Mutual Fund / IPO / FD

MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Fund scheme that has a defined investment objective and strategy.

The money thus collected is then invested by the fund manager in different types of securities. These could range from shares to debentures to money market instruments, depending upon the scheme’s stated objectives. The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

Open End Mutual Funds

These do not have a fixed maturity. You deal with the Mutual Fund for your investments and redemptions. The key feature is liquidity. You can conveniently buy and sell your units at Net Asset Value (NAV) related prices, at any point of time.

Closed End Mutual Funds

Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close ended schemes. You can invest in the scheme at the time of the initial issue and thereafter you can buy or sell the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchange could vary from the scheme’ NAV on account of demand and supply situation, unitholder’s expectations and other market factors. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but closer to maturity, the discount narrows. Some close-ended schemes give you an additional option of selling your units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations ensure that at least one of the two exit routes are provided to the investor under the close ended schemes.

Interval Schemes

These combine the features of open-ended and close-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV related prices.

IPO (Initial Public Offering)

Initial public offering (IPO), also referred to simply as a “public offering”, is the first sale of stock by a private company to the public. IPO is a way for a company to raise money from investors for its future projects and get listed to Stock Exchange.

From an investor point of view, IPO gives a chance to buy stocks of a company, directly from the company at the price of their choice (In book build IPO’s). Although an IPO offers more control over the price at which the investor is willing to buy the stock it is no less risky than buying a stock in the market.

From a company prospective, the single most important use of an IPO is the provision of funds. IPO’s provide capital for the company’s future growth or for paying its previous borrowings and allows the company’s stock to be traded publicly in the Stock Market.

IPO

Companies need fund to finance their new projects, upgrading of infrastructure, acquisition, future growth plans or to pay off previous borrowings. Borrowing the money from a financial institution compels the company to pay interest on those borrowings. On the other hand when a company issues an IPO or an Initial Public Offering, the company offers a fixed numbers of its shares to be held by the public and to be traded publicly. The investors in an IPO book their shares by offering the pay the company the issue price or the price of each share. The money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a pool of investors to provide it with large volumes of capital for future growth. The company is never required to repay the capital, but instead the new shareholders have a right to future profits distributed by the company.

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Types of IPO

Initial Public Offering can be made through the fixed price method, book building method or a combination of both.

Book Building Issue:

In a book building issue during the period for which the bid is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria. Book Building process helps the company achieve appropriate price and discover the demand for the issue.

Fixed Price Method:

Unlike the book building process in a fixed price process the price at which the stock has been offered is known in advance to the investor.

FIXED DEPOSITS

Corporate Fixed Deposit

Invest your hard-earned money in rated Fixed Deposit schemes with twin benefits of high level of safety & highly competitive returns.

We offer a range of Corporate Fixed Deposits varying in interest rate & tenures to help it grow consistently over a period of time.

INRODUCTION

Fixed Deposit (FD) is a savings instrument where you deposit an investment amount for a fixed duration at a fixed rate of interest. Even if interest rates change during the tenure of the FD, the interest rate is fixed at the time of the FD investment.

Fixed Income instrument provides Fixed/committed return on the amount invested. This is one of the most convenient investment options to the investors. Fixed Deposits mobilized by companies are governed by the provision of Section 58-A of the Companies Act, 1956. Fixed Deposits can be classified into deposits received from

  • Manufacturing Companies ( Non Banking-Non Finance Companies)
  • Non Banking Finance Companies (NBFC)

When you open a FD, you receive a certificate that mentions the invested amount, the interest rate and the maturity date, apart from some other details. If you opt for the cumulative option for getting the interest, the maturity amount would also be mentioned on the FD certificate. If you open a FD online through the internet facility, you also receive a FD certificate.

Request for premature withdrawal may be permitted at the sole discretion of the corporation only and cannot be claimed as a matter of right by the depositor, subject to the Housing Finance Companies (NHB) Directions, 2010 as applicable from time to time. Premature withdrawal will not be allowed before completion of 3 months from the date of deposit. There is some penalty for this in the form of a reduced interest rate.

Loans may be granted against Fixed Deposit upto 75% of the Principal deposit, provided the deposit has run for a minimum period of three months. However, granting of loan will be at the sole discretion of the Company.

Apart from this, one thing that needs to be kept in mind is that Income Tax will be deducted at source on interest payment of Rs. 5000/- and above in a financial year subject to changes/ alterations in the said provisions by the relevant authorities. Upto Rs. 5000/- TDS is not applicable. For exemption of TDS, Depositors should submit Form 15G/ 15H/ 15AA/ Order U/s10/ Order U/s 197 (as the case may be).

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