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Saturday, January 7, 2017


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Thursday, January 5, 2017

How to calculate and save income tax on share trading

Amit had invested a major part of his savings in the stock market. However, he was confused about the tax treatment of the profit arising from equity investment. First you need to know that there is no tax exemption on direct equity investment. (Investment in ELSS mutual funds offer tax exemption under 80C). So, our entire focus is on the various tax that is applicable in the PROFIT from equity investment. In this article, we are focusing on applicable tax on share trading and how one can optimize it.
Suppose you have purchased a share at Rs 100 and sold it at Rs 110. There is 10% profit from the transaction. However from this 10% (Rs. 10) an investor has to pay STT, brokerage charge, exchange charge, service charge as well as capital gain tax. Besides capital gain tax  all are fixed. To minimize capital gain tax one need to understand how such tax on share trading works:

Income Tax on share trading –

Income tax on share trading  depends on whether you are showing it as “Capital gain” or “Business Income”.
Capital gainIf  you are trading in stock market as an  investor (mostly involved in delivery based trading), the gains from trading can be classified as:
  • Long term capital gain: – If  equity shares are sold after 12 months holding then such gain is subject to tax exemption. However, the security must be traded an Indian stock exchange on which STT has been paid. Exemption on long-term capital gain tax is not applicable if the shares are sold on the exchange outside India. Long term capital loss from equity shares is a dead loss – it can neither be adjusted nor carried forward.
  • Short term capital gain: If equity shares are sold within 12 months from the date of purchase, then the short term capital gain tax of 15% is applicable irrespective of the personal tax slab (10%, 20% etc). If investor’s other income excluding short-term capital gain is less than basic exemption limit then he can take benefit of such shortfall in basic exemption limit. Any short-term capital loss from equity trading can be set off against  any short-term capital gains. The important points to note here is that long-term capital gain arising on shares sold directly to a friend without routing it through Indian stock exchange are not exempted from tax as STT is not paid on such shares.
Business incomeIf you are trading in the stock market frequently (mostly non-delivery trade), returns from it can be classified as follows:
  • Speculative Business income:  Profit from intraday trading is categorized under speculative business income. Tax treatment is similar to your Business income tax. It is  taxed as per the tax slab you fall in while losses  can be offset only against speculative gains. 
  • Non-speculative Business incomeIncome from trading futures & options on recognized exchanges (equity, commodity, & currency) is categorized under non-speculative business income. Tax on share trading in such cases is similar to your business income tax. The profits on F/O trading is taxed as per the tax slab you fall in whereas losses on such F/O trading can be set off against business profit.
So, the important point is whether to classify income from share trading under “capital gain” or “business income”. In general, if you are mostly involved in delivery based trading with very few non-delivery based trading then it is better to classify the income under “Capital Gain” head. (Consult with your chartered accountant before  finalizing the IT return)
Taxation on Dividend
A company shares a part of its profit with the shareholders in the form of dividend. Dividend in the hand of investor is tax-free. The company has already paid Dividend Distribution Tax. So effectively 15% tax has been already paid by the company on the investor’s behalf. Therefore such dividend is tax-free in the hands of the investor.

How to optimize post tax returns:-

Tax on share trading can be reduced considerably by following certain Tax saving methods –
Trading as business income: –
If you consider your trading gain as “business income” then you have to pay tax as per your Tax slab. The benefit is you can deduct your trading related expenses from the gain. Suppose you made a profit of Rs 1,00,000 from equity trading and you fall into 20% tax bracket so you need to pay 20% of 1,00,000 as tax. However, this tax outgo can be reduced by showing related expenses or by adjusting loss from share trading. Expenses on internet bill, telephone bill, newspaper/magazine purchase, computer charge, brokerage etc can be adjusted with your trading profit. For example, consider your internet+telephone bill as 24,000 (full year), Computer depreciation charge as 10,000, newspaper and magazine charge as 6,000, brokerage and related expense is 4,000. So, total trading related expense comes as (24,000+10,000+6,000+4,000) = 44,000. From the trading profit of 1,00,000 (1Lac) you can deduct 44,000 as expenses and thus net business profit comes at only 56,000. So, instead of paying tax on 1 Lac your taxable income stands at only 56,000.
Capital gain as investment income:-
If you don’t want to classify your trading activity as “business” then you need to pay only short term capital gain tax at 15%. This can be offset against only against short-term capital loss. Long term capital loss is a dead loss it can’t be adjusted or carried forward as long term capital gain is exempt from Tax. An Investor  can save tax on its short term capital gain by realizing losses existing in the portfolio.Suppose, you have  Short term capital gain of Rs10,000. This means you have to pay 15% of 10000 i.e, Rs 1500 as tax. At the same time you have stocks (purchased within 1 year) in your portfolio those are showing loss of Rs. 5,000. You are confident that over long run those stock will turn profitable. However to lower tax outgo you can sell and repurchase the same stock at the same rate after 2 days (As delivery takes T+2 days). So, your net profit stands at (10,000 – 5,000) = 5,000. Thus you have to pay tax of just Rs 750 (15% of 5,000) instead of Rs 1,500. In this process, you can continue holding the stock having good long-term prospects and also save tax.
Thus investors should clearly understand various tax on share trading to reap maximum benefits from the investment. As by varying your holding period,  classifying  income as “capital gain” or  “business income” and by taking advantages of tax optimization measures  you can reduce your tax liabilities considerably.
Important Note: – Consult with your chartered accountant before implementing any of the above measures. All income sources must be considered before classification of income from equity investment. Approach to your CA for an in-depth look at your overall financial statement before finalizing IT return.
Source: https://www.paulasset.com/articles/income-tax-on-share-trading/

Saturday, December 31, 2016

PENNY AND SMALL CAP STOCKS LOOKS INTERESTING FOR NEXT 5 YEARS HOLDING

1. marsons ltd
2. porwal auto components
3. indowind energy
4. jasch industries
5.godavari drugs
6.pressman advertising
7 future enterprises ltd (FEL )
8. prakash industries
9.snowman logistics
10. IL&FS investment managers
11. vardhman acrysil
12 Nocil ltd
13.Trident
14. Mirc electronics
15. Mic electronics
16.R system international
17. FCEL
18. Modison Metals
19. Nhc foods
20. First Source Solution

I am not going to give any Entry and Exit prises.  Penny stocks always risky sometimes we may loose entrie capital also.  I used to buy very very small amounts like rs.1000 each only and will for get about this time for next five years.

PERFORMANCE OF MY 2012 RECOS.

DATE OF RECOSCRIP NAMERECO PRICETOUCHED HIGHRETURNS % RETUNS  
       
09.03.2012ORIENT PAPERS AND PRODUCTS5610246 82.14  
20.03.2012KALPATARU TARNSMISSION106266160 150.94  
27.03.2012JYOTHY LABS (12.06.2012 1:1 bonus) reco.163 81.5381299.5 367.48 MULTIBAGGER
28.03.2012ISMT256.8-18.2 (72.80) 
31.03.2012LLOYD ELECT & ENGG43340297 690.70 MULTIBAGGER
3.04.2012JARGAN PRAKASHAM99213114 115.15  
05.04.2012EMMBI POLYMERS14139.85125.85 898.93 MULTIBAGGER
08.04.2012IL&FS TRANSPORT NETWORKS197119.15-77.85 (39.52) 
10.04.2012SWAN ENERGY RECO.118 SPILT ON 03.02.2014 1:159213.4154.4 261.69  
15.04.2012HSIL164.9477312.1 189.27  
16.04.2012ARVIND83.1423.6340.5 409.75 MULTIBAGGER
18.04.2012IRB INFRA199.3267.9568.65 34.45  
18.04.2012INFINITY COMPUTERS82323241 293.90 MULTIBAGGER
18.04.2012DELTA CORP67.5195.2127.7 189.19  
03.06.2012SEAMAC81.211533.8 41.63  
03.06.2012ASIANA HOUSING RECO.173 FV.10 T FV.2 ON 24.10.201334.2327.4293.2 857.31 MULTIBAGGER
04.06.2012ALLSEC TECHNOLOGY15.32400384.68 2,510.97 MULTIBAGGER
04.06.2012VIRINCHI 8.8885.776.82 865.09 MULTIBAGGER
04.06.2012PIONEER INVESTCORP2742.0515.05 55.74  
10.06.2012SHREE GANESH JEWELLERY93.354.08-89.27 (95.63) 
13.06.2012PENNAR INDUSTRIES28.57142.5 149.12  
16.06.2012SOLITAIR MACHINE16.549.533 200.00 MULTIBAGGER
17.06.2012NBCC (RECO 85.40) FV.10 TO FV.2 02.06.201617.72299.2281.48 1,588.49 MULTIBAGGER
18.06.2012CONTROL PRINT RECO.33.65 12.01.2016 1:2 BONUS 8.41360.25351.84 4,183.59 MULTIBAGGER
19.06.2012SUNIL HITECH ENGINEERS Reco.58 FV.10 to fv.1 & Bonus 1:1 12.03.20162.923.4320.53 707.93 MULTIBAGGER
19.06.2012AUTOMOBILE CORPORATION OF GOA299752453 151.51  
21.06.2012SHASHUN PHARMA117428.25311.25 266.03 MULTIBAGGER
23.06.2012TTK HEALTHCARE351.81110758.2 215.52 MULTIBAGGER
23.06.2012VIKRAM THERMO38.65139100.35 259.64 MULTIBAGGER
27.06.2012SUJANA UNIVERSE30.48-2.52 (84.00) 
04.07.2012ON MOBILE33.758248.25 142.96  
01.08.2012IVRCL44.44.39-40.01 (90.11) 
01.08.2012BF UTILITIES411.45391.65-19.8 (4.81) 
01.08.2012BOBMBAY BURMAH TRADING Reco.556.30 fv.10 to fv.2 08.11.2012111.26673.4562.14 505.25 MULTIBAGGER
06.08.2012MEDICAPS reco.44.50 later 3:1 19.03.20131536.921.9 146.00  
08.08.2012CAPRIHANS 46.6131.785.1 182.62  
27.08.2012CEREBRA INTEGRATED TECHNOLOGY31.9523-8.95 (28.01) 
08.09.2012ARSHIYA INTERNATIONAL116.229.8-86.4 (74.35) 
09.09.2012DAIKAFFIL CHEMICALS FACE VALUE.1012.980.667.7 524.81 MULTIBAGGER
22.09.2012AVON ORGANICS28.511.43-17.07 (59.89) 
26.09.2012APCOTEX INDUSTRIES RECO.202.50 14.08.2013 FV.10 TO FV.5 & 31.07.2015 bonus 1:150.62435384.38 759.34 MULTIBAGGER
27.09.2012MRF103305460044270 428.56 MULTIBAGGER
27.09.2012SREI INFRA27.391.9564.65 236.81 MULTIBAGGER
30.09.2012COSTAL ROADWAYS17.9528.9511 61.28  
10.10.2012NAVNEET PUBLICATIONS58.6119.761.1 104.27  
10.10.2012FIRST SOURCE SOLUTIONS12.1553.6541.5 341.56 MULTIBAGGER
11.10.2012CENTURY TEXTILES374.51037.25662.75 176.97  
11.10.2012SICAGEN INDIA15.9530.714.75 92.48  
12.10.2012HINDUSTAN ZINC137.15289151.85 110.72  
20.10.2012NETWORK1837.233.4-3.8 (10.22) 
21.10.2012IDFC152.583.45-69.05 (45.28) 
23.10.2012ROLTA INDIA64.960.5-4.4 (6.78) 
28.10.2012BAYER CROP SCIENCE112046273507 313.13 MULTIBAGGER
04.11.2012MSR INDIA RECO.160 FAVE V.10 TO F.V5 31.03.2013AND BONUS 5:1 20.12.20124039.6-0.4 (1.00) 
04.11.2012TALWAKRA BETTERVALUE197.6302104.4 52.83

Thursday, December 29, 2016

Munjal Showa Ltd Auto Parts & Equipment - VALUE BUY


Story image for MUNJAL SHOWA LTD from Moneycontrol.com

“Established in 1985, in technical and financial collaboration with Showa Corporation of Japan, the pioneering global leaders in the manufacture of shock absorbers, Munjal Showa Limited is a member of Hero Group, a US $1.3 billion manufacturing conglomerate, with a 45-year history. Munjal Showa Limited in its joint venture with Showa Corporation (holding 26 percent stake in the Company), designs and manufacturers shock absorbers and struts for leading two-wheelers and fourwheelers. MSL’s manufacturing plant is spread over an area of 24,075 sq mt in the industrial area of Gurgaon, Haryana, on the outskirts of the National Capital Territory of Delhi, India Munjal Showa Limited is one of the largest suppliers of shock absorbers to major auto giants in India, Japan, Germany, the United States and the United Kingdom, amongst other developed markets. The Company's products conform to the highest standards of quality, safety, comfort and dependability and are QS 9000, ISO 14001 and ISO 9001 compliant. The use of advanced technology and a team of experienced personnel have led to outstanding growth in the Company. It has established a strong foothold in the auto ancillaries manufacturing market and enjoys a wide patronage.” “Munjal Showa products serve as original equipment to a wide range of Maruti Suzuki upper end cars and export models, Honda City car, complete range of Hero Honda Motorcycles, Kawasaki Bajaj Motorcycles, Kinetic Scooters and Hero range of mini-motorcycles and mopeds and Honda Motorcycles and Scooters India (Pvt) Limited. In over a decade the Company's state-of-the-art Shock Absorbers, Front Fork, Struts and Window Balancers/Gas Springs have become symbols of reliability and quality for popular two and four wheeled vehicles.

- Management expects to grow in line with the industry growth in the OEM segment. It expects the 2W segment to witness stable growth and is also seeing momentum coming back in passenger vehicles.

The company is a pioneering global leader in the manufacture of shock absorbers. Munjal Showa Ltd operates as an ancillary and manufactures automobile components mainly for the use of two-wheeler and four-wheeler industries. The company designs and manufactures front forks, shock absorbers, struts, gas springs and window balancers for sale in the domestic market

- The company is currently operating at ~80% utilization in 2Ws
.
  
In 2015 Haryana State Industrial & Infrastructure Development Corporation (HSIIDC) had demanded additional money for the allocated land in the entire Manesar industrial belt and had asked the units located there to pay or face cancellation of the land parcels allotted to them. As per the company, there has been some relief provided on that front by the High Court and as such there is no need for further provisions. There may be reversal of the earlier provisions (Munjal Showa had provided Rs 70 lakhs for the same).

“With due consideration to factors like a) strong parentage and collaboration with Showa Corporation (Japan) gives MSL an edge over its peers, b) stable margins, c) positive operating cash flow, d) decent return ratios, e) debt free company and f) quality management.
Expectation of improvement in economic environment will help in recovery of the overall automobile sector. With slew of new product launches lined up by its key clients, Munjal is expected to benefit going forward. Diversification will reduce risk of concentration; aiding in stable revenues. Control over raw material cost and other expenses will result in better operational performance. In addition; low gearing ratio, higher return ratios, healthy dividend yield and support from the promoter group continues to be the key positives for the company

- Contribution to Hero Moto Corp stood at ~75% of revenues; whereas Honda Scooters accounted for 14%; Honda Cars ~5%, Maruti 5% and balance 1% is contributed by Yamaha. For Maruti and Honda export models, Munjal Showa enjoys 100% share.

- The company is currently keeping its 100% position as open.

VALUATIONS OF THE COMPANY:
Market Cap.: ₹ 754.31 Cr.
Current Price: ₹ 188.60
Book Value: ₹ 121.39
Stock P/E: 12.38
Dividend Yield: 2.12%
Face Value: ₹ 2.00
52 Week High/Low: ₹ 258.70 / ₹ 150.00
Return on equity: 13.63%

Average return on equity 10Years: 18.18%
Debt to equity: 0.00
EPS: ₹ 15.24
OPM: 7.67%
Dividend last year: ₹ 16.00 Cr.
Price to book value: 1.55
Price to Cash Flow: 11.39
Price to Sales: 0.50
NPM last year: 4.07%
Inventory turnover ratio: 23.17
Debtor days: 48.40
Pledged percentage: 0.00%
Unpledged promoter holding: 65.02%
Change in promoter holding 3Years: 0.01%
Market Cap to Sales: 0.50

CLIENTS: 
HERO MOTOR CORP LTD, HONDA CARS INDIA LTD,HONDA MOTORS CYCLES & SCOOTERS INDIA PVT LTD, MARUTI SUZUKI, INDIA YAMAHA MOTORS PVT LD.

Note: 1 crore = 10 millionRs cr
No Consolidated Avaliable
Mar 2016Mar 2015Mar 2014Mar 2013Mar 2012
INCOME :
Sales Turnover1,633.931,783.821,734.671,723.961,674.09
Other Income5.198.156.083.471.59
Stock Adjustments-1.602.525.46-2.154.61
Total Income1,637.521,794.491,746.211,725.281,680.29
EXPENDITURE :
Raw Materials1,096.011,214.451,194.301,176.501,163.87
Excise Duty132.09140.86136.69142.54117.21
Power & Fuel Cost44.1655.9757.6559.7054.10
Other Manufacturing Expenses86.9790.6391.8696.0791.62
Employee Cost100.8592.4388.0476.5965.77
Selling and Administration Expenses57.2962.5162.1661.1459.15
Miscellaneous Expenses2.722.054.049.864.28
Less: Preoperative Expenditure Capitalised0.000.000.000.000.00
Profit before Interest, Depreciation & Tax117.44135.60111.46102.89124.29
Interest & Financial Charges0.290.622.867.3311.16
Profit before Depreciation & Tax117.15134.98108.6095.56113.13
Depreciation29.3028.6728.4127.6427.23
Profit Before Tax87.85106.3180.1867.9285.90
Tax26.7030.6810.487.2418.77
Profit After Tax61.1575.6369.7060.6867.13
Adjustment below Net Profit0.00-1.780.000.000.00
P & L Balance brought forward163.64129.0595.7369.0835.90
Appropriations39.2539.2536.3834.0433.95
P & L Bal. carried down185.54163.64129.0595.7369.08
Equity Dividend16.0016.0014.0012.0012.00
Preference Dividend0.000.000.000.000.00
Corporate Dividend Tax3.263.262.382.041.95
Equity Dividend (%)200.00200.00175.00150.00150.00

Compounded Sales Growth:

10 Years:
8.99%
5 Years:
3.1%
3 Years:
-1.71%
TTM:
-2.06%

Compounded Profit Growth:

10 Years:
9.68%
5 Years:
12.39%
3 Years:
-3.89%
TTM:
-14.82%
Return on Equity:

10 Years:
18.18%
5 Years:
20.17%
3 Years:
17.46%
TTM:
13.63%
Rs cr
No Consolidated Avaliable
Mar 2016Mar 2015Mar 2014Mar 2013Mar 2012
SOURCES OF FUNDS :
Share Capital8.008.008.008.008.00
Reserves & Surplus444.92402.72348.13294.81248.16
Total Shareholders Funds452.92410.72356.13302.81256.16
Secured Loans0.000.000.0021.1163.16
Unsecured Loans3.282.521.466.0010.65
Total Debt3.282.521.4627.1173.81
Total Liabilities456.20413.24357.59329.92329.97
APPLICATION OF FUNDS :
Gross Block469.04459.53450.19438.47412.81
Less: Accum. Depreciation271.55248.45217.27192.50167.84
Net Block197.49211.08232.92245.97244.97
Capital Work in Progress2.611.740.547.4411.19
Investments81.8968.0030.0020.003.00
Current Assets, Loans & Advances
Inventories63.1366.5349.3939.9949.07
Sundry Debtors199.11203.36176.87141.61175.97
Cash and Bank Balance2.431.5615.5617.934.72
Loans and Advances65.5863.2571.6560.8954.75
Less: Current Liab. & Prov.
Current Liabilities149.62177.08195.96184.91191.47
Provisions6.4325.2023.3819.0222.23
Net Current Assets174.20132.4294.1356.4970.81
Miscellaneous Expenses not w/o0.000.000.000.000.00
Total Assets456.19413.24357.59329.90329.97







Shareholding PatternDescription: More
Promoters
65.02 %
Mutual Funds / UTI
0.94 %
FI/Bank
0.04 %
Insurance
0.00 %
Others
8.68 %
Govt
0.00 %
FII
0.00 %
Non-Institutions
31.23 %
Depository Receipts
0.00 %
Total
100.00 


 Funds Owning this StockDescription: More
Scheme Name
Value (Rs cr)
2.64
4.36
4.36
4.51
2.03

ACE INVESTOR: ANIL KUMAR GOEL HOLDING .

Key Notes:

The company is currently enjoying zero-debt status which can pave ways for future expansion plans. Also, there has not been any significant capex since 2012 which has lead to robust free cash flows. Moreover, the company has almost doubled its current investments in FY16 due to surplus cash generation. Therefore, the company has sufficient headroom available for business expansion. In addition to this, they also hold a good track record for dividend pay outs.

 The growth prospects of the Indian auto components industry remain promising; there are new challenges as we evolve into a critical part of the global auto ecosystem. Indian suppliers, on one hand there is the need to maintain competitiveness in an inflationary environment and on the other they need to compete with the best in an increasingly uncertain global market.

 OEMs  (Original Equipment Manufacturing)  internationally are reducing the number of suppliers that they wish to work with. Thus, it calls for Tier-1 suppliers to facilitate up-gradation and scaling up capacity, quality, technology, people and even hand hold the Tier-II and Tier-III suppliers, without which it will be really difficult to sustain the industry’s competitiveness in the long term. MSL prospects seem to be bright due to strong parentage of Hero Group as compared to its competitors

Risks. The concerns are volatility in raw materials prices such as iron, steel etc.
The concentration of business with few customers may adversely effect the profitability of the company.  The profitablity of the company further effect the government policies regarding excise duty and import duty.

 Crude oil prices influence Auto Sector significantly; any volatility due to tense situation in Middle East and its escalation can dampen market appetite indefinitely.

 Higher dependence on Hero Moto Corp pose a significant risk to the company.

Munjal Showa mainly supplies to Honda Motors and Hero Motocorp. Munjal has a market share of 60% in the 2-wheeler segment and hence dominates this segment. This can be attributed to its position as the sole supplier of shocks to Hero Motocorp which is a leading motorbike company in India. Though this is positive, Munjal’s concentrated customer base is a big risk, especially when Hero performs badly Munjal will inevitably so. Munjal has technology tie-up with a Japanese company.

 Any slowdown in the auto industry will impact the performance of the company

 Cheaper Imports can hamper prospects.


Munjal Showa Limited

Industry : Auto Components

AA FOR LONG TERM  A+1 FOR SHORT TERM.






COMPARATIVE PERFORMANCE

1M (%)3M (%)6M (%)
Munjal Showa Ltd3.6027.8546.34
NIFTY (S&P CNX)5.5818.4618.68
BSE Sensex6.1718.2118.21
BSE 5005.2619.1519.90