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What’s the deal with IPOs?

March 24, 2022

As the name suggests, an IPO, or an Initial Public Offering, can be considered to be a company’s debut on the stock market as a publicly traded company, changing from being a privately held entity. The company that is issuing the IPO raises the capital in the primary market, and after the completion of the IPO, all investors can trade its shares, which is then referred to as the secondary market. 

While from the perspective of an investor, an IPO presents an opportunity to attain shares of a company that showcases the potential to grow, to the company, it is an opportunity to raise capital from the public market and use the funds for purposes that will help them achieve their ambitions of growth.

Why does a company launch an IPO?

While it may seem to be a simple process to bring a company into the public market, the process is long and involves a lot of steps that need to be completed. Starting from making the choice of an investment bank to ensuring the regulatory filings, there are several stages before a business can offer the shares of their company to the public.

This may raise a question about why companies should trade their companies publicly, and dilute their shares. To answer this question, it is important to understand the following advantages of going public.

Increased Capital: By publicly trading their company, a business has the opportunity to raise a higher capital than they could have been able to as a privately held company. The other methods of raising capital, in the form of loans, are riskier and more expensive than launching an IPO. Furthermore, a loan limits the capital raised, while an IPO allows the company to raise capital from the public market.

Publicity gain: Offering an IPO allows a company to gain publicity by being listed on the stock exchange. This results in the company becoming more recognisable to the public, increasing consumer trust in the brand, its products and services. This increase in publicity also facilitates smoother acquisitions and mergers along with higher cash flow due to the publicly listed shares.

Credibility Formation: A result of being a publicly listed company after an IPO causes the company to have an increased visibility, which also increases the credibility of the company.

Assessment of Valuation: After a company is listed in the stock exchange, the valuation of the organisation is bsaically equal to the amount that investors are willing to pay for it. This allows investors to know and understand the valuation of the company. A proper valuation assessment also makes it easier to carry out mergers and acquisitions when needed.

What kind of companies are launching IPOs?

In the current scenario, a lot of companies, including new-age consumer tech companies and startups are pursuing an IPO. The year 2021 proved to be a record year for IPOs, witnessing investments worth over Rs 1.3 lakh crore across 65 IPOs. This record amount was more than four times the entire amount that was raised in 2020 by IPOs, which amounted to Rs 26,628 crore.

With the Indian IPO ecosystem growing at a rapid pace, it is expected that 2022 will also bear witness to a very active IPO market. For you as an investor, it is expected to be one of the best seasons to take part in the IPO boom, and secure your future.

While investors will see increased chances of investing in the market, it should be noted that in 2021, a lot of companies experienced a downturn after launching their IPO, which has resulted in investors becoming much more cognisant of current market situations. Companies likely to have an IPO in 2022 include the likes of the highly anticipated LIC, along with companies like Pharmeasy, MobiKwik and Ixigo. 

In 2021, new age digital firms like Zomato and Nykaa succeeded in gaining the highest amounts in fresh capital. However, PayTM, which raised Rs.18,300 crores through their IPO, surpassing Coal India in the amount of capital raised, saw a decline in their share prices.

Should you invest in an IPO directly?

Many investors buy the shares of an IPO with the intent of associating themselves with a company and earning long term gains for themselves in the process. However, there are also investors who invest in IPOs with the specific purpose of listing short-term gains. Depending on the demand of a company’s shares, the listing price (the price that you actually see for a stock on the stock market) of a company can be either higher or lower than the offer price. If the demand for a company’s shares is high, the listing price becomes higher than the offer price, and you stand to make significant returns on your investment. However, according to financial experts, when it comes to well-managed companies, it is usually advisable to stay invested for the long term after investing in their IPO to give yourself the best chance of maximising your returns.

Many investors are not fulfilling their maximum potential gains by exiting their investments too quickly after listing. In such cases, a thematic fund, or an equity mutual fund serves you well because they hold investments for a longer time after listing. With the IPO frenzy currently going on, it is also possible that many investors do not get shares allotted to them in the IPO. In such cases, you can also choose to take the mutual fund route to an IPO. However, it is always best to consult your financial advisor before you make an investment decision.

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Why should NPS never be overlooked in tax planning?

February 17, 2022

For most of us, retirement may seem to be a long way off. It may look like we have a lot of time on our hands to plan for the retirement of our dreams, but more often than not, it arrives sooner than we anticipated. The key to a stress free retirement is having a great retirement plan, one that not only meets all your needs, but also gives you more than that. While there are many retirement plans that are at your disposal, not every plan suits your requirements. It is crucial that you take the time to sort out your priorities and decide a retirement plan before you proceed with it.

The National Pension System, introduced by the Government of India in 2004, is among one of the most beneficial retirement plans. Apart from the trust that comes with being associated with a government fund, it also provides substantial benefits and a healthy monthly compensation as pension after your retirement. The NPS is a great tool, not only for planning your retirement, but also to help with your taxes.

Tax Free Money on Maturity?

Yes, investing in the NPS effectively makes your accumulated corpus tax-free on maturity. According to the current rules on taxation, if you are a subscriber to the National Pension System, you are eligible to withdraw 60% of the corpus at maturity, completely tax-free. For the remaining 40% of the corpus, you are required to buy an annuity, which is also exempted from the taxation systems. This effectively means that the entire corpus we invest becomes tax-free.

However, the monthly payments that you receive as pension after your retirement will be taxable, which will qualify under the base tax exemption limit. This means that only a portion of that income will be taxed.

Since the National Pension System is a government retirement plan, the taxation rules are very investor friendly, which makes it an attractive venture for us all.

A true-blue retirement plan?

As young individuals, we all think retirement is far away, and that we have time to save up for it. While we are busy living our lives, our retirement age dawns upon us sooner than we realise. It is important to make savings that can help us lead our desired lifestyle even after retirement.

Moreover, starting early means that we can accumulate a higher corpus, which can lead to more payouts. The lock-in period of NPS until our retirement is a blessing in disguise because it prevents us from misusing our retirement funds for unnecessary expenses. We can still opt for a loan in case of emergencies, but we cannot get a loan for our expenses post retirement. It is important that we start saving early and restrict ourselves from using the amount for other miscellaneous expenses.

Highly regulated at super low costs?

The National Pension System is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), which is a government body, assuring the protection of your rights and interests with utmost efficiency. This is a crucial aspect, taking into account the long term investments which concern your life after retirement. The financial goal in this scenario is to ensure a good, stable life after retirement, which is among the most important but vulnerable phases of your life.

A Diverse Portfolio?

The amount you invest into your NPS account is pooled together into a larger investment fund, which is then further invested into the market by fund managers vetted by the PFRDA. These investments are made in a diversified portfolio comprising government bonds, bills, corporate debentures, and shares. Over time, these investments multiply and form a substantial corpus, a part of which you can withdraw as lump sum post retirement.

Furthermore, NPS also allows you the provision to choose from multiple fund managers and different asset allocation options. Depending on your risk and return expectations, you can choose the options that best suit your needs. You can also switch between funds if the performance is not upto your expectations.

Investing from your home?

You can apply for a National Pension System account online, upon which you receive a Permanent Retirement Account Number (PRAN). A PRAN is a unique number that remains constant throughout your lifetime, even if you change cities or jobs. 

Upon opening the account, you are given access to an online portal which allows you to track and manage your NPS account. All updates, statements, fund performance details, and new investments can be done using the portal. It can also be used to switch between different funds. Not having to visit financial institutions, or stand in those long and tiring queues, is surely an advantage.

The advantages provided by the National Pension System are hard to ignore, and if you are an investor looking for a retirement plan, delay no more. Apply for NPS with KFintech here https://nps.kfintech.com/

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Make sure you retire with a pension | How to choose the best retirement plan?

February 7, 2022

You have a certain lifestyle that you are accustomed to, and it is reasonably easy to understand that you would want the same lifestyle moving forward, if not a better one. While you work hard to build a stable life for yourself and your loved ones, you also have a responsibility to secure your own future. In order to do so, it is essential to have a proper retirement plan in place.

When planning your retirement, here are answers to some questions you should be asking.

What exactly is a Retirement Plan?
A retirement plan gives you the opportunity to relish your retirement by giving you a regular income, which can help you sustain your finances. While it may seem that retirement is a long way off, it is not. Retirement comes sooner than you think and that is why it is important to figure out what you need from your retirement plan. Moreover, having a retirement plan also ensures that you are prepared for an emergency, however far-fetched that might be.
Planning for retirement now means ensuring that you make systematic savings over time, which, in turn, gives you returns when you need a steady source of income the most. While retirement means that you are void of your usual income from your employer/client, your sustenance costs do not go down. This includes your usual cost of living, medical expenses, and any others associated with your lifestyle.
While every retirement plan is unique with their own attributes, the National Pension System is a retirement plan that supersedes most other retirement plans by a large margin.

Why do you need a retirement plan?
You can be the master of your trade, and can possess a great deal of knowledge, but what we can never be certain of, is what the future holds for us. While we hope that it is certainly bright and the best, it does not hurt to take precautions and ensure safety in case of uncertainties. Saving now, to ensure that you do not have to struggle in the future, is one of the biggest precautions we can take while we’re still gainfully employed.
Moreover, retirement plans like the National Pension System, an initiative by the Government of India, ensures that you save a significant amount of money every year in taxes. You can save as much as ₹62,400 every year over and above the tax redemptions you can get on other investments.
This retirement plan not only ensures that you have an adequate amount of income every month after retirement as a pension, but also saves you money right now with its tax benefits, which make it a prospect that is hard to pass by.

What makes NPS a special retirement plan?
The National Pension System, or the NPS, is a government initiative that was introduced in 2004 and is regulated by the Pension Fund Regulatory and Development Authority (PFRDA), and has appointed KFintech as Central Recordkeeping Agency (CRA).
What makes NPS special is its ability to increase in value over time. The funds invested into the National Pension System are pooled together and then reinvested into the market as government bonds, bills, corporate debentures, and shares, making it a highly diversified portfolio. These funds are invested by portfolio managers who have been vetted by the PFRDA. These investments increase in value over time and accumulate to form a substantial corpus that you can withdraw on retirement as lump sum, and in the form of monthly payouts as pension.
The National Pension System is among the most flexible retirement plans because it gives you the liberty to have the investment schemes and the fund managers of your choice. Depending on the returns you expect from your investment, you can make the necessary choices. Moreover, you can also switch between schemes and fund managers, keeping in accordance with certain regulations.
The National Pension System also provides you with substantial tax benefits. You can save upto ₹1,50,000 under section 80CCD, plus an additional amount of upto ₹50,000 under section 80CCD (1B). This attribute of NPS makes it a retirement plan with dual benefits, of both saving your money as well as ensuring that you have a superior return on your investments.
This scheme is open to all Indian citizens between the ages of 18 and 75. If you are looking for a retirement plan, you check the National Pension System with KFintech here <https://nps.kfintech.com/>

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NPS – Is it a stable retirement plan?

February 3, 2022

When you think about retirement, you immediately have a picture of leisure and a whole lot of time on your hands. Daydreaming aside, it is important to note that your retirement can be however you want it to be. Retirement is one of the phases of your life that requires intricate early planning and disciplined saving, such that your lifestyle does not get compromised when you retire for good. In order to do that, you should look for a stable and sustainable retirement plan that caters to your long term needs. While there are many retirement plans available that are provided by numerous service providers, it is important to choose the right one, because this concerns your potential future, and the lifestyle that comes along with it. Therefore, there are certain questions that might come to your mind. Let’s examine them one by one!

Why is early planning and saving important?
To ensure that your future is safe and you are equipped with the essentials to continue the lifestyle of your choice, it is integral to save enough while you have a steady source of income. While it may seem that your retirement years are far and you have plenty of time, it is true that time flows swiftly, and before you realise, your retirement will be imminent. Moreover, early planning and early saving is important to develop a disciplined habit that enables you to make the best decisions.
For instance, if you start early, the biggest advantage that you have is time, and the opportunity to segregate your savings, so that you do not face the burden of saving a large amount in a small time. Although it is understandable that expenses are more than savings in the younger years, it is important to realise that smart savings will help you fulfil your long term goals efficiently, and also put your retirement planning into a clearer perspective.

What is NPS?
Among the many retirement plans that are available for subscription from multiple similar service providers, NPS, or the National Pension System is among the most sustainable ones. A retirement savings plan that has been introduced by the Government of India, this is a voluntary scheme that enables you to make smart segregated savings during your work life. The motive behind this plan is to create an opportunity that provides adequate income after retirement to Indian citizens.
In the National Pension System, or the NPS, the investments are pooled together into a pension fund which are then further invested into a diversified portfolio that comprises Government Bonds, Bills, Corporate Debentures, and Shares. These investments are made by professional fund managers who are vetted by the Pension Fund Regulatory and Development Authority (PFRDA), under approved guidelines. These investments grow and form a substantial sum over the years, which can then be withdrawn as lump-sum and monthly dividends as pension on your retirement.
Apart from providing substantial long term returns, there are several other benefits that NPS provides, which makes it one of the most sustainable retirement plans.

Benefits of NPS
Flexibility: One of the most lucrative benefits provided by the National Pension System is the flexibility that it comes with. You have the option to choose from a number of investment options, and the fund managers. You can choose your investment option according to the expected returns and monitor the growth of your portfolio. You also have the option to switch between fund managers and investment options keeping in line with the guidelines.
Tax Benefits: One of the most attractive benefits of the NPS, along with letting you make savings for your retirement, is that it also allows you to make tax redemptions letting you save more money. The National Pension System allows you to make tax redemptions of upto 2 lacs per annum as per 80CCD and 80CCD (1B).
Portability: Once you open an account with NPS, you get a Permanent Retirement Account Number (PRAN), which is unique and stays with you throughout your lifetime. This allows you to make your NPS account to become portable between jobs, even if your location changes. This ensures that your corpus remains constant.
Regulations: The National Pension System is regulated by the PFRDA, which is a government body, and follows transparent investment norms. Not only does it build trust, it also ensures that NPS accounts are among the lowest charging accounts in terms of maintenance, which, in the long term can lead to saving substantial amounts of money.
These benefits make the National Pension System, or the NPS, one of the most sustainable and stable retirement plans around. The smart segregated savings, coupled with long term returns and tax benefits make NPS a really worthwhile investment option. If you are looking for a suitable investment plan, you can choose to invest in NPS with KFintech, which is one of the Central Record Keeping Agencies in the country.

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