@Leisure - Vol-7 | srei

@Leisure - Vol-7

Newsletter
 

Home Trade Scam – Glitz, Glamour and Fraud

Home Trade was a financial services portal that was started in 2001 by Sanjay Agarwal, an MBA from Mumbai University who had worked with TCS and Citibank. It was launched with a glitzy advertising campaign that featured Sachin Tendulkar, Shah Rukh Khan and Hrithik Roshan. Its funding came from a Mauritius based company called EDTV and some non-resident Indians. The company even took the help of leading consultancies like PricewaterhouseCoopers and advertising agencies like Adfactors.

The company took money from several cooperative banks in Gujarat and Maharashtra to invest in Government securities by promising them high rates of return. Agarwal would buy these securities on behalf of one bank and resell them to another. He gave photocopies of certificates and forged contract notes to the banks as evidence of his purchases. In many cases the company simply took the money and did not purchase the government securities.

The first signs of trouble came when the Nagpur District Central Cooperative Bank complained about the non-payment of their dues, which amounted to Rs. 125 crore. Soon other cooperative banks began demanding their payments and the Home Trade scam came to light. At the offices of Home Trade, the employees found that they were no longer being paid their salaries with the company being operational for only a few months.

As the government began their investigations, the true extent of the scam was revealed. The company’s involvement also extended to a Kolkata based employees provident fund scheme which safeguarded the life savings of working class citizens. Collusion was found between heads of cooperative banks and politicians from leading political parties. Sanjay Agarwal and the firm’s finance director Ketan Seth were subsequently arrested along with many others. Show cause notices and warnings were issued to the Bombay Stock Exchange and the Bangalore Stock Exchange for the manner in which they allowed listing of companies and their regulatory procedures. The Home Trade scam was estimated to be around Rs. 500 crore and had affected more than 20 cooperative banks in Gujarat and Maharashtra.

Disclaimer : Names stated in the article are reported in the public domain. SREI bears no responsibility for quoting these names and will not accept any legal claims in this regard.

 

 
 

How to invest in NCDs?

If you think investment options are limited for you as a debt investor, you should certainly take a look at Non convertible debentures (NCDs). An NCD is a debt paper issued by companies for a specific tenure carrying a fixed coupon rate (interest rate on the face value of the bond). The main attraction of debentures is the higher rate of return in comparison to other fixed income instruments. In the past two years, this has been 11-12 per cent per year. The interest payout is monthly, quarterly, annually or cumulative.

There are two ways you can purchase NCDs:

Offline: This involves filling up the application form manually, attaching a cheque to it and submitting the same to the designated centres like banks. The latter would give you a receipt and an application number. Keep this carefully to check the status of your application.

Online: You have to open a trading and demat account to invest in NCDs online. The process of investing in NCDs is similar to that of equity shares; simply log on to the brokerage site where you hold the demat and trading account, and make the investment. NCDs can also be bought upon listing in the secondary market. But in case listing takes place at a premium, you have to pay more. After the purchase, NCDs are held in your demat account like shares.

In any investment, the safety of capital is important. Therefore, you must check the company for its repayment ability. You must check the credit ratings assigned to the NCDs by agencies such as CRISIL, ICRA, and CARE. A higher rating like AAA indicates highest safety on repayment of principal and interest. The rating and the return, however, are usually inversely related. Higher the rating, lower will normally be the return, and vice versa. Srei Infrastructure Finance Ltd. has consistently earned higher ratings from various prominent agencies and offers various choices in NCDs. The company’s focus in priority sectors like infrastructure lending with interests in equipment finance and project advisory, and over 24 years’ of experience, give its offering high credibility.

 
 

Capital Gains Give Bonds Edge Over Fixed Deposits

Every investment portfolio benefits from bonds. The idea is to strike that balance in all asset classes so as to ensure returns, growth and safety.

For any investor, earnings are hard to come by, so it becomes imperative to invest wisely in avenues that provide adequate returns with capital protection. The most common investment avenue is Bank Deposits.

Bank Deposits offer a fixed tenure, a fixed rate of return and capital protection. However, higher inflation may make the investment less attractive as it diminishes the value of returns. While bank deposits are liquid, they are designed as short term investment products. But despite these short comings, it continues to be the most favoured.

Another safe investment avenue is Bonds. Bonds are safer than the other more risky investments such as equities, equity mutual funds, real estate, etc.

When you subscribe to a Bond, its issue Price is at par. The interest offered is known as Coupon. While prices of bonds as well as their yields keep fluctuating, the coupon payment stays the same. Bond maturities vary from 5 to 20 years. An investor will essentially understand its potential in delivering stable and volatility free returns over the long term. If you hold a Bond to maturity, price fluctuations does not matter. You will get back the original value of the Bond, along with all the interest you expect.

Bonds additionally provide opportunity for capital gains. If the interest rates are high and are expected to head lower, you should buy Bonds the reason being, when rates fall, bond prices go up enabling capital gain in addition to interest the bond may be paying.

 
 

Buddy Jokes

1. If you borrow Rs 10 lakh from a bank and cannot repay it, you would have a problem.
But if you borrow Rs 1000 crore and can’t repay it, then the bank has a problem!

2. A fancy new hair salon opened up across the road from a popular old one.
To attract customers a big sign board at the entrance read:
“HAIR CUTS AT JUST Rs 20!”
The shrewd owner of the older hair salon put up his own sign board which read:
“WE CAN FIX HAIR CUTS DONE AT Rs 20”

3. An economist is an expert who can explain why the things he had predicted yesterday didn’t happen today!

A supervisor had ten very lazy men working for him. One day, he decided to trick them into doing some work for a change.

4. He gathered them around him and announced, “Who is the laziest one among you? Please raise your hand and I’ll give you a really easy task today.” Nine of them raised their hands.
He went to the tenth man and asked him “Why didn’t you raise your hand?”
“Sir, feeling too lazy” came the reply.