SEBI Annual Report 2018–Quick Notes

Link to the SEBI annual report – https://www.sebi.gov.in/reports/annual-reports/aug-2018/annual-report-2017-18_39868.html 

  • FPI portfolio: Top 40 stocks Forty stocks account for 74% of FPIs’ equity portfolios in India
  • Mutual fund portfolio: Top 40 stocks Forty stocks account for 63% of MFs’ equity portfolios in India
  • LIC portfolio: Top 40 stocks Forty stocks account for 83% of LIC’s equity portfolio in India
  • Of the 223 issues, 216 were from the private sector which raised ` 68,870 crore compared to 118 issues that raised ` 31,683 crore in 2016-17.
  • In the cash segment, the turnover at NSE increasedby 43.1 per cent during 2017-18 compared to 19.3 per cent growth in the previous year. The turnover of BSE too increased by 8.5 per cent during 2017-18 compared to 34.9 per cent growth in the previous year.
  • The turnover of all stock exchanges in the cash segment increased by 37.4 per cent to ` 83.2 lakh crore in 2017-18 from ` 60.5 lakh crore in the previous year.
  • Of the aggregate turnover, NSE accounted for 87 per cent of the total turnover and BSE accounted for 13 per cent of the total turnover.
  • Over the years, index options have emerged as the most traded instrument in the Indian derivatives market. During 2017-18, the share of index options in total turnover at NSE increased further to 81.8 per cent from 77.1 per cent in the previous year.
  • So far, under mass media campaign, more than 67,980 TVCs, around 2, 25,040 radio spots, over 5,200 insertions in various print editions, around 962 screens in cinema halls were covered under the campaign. Further, around 53 crore bulk SMSes in various languages were sent cautioning investors against Ponzi schemes/unregistered CIS
  • During 2017-18, the total amount of fees and other charges received was ` 624.44 crore (audited) as against ` 518.75 crore in 2016-17 (audited). The recurring fee was 48.90 percent in 2017-18 as compared to 60.70 percent in 2016-17 of the total fee collected. During the year 2017-18, the largest recurring fee of ` 78.00 crore was collected from Derivatives Members registration followed by ` 40.82 crore collected from Stock Brokers and Sub- Brokers. In non-recurring fee category, the highest fee was collected from Offer Documents and prospectuses filed (` 112.24 crore) followed by Buy Back of Share (` 106.12 crore) and Takeover Fees (` 29.70 crore).
  • As on March 31, 2018 the total number of employees in various grades is 794 (including employees on deputation/ contract), out of which 698 employees are officers and 96 employees comprise secretaries and other staff. The male and female composition is 527 and 267, respectively.

There is a very long section on SEBI orders which is very interesting to see actions taken and how much time it takes.

Some more snapshots from the report

  • Mumbai continues to be the leader in turnover.

Mumbai Rocks

  • Free Float Market Cap at 45% of total market cap.

Free Float Market Cap

  • Only 3121 stocks trade for more than 100 days.. No of listed maybe 5200.
  • Only 1730 stocks have traded from more than 100 days regularly on NSE.

Trading Frequency

  • CDSL catching up in terms of investor accounts but value-wise NSDL is way above.

NSDL CDSL

  • CDSL leads in geographical spread of DP locations.

Geographical Spread

  • Options share increasing. But its due to calculation on notional value of the contract.

Index Futures to Derivatives

  • Good increase in AUM and no of clients in PMS.

Portfolio Managers

  • AIFs picking up big time.

AIF

  • Not a major jump in FPIs

Intermediaries

  • USA followed by Mauritius on in Assets Under Custody

AUC FPIS

  • No of SME listings are ramping up in a very big way.

SME listings

  • Market cap is still small.

SME capital raising

  • Pending actionable grievances being reduced at a great rate.

SEBI grievancesSEBI pending grievances

  • Sub Brokers reducing !!

Sub BrokersPortfolio Managers RIA RA

  • Given the high networth requirements doubt no of MFs are going to grow anytime soon.

No of Mutual Funds

  • Way too much surveillance ?

Surveillance Measures

Individual Shareholding Increases in Downtrends–PC Jewellers , Vakrangee and Manpasand Beverages top the charts

We had written a note on how Retail Investors keep averaging stocks in this article on NooreshTech Blog

http://www.nooreshtech.co.in/2018/04/why-do-traders-go-bust-and-investors-get-lost.html

Look at this snippet from Kotak Institutional Research Report.

Almost all the stocks are in downtrends and have corrected more than 20% from their highs.

 

Page Industries–90 PE is not expensive–Cartica Capital

An interesting take from Cartica Capital which is the 2nd largest public shareholder in the stock after Nalanda.

Video Link – https://www.youtube.com/watch?v=BnoCjHHyjJU

Check 2.40 to 4.10 . The overall interview is also interesting.

You might want to read up on Modigliani Miller Model for valuation

Indag Rubber–Buys a Group Company – Electric Vehicles Ancillary–Sun Mobility–Diversification or Diworsification?

Intimation under Regulation 30 about investment upto Rs.14.50 crores (USD 2.1 million) by way of acquisition of 21,00,000 equity shares of USD 1 each of SUN Mobility Investor Ltd.(Jersey)

https://www.bseindia.com/xml-data/corpfiling/AttachHis/9942e6e3-ef09-4c96-ac6c-3ac533796c69.pdf

http://www.sunmobility.co.in/ 

Khemka group has indirect control and ownership.

Investment is being done at book value of USD 1 per share.

Although the total investment is only 14.5 cr as of now. Will this be a good diversification or diworsification ?

Disclosure – No Holdings. Not a recommendation.

Banks Strategy of Mutual Fund Distribution–Highly Biased ?

8 out of top 10 Mutual Fund Distributors by Commission are Banks. With more than 3200 cr of commission income in between them.

Strategy is Highly Biased ?

Bank Selling Strategy

State Bank of India makes 99% of its mutual fund commission income from distributing schemes of SBI Mutual Fund.

SBI seems to have picked up distributing mutual funds only in last 3 years.

In last 1 year commission income has gone up from 178.7 cr to 557.9 cr !!!

Year Commission Income 
2017-18 557.9
2016-17 178.7
2015-16 62.12
2014-15 69.38
2013-14 28.95
2012-13 36.43
2011-12 30.76
2010-11 37.64

ICICI Bank gets 73% of the mutual fund commission income from distributing ICICI Prudential Mutual Fund.

But ICICI Securities only gets 18.5% of the commission income by distribution of ICICI Pru MF. Is it because one cannot buy Regular Plans through ICICI Direct but account holders have a choice to select their own preferred AMC ?

ICICI Securities Limited 316.53 58.45 18.5

Source Links

AMFI commission Disclosures –

Websites of respective Mutual Funds

More than 800 Mutual Fund Distributors with Payouts of more than 1 cr in 2018

In the last few years Mutual Fund Distribution has picked up in a strong way.

The number of mutual fund distributors with a pay-out of 1 cr plus has almost gone up 3.5 times since 2011-2012.

Mutual Fund Commission

The top 20 distributors by commission paid

Top 20 MF Distributors

NJ IndiaInvest continues to be on top.

8 out of the top 10 distributors are Banks !!

Out of all the banks SBI has increased commission income to 557.9 cr from 178.7 cr last year.

Source Links

AMFI commission Disclosures –

Websites of Mutual Funds

Midcap Funds Underperformed in 2017 because of Vakrangee Limited ?

 

“Mid cap category was the worst hit, with 62 per cent schemes underperforming. We had a total of 34 mid cap schemes in our list.”

From this Nov 2017 article.
//economictimes.indiatimes.com/articleshow/61736777.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

A lot of Midcap Mutual Funds underperformed the Benchmark – Nifty Midcap 100 in 2017.

One of the reasons was the huge move in Vakrangee Limited and a little bit of a outperformance move in Rajesh Exports. Both these companies have almost zero Mutual Fund Holdings . ( good to see such a boycott.)

But the index calculation does not care for valuations or any other governance concerns. Its a free float survivorship index. For example RCOM was the 7th Largest weight in Nifty in 2007 peak.

Stock Value – Dec 2016 Weights – Dec 2016 Value – Dec 2017 Weights – Dec 2017 Value – Feb 2018 Weights – Feb 2018 Returns Dec16 to Dec17
Rajesh Exports 462 1.18% 805 1.47% 837 1.52% 74.24%
Vakrangee 137 1.58% 421 3.47% 163 1.34% 207.30%
Nifty Midcap 100 4402   6697   6199   52.14%

Of the 52% return in 2017 almost at 3-4% impact came from Vakrangee !!!

Control Print – Quick Notes from QIP Placement Document

Starting a new series on quick notes from the QIP Placement Document shared by the companies. We find this document to be more detailed in comparison to the Annual Report. The most detailed document is the DRHP but that comes out only for new listings.

This is not a Buy/Sell Recommendation. We may only post on companies we track.

All QIP documents generally updated on this link –https://www.bseindia.com/corporates/qip.aspx

Control Print – QIP Placement Document

Business

· Company is one of India’s leading Coding and Marking solutions provider for printing variable information such as batch numbers, manufacturing and expiry dates, maximum retail prices, serial numbers, special markings, logos, company names and barcodes

· Vertically integrated company, involved in the development, research, manufacturing, marketing and commercializing of printing machines, spare parts, consumables (fluids) and associated services

About Industry – Coding & Marking

· Industry growth is closely co-related to packaging industry growth and the manufacturing sector growth as a whole

· Dominated value-wise by 4 players (Videojet Technologies, Domino Printech, Markem-Imaje India and Control Print) with our Company being amongst them

· Consistent growth of 15%+ over the last decade and is estimated to grow at similar rates approximately 10-15% revenue growth in the near future

· North America accounted for the largest market share of approximately 31% of the global market in 2016

· China, Japan, and India are three top countries contributing towards highest market size in the Asia Pacifc region

· Worldwide Coding and Marking market can be segmented on the basis of technology

(1) Continuous Ink Jet Printer (CIJ)

(2) Piezo Ink Jet Printer (PIEZO)

(3) Print and Apply Labelling Products (PALM)

(4) Thermal Ink Jet Printer (TIJ)

(5) Thermal Transfer Overprinting Printer (TTO)

(6) Valve Jet Printer (VIJ)

(7) LASER

· Continuous inkjet (CIJ) coding is presently the most preferred technology in the global coding and marking system market due to its ease of installation

· Indian Coding and Marking industry is estimated to be worth 1000 crores.

Products

· Continuous Inkjet Printers (CIJ)

· Drop-on-Demand Valvejet Printers (LCP)

· Thermal Transfer Over-printers (TTO)

· Thermal Drop-on-Demand Inkjet Printers (TIJ)

· Laser Coders

· Thermal Ink Coders

· High Resolution Piezo Drop-on-Demand Inkjet Printers (HR) and

· Related consumables and spares.

CIJ printers have been growing at a stable rate of 7-8% annually. However, increasing adoption of TIJ, TTO, and LCP printers is expected to drive the industry growth higher

Manufacturing Facilities

Two manufacturing plant across India, one at Nalagarh, Himachal Pradesh (37,316 sq ft), and other at Guwahati, Assam (65,000 sq ft) and One Research & development centre at Vasai Maharashtra (4500 sq ft).

Production Process

· Pre-dominantly an assembly process starting from the semi-fnished goods (SFG), followed by the assembly of printers and the testing procedure before dispatch of the printers

· Production of SFGs

· Production of Printers

Ø 1st Stage/Housing Assembly

Ø Final Printer Assembly

· Testing of Printers

Raw Materials

· Electronic & pneumatic components printer assembly and dyes & chemicals for consumable production

Customers and Geography Catered

· We provide our goods and services to a wide range of industries including Personal Care, Food & Beverages, Pharmaceuticals, Construction Materials, Cables, Wires & Pipes, Metals, Automotive & Electronics, Agrochemicals, Chemicals & Petrochemicals amongst others

· Registered office is located at Andheri, Mumbai and branches located at other prominent cities of India such as Delhi, Chandigarh, Kolkata, Jamshedpur, Hyderabad, Chennai, Bengaluru, Colombo (Sri Lanka), Pune and Ahmedabad

· Targeting the markets of Sri Lanka, Nepal and Bangladesh

· Countries to which we export our products are Germany, China, Sri-Lanka, Nepal, and Bangladesh

Subsidiaries

· One wholly-owned subsidiary – LIBERTY CHEMICALS PVT. LTD.

Staff

· 328 sales and service field staff across 13 branch offices in India and Sri Lanka

· The total manpower strength of our Company as of March, 2017 is 665 employees.

· As on March 31, 2017, our sales and marketing team consists of 110 employees

Use of Proceeds

· Primarily for the purpose of capital expenditure for ongoing and future expansion projects, acquisitions, working capital and general corporate purposes

Revenue Breakup

· Income from operations substantially comprises of sale of Printers on outright basis, Printers on Rent and on Cost per Print basis, sale of consumables like Inkjet fluids, Ribbons and Ink-rolls, Annual Maintenance Services

· No Single customer above 5% revenue

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Industry Revenue Breakup

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Expenses Breakup

· Expenses comprise of operating expenses, employee benefts expenses, fnance cost, depreciation and amortization and other expenses

· Operating expenses constituted for 40.46%, 39.93% and 41.42% of our total revenue for Fiscal 2017, Fiscal 2016 and Fiscal 2015

· Employee benefit expenses constituted for 18.73%, 19.42% and 18.69% of our total revenue for Fiscal 2017, Fiscal 2016 and Fiscal 2015

· Finance costs accounted for 0.72%, 1.21% and 0.92% of our total revenue for Fiscal 2017, 2016 and 2015

· Depreciation and amortization expenses accounted for 2.69%, 2.13% and 1.87% of our total revenue for the Fiscals 2017, 2016 and 2015

· Other expenses (includes rent and repairs / maintenance of office premises) accounted for 14.55%, 13.85% and 14.93% of our total revenue for Fiscals 2017, 2016 and 2015