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Sunday, November 15, 2009

8 Steps to buy a share!!!!!!!

LOOKING to buy stocks but you are not sure how to select them? Don't fret.

I have eight ratios that would make your life easier, and of course, enable you to make the best possible stock selection.

1. Ploughback or Reserves
Every year, the company divides its net profit (profits in hand after subtracting various expenses including taxes) in two portions: ploughback and dividends.

While dividends are handed out to the shareholders, ploughback is kept by the company for its future use and is included in its reserves. Ploughback is essential because, besides boosting the company’s reserves, it is a source of funds for the company’s expansion plans. Hence, if you are looking for a company with good growth prospects, check its ploughback figures. Reserves are also known as shareholders’ funds, since they belong to the shareholders. If a company’s reserves are twice its equity capital, the company can reward its shareholders with a generous bonus. Also any increase in reserves will push the share price of your share.

2. Book value per share
This ratio shows the worth of each share of a company as per the company's accounting books. It is calculated as:
Shareholders' funds
------------------------------------------------ = Book Value per share
Total quantity of equity shares issued

Shareholders' funds can be computed as such:
Total assets (equity capital to the company's reserves) less total liabilities (money owed to creditors).

Book value is an old record that uses the original purchase prices of the assets.

However, it doesn't show the present market price of the company’s assets. As a result, this ratio has a restricted use when it comes to estimating the market price of the shares, but can give you an estimate of the minimum price of the company’s shares. It will also help you judge if the share price is overpriced or under-priced.

Also read: 4 golden rules of equity investing

3. Earnings per share (EPS)
One of the most popular investment ratios, it can be computed as:
Profit Post Tax
------------------------------------------------ = EPS
Total quantity of equity shares issued

This ratio computes the company's earnings on a per share basis. Say, you own 100 shares of ABC Co., each having a face value of Rs 10. Assume the earnings per share is Rs 10 and the dividend declared is 30 per cent, or Rs 3 per share. This implies that on every share of ABC Co., you earn Rs 6 each year, but you actually get Rs 3 via dividend. The balance of Rs 4 per share goes into the ploughback (retained earnings). Had you purchased these shares at par, it implies a return of 60 per cent.

This example shows that instead of looking at the dividends received from to company as the base of investment returns, always look at earnings per share, as it is the actual indicator of the returns earned by your shares.

4. Price Earnings Ratio (P/E)
This ratio highlights the connection between the market price of a share and its EPS.
Price of the share
------------------------ = P/E
Earnings per share

It shows the degree to which earnings of a share are protected by its price. Say, the P/E is 40, it means the share price is 40 times its earnings. So if the company's EPS is constant, it will need about 40 years to make up for the purchase price of the share, after taking into account the dividends and the capital appreciation. Hence, low P/E means you will recover your money quickly.

P/E ratio shows what the market thinks about the earnings potential and future business forecast of a company. Companies with high P/E ratios are the darlings of the investors and thus enjoy a higher market rating. In order to use the P/E ratio properly, take into account the future earnings and growth projections of the company. If the current P/E ratio is low, as against the future prospects of a company, then the shares make an attractive investment option. But if the company is saddled with losses and falling sales, stay away from it, despite the low P/E ratio.


5. Dividend and yield
Dividend is the portion of the profit that is distributed amongst shareholders. Companies offering high dividends, normally don’t have much of growth to talk about. This is because the ploughback required to finance future development is insufficient. Similarly, those companies in high growth sector don’t give any dividend. Instead here they give sharp capital appreciation, which ultimately will lead to higher dividends.

So it makes much more sense to invest for capital appreciation instead of dividends. Rather it makes more sense to invest for yield, which is nothing but the association between the dividends and the market price of the shares. Yield (dividend yield) can be calculated as:

Dividend per share
----------------------------- x 100 = Yield
Market price of a share

Yield shows the returns in percentage that you can expect via dividends earned by your investment at the current market price. It is more useful than simply focusing on the dividends.

Also read: Will dividend yield stock make you rich?

6. Return of capital employed (ROCE)
ROCE is the ratio that is calculated as:
Operating profit
----------------------------------------
Capital employed (net value + debt)

To get operating profit, add old taxes paid, depreciation, special one-off expenses, and special one-off income and miscellaneous income to get the net profit. The operating profit is a far better indicator of the profits earned by the company instead of the net profit. Hence this ratio is the better indicator of the general performance of the company and the company’s operational efficiency. It is one of the most useful ratio that lets you compare amongst the companies.

7. Return on net worth (RONW)
RONW is calculated as
Net Profit
-----------------
Net Worth

This ratio gives you an idea of the returns generated by investing in the company. While ROCE is an effective measure to get a general overview of the profitability of the company’s business operations, RONW lets you gauge the returns you can earn on your investment. When used along with ROCE, you get an overview of the company’s competence, financial standing and its capacity to generate returns on shareholders’ finances and capital employed.

8. PEG ratio
PEG is an essential and extensively used ratio for calculating the inbuilt worth of a share. It helps you decide whether the share is under-priced, totally priced or overpriced. To derive the ratio, you have to associate the P/E ratio with the expected growth rate of the company. It assumes that higher the growth rate of the company, higher the P/E ratio of the company’s shares. Vice versa also holds true.

P/E
----------------------------------
Expected growth rate of the EPS of the company

In general, a PEG lesser than 0.5 is a lucrative investment opportunity. However if the PEG exceeds 1.5, it is time to sell.

These are some of the most critical ratios that must be considered when purchasing a share. Extensive reading of the financial performance of the company in newspapers and magazines will help you get all the relevant information to arrive at the correct decision.

Tuesday, July 7, 2009

BUDGET HIGHLIGHTS


Key Features of Budget 2009-2010
CHALLENGES
! to lead economy to high GDP growth rate of 9 per cent per annum at the earliest
! to deepen and broaden the agenda for inclusive development
! to improve delivery mechanisms of the government.
OVERVIEW OF THE ECONOMY
! Growth rate of Gross Domestic Product dipped from an average of over 9 per cent
in the previous three fiscal years to 6.7 per cent during 2008-09.
! Whole sale price index rose to nearly 13 per cent in August, 2008 and had an
equally sharp fall to zero per cent in March, 2009.
! The structure of India’s economy changed over the last ten years with contribution
of the services sector to GDP at well over 50 per cent and share of merchandise
trade doubling to 38.9 per cent of GDP in 2008-09.
! Recognising economic recovery and growth as co-operative effort of the Central
and State Governments, meeting with Finance Ministers of States held as part of
preparation of the Budget. This is intended to become an annual feature.

BUDGET ESTIMATE 2009-10
! Budget Estimates provide for a total expenditure of Rs.10,20,838 crore consisting
of Rs.6,95,689 crore under Non-plan and Rs.3,25,149 crore under Plan registering
an increase of 37 per cent in Non-plan expenditure and 34 per cent in Plan
expenditure over B.E. 2008-09.
! Total expenditure in B.E. 2009-10 increased by 36 per cent over B.E. 2008-09.
! Increase in Non-plan expenditure is mainly due to implementation of Sixth Central
Pay Commission recommendations, increased food subsidy and higher interest
payment arising out of larger fiscal deficit in 2008-09.
! Interest payments estimated at Rs.2,25,511 crore constituting about 36 per cent of
Non-plan revenue expenditure in B.E. 2009-10.
! Subsidies up from Rs.71,431 crore in B.E. 2008-09 to Rs.1,11,276 crore in B.E.
2009-10.
! Outlay for Defence up from Rs.1,05,600 crore in B.E. 2008-09 to Rs.1,41,703
crore in B.E. 2009-10.
! Gross Budgetary Support for Annual Plan 2009-10 enhanced by Rs.40,000 crore
over Interim B.E. 2009-10.
! State Governments to be permitted to borrow additional 0.5 per cent of their GSDP
by relaxing the fiscal deficit target under FRBM from 3.5 per cent to 4 per cent of
their GSDP. This will enable the States to borrow Rs.21,000 crore additionally
over Interim B.E. 2009-10.
! Gross tax receipts budgeted at Rs.6,41,079 crore in B.E. 2009-10 compared to
Rs.6,87,715 crore in B.E. 2008-09.
! Non-tax revenue receipts estimated at Rs.1,40,279 crore in B.E. 2009-10 compared
to Rs.95,785 crore in B.E. 2008-09.
! Revenue deficit projected at 4.8 per cent of GDP in B.E. 2009-10 compared to 1
per cent in B.E. 2008-09 and 4.6 per cent as per provisional accounts of 2008-09.
! Fiscal deficit as a percentage of GDP is projected at 6.8 per cent compared to 2.5
per cent in B.E. 2008-09 and 6.2 per cent as per provisional accounts 2008-09.

TAX PROPOSALS
! Tax reform, like all reforms, is a process and not an event. Thrust of reforms has
been to improve the efficiency and equity of our tax system. This is sought to be
achieved by eliminating distortions in the tax structure, introducing moderate levels
of taxation and expanding the base and accompanied by requisite re-engineering
of key business processes coupled with automation.
! Recent initiative, on direct taxes side, of the setting up of a Centralized Processing
Centre (CPC) at Bengaluru where all electronically filed returns, and paper returns
filed in entire Karnataka, will be processed.
! Centre’s Tax-GDP ratio has increased to 11.5 per cent in 2008-09 from a low of 9.2
per cent in 2003-04. Share of direct taxes in the Centre’s tax revenues has increased
to 56 percent in 2008-09 from 41 percent in 2003-04, reflecting sharp improvement
in equity of our tax system.
! Structural changes in direct taxes to be pursued by releasing the new Direct Taxes
Code within the next 45 days and in indirect taxes by accelerating the process for
the smooth introduction of the Goods and Services Tax (GST) with effect from 1st
April, 2010.
! The Direct Taxes Code, along with a Discussion Paper, to be released to the public
for debate. The Direct Taxes Code Bill will be finalised for introduction in Lok
Sabha sometime during the Winter Session based on the inputs received.
! The Authorities for Advance Rulings on Direct and Indirect Taxes to be merged by
amending the relevant Acts.
! Agreement has been reached on the basic structure of GST in keeping with the
principles of fiscal federalism enshrined in the Constitution. Broad contour of the
GST Model envisages dual GST comprising of a Central GST and a State GST.
The Centre and the States will each legislate, levy and administer the Central GST
and State GST, respectively.
Direct Taxes
! No changes made in the Corporate Tax rates.
! Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh to
Rs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90 lakh
for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60 lakh for all
other categories of individual taxpayers.
! Deduction under section 80-DD in respect of maintenance, including medical
treatment, of a dependent who is a person with severe disability being raised from
the present limit of Rs.75,000 to Rs.1 lakh.
! Surcharge on various direct taxes to be phased out; in the first instance, by
eliminating the surcharge of 10 percent on personal income-tax.
! Sun-set clauses for deduction in respect of export profits under sections 10A and
10B of the Income-tax Act being extended by one more year i.e. for the financial
year 2010-11.
! Fringe Benefit Tax on the value of certain fringe benefits provided by employers to
their employees to be abolished.
! Scope of provisions relating to weighted deduction of 150% on expenditure incurred
on in-house R&D to all manufacturing businesses being extended except for a
small negative list.
! Businesses to be incentivised by providing investment linked tax exemptions
rather than profit linked exemptions. Investment linked tax incentives to be
provided, to begin with, to the businesses of setting up and operating ‘cold chain’,
warehousing facilities for storing agricultural produce and the business of laying
and operating cross country natural gas or crude or petroleum oil pipeline network
for distribution on common carrier principle. Under this method, all capital
expenditure, other than expenditure on land, goodwill and financial instruments
to be fully allowable as deduction.
! Minimum Alternate Tax (MAT) to be increased to 15 per cent of book profits from
10 per cent. The period allowed to carry forward the tax credit under MAT to be
extended from seven years to ten years.
! New Pension System (NPS) to continue to be subjected to the Exempt-Exempt-
Taxed (EET) method of tax treatment of savings. Income of the NPS Trust to be
exempted from income tax and any dividend paid to this Trust from Dividend
Distribution Tax. All purchase and sale of equity shares and derivatives by the
NPS Trust also to be exempt from the Securities Transaction Tax. Self employed
persons to be enabled to participate in the NPS and to avail of the tax benefits
available thereto.
! Alternative dispute resolution mechanism to be created within the Income Tax
Department for the resolution of transfer pricing disputes. Central Board of Direct
Taxes (CBDT) to be empowered to formulate ‘safe harbour’ rules to reduce the
impact of judgemental errors in determining transfer price in international
transactions.
! Commodity Transaction Tax (CTT) to be abolished.
! Donations to electoral trusts to be allowed as a 100 percent deduction in the
computation of the income of the donor.
! Deduction under section 80E of the Income-tax Act allowed in respect of interest
on loans taken for pursuing higher education in specified fields of study to be
extended to cover all fields of study, including vocational studies, pursued after
completion of schooling.
! To mitigate the practical difficulties faced by charitable organisations, anonymous
donations received by charitable organisations to the extent of 5 percent of their
total income or a sum of Rs.1 lakh, whichever is higher, not to be taxed.
! Scope of presumptive taxation to be extended to all small businesses with a turnover
upto Rs. 40 lakh. All such taxpayers to have option to declare their income from
business at the rate of 8 percent of their turnover and simultaneously enjoy exemption
from the compliance burden of maintaining books of accounts. As a procedural
simplification, they are also to be exempted from advance tax and allowed to pay
their entire tax liability from business at the time of filing their return. This new
scheme to come into effect from the financial year 2010-11.
! Tax holiday under section 80-IB(9) of the Income Tax Act, which was hitherto
available in respect of profits arising from the commercial production or refining
of mineral oil, to be extended to natural gas. This tax benefit to be available to
undertakings in respect of profits derived from the commercial production of mineral
oil and natural gas from oil and gas blocks which are awarded under the
NELP-VIII round of bidding. The section to be retrospectively amended to provide
that “undertaking” for the purposes of section 80-IB(9) will mean all blocks awarded
in any single contract.
Indirect Taxes
! Proposals on indirect taxes to seek to achieve stable framework by maintaining the
overall rate structure for customs and central excise duties as well as service tax.
Customs duties
! Customs duty of 5% to be imposed on Set Top Box for television broadcasting.
! Customs duty on LCD Panels for manufacture of LCD televisions to be reduced
from 10% to 5%.
! Full exemption from 4% special CVD on parts for manufacture of mobile phones
and accessories to be reintroduced for one year.
! List of specified raw materials/inputs imported by manufacturer-exporters of sports
goods which are exempt from customs duty, subject to specified conditions, to be
expanded by including five additional items.
! List of specified raw materials and equipment imported by manufacturer-exporters
of leather goods, textile products and footwear industry which are fully exempt
from customs duty, subject to specified conditions, to be expanded.
! Customs duty on unworked corals to be reduced from 5% to Nil.
! Customs duty on 10 specified life saving drugs/vaccine and their bulk drugs to be
reduced from 10% to 5% with Nil CVD (by way of excise duty exemption).
! Customs duty on specified heart devices, namely artificial heart and PDA/ASD
occlusion device, to be reduced from 7.5% to 5% with Nil CVD (by way of excise
duty exemption).
! Customs duty on permanent magnets for PM synchronous generator above 500
KW used in wind operated electricity generators to be reduced from 7.5% to 5%.
! Customs duty on bio-diesel to be reduced from 7.5% to 2.5%.
! Concessional customs duty of 5% on specified machinery for tea, coffee and rubber
plantations to be reintroduced for one year, upto 06.07.2010.
! Customs duty on ‘mechanical harvester’ for coffee plantation to be reduced from
7.5% to 5%. CVD on such harvesters has also been reduced from 8% to nil, by
way of excise duty exemption.
! Customs duty on serially numbered gold bars (other than tola bars) and gold coins
to be increased from Rs.100 per 10 gram to Rs.200 per 10 gram. Customs duty on
other forms of gold to be increased from Rs.250 per 10 gram to Rs.500 per 10
gram. Customs duty on silver to be increased from Rs.500 per Kg. to Rs.1000 per
Kg. These increases also to be applicable when gold and silver (including ornaments)
are imported as personal baggage.
! Customs duty on cotton waste to be reduced from 15% to 10%.
! Customs duty on wool waste to be reduced from 15% to 10%.
! Customs duty on rock phosphate to be reduced from 5% to 2%.
! CVD exemption on Aerial Passenger Ropeway Projects to be withdrawn. Such
projects will now attract applicable CVD.
! Customs duty exemption on concrete batching plants of capacity 50 cum per hour
or more to be withdrawn. Such plants will now attract customs duty of 7.5%.
! On packaged or canned software, CVD exemption to be provided on the portion of
the value which represents the consideration for transfer of the right to use such
software, subject to specified conditions.
! Customs duty on inflatable rafts, snow-skis, water skis, surf-boats, sail-boards and
other water sports equipment to be fully exempted.
Central excise duties
! Excise duty rate on items currently attracting 4% to be raised to 8% with following
major exceptions:
• Specified food items including biscuits, sharbats, cakes and pastries
• Drugs and pharmaceutical products falling under Chapter 30
• Medical equipment
• Certain varieties of paper, paperboard and articles thereof
• Paraxylene
• Power driven pumps for handling water
• Footwear of RSP exceeding Rs.250 but not exceeding Rs.750 per pair
• Pressure cookers
• Vacuum and gas filled bulbs of RSP not exceeding Rs.20 per bulb
• Compact Fluorescent Lamps
• Cars for physically handicapped
! Specific component of excise duty applicable to large cars/utility vehicles of engine
capacity 2000 cc and above to be reduced from Rs. 20,000/- per vehicle to Rs.15,000
per vehicle.
! Excise duty on petrol driven trucks/lorries to be reduced from 20% to 8%. Excise
duty on chassis of such trucks/lorries to be reduced from ‘20% + Rs.10000’ to
‘8% + Rs.10000’.
! Excise duty on Special Boiling Point spirits to be reduced to 14%.
! Excise duty on naphtha to be reduced to 14%.
! Duty paid High Speed Diesel blended with upto 20% bio-diesel to be fully exempted
from excise duties.
! The ad valorem component of excise duty of 6% on petrol intended for sale with a
brand name to be converted into a specific rate. Consequently, such petrol would
now attract total excise duty of Rs.14.50 per litre instead of ‘6% + Rs.13 per litre’.
! The ad valorem component of excise duty of 6% on diesel intended for sale with a
brand name to be converted into a specific rate. Consequently, such diesel would
now attract total excise duty of Rs.4.75 per litre instead of ‘6% + Rs.3.25 per litre’.
! Excise duty on manmade fibre and yarn to be increased from 4% to 8%.
! Excise duty on PTA and DMT to be increased from 4% to 8%.
! Excise duty on polyester chips to be increased from 4% to 8%.
! Excise duty on acrylonitrile to be increased from 4% to 8%.
! The scheme of optional excise duty of 4% for pure cotton to be restored.
! Excise duty for man-made and natural fibres other than pure cotton, beyond the
fibre and yarn stage, to be increased from 4% to 8% under the existing optional
scheme.
! An optional excise duty exemption to be provided to tops of manmade fibre
manufactured from duty paid tow at par with tops manufactured from duty paid
staple fibre.
! Suitable adjustments to be made in the rates of duty applicable to DTA clearances
of textile goods made by Export Oriented Units using indigenous raw materials/
inputs for manufacture of such goods.
! Full exemption from excise duty to be provided on goods of Chapter 68 of Central
Excise Tariff manufactured at the site of construction for use in construction work
at such site.
! Excise duty exemption on ‘recorded smart cards’ and ‘recorded proximity cards
and tags’ to be made optional. Manufacturers have the option to pay the applicable
excise duty and avail the credit of duty paid on inputs.
! EVA compound manufactured on job work for further use in manufacture of
footwear to be exempted from excise duty.
! Benefit of SSI exemption scheme to be extended to printed laminated rolls bearing
the brand name of others by excluding this item from the purview of the brand
name restriction.
! On packaged or canned software, excise duty exemption to be provided on the
portion of the value which represents the consideration for transfer of the right to
use such software, subject to specified conditions.
! Excise duty on branded articles of jewellery to be reduced from 2% to Nil.
Service tax
! Service Tax to be imposed on the following services:
• Service provided in relation to transport of goods by rail
• Service provided in relation to transport of coastal cargo; and goods through
inland water including National Waterways
• Advice, consultancy or technical assistance provided in the field of law (this
tax would not be applicable in case the service provider or service receiver is
an individual).
• Cosmetic and plastic surgery service
! Exemption from service tax being provided to inter-State or intra-State transportation
of passengers in a vehicle bearing ‘Contract Carriage Permit’ with specified
conditions.
! Exemption from service tax (leviable under Banking and other financial services
or under Foreign exchange broking service) being provided to inter-bank purchase
and sale of foreign currency between scheduled banks.
! Two taxable services, namely, ‘Transport of goods through road’ and ‘Commission
paid to foreign agents’ to be exempted from the levy of service tax, if the exporter
is liable to pay service tax on reverse charge basis. However, present cap of 10%
on commission agency charges is retained. Thus there would be no need for the
exporter to first pay the tax and later claim refund in respect of these services.
! For other services received by exporters, service tax exemption to be operated
through the existing refund mechanism based on self-certification of the documents
where such refund is below 0.25 per cent of FOB value, and certification of
documents by a Chartered Accountant for value of refund exceeding the above
limit.
! Export Promotion Councils and the Federation of Indian Export Organizations
(FIEO) to be exempt from service tax on the membership and other fees collected
by them till 31st March 2010.
Tax proposals on direct taxes to be revenue neutral. On indirect taxes, estimated net gain
to be Rs.2,000 crore for a full year.

TOWARDS ECONOMIC REVIVAL
Short-term Measures
! To counter the negative fallout of the global slowdown on the Indian economy,
Government responded by providing three focused fiscal stimulus packages in the
form of tax relief and increased expenditure on public projects along with RBI
taking a number of monetary easing and liquidity enhancing measures.
! Fiscal accommodation led to an increase in fiscal deficit from 2.7 per cent in
2007-08 to 6.2 per cent of GDP in 2008-09.
! The fiscal stimulus at 3.5 per cent of GDP at current market prices for 2008-09
amounts to Rs.1,86,000 crore.
! Measures taken by the Government were effective in arresting the fall in GDP
growth rate in 2008-09. 6.7 per cent growth rate recorded in 2008-09.
Infrastructure Development
! IIFCL to evolve a Takeout financing scheme in consultation with banks to facilitate
incremental lending to infrastructure sector.

! IIFCL to refinance 60 per cent of commercial bank loans for PPP projects in critical
sectors over the next fifteen to eighteen months. IIFCL and Banks are now in a
position to support projects involving total investment of Rs.1,00,000 crore.
Highway and Railways
! Allocation to National Highways Authority of India (NHAI) for the National
Highway Development Programme (NHDP) increased by 23 per cent over
B.E. 2008-09 in B.E. 2009-10 and allocation for Railways increased from Rs.10,800
crore in Interim B.E. 2009-10 to Rs.15,800 crore in B.E. 2009-10.
Urban Infrastructure
! Allocation under Jawaharlal Nehru National Urban Renewal Mission (JNNURM)
stepped up by 87 per cent to Rs.12,887 crore in B.E. 2009-10 over B.E. 2008-09.
Allocation for housing and provision of basic amenities to urban poor enhanced to
Rs.3,973 crore in B.E. 2009-10. This includes provision for Rajiv Awas Yojana
(RAY), a new scheme announced.
Brihan Mumbai Storm Water Drainage Project (BRIMSTOWA)
! Provision for the project BRIMSTOWA initiated in 2007 and funded through Central
Assistance to address the problem of flooding in Mumbai, enhanced from Rs.200
crore in Interim B.E. 2009-10 to Rs.500 crore in B.E. 2009-10 to expedite
completion of the project.
Power
! Allocation under Accelerated Power Development and Reform Programme
(APDRP) increased by 160 per cent to Rs.2,080 crore in B.E. 2009-10 over
B.E. 2008-09.
Gas
! Blueprint to be developed for long distance gas pipelines leading to a National Gas
Grid to facilitate transportation of gas across the length and breadth of the country.
Assam Gas Cracker Project
! Outlay for Assam Gas Cracker Project stepped up suitably in B.E. 2009-10.
AGRICULTURE DEVELOPMENT
! Target for agriculture credit flow set at Rs.3,25,000 crore for the year 2009-10.
In 2008-09 agriculture credit flow was at Rs.2,87,000 crore.
! Interest subvention scheme for short term crop loans up to Rs.3 lakh per farmer at
the interest rate of 7 per cent per annum to be continued. Additional subvention of
1 per cent to be paid from this year, as incentive to those farmers who repay short
term crop loans on schedule. Additional allocation of Rs.411 crore over Interim
B.E. 2009-10 made for this.
Debt Relief for Farmers
! Time given to the farmers having more than two hectares of land to pay 75 per cent
of their overdues under Debt Waiver and Debt Relief Scheme extended from 30th
June, 2009 to 31st December, 2009.
! Taskforce to be set up to examine the issue of debt taken by a large number of
farmers in some regions of Maharashtra from private money lenders who were not
covered by the loan waiver scheme announced last year.
Accelerated Irrigation Benefit Programme
! Allocation under Accelerated Irrigation Benefit Programme (AIBP) increased by
75 per cent over B.E. 2008-09.
! Allocation under Rashtriya Krishi Vikas Yojana (RKVY) stepped up by 30 per
cent in B.E. 2009-10 over B.E. 2008-09.
RESTORING EXPORT GROWTH
! Adjustment assistance scheme to provide enhanced Export Credit and Guarantee
Corporation (ECGC) cover at 95 per cent to badly hit sectors extended upto
March 2010.
! Allocation for Market Development Assistance Scheme enhanced to Rs.124 crore
in B.E. 2009-10.
! Interest subvention of 2 per cent on pre-shipment credit for seven employment
oriented export sectors extended beyond the current deadline of September 30,
2009 to March 31, 2010.
! To facilitate flow of credit at reasonable rates, Rs.4,000 crore provided as special
fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries
Development Bank of India (SIDBI). This will incentivise Banks and State Finance
Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing
50 per cent of incremental lending to MSEs during the current financial year.
! Stimulus package for print media comprising waiver of 15 per cent agency
commission on DAVP advertisements and 10 per cent increase in DAVP rates to be
paid as a special relief subject to documentary proof of loss of revenue in nongovernmental
advertisements, extended from 30th June, 2009 to 31st December, 2009.
MEDIUM-TERM SUSTAINABILITY
! To bring the fiscal deficit under control, institutional reform measures to be initiated
during the current year itself.
Fertilizer Subsidy
! To ensure balanced application of fertilizers for increasing agricultural productivity,
Government intends to move towards a nutrient based subsidy regime so as to
cover larger basket of fertilizers with innovative fertilizer products available in the
market at reasonable prices.
! It is intended to move to a system of direct transfer of subsidy to the farmers in due
course.
Petroleum and Diesel pricing Policy
! With almost three quarters of our oil consumption met through imports, it is
important to recognise that domestic prices of petrol and diesel are broadly in sync
with global prices. Government to set up an expert group to advise on a viable and
sustainable system of pricing petroleum products.
Taxation
! SARAL – II forms to be introduced early.
People’s ownership of PSUs
! While retaining at least 51 per cent Government equity in Public Sector
Undertakings, people’s participation in disinvestment programmes to be encouraged.
! Public Sector Enterprises such as banks and insurance companies to remain in
public sector and will be given full support including capital infusion to grow and
remain competitive.
Financial Sector
! The threshold for non-promoter public shareholding for all listed companies to be
raised in a phased manner.
! Scheduled commercial banks allowed to set up off-site ATMs without prior approval
subject to reporting.
! A sub-committee of State Level Bankers Committee (SLBC) to identify and
formulate an action plan for providing banking facilities in under-banked/unbanked
areas in the next three years. Rs.100 crore set aside as one-time grant in-aid to
ensure provision of at least one centre/Point of Sales (POS) for banking services in
each of the unbanked blocks.
! Government has established Competition Commission of India, an autonomous
regulatory body. An Appellate body headed by a retired judge of Supreme Court
also constituted.
TOWARDS INCLUSIVE DEVELOPMENT
National Rural Employment Guarantee Scheme (NREGS)
! Allocation under NREGS increased by 144 per cent to Rs.39,100 crore in
B.E. 2009-10 over B.E. 2008-09.
! To increase productivity of assets and resources under NREGA, convergence with
other schemes relating to agriculture, forests, water resources, land resources, rural
roads initiated. In the first stage 115 pilot districts selected for convergence.
National Food Security Act
! National Food Security Act to be brought in to ensure entitlement of 25 kilo of rice
or wheat per month at Rs.3 per kilo to every family living below the poverty line in
rural or urban areas. Food Security Bill to be put on the website of the Department
of Food and Public Distribution for public debate.
Bharat Nirman
! Allocation for Bharat Nirman increased by 45 per cent in 2009-10 over
B.E. 2008-09. Allocations under Pradhan Mantri Gram Sadak Yojana (PMGSY)
increased by 59 per cent over B.E. 2008-09 to Rs.12,000 crore in B.E. 2009-10.
Under Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY), allocation increased
by 27 per cent to Rs.7,000 crore.
! Allocation under Indira Awaas Yojana (IAY) increased by 63 per cent to Rs.8,800
crore in B.E. 2009-10. Allocation of Rs.2,000 crore made for Rural Housing Fund
(RHF) in National Housing Bank (NHB) to boost the resource base of NHB for
refinance operations in rural housing sector.
Pradhan Mantri Adarsh Gram Yojana (PMAGY)
! New scheme Pradhan Mantri Adarsh Gram Yojana (PMAGY) with an allocation
of Rs.100 crore launched on pilot basis for integrated development of 1000 villages
having population of scheduled castes above 50 per cent.
EMPOWERMENT OF WEAKER SECTIONS
! The Swarna Jayanti Gram Swarozgar Yojana (SGSY) restructured as National Rural
Livelihood Mission to make it universal in application, focused in approach and
time bound for poverty eradication by 2014-15. In addition to capital subsidy at
enhanced rate, interest subsidy to poor households to be provided for loans upto
Rs.1 lakh from banks.
! There are over 22 lakh Women’s Self Help Groups linked with banks. Reach of
SHGs to be widened to enrol at least 50 per cent of all rural women in India as
members of SHGs over the next five years.
! Corpus of Rashtriya Mahila Kosh to be increased from Rs.100 crore to Rs.500
crore over the next few years.
Female Literacy
! National Mission for Female Literacy to be launched with focus on minorities, SC,
ST and other marginalized groups with the aim to reduce level of female illiteracy
by half in three years.
Integrated Child Development Services (ICDS)
! All ICD Services to be extended to every child under the age of six by
March, 2012.
Student Loans to Weaker Sections
! To enable students from economically weaker sections to access higher education,
a scheme to provide full interest subsidy during the period of moratorium introduced
to cover loans taken from scheduled banks to pursue any of the approved courses
of study in technical and professional streams from recoganised institutions in India.
Welfare of Minorities
! Plan outlay of Ministry of Minority Affairs enhanced from Rs.1,000 crore in B.E.
2008-09 to Rs.1,740 crore in 2009-10 registering an increase of 74 per cent. This
includes Rs.990 crore for Multi-Sectoral Development Programme for Minorities,
Grants-in-aid to Maulana Azad Education Foundation, National Minorities Development
and Finance Corporation and pre and post matric scholarship for minorities.
! Allocations made for the new schemes of National Fellowship for Students from
minority community and Grants-in-aid to Central Wakf Council for computerization
of records of State Wakf Boards.
! Rs.25 crore each allocated for establishing new campuses at Murshidabad in West
Bengal and Malappuram in Kerala by Aligarh Muslim University.
Welfare of workers in the unorganized sector
! Action initiated to ensure implementation of social security schemes for occupation
like weavers, fishermen and women, toddy tappers, leather and handicraft workers,
plantation labour, construction labour, mine workers, bidi workers and rickshaw
pullers. Necessary financial allocation will be made for these schemes.
Employment Exchanges
! New project for modernization of Employment Exchange in public private
partnership to be launched so that a job seeker can register on line from anywhere
and approach any employment exchange.
Handloom
! One handloom mega cluster each in West Bengal and Tamil Nadu and one
powerloom mega cluster in Rajasthan to be set up. New mega clusters for carpets
to be also set up in Srinagar (J&K) and Mirzapur (UP).
Health
! Allocation under National Rural Health Mission (NRHM) increased by Rs.2,057
crore over Interim B.E. 2009-10 of Rs.12,070 crore.
! All BPL families to be covered under Rashtriya Swasthya Bima Yojana (RSBY).
Allocation under RSBY increased by 40 per cent over previous allocation to Rs.350
crore in B.E. 2009-10.
Environment and climate change
! In furtherance to National Action Plan on Climate Change, eight national missions
representing a multi-pronged long-term and integrated approach to be launched.
! National Ganga River Basin Authority set up. Budgetary allocation under National
River and Lake Conservation Plans increased from Rs.335 crore in B.E. 2008-09
to Rs.562 crore in B.E. 2009-10.
! Special one-time grant of Rs.100 crore given to Indian Council of Forestry Research
and Education, Dehradun.
! Rs.15 crore each to be allocated to Botanical Survey of India and Zoological Survey of
India. An additional amount of Rs.15 crore to be allocated for Geological Survey of India.
TOWARDS BUILDING ACOUNTABLE INSTITUTIONS
Improving Delivery of Public Services
! Unique Identification Authority of India (UIDAI) to set up online data base with
identity and biometric details of Indian residents and provide enrolment and
verification services across country. Provision of Rs.120 crore made for this in the
Budget.
! First set of unique identity number to be rolled out in 12 to 18 months.
National Security
! Additional amount of Rs.430 crore provided over Interim B.E. 2009-10
to modernise police machinery in the States.
! Additional amount of Rs.2,284 crore proposed over Interim B.E. 2009-10 for
construction of fences, roads, flood lights on the international borders.
! Programme for housing to create 1 lakh dwelling units for Central Para-military
Forces personnel to be launched through innovative financing model.
One Rank One Pension for Ex-servicemen (OROP)
! Based on the recommendation of the Committee headed by the Cabinet Secretary
on OROP, government has decided to substantially improve the pension of pre
01.01.2006 defence pensioners below officer rank and bring pre 10.10.1997
pensioners on par with post 10.10.1997 pensioners. The decisions to be implemented
from 01st July, 2009 and will cost more than Rs.2,100 crore annually.
Education
! Provision for the scheme ‘Mission in Education through ICT’ substantially increased
to Rs.900 crore and the provision for setting up and up-gradation of Polytechnics
under the Skill Development Mission enhanced to Rs.495 crore.
! Rs.827 crore allocated for opening one Central University in each uncovered State.
! Rs.2,113 crore allocated for IITs and NITs which includes a provision of Rs.450
crore for new IITs and NITs.
! The overall Plan budget for higher education is to be increased by Rs.2,000 crore
over Interim B.E. 2009-10.
! Rs.50 crore allocated for Punjab University, Chandigarh. Plan allocation for
Chandigarh to be suitably enhanced during the year to provide better infrastructure
to the people of Chandigarh.
Commonwealth Games, 2010
! Outlays to be stepped up from Rs.2,112 crore in Interim Budget to Rs.3,472 crore
in regular Budget 2009-10.
Srilankan Tamils
! Rs.500 crore allocated for rehabilitation of internally displaced persons and
reconstruction of the northern and eastern areas of Sri Lanka. Ministry of External
Affairs to work closely with the Sri Lankan Government.
Cyclone Aila
! Rs.1,000 crore allocated for programme for rebuilding the damaged infrastructure
caused due to cyclone Aila in West Bengal.

Monday, March 2, 2009

RIL & RPL Merger



MERGER:

The board of directors of Reliance Industries and Reliance Petroleum on Monday approved the merger of the two firms, creating one of the world's largest petrochemical entity and offered the shareholders of RPL one RIL share for every 16 shares held by them. Shares of Reliance Industries opened down 1.24%, then dipped further to touch an intra-day low of Rs 1,213.20, a fall of 4.09% from its last closing price. Meanwhile, shares of RPL opened up 7.61% on the BSE, and touched its intra-day high of Rs 82 after the board approved the scheme of amalgamation.


THIN ARBITRAGE FOR TRADERS:

Basically, whenever a merger is announced and the swap ratio becomes public, the shares of the company that will cease to exist typically trades at a discount to the implied swap ratio. The arbitrage opportunity in the extinguishing company's share depends on liquidity.
"On Monday morning , initially both stocks will react positively in the region of 2-4% because there will always be two schools of thought in terms of which company will benefit more," said Bhakta. He expects discount (arbitrage window) will be around 2.5% to 3%. "Even if it touches 4%, it will come back to those levels converging with time, tangoing the process or sequence of merger," Bhatka said.

MERGER BY APRIL END:

The first step for RIL will be to seek legal sanction for the merger. The high court will hear the application in a week at the earliest. The court is then expected to ask RIL to get approval from shareholder. A notice for an extraordinary general meeting will have to be sent 21 days before it is held as per Companies' Act. So net-net, the merger could be consummated legally by April-end, said analysts.

EARNINGS & REFINING CYCLE:

RPL's cash flows are seen helping RIL's capital expenditure plans because RPL is more efficiently structured in terms of cash flows, analysts said. However, while the deal would bring much-needed liquidity in the short term, it also makes RIL less attractive to those who do not want to invest in a cyclical, commoditised business.
RIL already earns two-thirds of its revenues from refining, an industry that is facing a multi-year cyclical downturn. This merger would double RIL's refining capacity, thereby making its non-refining revenues negligible.
This will tie RIL's fortunes more closely to the refining cycle, which is globally entering a stage of depression. On the positive side, there will be a huge contribution to RIL's bottomline from sale of Krishna Godavari gas. The company, which pays only a 11% minimum alternate tax, can now use the depreciation from RPL plant to lower the profit of the combined entity and save on tax.

SEZ & TAX HOLIDAYS:

The merger is unlikely to have any impact on the tax holidays enjoyed by RPL, since they are bestowed upon the refining unit operating inside the special economic zone, rather than on RPL as a company. The tax benefits are expected to continue without any change. However, it will have an indirect beneficial impact due to the transfer of depreciation of RPL's plants to RIL's profit & loss accounts.

Friday, February 6, 2009

SATYAM SCAM


06th February 2009
SATYAM SCAM
This article will make you understand the Satyam Scam that happened between December 23rd 2008 to January 31st 2009 and which still continues.

Ramalinga Raju, the former Chairman of Satyam was found guilty of routing the cash funds from the company to his personal account for several years. He misrepresented the bank statements to the auditors of the company and as a result the fraud was unknown for several years. This accumulated to Rs.7200 crores which he had adjusted in several areas such as inflating cash and debtors balances and by deflating the current liabilities such as the creditors.

He planned several times to hide these malpractices but all of them failed. So as a last step he planned to acquire his Son’s Maytas Infra and Maytas Properties for which the shareholders did not approve, as most of them felt that he was doing for his personal benefits. On the same day the market value of Satyam shares came down by 80 to 100 rupees which was trading around Rs.300. So in order to increase the market price he announced the Buy-Back of shares because of which the market price again recovered. He used this golden opportunity to sell his shares and thereby reducing his stake to 2.6% from 8% and he also cancelled the buy-back of shares which for a second time reduced the market price.

Subsequently he wrote a letter to SEBI and BOD confessing the malpractices and fraud. In a letter to the board of directors, Raju states that “Satyam’s balance sheet as on Sep 30, 2008, carries an inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 reflected in the books). Further, it carries an accrued interest of Rs 376 crore which is non-existent. An understated liability of Rs 1,230 crore on account of funds arranged by me. An over stated debtor’s position of Rs 490 crore (as against Rs 2,651 crore in the books). The letter further states that the gap in the balance sheet has arisen purely on account of inflated profits over a period of last several years

The moment it was announced, the market value touched the bottom line of Rs 6 in NSE and Rs 11 in BSE. This Blue Chip Company was trading around Rs 800 before 1 year. This issue pulled the entire market down to the extent of 700 points (BSE) within a fraction of second.

As the second phase the government constituted the new Board of Directors and it appointed the Statutory Auditors as KPMG and Delloite and the Internal Auditor as Brahmaya & Co.,

Now the Satyam is recovering to its early life. Inspite of the fraud, it is getting several contracts. Companies such as iGate, L&T and M&M are showing interest to acquire the fraud-hit-company.

Thursday, April 3, 2008

How to buy Shares??????

To buy shares, or sell some or all of your shares, you need to contact a stockbroker or share-dealing service. As well as specialist stockbrokers, most high street banks and a number of building societies offer share-dealing services. Share dealing services may be telephone, postal or internet based and commission rates can vary considerably. Before selling shares, you should ensure that you have the related share certificate(s). If you are selling shares which are registered in a nominee name, rather than your own name, you need to contact the nominee to make arrangements to sell the shares. Before entering into this field you have to gain some knowledge about various difficulties you have to face it....

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