AJAY NEGI’s Post

Unlocking knowledge on Capital Market and Money Market. Capital Markets and Money Markets, both are components of Financial Markets. What are Financial Markets? Financial markets refer broadly to any marketplace where securities trading occurs, including the stock market, bond market, forex market, and derivatives market. Financial markets are vital to the smooth operation of capitalist economies. Diving into Capital Market and Money Market: 1. Capital Market: A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold. It is further divided into two components: A. Primary market: In a Primary Market, securities are created for the first time for investors to purchase. New securities are issued in this market through a stock exchange, enabling the government as well as companies to raise capital. Example - Initial Public Offer, New Fund Offer. B. Secondary market: When we buy and sell securities which are already present in the market. They are first introduced in primary markets. 2. Money Market: The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. It caters to the short-term borrowing needs of working capital. Types of Money market instruments/Securities: A. Call Money or Money at Call - Call Money refers to inter-bank borrowing and lending for a very short period, typically overnight to upto 14 days. The Call Money or Money at Call enables banks and financial institutions to manage their short-term liquidity requirements. B. Treasury Bills (T-Bills) - Treasury Bills or T-Bills refer to short-term securities issued by the RBI on behalf of the Central Government. They act as short-term fundraising tools for the government. C. Cash Management Bills (CMBs) - Similar to T-Bills, CMBs are also short-term securities sold by the RBI on behalf of the Central Government, but with a maturity period of less than 91 days. It is also aimed at meeting the short-term cash flow mismatches of the Government of India. D. Certificate of Deposit (CD) - Certificate of Deposit (CD) is a security issued by the Scheduled Commercial Banks (SCBs) and some other Financial Institutions (FIs) that have been permitted by the RBI to raise short-term funds. Certificates of Deposit (CDs) should be issued in multiples of ₹1 lakh, with a minimum amount of ₹1 lakh. #Financialmarkets #Investmentbanking #Stockmarket #Bondmarket #Forexmarket #Derivativesmarket.

Often, we hear about Corporate Action but some of us might not be having an idea about it. So, let's dig into it a little to know about it. A corporate action is any activity that brings material change to an organization and impacts its stakeholders, including shareholders, both common and preferred, as well as bondholders. These events are generally approved by the company's board of directors; shareholders may be permitted to vote on some events as well. Types of Corporate Actions: 1. Dividend Distribution: A company may distribute some of its profits to its shareholders through dividends. Dividends can be announced in cash, additional shares, or other assets. 2. Stock Split: A stock split involves dividing existing shares into multiple shares, thereby increasing the number of outstanding shares while curtailing the stock price proportionally. 3. Reverse Stock Split: Reverse stock split or stock consolidation is an action that involves combining multiple shares into one share, reducing the number of outstanding shares while increasing the share price proportionally. 4. Rights Issue: Companies may offer existing shareholders to buy additional shares at a lower or discounted price to raise additional capital. 5. Bonus Issue: A bonus issue, also known as a scrip dividend, is when a company issues additional shares to existing shareholders without extra cost. 6. Mergers and Acquisitions: Mergers involve combining two companies into one, while acquisitions involve one company purchasing another. These actions can lead to changes in share ownership and value. 7. Spin-Off: In a spin-off corporate action, a company creates an independent entity by separating one of its divisions or subsidiaries. Existing shareholders of the parent company are then given shares in the newly formed company. 8. Share Buyback: In a share buyback, a company repurchases its shares from the market, reducing the number of outstanding shares. #Capitalmarkets #Equityresearch #Investmentresearch #Tradesettlement #Investmentcompliance #Financialmodeling

Hi all, hope this post finds all of you well! Presenting a #FinancialModel with DCF and Relative Valuation approach on Cipla. About Cipla- Cipla Limited (stylized as Cipla) is an Indian multinational pharmaceutical company, headquartered in Mumbai. Cipla primarily develops medication to treat respiratory disease, cardiovascular disease, arthritis, diabetes, depression, and other medical condition. Cipla, as an organization has been built brick-by-brick on the foundation of care. Caring for life has always been and continues to remain, its guiding purpose. Driven by the same purpose, it has extended its presence to 80+ countries providing over 1,500 products across various therapeutic categories in 50+ dosage forms. To make healthcare more affordable globally, it is deepening its presence in the key markets of India, South Africa, the U.S. among other economies. Topics covered: 1. #HistoricalFinancials 2. #FinancialRatios 3. #Weightedaveragecostofcapital 4. #Intrinsicgrowth 5. #Betacalculation 6. #Terminalgrowth 7. #Relativevaluation 8. #DCFapproach Some Financials Highlights 1.Gross Margin has been slowly rising over the years. Good sign for the company. 2.EBITDA Margin has also been slowly rising over the years. Again, a good sign for the company. 3.Net Profit slipped between 2017-2019 but recovered well after that. There has been a rise of almost 20% in FY2023 as compared to FY2016 which is good for the company. 4.ROCE has shown a good growth over the years. 5.ROE has not been that impressive. Needs to be worked upon. 6.Debtor days have been constant. Can be worked upon. The more the company delays in making payment, the longer is the availability of cash. 7.Creditor days were good in the initial years as the company took long time to pay which is good but in the last 3 years, company has been paying early to the creditors. 8.Inventory days have been impressive because, days of converting inventory into sales/cash have come down from 101 to 83. Notes* 1.This is for educational purpose, not an investment advice. 2.Data taken from Screener. 3.Risk free Rate of return taken as 10-year bond yield from Investing .com 4.Tax Rate assumed. 5.Nifty Returns & Mahindra Returns taken from Yahoo Finance for Beta Calculation. 6.Terminal Growth Rate taken as average GDP growth for the last 20 years. 7.Cost of Debt taken from Google. 8.WACC= (Cost of Equity*Equity Weight) + (Cost of Debt*Debt Weight). 9. Intrinsic Growth= Reinvestment Rate% * ROIC% 10.BETA = Using SLOPE formula. 11. Market Return taken as the average of last 24 years used in calculation of Cost of Equity. 12.Cost of Equity (Ke) = Risk free rate + (Market Return-Risk free rate) *Beta Looking forward to connecting with you guys in case of any discussion to get some insights which in return will improve my understanding about the topic. #Financialanalysis #Equityresearch #investmentbanking #Financialanalyst #Investmentcompliance #Financialmodeling #Equitymarket #Debtmarket #Valuations

Often, we hear about Loan Syndication but some of us might not be having an idea about it. So, let's dig into it a little to know about it. Loan syndication refers to the process of pooling together funds from multiple lenders, known as syndicate members, to provide a large loan to a borrower. This borrowing arrangement is undertaken by corporations or governments seeking substantial financing for significant projects, acquisitions, or expansions.  The syndicate members, including institutional investors and HNI (High Net Worth Individuals), collaborate to assess the borrower’s creditworthiness, negotiate terms and conditions, and distribute the loan amount among themselves. Borrowers, which may include retail investors seeking significant capital, benefit from this collaborative effort. Loan syndication is crucial in enabling businesses and governments to access capital for their ambitious ventures while diversifying the risk for the lenders involved. It serves as a strategic financial mechanism that involves a collective effort from corporates, lenders, borrowers, HNI, retail investors, and institutional investors. Types of Loan Syndication: 1.Club Deals: Club deal syndication involves a select group of lenders forming a syndicate to provide a loan. This type is commonly used for mid-sized transactions where a smaller group of lenders is sufficient to meet the borrowing requirements. The lenders in a club deal syndication work closely together and share the risks and rewards of the loan. 2.Participating Loans: Participating loans are a type of loan syndication where each lender can participate in the profits generated by the borrower. In addition to receiving interest payments, participating lenders may receive a share of the borrower’s profits based on predefined terms. This type of syndication allows lenders to benefit from the borrower’s success beyond the regular interest payments. 3.Best-Efforts Syndication: Best-efforts syndication occurs when the lead arranger of the syndicate makes its best effort to raise the necessary funds for the loan but does not guarantee the total amount. In this arrangement, the lead arranger takes on the responsibility of underwriting a portion of the loan, while the remaining amount is sourced from other lenders based on their interest. The success of the syndication relies on the level of interest generated from these lenders. #Equitymarket #Debtmarket #investments #Privateequity #loansyndication

Hi all, hope this post finds all of you well! I feel immense pleasure to present my first ever #Financial Model on Mahindra & Mahindra.   About Mahindra & Mahindra: Mahindra & Mahindra Limited (M&M) is an Indian multinational automotive manufacturing corporation headquartered in Mumbai. It was established in 1945 as Mahindra & Mohammed and later renamed Mahindra & Mahindra. Part of the Mahindra Group, M&M is one of the largest vehicle manufacturers by production in India. Its unit, Mahindra Tractors, is the largest manufacturer of tractors in the world by volume. It was ranked 17th on a list of top companies in India by Fortune India 500 in 2018. Its major competitors in the Indian market include Maruti Suzuki India and Tata Motors. Topics covered: 1. #HistoricalFinancials. 2. #CommonSizeStatements. 3. #BetaCalculation. 4. #IntrinsicGrowthCalculation. 5. #WeightedAverageCostofCapital. 6. #DCFApproach.   Notes* 1.This is for educational purpose, not an investment advice. 2.Data taken from Screener. 3.Risk free Rate of return taken from Investing .com 4.Tax Rate assumed. 5.Nifty Returns & Mahindra Returns taken from Yahoo Finance for Beta Calculation. 6.Terminal Growth Rate taken as average GDP growth for last 20 years. 7.Cost of Debt taken from Google. 8.WACC= (Cost of Equity*Equity Weight) + (Cost of Debt*Debt Weight). 9. Intrinsic Growth= Reinvestment Rate% * ROIC%. 10.BETA = Using SLOPE formula. 11.Cost of Equity (Ke) = Risk free rate + (Market Return-Risk free rate) *Beta.   Looking forward to connecting with you guys in case of any discussion to get some insights which in return will improve my understanding about the topic. #capitalmarkets #InvestmentBanking #FinancialAnalyst #EquityResearch #debtmarket #InvestmentResearch #FinancialModeling #Valuations #FinancialStatements

Often, we hear about Alternative Investment Funds but some of us might not be having an idea about it. So, let's dig into it a little to know about it. Alternative Investment Fund or AIF is a privately pooled investment vehicle that invests in alternative asset classes such as private equity, venture capital, hedge funds, real estate, commodities etc. It is quite popular among mature investors, who are willing to earn higher returns by taking higher risks. As per the recent SEBI data, it has shown an overall growth of 30% in FY 2022-23. Generally, HNIs (High net worth individuals) and institutions invest in the AIFs as the investment amount is substantially higher. Types of AIFs in India Venture capital funds (Including Angel Funds): This fund specifically invests in start-up or early-stage ventures that have high growth potential.  SME Funds: This fund invests in small and medium enterprises with a good track record in profitability and growth.  Social Venture Funds: This fund invests in companies that aim to make a positive impact on society or the environment, such as sustainability, clean energy, etc. It has also generated favorable returns in the past.  Infrastructure funds: This fund invests in infrastructure projects such as railways, bridges, airports, etc. Private Equity Funds: It makes equity investments in unlisted companies and helps them to raise capital. As unlisted companies face problems in raising capital through debt or equity, private equity funds allow them to raise capital easily.  Debt Funds: This fund invests in the debt securities of the unlisted companies via debt instruments such as bonds, debentures, and other fixed-income instruments.  Hedge fund: Hedge fund uses various investment strategies like short selling, arbitrage, futures, derivatives, and margin trading to generate maximum returns for the investor. Who can invest in an AIF? The following are the criteria for investing in AIF:  1.Indian Residents, NRIs (Non-Resident of India), and foreign nationals are eligible to invest in these funds. 2.Joint investors can also invest in AIF. They can be spouse, parents, or children of investors. The minimum investment amount for investors is Rs1 crore for investors. For directors, employees, and fund managers, this limit is Rs 25 lakh. -Most AIFs come with a minimum lock-in period of three years.  -The maximum number of investors in every scheme is capped at 1,000. Why invest in AIFs? Potential for Higher Returns: AIFs may offer higher returns than traditional investments due to their exposure to a broader range of assets and investment strategies. However, this higher return also comes with higher risk. Portfolio Diversification: By giving investors access to alternative asset classes, including hedge funds, real estate, and private equity, AIFs help them diversify their portfolios. #Capital Market #Finance #Private Equity #Equity Research #Investment banking #Investment Compliance #Derivatives Market #Debt Market

Some terminologies used under Investment Company Act of 1940 Cross Trade (17a-7): Cross trade is the technique of offsetting purchase and sell orders for the same financial instrument without notifying the exchange of the transaction. Cross-trades are permissible if they comply with the requirements outlined in Rule 17a-7 of the Investment Company Act of 1940.Rule 17a-7 under the Investment Company Act of 1940 permits cross trading between funds having a common adviser. It requires to meet some criteria like being executed at the “independent current market price, happening through same broker etc. Affiliate Transaction (17e-1) Rule 17e-1 governs the receipt of compensation by a broker affiliated with a registered investment company in connection with securities transactions by the investment company. Rule 10f-3: Rule 10f-3 permits a registered investment company ("fund") to purchase securities from underwriting syndicates whose members include affiliated persons of the purchasing fund, under certain conditions. The fund's directors must approve procedures for purchases made in reliance on the rule, regularly review fund purchases to determine whether they comply with these procedures and approve necessary changes to the procedures. Rule 12d3: Rule 12d3-1 prohibits a registered investment company (such as a mutual fund, ETF, or UIT) from acquiring: -more than 5% of the value of its total assets in the securities of an issuer. -more than 5% of outstanding equity security of an issuer. -more than 10% of the outstanding principal amount of the debt securities of an issuer. These requirements are in place if the issuer derived more than 15% of its gross revenues in its most recent fiscal year from securities-related activities, i.e. as a broker, a dealer, an underwriter, an investment advisor registered under the Investment Advisers Act of 1940. #Capital Market #Regulatory Reporting #Trade Settlement #Investment Compliance #Post-trade Compliance #Pre-trade Compliance

What is Investment Company Act of 1940: The Investment Company Act of 1940 is an act of Congress that regulates the organization of investment companies and the activities they engage in. It sets standards for the investment company industry. A primary purpose of the Act is to protect investors by ensuring that they're aware of the risks associated with buying and owning securities. Investment companies are required by the Act to provide investors with information about their investment objectives, investment policies, and financial condition when stock is first sold and, henceforth, at regular intervals. Investment companies must also inform investors about investment company structure and operations. The legislation in the Investment Company Act of 1940 is enforced and regulated by the Securities and Exchange Commission (SEC). This legislation defines the responsibilities and requirements of investment companies and the requirements for any publicly traded investment product offerings, such as open-end mutual funds, closed-end mutual funds, and unit investment trusts. The Act primarily targets publicly traded retail investment products. The Investment Company Act of 1940 was passed in order to establish and integrate a more stable financial market regulatory framework following the Stock Market Crash of 1929. It is the primary legislation governing investment companies and their investment product offerings. The Securities Act of 1933 was also passed in response to the crash, but it focused on greater transparency for investors; the Investment Company Act of 1940 is focused primarily on the regulatory framework for retail investment products. #Capital Market #Regulatory Reporting #Trade Settlement #Investment Compliance #Post-trade Compliance #Pre-trade Compliance

What is Regulatory Reporting? Regulatory reporting is essentially the systematic process of collecting and submitting information about an organization’s financial and operational activities to regulatory authorities. These reports cover a broad spectrum of data, including financial statements, risk exposure, customer information, and transaction details. Understanding the concept of regulatory reporting in investment banking is vital for monitoring and supervising financial institutions, such as banks, insurance companies, and investment firms. The Importance of Regulatory Reporting: Reporting reports help regulators assess an organization’s compliance with legal and regulatory requirements. These reports are particularly crucial in:   1. Financial Stability After the 2008 global recession, regulators worldwide increased their emphasis on gathering precise and prompt data from financial institutions. This information allows authorities to identify potential risks and take corrective actions before they escalate and jeopardize the stability of the financial system. 2. Investor Protection Reporting that is both timely and transparent guarantees that investors can access precise and current information regarding an organization’s financial health. This, in turn, aids them in making well-informed investment decisions. Such transparency is vital for upholding trust and confidence in the financial markets.   3. Risk Management Efficient regulatory reporting assists financial institutions in more effectively identifying and managing risks. It enables organizations to evaluate their exposure to different types of risks, including credit, market, and operational risks, and take suitable measures to reduce them. This risk mitigation is crucial for ensuring the long-term sustainability of the organization.   4. Legal Compliance Financial institutions are subject to numerous laws and regulations, and regulatory reports assist them in showcasing their compliance with these requirements. Non-compliance with regulatory reporting obligations can lead to legal consequences, including fines and sanctions. #Capital Market #Regulatory Reporting #Trade Settlement #Investment Compliance #Post-trade Compliance #Pre-trade Compliance