@Leisure - Vol-14 | srei

@Leisure - Vol-14

Newsletter
 

Bank notes are not made out of paper

Upon hearing the word ‘money’, the first image that will come to mind is bank currency notes printed by the Reserve Bank of India (RBI). Most people think that bank notes are made out of paper, but that's not quite so. Even though bank notes give the feeling of paper, the bank notes printed by the RBI are actually made out of used clothes! The materials that RBI uses are cotton, ink and cotton rag. Cotton rag is a material made of old clothes. The exact formulas used for making these materials are kept secret to avoid fakes.

Different materials are used to make currency in different countries, but almost all of them are made out of cotton rag, linen, abaca, plastic and other textile fibres, which ensure that the notes last much longer than they would in the case of paper. An average note has a lifespan of two years.

Today, currency is not limited to notes and coins. We have other forms of exchanging currency as well, like bank cheques, demand drafts, credit cards, debit cards, electronic wire transfers, etc. Slowly with time, the role of notes is getting reduced, and other modes of money are becoming increasingly popular. In fact, it is possible that debit and credit cards and wire transfer wipe out notes entirely as a form of money. People are even transferring ‘money’ with their mobiles now.

Even though other means are getting popular, even today if someone says ‘money’, we think of currency notes. That's why we tend to be more profligate with a credit card. This thinking of money as only bank notes can come at a cost. For example, while handing out a ten rupee note to someone, you may think three times, but while lending your pen to someone, even when there is no chance of getting it back, you can be very generous.

It is somehow set in our minds that money is all about the paper that the bank currency is made of, but in reality money comes in all shapes and sizes. Money is a measure of wealth, and how much money you have is determined by the overall wealth you own, let it be the bigger things like land, investments, vehicles, etc. or smaller things like a pen, your clothes, or other possessions. Basically your wealth is a sum total of your assets.

We all need money, and lot of it. Just that we don't sometimes understand what money is all about, and relate it only with currency and its exchange, even when in reality it is a lot more than that.

 
 

The Srei story: Celebrating a 25 year old journey

Srei started its 25-year long journey in 1989 as hire-purchase company. The beginnings might have been humble but we have come a long way. Today Srei has Assets Under Management (AUM) to the tune of Rs. 34,069 crore. Throughout this journey, there have been many challenges and events. We have worked our way through a controlled economy of the pre-liberalisation era, the advent of the Internet, globalisation and routine market cycles. Srei has built a pan-India presence and evolved from being a player in one business to being a multi-dimensional business conglomerate.

The core strength of Srei’s initial business was financing conventional infrastructure equipment. However, we took a strategic decision to enter industry segments, which were under-financed but had high growth potential. Srei has been operating in the IT software solutions and healthcare equipment segments since 2010-11. Our partnership with BNP-Paribas has allowed us to work with their partners like Oracle, EMC and Fujitsu, and in medical equipment fields with GE, Phillips and Siemens. Srei is also active in providing project advisory services. Our advisory services comprise project conceptualisation, fee-based studies and project monitoring. Srei is also operational in the telecom infrastructure business through Viom Networks, a joint venture between Tata Teleservices and Quippo-a Srei Group enterprise. Quippo is the pioneer in the Shared Passive Telecom Infrastructure industry in India. Viom is the world’s largest independent telecom infrastructure company.

We have survived many ups and downs in the industry because of our core business strength and fund mobilisation capability. Srei has been at the forefront of building one of India’s largest bankers’ consortia. We have also been able to channel funds through international institutions like DEG (Germany), IFC (Washington), FMO (Netherlands), BIO (Belgium), Nordic Investment Bank (Finland) and Proparco (France). We were among the first Indian Non-Banking Finance Companies (NBFCs) to raise funds in international stock markets.

Srei has adopted a disciplined approach to lending. We work with the Small and Medium Enterprises (SME) sector and retail segment in an advisory capacity to minimise Non-Performing Assets (NPAs). We have also capitalised on our international relationships to put in place the best governance practices. Our analytical risk management practices, which have been strengthened because of our relationship with BNP Paribas, have helped us contain NPAs further. Finally we fund businesses, which have strong and valuable assets that can be held as collaterals. This has ensured that recoveries can be made in case of defaults.

Today Srei has over 87 offices all across India and we provide a wide range of services. With the help of Sahaj, we have gained access to the huge rural market of India where we see immense possibilities. Our company has also been expanding its global presence. We have currently two offices in Russia and are also present in Germany, Nigeria, Mauritius and Singapore.

Srei has had a wonderful 25 years in which we have turned a profit (on a standalone basis) in every year of our existence, no matter what challenges we faced. We are excited about our future too. India requires significant investments for development in the future and the private sector, including Srei, will have an important role to play. We are confident that we will be able to strengthen our position while driving the next phase of India’s growth.

 
 

Which is your type of bond?

A bond is a financial instrument issued by a borrower to a lender. It is a standardized contract between the borrower and many lenders with uniform terms and conditions with regard to the interest rate, tenure, etc. and come in pre-specified denominations. There are many types of bonds as enumerated below:

  1. Treasury bills (T-bills): These are short term borrowing instruments issued by the government with a maximum tenure of one year. These are highly liquid securities with good volume of transactions happening in the secondary market.
  2. Commercial paper: These are similar to T-bills but are issued by corporate companies to meet their temporary funding needs. Unlike T-bills, commercial papers carry credit risk (risk of default) as they do not have the government backing
  3. Government bonds: Also called as Gilts, these are longer term borrowing instruments issued by the government to fund its budgetary expenses. The term could range from one year to as long as thirty years. These too are highly liquid with regular trading in the secondary market.
  4. Corporate bonds: These are longer term borrowing instruments issued by corporate companies to meet their business funding needs. Though these are also traded in the secondary market, their liquidity may be thin. These bonds also carry credit risk as the borrower may default on his obligation. It is important to check the credit rating of the issuer before investing.
  5. Inflation indexed bonds: These are usually bonds issued by the government whose interest rate is not fixed but pegged to an identified inflation index like the Wholesale Price Index (WPI) or the Consumer Price Index (CPI). The interest rate is specified as a mark up over the index and is periodically reset.
  6. Deep discount bonds: These bonds do not pay out periodical interest. They are issued at a discount to the face value and are redeemed at face value. The difference between the discounted issue price and the face value is the return to the investor.
  7. Floating rate bonds: These bonds do not come with a fixed interest rate. Instead, the interest rate is pegged to an identified benchmark like the MIBOR (Mumbai Interbank Offered Rate). The interest applicable to the investors is periodically reset based on the movement of the benchmark.
  8. Tax-free bonds: Certain bond issues authorized by the government offer you tax-free interest payments. These are typically for infrastructure or other social funding identified by the government.

So which bond should you buy?

With such a vast array of bonds available for investment, your task of picking the right one is indeed a tough one. Here is an attempt to make your selection process easier:

If you are looking to...You may consider...

If you are looking to... You may consider...
Park your money for the short term. T-bills if you can hold them to maturity which is usually 91 days, 182 days or 364 days. Selling it before maturity may expose you to capital losses. Commercial papers, if you are comfortable with the credit risk.
Invest your money for a few years Gilts or corporate bonds with maturity in line with your investment horizon.
Protect your capital from inflation Inflation Indexed bonds
Invest for a few years without any interim cash inflow Deep discount bonds
Invest for tax-free income Tax-free bonds
Invest for a few years with market linked interest receipts Floating rate bonds

Note: Some debt securities listed above (such as Gilts, T-bills, etc.) are available for investment to retail investors through mutual funds (debt schemes or balanced schemes).

A carefully built bond portfolio can provide you attractive investment solutions. Talk to your financial advisor today.

 
 

Buddy Jokes

1. A company offered Rs. 1000 for each money-saving idea submitted by its employees.
The first prize went to the employee who suggested the award be cut to Rs. 500.

2. Corporate Life!
In the past few years, I learnt to operate
3 critical machines: Scanner, Printer and Xerox Machine
3 High End Software programs: Microsoft Word, Microsoft Excel and Microsoft PowerPoint
3 great short cuts: Ctrl+C, Ctrl+V and Ctrl+S
And 3 very important words for professional life: ‘Yes SIR’, ‘Ok SIR’, and ‘I'll Just Do That SIR’.

3. Life is spent in 3 stupid STAGES
TEEN AGE: when you have lots of Time & Energy, but No Money to spent
WORKING AGE: when you have lots of Money & Energy, but No Time to spent
OLD AGE: when you have lots of Time & Money, but No Energy left.