Especially for a retired individual debt funds enable them to generate regular income post retirement. This investment avenue is the most utilized tool by individuals as it is at par with inflation. Retirees are ready to take moderate risk thus, they could invest in hybrid debt funds, l iquid funds, regular growth funds, large cap and blue chip funds to earn impressive interest on their income. Individual who can

afford to take risk could go for equity oriented hybrid funds. Investors need to avoid small cap funds as it's too risky.

Eligibility:

There is no criteria for

investments in Mutual fund.

Jus t based on your r i sk

capability you need to hold

those funds.

One of the recommended tool

in mutual fund is the systematic

withdrawal plan. Individuals

could pay lump sum amount to

the fund and in return could get

m o n t h l y w i t h d r a w a l f o r

handl ing the i r day- today

expenses.

Reverse mortgage:

When there is no income

source, retirees tend to sell-off

their assets especially house or

gold. Leading them to pay rent

that is more expensive than the

owned house, a better way is

going for a reverse mortgage.

Reverse mortgage means

lending your house property to

bank and in return receive

monthly payments for your

daily activities. In simple words,

its opposite of a loan where you

receive the payments here.

Repayment of the loan is till the



product that enables the

individual to avail the income

immediate ly i .e . post i ts

investment the plan starts

g iv ing regular income in

f r e q u e n c y t o m o n t h l y ,

quarterly, half-yearly or yearly.

Interest rate defers f rom

scheme to scheme.

Eligibility:

· Maximum entry age is 80

years (based on last birthday)

for immediate annuity.

· Purchase Price (Amount

invested) is based on the age

and annuity chosen.

· Minimum amount of Rs

10,000 is the annuity payout

and maximum no limit set.

· One can payout monthly,

quarterly, half-yearly or yearly.

Immediate annuity avails tax

benefits on premium paid

under Section 80CCC and

commutation under Section

10(10A) of the Income Tax Act,

1961. The drawback of this

investment avenue is the

closure of the account, you

cannot cancel the plan nor opt

out of the plan.

Post-Office Monthly scheme

A post office monthly scheme is

b o r r o w e r ' s d e a t h o r

permanently moves out of the

house. Interest rates are low in

a reverse mortgage.

Eligibility:

· The age criteria is 60 and

above for single owner while a

58 could be for joint owners

· Resident of India

· Loan is provided for max 20

y e a r s f r o m t h e t i m e o f

application

· The amount availed by banks

is Minimum amount according

to the bank and maximum is Rs.

1 crore.

Pe n s i o n p l a n b y i n s u r a n c e

companies:

In this retirement plan retirees

pay a single lump sum amount

i n t h e p e n s i o n p l a n s o f

insurance companies. There is

dual benefit here, there is

i n v e s t m e n t b a c k e d b y

insurance. Can avail a tax

benefit on the premiums paid

under section 80CCC of the

Income Tax Act, 1961.

Immediate annuity

For retirees who receive lump

sum amount this plan is good to

go with. It is an insurance



The views expressed in the article are personal views of the author and do not necessarily represent the views of ICICI Securities

a small saving investment that is backed by government. The returns received from this scheme is 7.6 % for Q2 of FY 2019-20 (Ju ly- sept ) . The account matures in 5 years from the date of account opening. 5 % Bonus was availed to account holders, who had opened account

stbefore 1 December 2011.

Eligibility:

· A minor at the age of 10 years could open this account, post 18 the minor could avail the funds in the account.

· Account could be opened by a single or joint account (up to 3 adult holders)

· Depositing amount could be minimum Rs. 1, 500, or in multiples of Rs. 1,500 and maximum amount is Rs. 4.5 lakhs for single account holders and Rs. 9 lakhs for joint account holders.

In post office monthly income

scheme, there is no tax rebate

on the investments or maturity

amount. For a premature

withdrawal/ closure of the

account before completion of 5

years, charges are applied; a.

Withdrawal in between 1-3

years of account opening is 2%

o f t h e d e p o s i t a n d b .

Withdrawal in between from 3

till maturity is 1% of the deposit.

Summing up:

So, when you ta lk about

retirement it doesn't mean u

need to completely go for

savings and not spend at all.

There has to be a limit for every

e x p e n s e , s a v i n g s a n d

i n v e s t m e n t s d o n e b y

individuals. Our advice would

be to start your retirement plan

today itself, so you don't have to

face any financial issues during

retirement phase. Also, making

a will is the most important for

securing the ownership in the

right hands.

Tête-à-tête


It's better to plan rationally!

Is my taken action right for the retirement? No matter how many dreams

you list down it should be fulfilled even post your retirement. This article

is supported by our expert Mr. Abhishake Mathur, SVP and Head -

Investment Advisory and Service, ICICI Securities in bringing out the

measures to plan your financials during retirement…

Abhishake Mathur, SVP and Head - Investment

Advisory and Service,ICICI Securities

Q. What is the ideal age of

retirement? When should one

retire?

A. People who started their

careers till 1980's worked till

their age of 58-60 years before

calling it a day. However,

people who started their

careers this century look to

retire from active work life

early, around 45-50 years of

age. The reality of when they

will actually retire is yet to be

s e e n . O f c o u r s e , e a r l y

retirement doesn't necessarily

mean that income stops

completely. Most prefer to

work part-time, say 3 days a

week, in their first phase of

retired life and earn a decent

money to fund their day-to-day

needs.

The reality is that many find it

difficult to retire early because

they are not prepared. Given

the reduction in pension

benefits offered on the job,

better lifestyle and increased

life expectancy are some of the

factors that impact the

preparedness.

Q. Do you think a self-employed

individual should have a retirement

plan? If so, what could be his plan of

act ion and what ret i rement

benefits can he avail?

A . Absolutely. Being self-employed, sometimes, you tend to feel that you can retire any time as per your wish or

Tête-à-tête


even work till the end of your l i f e t i m e , a s t h e r e i s n o retirement age like a salaried person.

However, even if you are self-employed, it's important you plan your retirement well in advance by fixing a retirement age and plan for succession in your business accordingly. If succession is not planned properly, then the business might not sustain properly, p o s t t h e d e m i s e o f t h e individual.

Unlike a salaried person, a self-employed person doesn't get re t i r ement bene f i t s l i ke provident fund, gratui ty, superannuation, etc., which contr ibute a par t o f the r e t i r e m e n t n e e d s o f a n individual. Hence, a self-employed person has to start investing more from the early stages of one's career to build a retirement corpus. Now, you have opt ions l ike Publ ic Pr o v i d e n t Fu n d ( P P F ) & National Pension System (NPS), which can be opted in addition to other investment options like mutual funds and e q u i t y f o r b u i l d i n g t h e

retirement corpus.

Q. Should housewives have a retirement plan? If yes, how should they plan their retirement savings?

A. Housewives contribute a significant part in a family's overall development, from upbringing of kids and fulfilling most needs of al l family members. Any retirement plan made should be for both spouses put together i.e. one m u s t c o n s i d e r t h e l i f e expectancy & needs of both spouses and make the plan. Generally, women outlive men and there's an age difference between husband and wife, which mean that the wife may live around 5-10 years after the husband's lifetime. Hence, considering the needs of the wi fe dur ing these years become very important while making a retirement plan for the family.

Also, housewives need to take active involvement in the finances and the investments made for the family. This will help them to handle these confidently, post the husband's lifetime. This becomes very

Tête-à-tête


important if there is any unforeseen event in the family at a much earlier time than expected. During such times, with the available corpus in hand, housewives have to make a proper plan for the day-to-day needs, child's higher education and marriage goals and her retirement. This is to ensure the funds are invested into appropriate avenues to fund these needs.

Q. What are the best retirement products one could purchase during an accumulation phase?

A. Equity mutual funds are one of the most sought after investments for accumulating t h e r e t i r e m e n t c o r p u s , specifically if there is more than 15-20 years for retirement. These investments work well in the long run and one can start investing even with a very small amount t h r o u g h S y s t e m a t i c Investment Plan (SIP). National Pension System (NPS) is also becoming an increasingly popular investment avenue to build the retirement corpus, g iven the addi t ional tax benefits provided on the

investment amount and exemption of tax on the lumpsum withdrawal amount of 60% of the corpus at retirement.

The earlier one starts for

investing towards retirement,

t h e b e t t e r i t i s , a s

compounding works better in

the long run. I would suggest

that from the first month of

one's career, one should start

investing, even if it's as small

an amount as Rs.1000 per

month. The amount can be

increased every year gradually,

as and when the income

increases. There will be a huge

difference between the corpus

accumulated by a person

starting this early and a person

starting after say 8-10 years.

Q. When an individual gets his

ret irement benefi ts such as

gratuity, superannuation, PF, etc.

what should be his investment

style? Which avenues could he

consider to invest his money?

A. When a salaried person

retires, he/she gets retirement

benefits like provident fund

a c c u m u l a t i o n , g r a t u i t y,

superannuation accumulation

Tête-à-tête


(partly, and remaining in the

form of regular pension),

encashment of privileged

leaves, etc. All these benefits

put together make a significant

amount, if one has worked for

25-30 years without breaking

any of the benefits in between.

The amount received from

these benefits plus the amount

accumula ted f rom one 's

investments are to be used to

fund all the retirement needs.

Some of the retirement needs

c o u l d b e i m m e d i a t e ,

lumpsum, regular over a

period of time, etc. Hence,

depending on the time frame

of these needs, one has to

invest into the appropriate

i n v e s t m e n t a v e n u e s .

Generally, the corpus available

a t re t i rement has to be

invested in an allocation of

Equity – 30-40% and Debt – 60-

70%; the debt portion would

help in funding the immediate

& short-term needs, while the

equity portion would help in

accumulat ing the corpus

further to fund the long-term

needs. The allocation also

depends on the corpus and the

amount required from the

investments to meet the day to

day needs.

Q. With current increase in

medical expenses, how should one

protect themselves from post

retirement expenses?

A. Medical expenses have

been inflating at a much higher

pace than other expenses.

And , pos t re t i rement , a

significant portion of expenses

can go towards medica l

expenses. Hence, it's every

important to plan well in

advance for the same.

Salaried persons generally

have an employer-provided

group medical insurance cover

till their employment, which

covers the hospitalization

expenses. However, this cover

ceases once they retire. If they

would want to take a fresh

medical cover post retirement,

the premiums would be on a

higher side, given their age;

also, if there's any health issue

l i ke d iabe tes and b lood

pressure, which are quite

common these days, then the

normal medical insurance

cover may be declined or they

Tête-à-tête


may have to shell out higher

premium.

Hence, it's important to take a

separate medical insurance

cover for you and your family,

over and above the employer-

provided group cover, by your

mid-30's itself, when you are fit

and healthy. This can be

renewed every year till your

lifetime and hence, can be

quite useful in your retired life,

t o f u n d a n y m a j o r

hospitalization expenses. For

s e l f - e m p l o y e d p e r s o n s

though, a medical cover has to

be taken much earlier, given

that they are not covered in any

group medical cover.

The cover amount has to be

higher, say around 20-25 lakh,

as the medical costs have shot

up and would keep increasing

further. One may consider a

basic cover of around 5-7 lakh

and take a top-up cover for the

remaining amount, which can

help in reducing the overall

premium amount being paid.

Medical insurance generally

covers only hospitalization

expenses. However, when you

become old, your day-to-day

medical expenses could be on

the rise and there could always

be some por t ion o f the

expenses not covered under

i n s u r a n c e , e v e n d u r i n g

hospitalization. To ensure you

have enough funds to fund all

these expenses, it's a good

idea to build a specific medical

expenses fund, say around 8 to

10 lakh (in present value), by

the time you retire.

Q. Is it the right thing to utilize the

retirement savings in paying off

your debts or there is an alternate

option for payoff?

A. Generally, by the time you

retire, it's better to be debt-free,

so that you do not have the

tension of paying the EMIs, as

you are dependent only on

income from your investments

and may be some rental and

pension income. Hence, if you

have any loan outstanding at

the time of your retirement, it's

good to pre-close the same

with any of the investments

a c c u m u l a t e d f o r y o u r

retirement or your retirement

benefits.

However, if the loan amount is high, it's important to plan well

Tête-à-tête


in advance and keep making part prepayments every year, so that you can pre-close the loan before you retire and do not utilize any of the investments accumulated for your retirement or your retirement benefits.

Q. In a choice of investment, which goal would you prioritize first w h e t h e r c h i l d r e n ' s h i g h e r education goal or retirement goal? If we choose retirement goal then how would one accomplish the other goal in that duration?

A. When it boils down to a choice between children's higher education goal and retirement goal, generally we tend to give higher importance to the former, as we are emotionally connected to our children. However, when it comes to financial planning, it's bet ter to p lan rat ional ly i ns tead . I n my op in ion , retirement goal should take higher priority compared to children's higher education goal. If you happen to face a shortfall in the accumulation of the corpus required for your children's education goal, you still have an alternative option

like an education loan, which can be repaid by the children.

However, if you happen to face

a shortfall in the accumulation

of retirement corpus, you may

not have a great alternative,

g i v e n t h e d e c r e a s i n g

dependency on your children

to fund your retirement needs.

You cannot take any loans

either to bridge the shortfall.

Reverse mortgage can be of

help, but it's still at a nascent

stage and the property might

be sold off at the end of your

lifetime to pay it off, if your

heirs don't pay it off.

Q. How should one decide the

percentage of withdrawal post

retirement as the remaining will be

required for future expenses?

A. If accumulating the required corpus by the time you retire is important, withdrawing from the corpus and spending t o w a r d s y o u r n e e d s appropriately, without going overboard, is more important, as any overshoot i n withdrawals can lead to the corpus getting exhausted before the end of your expected lifetime. This

Tête-à-tête


becomes a huge concern then.Th is i s where Safe Withdrawal Rate concept c o m e s i n , w h i c h i s t h e percentage of amount that can b e w i t h d r a w n f r o m t h e retirement corpus every year. A study made in US in 1994 says 4% is a safe withdrawal rate to ensure the corpus lasts f o r 3 0 y e a r s . H o w e v e r, practically, the expenses might not have a uniform pattern every year. In the initial years of re t i rement , the t rave l & vacations could be higher, compared to the last stages;

but at that time, the medical expenses could be higher. There could be some one-time expenses too coming in between.

All this mean that it's important

to foresee and project your

retired life's cashflows and

then decide on the withdrawal

rate based on the needs,

corpus available and the

avenues where the money is

being invested into. This is

where a financial planner can

be of great help and plan it for

you.

ASK OUR PLANNER


Do I need to rearrange my asset allocation?

Q. What is the impact on senior citizens asset allocation as the maximum funds are parked in debt oriented mutual funds? Suggest what should be done.-Kunal Apte

A Recently a series of debt oriented mutual funds have witnessed a fall in their NAVs due to few NBFCs which missed their principal and / or i n t e r e s t p a y m e n t s o n outstanding bonds. I t is important that investors set their expectations right w.r.t their investments in debt mutual funds. Debt mutual funds offer superior taxation benefits when investment horizon is more than 3 years ( investors get indexation benefit while calculating long term capital gains) compared to traditional bank or post office deposits. Thus investors c a n s e l e c t s u i t a b l e s u b category of debt oriented mutual funds according to their needs and requirement.

If investors want to minimize c r e d i t r i s k s , t h e r e a r e 'Corporate Bond' funds which

invest at least 80% of their corpus in the highest-rated corporate bonds – rated AAA and above. Another option is to invest in 'Banking & PSU' debt funds, which invest at least 80% of the corpus in a mix of bonds or debentures issued by banking firms and public sector enterprises which boast highest credit rating. However both these categories can suffer from interest rate risks if aggregate maturity of portfolio is on the higher side. If investors want to minimize interest rate risks, they can consider investing in lower duration schemes – Overnight Funds, Liquid & Ultra-Short Duration funds. As the i r por t fo l io is most ly composed of instruments which are to mature within a year, NAV fluctuations due to interest rate changes is very low or negligible.

If investors do not want to expose their investments to any form of volatility, they can invest their funds in traditional bank or post office deposits. Returns are also guaranteed

ASK OUR PLANNER


for the term of the investment, w h i c h m a k e s t h e s e instruments better choice for c o n s e r v a t i v e i n v e s t o r s . According to new budget provisions, interest income upto Rs. 50,000 from bank & post office are exempt for senior citizens. Other options can be Senior Citizen Savings Scheme or Pradhan Mantri Vaya Vandana pension plan which provide higher pre-tax returns to investors. The disadvantage is that the interest payouts or pension income from such traditional instruments is taxable in the hands of the investor as per tax slab.

The decision to change your asset allocation should be g u i d e d b a s e d o n y o u r withdrawal needs and whether your avai lable corpus is s u f f i c i e n t t o m e e t y o u r recurring expenses in line with rising inflation and any one-time requirements in the future. As someone who is in need of stability and longevity of accumulated corpus, debt should be a major part in your portfolio and the various sub-categories of debt oriented

mutual funds can be considered by the investor, in addi t ion to t radi t ional instruments, to achieve the dual objective of portfolio stability and growth.

Q. Tax Liability on money received on Surrender of LifeStage Pension Plan from ICICI. I have taken LifeStage Pension Plan from ICICI in Sept'2009 having a death benefit with Zero Sum Assured which make it a pure Investment Plan. I have surrendered po l icy on April'2018 and received an amount of Rs.11.14/- Lakh after paying a premium Rs.7.2/- lakh upto 2016 @ Rs.98000/- per annum. I have not claimed IT rebate on the premium paid between 2009 and 2016. Please Clarify, my Tax liability will be on Entire amount Rs.11.14 Lakh received or Rs.3.94/- i.e., Diff of the amount received and premium paid. (11.14 - 7.2=3.94) considering it as capital gain as premium paid Rs.7.2/-lakh is taxed money. Your clarification will help immensely in filing IT return 2018-19 which is due on 31st July'2019.

- Fahim Ashraf

A The Income Tax Act only says that i f any amount available in a pension policy, in

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respect of which deduction has been allowed, together with interest or bonus, is received on account of surrender, then such amount is added to your income and taxed as per your income slab. It does not explicitly say how it is taxed, if deduction was not claimed. Our interpretation is that if deduction was not claimed for the premiums paid, then the accumulated gains (Surrender Value less Total Premiums Paid) will be added to your income and taxed as per the tax slab. If that's the case, then only the accumulated gains can be shown as 'Income from Other Sources' in the return. However, we suggest you to take opinion from a Chartered Accountant and then file your return.

Q. Currently I am paying off my education loan, while I require a car loan as well as a personal loan. Do banks provide dual loans? Which loan should be paid-off first? In this situation, does my credit score be impacted?

- Nikhil Reddy

A Banks are willing to lend to an individual so long as they

meet bank's underwriting requirements. Banks generally assess individual's repaying capacity by asking for income & i n v e s t m e n t / a s s e t documents. If need be, lenders may also ask for guarantor's detai ls who wi l l have to assume the loan liability in case b o r r o w e r d e f a u l t s o n payments. While car loan is secured loan (the purchased vehicle acts as collateral and can be sold off by the lender to make good of loan amount in case of default), personal loans are unsecured. Hence, the terms will be a bit stricter in case of unsecured loans i.e. banks normally charge higher rate of interest on personal loans; banks also ask for a guarantor if required.

Taking too many loans does not negatively affect your credit score. In fact, if you keep making timely payments of loan EMIs, your credit score gradually improves. However when you apply for new credit (credit cards, loans etc), the lender runs an inquiry on your CIBIL report to check your credit history. Too many of such inquiries within a short span o f t ime negat ive ly

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impacts your credit score as this portrays credit hungry behavior. This negative impact is small and can be improved gradual ly through t imely repayments of loan EMIs. One other point to note is that acting as a guarantor for another person's loan will not affect your credit score but if the person for whom you have given guarantee defaults or delays payments, then as a guarantor your credit score will be hurt.

Q. My friend Mr. A (Date of Birth: 1-4-1935) has taken a lifestage policy from ICICI Pru on Dec 1, 2009 for 10 years IN THE NAME OF his WIFE

th(Date of birth: 20 May 1944). His wife does not have any income on her own any time. He has paid all the 10 yearly instalments of 50000 rupees as subscription. In 2014 and 2016 he had availed tax exemption under 80CCC to the extent of 20000 each. (Total 40000 rupees). The present value of the investment is around 7.6 lakhs. As per the policy terms, on maturity, the one third maturity amount will be paid by cheque in his wife's name (free of tax) and the cheque for two thirds maturity amount will be directly utilized for buying the new annuity if opted so. The policy will mature in

Dec 2019. On maturity of the policy, he wants to opt to buy another annuity to the extent of two thirds value of the maturity amount in her name and take cash to the extent of one third of the maturity proceeds as per one of the policy terms and deposit the same in his savings bank account (joint account).

- Raman

A On maturity of a pension rd

policy, a maximum of 1/3 of the maturity amount can be withdrawn as lumpsum, which is exempt from tax. The

r dr e m a i n i n g 2 / 3 w i l l b e converted to annuity and she will start receiving pension as per the frequency and choice opted by her. The amount received as pension would be considered as her income and added to her income, if any, and would be taxable as per her income slab. For the amount specified by you, the pension amount will be less than the minimum amount eligible for income tax and hence, it will not be taxable, if she does not have any other income. Please ensure to approach the insurer atleast a week before maturity and inform how much

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she would like to withdraw as lumpusm; if not, the entire maturity amount may be converted to annuity once the policy matures.

Q. Tax on income from ICICI Pru pension plan Commencement 2 4 . 0 1 2 0 1 0 V e s t i n g d a t e 24.1.2020 I want to surrender and use the entire amount. Fund value as on the date 1196000 Premium paid 600000 What is the taxable amount? Pl suggest.- Y. Chalapathi rao

A If you surrender a pension policy before its maturity, then the entire surrender proceeds shall be added to your income and taxed as per the income slab, if you have claimed any deduction on the premiums paid for the policy. The Income Tax Act only says that if any amount available in a pension policy, in respect of which deduction has been allowed, together with interest or bonus, is received on account o f sur render, then such amount is added to your income and taxed as per your income slab. It does not explicitly say how it is taxed, if deduction was not claimed.

Our interpretation is that if deduction was not claimed for the premiums paid, then the accumulated gains (Surrender Value less Total Premiums Paid) will be added to your income and taxed as per the tax slab. However, we suggest you to h i re a Char tered Accountant to understand the intricacies of the section and how it would be taxed.

Q. I am a 30 year old planning to save for retirement. Should I select a pension plan from an insurance company? Please advice the benefits.

- Tushar Khanna

A Life insurance companies offer two types of pension policies – traditional pension po l i c ies and un i t l inked pension policies. Traditional pension policies only provide an option to invest in Fixed Income ins t ruments l i ke government securities or/and corporate bonds. By nature of underlying investments, the accumulated corpus may prove to be inadequate for meeting post-retirement needs of the investor. Unit Linked Pension policies, however,

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provide investor an option to invest in both 'Equity' & 'Debt' asset c lasses in var ious proportions, which can help create a more sustainable corpus. Pre-mature withdrawal from traditional plans result in a very low surrender value c o m p a r e d t o t h e t o t a l premiums paid till date, while in case of Unit Linked Pension plans, the fund value at the time of surrender, is payable.

I n b o t h t h e s c e n a r i o s , p r e m a t u r e w i t h d r a w a l / surrender before maturity date attracts tax liability on the received amount. In case you had taken tax deduct ion benefits for premiums paid under section 80C / 80CCC, t h e n t h e e n t i r e a m o u n t received is taxable. If you had not taken any tax deduction benefits, then the difference amount (total amount received less total premiums paid) is taxable. This amount is added onto investor's income and taxed at the marginal rate of tax.

r dU p o n m a t u r i t y, 1 / 3 o f a c c u m u l a t e d c o r p u s i s received as lump-sum while the remaining portion has to be compulsorily annuitized. The

limitation here is that the pension income from such annuity is fully taxable. Also as the pension amount is fixed, it may not be able to meet the inflated adjusted expenses of the pensioner.

Considering above limitations, an investor with a time horizon of about 20-25 years t i l l re t i rement , i s bet ter o f f investing through mutual funds. With the available time in hand, you can consider raking higher risk and opt to invest 80% of your investible surplus in Equity oriented mutual funds (using Large Cap / Multi Cap / Mid Cap funds) and 20% of investible surplus in Debt oriented mutual funds (us ing Corporate Bond / Medium & Long Duration funds) every year. You can anytime withdraw from this portfolio as there are no liquidity restrictions (however there are exit load of certain % of the investment, if you withdraw before a given period, generally 12 months). Following a specific asset allocation and periodic re-balancing wi l l help your portfolio reduce the risk level.

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Alternatively, you can also consider investing in NPS for your retirement. Investments upto Rs. 1.50 lakh is eligible for tax deduction under section 80C and another additional deduction of Rs. 50,000 under 80CCD(1b). Your funds are invested among different asset class: Equity, Government Bonds & Securities, Corporate Bonds and Alternate Assets like REITs & InVITs. You have the option to choose the asset allocation yourself or set it in auto mode: allocation to Equity will keep on reducing as investor's age increases. The major limitation is NPS is a strict retirement investment vehicle. Upon maturity at age 60 (or company decided retirement age), you can withdraw 60% of the portfolio as lump-sum (entirely tax-free) whi le remain ing 40% of p o r t f o l i o h a s t o b e compulsor i ly annui t ized, suffering same issues related to annuity as explained above. Withdrawing before retirement or age of 60 will mean only 20% of the withdrawal as lump-sum, while remaining 80% is annuitized. In the meanwhi le , on ly cer ta in

percentage of the corpus can be withdrawn that too based on occurrence of certain pre-defined events.

You could a lso consider investing into a combination of mutual funds and NPS for accumulating your retirement corpus.

Q. The subject policy is maturing next year in June 20. What are the maturity benefits for this policy? What action do have I to take for getting maturity benefits?

- Mangesh Joshi

A We do not have access to your policy details. You can check the maturity benefits of your policy from your policy document . Al ternat ive ly, please provide the name of the policy to help us answer your query. If the insurer is ICICI Prudential, then you would have to register your bank account details with them in advance, as per the process provided in their website. Please visit their website and go to Customer Services > Processes > Payout Related to know the same. Your maturity

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Do you also have similar queries to ask our experts? Write to us at: [email protected].

amount w i l l be d i rec t l y credited to your bank account number registered with them

within 15 days of your policy maturity date.

MUTUAL FUND ANALYSIS


Investing in infrastructure funds

The equity market have seen a

sharp correction in the last

month from near all-time levels

at the start of July 2019.

Concerns over taxation on

foreign investors, growth

slowdown and global market

volatility surrounding the trade

war between the US and China

have turned foreign investors

cautious. However, domestic

inst i tut ional investors,

particularly mutual funds, have

been net buyers in the current

fall indicating a value buying

opportunity.

The broader market reflected

by midcaps and small caps

continues to underperform

and has fallen significantly from

their highs in January 2018.

Many of the midcap and small

cap stocks offer good buying

opportunity.

Ind iv idua l companies in

i n v e s t m e n t o r i e n t e d

infrastructure segments like

capital goods, power, utilities,

and industrials sector have

lagged in performance in the

last four to five years. In the

midst of current negative

investor sent iments, the

structural positives in terms of

l o w e r i n t e r e s t r a t e

environment and the

government's significant

infrastructure spending

guidance augur wel l for

companies operating in these

sectors. Therefore, historical

underperformance, reasonable

valuations and improved

b u s i n e s s o u t l o o k m a k e

infrastructure funds better

placed for medium to long term

investment.

Infrastructure: Government's

key focus area

The manifesto of the ruling

p a r ty env i s ages o ve r a l l

infrastructure investment to the

tune of 100 lakh crore by `

2022, implying an annual

i n v e s t m e n t o f

20 lakh crore. To meet this, we `

believe the government will

have to step up tendering &

awarding activity exponentially

from 9.6 lakh crore & 3.3 lakh ̀ `

crore, respectively, in FY19.

T h i s c o u l d o f f e r h u g e



opportunities to all infra and

allied industries and see a

significant rise in the order

book from the current level

over the next three years.

In terms of verticals, it plans to

construct 60,000 km of national

highways in the next five years.

I n o u r v i e w, t h e m a j o r

component of 60,000 km would

involve Bharatmala 1.0 and

balance road work under NHDP

aggregating 34,800 km at an

estimated cost of 5.35 lakh `

crore. EPC players could reap

good benef i ts f rom th is

opportunity.

On the urban infrastructure

front, it aims to cover 50 cities

with the metro network. With

400 km of metro lines currently

operational, the government

could have to add additional

~700 km of metro line to cover

50 cities, which could entail

investment of 2.8-3.5 lakh `

crore. Assuming 50% as civil

work, it could present an

opportunity of 1.4-1.85 lakh `

crore.

In terms of airport, it aims to

d o u b l e t h e n u m b e r o f

functional airports in the next

f i ve years (101 a i rpor ts

functional currently). As per

media reports, the construction

of 100 new airports could entail

investment of US$60 billion ( `

4.2 lakh crore).

On the housing front, by 2022, it

plans to ensure a pucca house

to every family who are either

living in a kuccha house or have

no access to housing.

Being thematic in nature,

allocation to infrastructure

funds should not exceed 5-10%

of an investor's overall equity

portfolio. Our preferred funds in

this sector are Sundaram Infra

A d v a n t a g e F u n d , Ta t a

Infrastructure Fund and UTI

Infrasturcture Fund.



Product Label:

Sundaram Infrastructure Advantage Fund

Fund Objective:To generate long-term returns by investing predominantly in e q u i t y / e q u i t y - r e l a t e d instruments of companies engaged either directly or indirectly in infrastructure - and infrastructure related activities or expected to benefit from the growth and development of infrastructure.

NAV as on July 31, 2019 ( )` 30.4Inception DateFund Manager S. KrishnakumarMinimum Investment ( )` Lumpsum 100

SIP 100Expense Ratio (%) 2.56Exit Load 1% on or before 12MBenchmark S&P BSE 100 - TRILast declared Quarterly AAUM( cr)` 613

Key Information

September 29, 2005

THIS PRODUCT IS SUITABLE FOR INVESTORS WHO ARE SEEKING• Long term capital wealth creation solution• An equity fund that predominantly invests in equity and equity related securities of companies engaged in banking and financial services.

Performance:

The fund is among the oldest funds in the infrastructure sector space. The funds recent performance has lagged its benchmark as it shied away from few of the expensive stocks which continued to rally in last few months. However we believe that the fund is well positioned to outperform the benchmark going forward. As

stof July 31 , it has generated CAGR of 4.8% and 7.4% over three years and five years vs. 9.6% and 9% returns by benchmark, respectively.

Performance vs. Benchmark

-6.5

4.8 7

.4 8.4

-2.3

9.6

9

N.A

.

-10

-5

0

5

10

15

1 Year 3 Year 5 Year Since Inception

CA

GR

Retu

rns

%

Fund Benchmark



Portfolio:

The portfolio comprises 41 stocks. Currently, the portfolio is tilted towards large caps (~64%) while midcap and small cap stocks make up the rest. The fund has significant exposure to large private corporate centr ic banks,

%

5.2

5.2

5.1

4.3

4.1

4.0

3.4

3.4

3.4

3.3

Top 10 Holdings Asset Type

Larsen & Toubro Ltd. Domestic Equities

ICICI Bank Ltd. Domestic Equities

The Ramco Cements Ltd. Domestic Equities

Timken India Ltd. Domestic Equities

Kalpataru Power Transmission Ltd. Domestic Equities

Grindwell Norton Ltd. Domestic Equities

HDFC Bank Ltd. Domestic Equities

Shree Cement Ltd. Domestic Equities

Praj Industries Ltd. Domestic Equities

Honeywell Automation India Ltd. Domestic Equities

indicating a play on capex cycle revival. However, the fund also has stocks catering to the retail segment. The fund has handpicked public sector banks (non PCA) with relatively better capital adequacy poised to benefit from a revival in the credit cycle.

%13.3

13.2

12.8

8.4

6.0

4.9

4.1

4.0

3.4

2.9

Top 10 Sectors Asset Type

Engineering - Industrial Equipments Domestic Equities

Bank - Private

Engineering - Construction Domestic Equities

Cement & Construction Materials Domestic Equities

Refineries Domestic Equities

Abrasives Domestic Equities

Consumer Durables - Electronics Domestic Equities

Domestic Equities

Bearings Domestic Equities

Construction - Real Estate Domestic Equities

Transmission Towers / Equipments Domestic Equities

%

1

Whats out

GAIL (India) Ltd.



Our View:The fund's strong performance since inception and a long history are comforting factors even though the performance in recent times has been

mediocre. With a good mix of stocks that are a play on corporate lending and private lending, we feel investors can consider the fund from a three-year perspective.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link:https://www.sundarammutual.com/uploaddir/consolidated_factsheet/Consolidated_Factsheet_7_2019_230819_170329.pdf

Data as on July 31, 2019; Portfolio details as on Jun- 2019 Source: ACE MF, ICICI Direct Research



Tata Infrastructure Fund

Fund Objective:

The scheme aims to provide income d is t r ibut ion and medium to long term capital g a i n s b y i n v e s t i n g predominantly in equity or equity related instruments of the companies in the infrastructure sector.

THIS PRODUCT IS SUITABLE FOR INVESTORS WHO ARE SEEKING• Long term capital wealth creation solution• An equity fund that predominantly invests in equity and equity

related securities of companies engaged in banking and financial services.

Product Label:

NAV as on July 31, 2019 ( )` 53.6Inception DateFund Manager

Rupesh Patel

Minimum Investment ( )` Lumpsum 5000SIP 150

Expense Ratio (%) 2.55Exit Load 0.25% on or before 3MBenchmark S&P BSE India Infrastructure Index - TRILast declared Quarterly AAUM( cr)` 571

Key Information

December 31, 2004

Investors understand that their principal will be at high risk

Performance

The fund has consistently been

among the top performing

funds in the sector over shorter

as well as longer timeframes. It

has delivered 4.9% CAGR and

8 . 6 % C A G R r e t u r n s ,

respectively, for three and five-styear time frames as of July 31 .

The historical performance the

benchmark is not available as

i t ' s a newly constructed

benchmark.


-1.

7

4.9 8

.6 12.2

-5

0

5

10

15

1 Year 3 Year 5 Year SinceInception

CA

GR

Re

turn

s %

Fund Benchmark



Portfolio

The fund 's port fo l io has exposure to a diverse mix of businesses within the banking and financial services space – banks (private as well public), NBFCs as well as insurance. Its focus on corporate facing private banks is accentuated by recent additions to the portfolio. Currently, there are

35 stocks in the portfolio, making it less concentrated than some other funds and with a larger tail than most peers. The fund has lower exposure to its top picks than some other peers. It has ~60% of its portfolio invested in large cap stocks with the rest invested in midcaps and small caps.

%

11.7

6.3

5.4

5.4

5.2

4.5

4.2

3.9

3.3

3.0



Astral Poly Technik Ltd. Domestic Equities

KNR Construction Ltd. Domestic Equities



Power Grid Corporation Of India Ltd. Domestic Equities

NCC Ltd. Domestic Equities

Sadbhav Engineering Ltd. Domestic Equities

Voltas Ltd. Domestic Equities

AIA Engineering Ltd. Domestic Equities

%25.7

8.5

8.0

6.3

5.4

5.1

4.1

3.9

2.9

2.8



Plastic Products Domestic Equities

Bank - Private Domestic Equities


Bearings Domestic Equities

Domestic Equities

Port Domestic Equities


Power Generation/Distribution Domestic Equities

Air Conditioners Domestic Equities

Construction - Real Estate

%

2.1

Whats In

Tata Steel Ltd.



Our View:

The portfolio is well

const ruc ted in te rms o f

diversification. Investors can

consider the fund from a three-

year perspective.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link:http://www.tatamutualfund.com/our-funds/equity/sectoral/tata-infrastructure-fund




UTI Infrastructure Fund

Fund Objective:

The investment objective of

the Scheme is to provide long

term capital appreciation by

investing predominantly in

equity and equity related

secur i t ies o f companies

engaged either directly or

indirectly in the infrastructure

areas of the Indian economy.

However, there can be no

assurance or guarantee that

the investment objective of the

scheme would be achieved.

NAV as on July 31, 2019 ( )` 26.6Inception DateFund Manager

Sanjay Ramdas DongreMinimum Investment ( )` Lumpsum 5000

SIP 500Expense Ratio (%) 2.26Exit Load 1% on or before 1Y, Nil after 1YBenchmark NIFTY INFRA - TRILast declared Quarterly AAUM( cr)` 1379

Key Information

April 7, 2004

Product Label:

THIS PRODUCT IS SUITABLE FOR INVESTORS WHO ARE SEEKING

• Long term capital wealth creation solution

• An equity fund that predominantly invests in equity and equity

related securities of companies engaged in banking and financial

services.

Investors understand that their principal will be at high risk

Performance

The fund has consistently been among the top performing funds in the sector over shorter as well as longer timeframes. It has delivered 5% CAGR and 6 . 3 % C A G R r e t u r n s , respectively, for three and five-year time frames vs. 3.2% C A G R a n d 1 . 1 % C A G R performance of the benchmark over these time frames (as of

stJuly 31 ).


-3.8

5 6.3

11.8

0.1 3

.2

1.1

7.8

2

-5

0

5

10

15

1 Year 3 Year 5 Year SinceInceptionC

AG

R R

etu

rns

%

Fund Benchmark



PortfolioThe fund 's port fo l io has exposure to a diverse mix of businesses within the banking and financial services space – banks (private as well public), NBFCs as well as insurance. Its focus on corporate facing private banks is accentuated by recent additions to the portfolio. Currently, there are

42 stocks in the portfolio, making it less concentrated than some other funds and with a larger tail than most peers. The fund has lower exposure to its top picks than some other peers. It has ~60% of its portfolio invested in large cap stocks with the rest invested in midcaps and small caps.

%

8.2

7.3

6.4

6.4

5.7

3.5

3.3

3.2

3.1

3.1


Axis Bank Ltd. Domestic Equities


Bharti Airtel Ltd. Domestic Equities



State Bank Of India Domestic Equities

Blue Star Ltd. Domestic Equities

Ultratech Cement Ltd. Domestic Equities

Voltas Ltd. Domestic Equities

Kalpataru Power Transmission Ltd. Domestic Equities

%19.8

13.6

12.5

6.4

6.3

5.8

4.0

3.9

3.9

3.5


Bank - Public


Bank - Private Domestic Equities



Logistics Domestic Equities

Telecommunication - Service Provider Domestic Equities

Domestic Equities

Air Conditioners Domestic Equities

Industrial Gases & Fuels Domestic Equities

Power Generation/Distribution Domestic Equities



Our View:The portfolio is well const ruc ted in te rms o f

diversification. Investors can consider the fund from a three-year perspective.

You can view performance of other schemes being managed by the fund manager of this scheme on the following link: https://docs.utimf.com/v1/AUTH_5b9dd00b-8132-4a21-a800-711111810cee/ UTIContainer/UTI% 20Fund %20Watch %20August%20201920190807-213004.pdf




Performance of other schemes managed by these fund managers:

1. Sundaram Infrastructure Advantage Fund

8.68 11.90 ---- -- --

8.63 11.89 ---- -- --

2.77 10.35 11.788.52 17.88 15.79

-- -- ---23.76 -- --

-- -- --

-23.76 -- ---- -- --

-23.76 -- --

Performance of other schemes managed by the fund manager - S. Krishnakumar

Sundaram World Brand Fund-Sr III-Reg(G)MSCI ACWI IndustrialsSundaram Fin Serv Opp Fund(G)Nifty Financial Services - TRI

Fund Name 1 Year 3 Years 5 Years

Top 3 Performing Schemes Sundaram World Brand Fund-Sr II-Reg(G)MSCI ACWI Industrials

S&P BSE 250 Small Cap

Bottom 3 Performing SchemesSundaram Emerging Small Cap-Sr-V-Reg(G)S&P BSE 250 Small CapSundaram Emerging Small Cap-Sr-VI-Reg(G)S&P BSE 250 Small CapSundaram Emerging Small Cap-Sr-VII-Reg(G)

Note : The schemes may or may not have been managed by the same Fund Manager since its inceptionNote : The concerned Fund Manager manages 40 other schemes of the concerned Mutual Fund

-6.95 8.28 ---7.58 6.88 7.84-7.06 8.41 ---7.58 6.88 7.84-7.82 6.63 ---7.58 6.88 7.84

-12.04 -- ---11.72 3.80 7.00-12.90 -- ---7.58 6.88 7.84

-- -- ---- -- --

S&P BSE 500

Bottom 3 Performing SchemesSundaram Smart NIFTY 100 Eq Weight Fund-Reg(G)NIFTY 100 Equal Weight Index - TRISundaram Value Fund-VII-Reg(G)S&P BSE 500

Top 3 Performing Schemes Sundaram Value Fund-II-Reg(G)S&P BSE 500Sundaram Value Fund-III-Reg(G)S&P BSE 500Sundaram LT Tax Adv Fund-Sr II-Reg(G)

Performance of other schemes managed by the fund manager - S. Bharath

Fund Name

Sundaram Equity Savings Fund-Reg(G)NIFTY 50 Equity Savings Index

1 Year 3 Years 5 Years




2. Tata Infrastructure Fund

0.03 7.36 8.810.93 11.49 9.09-1.74 4.85 8.60

-- -- ---2.14 8.31 12.560.93 11.49 9.09

-3.55 5.88 11.17-14.85 3.68 9.18-9.41 3.08 7.18

-7.83 7.81 9.61

Performance of other schemes managed by the fund manager - Rupesh Patel

Tata Infrastructure Fund-Reg(G)S&P BSE India Infrastructure Index - TRITata India Tax Savings Fund-Reg(DP)S&P BSE SENSEX - TRI


Top 3 Performing Schemes Tata Large Cap Fund(G)S&P BSE SENSEX - TRI

Bottom 3 Performing SchemesTata Mid Cap Growth Fund(G)Nifty Midcap 100 - TRITata Ethical Fund(G)Nifty 500 Shariah - TRI

Note : The schemes may or may not have been managed by the same Fund Manager since its

inception Note : The concerned Fund Manager manages 4 other schemes of the concerned Mutual

Fund

-1.74 4.85 8.60-- -- --S&P BSE India Infrastructure Index - TRI

Performance of other schemes managed by the fund manager - Abhinav Sharma


Top 3 Performing Schemes Tata Infrastructure Fund-Reg(G)

Note : The schemes may or may not have been managed by the same Fund Manager since its

inception Note : The concerned Fund Manager manages 1 other schemes of the concerned Mutual

Fund



3. UTI Infrastructure Fund

-3.75 5.05 6.340.10 3.21 1.10-6.59 7.14 8.81-2.29 9.58 8.96

Performance of other schemes managed by the fund manager - Sanjay Ramdas Dongre

UTI MEPUSS&P BSE 100 - TRI


Top 3 Performing Schemes UTI Infrastructure Fund-Reg(D)NIFTY INFRA - TRI




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EQUITY MODEL PORTFOLIO


Our indicative large-cap equity model portfolio is delivering an impressive

return (inclusive of dividends) of 146.20% till date (as on July 31, 2019) since its

inception (June 21, 2011) vis-à-vis the benchmark index (S&P BSE Sensex)

return of 110.73% during the same period, an outperformance of 35.47. This

validates our thesis of selecting companies with sound business fundamentals

that forms the core theme of our portfolio. We have revised stocks in our midcap

portfolio. It continues to outperform, delivering 234.79% (inclusive of

dividends) till date (as on July 31, 2019) vis-à-vis the benchmark index (CNX

Midcap) return of 105.90%, an outperformance of 128.89. Our consistent

outperformance demonstrates our superior stock picking ability as markets

aligned to our view of favourable risk reward, good franchisee vs. reward-at-

any-risk businesses.

We have always suggested the SIP mode of investment and still find a lot of

merit in it as the preferred mode of deployment given the market conditions and

volatility associated since the inception of the portfolio. We highlight that the SIP

return of our portfolio has consistently outperformed the indices.

Following the same pace and opportunities in the market, our latest portfolio

(large caps) remains overweight on BFSI sector – HDFC Bank (10%), HDFC

Limited (9%), Axis Bank (6%) Bajaj Finance (6%) and SBI (6%). Tech Mahindra

Limited is the latest addition to the large-cap portfolio, given 6% weightage.

Maruti Suzuki and EICHER Motors have been removed from the large-cap and

diversified model portfolio. Please note that the weightage for State Bank of

India and Divis Laboratories have been revised. Affirming our view on

consumption demand, Dabur (5%) and Marico (4%) continue to be part of our

large cap portfolio.

Brigade Enterprises given 6% weightage and Somany Ceramics given 6%

weightage are the latest addition to the mid-cap portfolio. Exide Industries and

Graphite India have been removed from the mid-cap and diversified model

portfolio.

We remain positive on auto, IT and pharma. We remain overweight to neutral on

pure play defensives (IT, FMCG) as secular earnings coupled with sector

rotation could lead to consolidation in near term valuations and offer stock

specific opportunities.

We continue to remain underweight on metals and oil & gas with our only pick

being Gail Ltd., which has a better risk reward opportunity. Among individual

names, we recommend TCS in the IT space, HDFC and HDFC Bank in the BFSI

space and ITC in consumer space.



Name of the company

Largecap Stocks

Model Portfolio

Largecap(%)

Midcap(%)

Diversified(%)

Mahindra & Mahindra (M&M) 4.0 2.8

HDFC Bank 10.0 7.0

Axis Bank 6.0 4.2

HDFC Limited 9.0 6.3

Bajaj Finance 6.0 4.2

State Bank of India 8.0 5.6

Larsen & Toubro 6.0 4.2

UltraTech Cement 4.0 2.8

Dabur India 5.0 3.5

Marico 4.0 2.8

ITC 6.0 4.2

Nestle India 4.0 2.8

Tata Consultancy Services 6.0 4.2

Tech Mahindra Limited 6.0 4.2

Hindustan Zinc 6.0 4.2

GAIL Ltd. 5.0 3.5

Divis Laboratories 5.0 3.5

Total 100.0

Largecap share in diversified 70.0



Bharat Forge 6.0 1.8

Bajaj Finserve 8.0 2.4

Indian Bank 6.0 1.8

AIA Engineering 6.0 1.8

Kalpataru Power transmission 6.0 1.8

Ramco Cement 6.0 1.8

Kansai Nerolac 6.0 1.8

Pidilite Industries 6.0 1.8

Tata Chemicals 6.0 1.8

Bata India 6.0 1.8

Brigade Enterprises 6.0 1.8

Somany Ceramics 6.0 1.8

Firstsource Solutions 6.0 1.8

Container Corporation of India 6.0 1.8

Syngene International 8.0 2.4

Arvind Fashions 6.0 1.8

Total 100.0

Midcap share in diversified 30

TOTAL 100.0

ICICI Securities has received an Investment Banking mandate from Mahindra & Mahindra.



Performance so far since inception*

146.2013853

234.7949728

170.3703537

110.7338154 105.9024365 108.8265052

0

100

200

300

Large Cap Midcap Diversified

%

Portfolio Benchmark

*Returns (in %) as on July 31, 2019

Large-cap Portfolio Benchmark: BSE Sensex; Mid-cap Portfolio Benchmark: CNX Midcap; Diversified Portfolio Benchmark: Combination of BSE Sensex and CNX Midcap

Value of Rs 1,00,000 invested via SIP at end of every month

98

00

00

0

98

00

00

0

98

00

00

0

14

67

27

48

.03

21

21

47

54

.62

15

48

02

29

.12

13

11

58

89

.46

13

01

58

00

.12

12

29

78

17

.14

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Largecap Midcap Divesified

|

Investment Value of Investment in Portfolio Value if invested in Benchmark

Start date of SIP: June 30, 2011; *Value as on July 31, 2019

QUIZ TIME


1. The current rate of Senior Citizen Savings Scheme (SCSS) is

______ for Q2 of FY 2019-20 (July-sept).

2. What is the age criteria for reverse mortgage?

3. ____________ is that phase of retirement where you no longer build

wealth but utilize it.

4. Returns received from which scheme is 7.6 % for Q2 of FY 2019-20

(July-sept)

5. Debt investors are not subject to taxation. State True or False.

6. Loan approved in a reverse mortgage is max _______ years from

the time of application.

Note: You may send in your answers at:[email protected]. The answers will be published

in our next edition. The names of the earliest all correct entries will be

published too. So jog your grey cells and be quick to send in your

entries.

Correct answers for the July 2019 Quiz is:

1. A meter that indicates the risk involved in the fund? – Riskometer

2. Asset Management Company comes up with a New Fund Offer

when there is a demand for a specific investment category.

3. You can redeem units of mutual fund at any time, if you have

invested in Open-ended scheme.

4. A measure of volatility of returns on funds that tells us how much

the return of a fund can deviate from its historical mean. -

Standard deviation

5. There is no tax implication on Physical Gold-False

6. Which investment has restriction in withdrawal, but investors thcould withdraw partial amount, post 7 year of the investment? -

Public Provident Fund

PRIME NUMBERS

Equity Markets


Domestic Equity Indices

Global Equity Indices

Sectoral Indices

61

31-Jul-19 28-Jun-19 Change (%)

CNX Nifty 11118.0 11789.0 -5.7%

CNX Midcap 15921.2 17654.1 -9.8%

S&P BSE Sensex 37481.1 39394.6 -4.9%

S&P BSE 100 11210.8 11909.7 -5.9%

S&P BSE 200 4634.7 4926.6 -5.9%

S&P BSE 500 14324.1 15291.7 -6.3%


Dow Jones 26,864.3 26,600.0 1.0%

S&P 500 2,980.4 2,941.8 1.3%

Nasdaq 8,175.4 8,006.2 2.1%

FTSE 7,646.8 7,425.6 3.0%

DAX 12,189.0 12,398.8 -1.7%

CAC 40 5,511.1 5,539.0 -0.5%

Nikkei 21,521.5 21,275.9 1.2%

Hang Seng 27,565.7 28,542.6 -3.4%

Shanghai Composite 2,932.5 2,978.9 -1.6%

Taiwan Weighted 10,823.8 10,730.8 0.9%

Straits Times 3,300.8 3,372.3 -2.1%


S&P BSE Auto 15,472.0 17,904.2 -13.6%

S&P BSE Bankex 32,689.4 34,971.9 -6.5%

S&P BSE FMCG 17,555.9 19,855.4 -11.6%

S&P BSE Healthcare 12,704.4 12,889.3 -1.4%

S&P BSE Metals 9,685.5 11,107.2 -12.8%

S&P BSE Oil & Gas 13,237.0 14,803.3 -10.6%

S&P BSE Power 1,966.3 2,093.9 -6.1%

S&P BSE Realty 2,067.1 2,201.4 -6.1%

S&P BSE Teck 7,686.8 7,674.2 0.2%

PRIME NUMBERS


Debt Markets

Volatility Index (VIX)

62

31-Jul-19 28-Jun-19

VIX 13.59 14.95

Government Securities Yield (in %) Jul-19 Jun-19 Change (bps)

10 year 6.37 6.88 -51

5 year 6.30 6.77 -46

3 year 6.21 6.58 -37

1 year 5.87 6.19 -32

Corporate Bond Yields (in %) Jul-19 Jun-19 Change (bps)

AAA 10 year 7.91 8.35 -44

AAA 5 year 7.73 8.09 -36

AAA 3 year 7.41 7.84 -43

AAA 1 year 7.27 7.61 -35

AA 10 year 8.29 8.63 -35

AA 5 year 8.07 8.50 -43

AA 3 year 7.89 8.43 -54

AA 1 year 7.71 8.17 -47

Commercial Paper (in %) Jul-19 Jun-19 Change (bps)

12 Months 0

6 Months 0

3 Months 0

1 Month 0

Note : Data not available on Bloomberg for 3,6 and 12 month CP post 1/15/19 and for 1 month CP post 3/27/18

T-Bills Yields (in %) Jul-19 Jun-19 Change (bps)

91D TB 0

182D TB 0

364D TB 0

Note : Data not available on Bloomberg for 3,6 and 12 month Tbill post 3/28/18

PRIME NUMBERS

10-year benchmark yields (%) across countries


Macro-economic Indicators

Consumer price index (CPI)

Wholesale price index (WPI)Month

63

Countries 31-Jul-19 28-Jun-19 Change in bps

US 2.014 2.005 1

UK 0.611 0.833 (22)

Japan (0.153) (0.158) 1

Spain 0.280 0.392 (11)

Germany (0.440) (0.327) (11)

France (0.186) (0.007) (18)

Italy 1.542 2.102 (56)

Brazil 7.229 7.452 (22)

China 3.160 3.236 (8)

India 6.369 6.879 (51)

MF Investment Jul-19 Jun-19 Fy19

Equity 15084 6232 87667

Debt 52799 45371 389356

FII Investment Jul-19 Jun-19 Fy19

Equity -13316 1033 9722

Debt 8418 8265 -39425

Items Weights(%) May-19 Jun-19 Jul-19

Food&bev. 45.86 2.03 2.37 2.33

Pan,tob& intox. 2.38 3.93 4.11 4.89

Cloth & Foot 6.53 1.80 1.52 1.65

Housing 10.07 4.82 4.84 4.87

Fuel & light 6.84 2.48 2.32 -0.36

Misc. 28.31 4.62 4.45 4.65

CPI 100 3.05 3.18 3.15

Weights May-19 Jun-19 Jul-19WPI 100.0 2.45 2.02 1.08 Primary Articles 22.6 6.16 6.72 5.03 Fuel & Power 13.2 0.98 -2.20 -3.64 Manufactured Goods 64.2 1.28 0.94 0.34

*WPI numbers are based on new series with 2011-12 as the base year’

PRIME NUMBERS

Commodities


Mutual Funds: Category Average Returns

Equity Funds Returns (in %)

Debt Funds Returns (in %)

Index of industrial production (IIP) Sector-wise growth rate (%)

Currencies and Commodities

Currencies

64

Sources for above data: Bloomberg, Reuters, CRISIL, MOSPI, ICICIdirect.com Research

Categories 30-Jun-19 31-May-19 30-Apr-19 Weight(%)Mining -3.3 2.2 -18.7 14.4Manufacturing -4.3 6.2 -8.3 77.6Electricity -2.2 8.6 1.7 8.0Overall -3.9 5.9 -8.8 100.0

*IIP numbers are based on new series with 2011-12 as the base year’

31-Jul-19 28-Jun-19 Change (%) StatusUSDINR 68.8 69.0 -0.3% AppreciatedEURINR 76.7 78.5 -2.4% AppreciatedGBPINR 83.7 87.6 -4.4% AppreciatedAUDINR 47.4 48.3 -1.9% AppreciatedCHFINR 69.5 70.8 -1.8% AppreciatedJPYINR 0.6 0.6 -1.2% AppreciatedCNYINR 10.0 10.1 -0.5% Appreciated

31-Jul-19 28-Jun-19 Change (%)Crude ($/barrel) 65.2 66.6 -2.1%Gold ($/ounce) 1,413.8 1,409.5 0.3%

Multicap Midcap Large Cap Small cap ELSS6 months 0.43 -2.34 3.02 -5.22 -0.141 year -6.83 -11.78 -3.04 -17.06 -8.073 year 6.62 3.77 7.34 2.78 6.945 year 9.16 9.96 8.83 9.75 9.56

Returns as on July 31, 2019

Debt Funds Returns (in %) Liquid Debt ST Ultra ST Debt LT

6 months 6.74 3.31 6.67 24.34

1 year 6.76 5.18 6.05 19.87

3 year 6.78 5.95 6.52 9.08

Returns as on July 31, 2019

Printed by jasmine Art Printers Pvt. Ltd., A-737/3, TTC Ind. Area, MIDC, Navi Mumbai - 400 710.

Documents

Our retirement will perhaps be quite · 2019-09-10 · But before you decide the best instruments to invest in for your retirement it is important to actually ascertain how much money