Google News For Retail Investors: A Geo & SEO Guide To Market Signals

When a company makes net profits, a portion of the net profits is paid out to the shareholders in dividends.

This is usually referred to as paying some or all of your profits back to shareholders.

Paying out dividends to shareholders of a company will normally receive a portion of those dividends as cash income.

Ploughing back profits is the opposite of paying out dividends. When a company makes net profits, a portion of the net profits is paid out to the shareholders in dividends.

On the other hand, ploughing back profits involves investing its money into its operations rather than distributing it to the shareholders.

Example of Plough Back Ratio of X Ltd and Y Ltd

X Ltd Amount Y Ltd Amount Total Equity Rs.10,00,00,000Total EquityRs.10,00,00,000Net Profits 2017-18Rs.3,30,00,000Net Profits 2017-18Rs.3,30,00,000Dividend PaidRs.66,00,000Dividend PaidRs.33,00,000Dividend Ratio20%Dividend Ratio10%Plough Back Ratio80%Plough Back Ratio90%Market CapitalizationRs.52.80 Crore Market CapitalizationRs.85.80 Crore P/E Ratio16XP/E Ratio26X

In the above example, we can see that both companies X and Y have the same equity base, and we considered that they earned the same profit in the last financial year 2020-2021.

This means both X and Y have the same return on Equity (ROE).

Return on Equity(ROE) = Net Profit of Business / Total Equity of Business.

ROE of X = 3.30 Cr(Net Profit) / 10 Cr(Total Equity) = 33%

ROE of Y = 3.30 Cr(Net Profit) / 10 Cr(Total Equity) = 33%

We have seen both X and Y companies have the same ROE and similar net profits.

But they both differ in the way they pay out dividends.

For example, X pays out 20% of its profits as dividends and ploughs back 80% of profits. On the other hand, we see Y pays out just 10% of its profits as dividends and ploughs back 90% of its profits into its reserves.

What is significant is that X quotes at a P/E ratio of 16X while Y quotes at a P/E Ratio of 26X.

Why is there such a vast difference?

Because Y invests more profits to buy assets and grow as a company and make profit accordingly rather than giving money to shareholders.

To know more about investment in high dividend-paying companies - click here

Why Don't Many Traders Reward High Dividend Paying Companies?

Both companies have the same ROE in the above example, but the Y’s P/E ratio is much higher than X.

Why is it so? Some people like it if the company pays a high dividend, but many don't like dividend-paying companies.

The reason behind that is that when a company gives a high percentage of dividend to shareholders as X did, traders stop investing in that stock because they think that the company should invest the profit into their growth rather than giving high dividend shareholders.

Company Y gives only 10% of its shareholders and invests more of its profit into their growth. That's the reason the Y P/E ratio is 26X

Some people like that they should get the bonus money from the company, i.e., dividend, but these people are very less. The majority of long-term investors don't like dividend-paying companies.

So, Which Company Should you Invest in, X or Y?

X pays out 20% dividends compared to Y's 10% payout. Hence, if you are looking for dividend income, you would prefer investing in X.

But suppose you are a long-term investor who is willing to remain invested for at least ten years and does not mind volatility in the stock price.

Then you would prefer investing in Y because Y invests 90% of profits back into the business, and hence Y will have much more money to grow at a faster rate than X. Thus, your long-term expected return from Y is higher than that of X.

Advantage of Plough back Profits for Traders

Plough back profits is a term used in the corporate world. The number of net profits (or net profit available to shareholders) that a company reinvests back into the business, rather than paying out as dividends.

The reinvestment back into the business is generally done in two ways:

1) Increasing working capital by buying additional inventory and raw materials, paying off debt, and increasing short-term investments.

2) Investing in long-term assets such as new facilities, machinery, and equipment.

The advantage of ploughing back profits into the business, as opposed to paying out dividends to shareholders, is that it allows for the creation of long-term value for the company.

This ultimately helps the share price at some stage in the future.

Conclusion

So the plough back ratio can be beneficial for both short-term traders and long-term traders accordingly. If you are a short-term trader, you should invest in a high dividend-paying company, and if you are a long-term trader, you should invest in a no dividend-paying company or less dividend-paying company.

If you are new to stock trading, you may be wondering what the P/E ratio is. And why it is considered while purchasing stocks. This blog is intended to give you a brief understanding of the P/E ratio.

As a stock market trading investor, you always want to buy undervalued or low P/E ratio stocks.

Trying to understand the reason behind this concept will be helpful to get an idea of what the P/E ratio is and how it works.

As defined, the "Price to Earnings Ratio" or P/E ratio is a valuation indicator that measures the number of money investors pay for each dollar of a corporation's earnings.

It is calculated by dividing the current market price by its earnings per share (EPS).

The P/E ratio can also be stated as "how much an investor pays for one Rupee of earnings".

It gives valuation multiple times higher or lower than the market average. The lower the number, the better the bargain.

So why should you prefer low P/E ratio stocks? To answer this question, we need first to understand how it works.

How does the P/E ratio work?

Low P/E ratio stocks can be considered as blue-chip companies. These are the companies considered to be leaders in their respective fields. They are well established, have a long history and reputation, and have a loyal customer base.

So why should you prefer low P/E ratio stocks?

To answer this question, we need first to understand how it works.

P/E = Price/Earnings Ratio

The P/E ratio is the most commonly used metric for valuing stocks. It's calculated by dividing the market price per share by earnings per share (EPS).

The lower the P/E ratio, the better it is for investors because it means you get more earnings per Rupee spent.

For example, if a company has a P/E ratio of 10, it means you have paid Rs 10 to buy Rs 1 worth of profits (earnings).

Whereas if a company has a P/E ratio of 20, you will have to pay Rs 20 to buy Rs 1 worth of profit. 20 is higher than 10, and hence the former company offers lower value.

Low P/E Stocks = Low-Risk Investment

Now that we know how the P/E ratio works, let's quickly jump into the factors to invest in Low P/E stocks.

Consideration Factors to Buy Low P/E Ratio Stocks

A low P/E ratio could well be a valuation call; it could be a call on the quality of the business.

It is essential to know the reasons for a low P/E ratio before investing in such companies.

If the company is bad, avoiding such companies would be a smart move.

On the other hand, if it is because the market has doubts regarding the future performance of the company, then you must make an independent analysis based on facts before you decide to avoid them or not.

Another example is of Nifty midcap stocks. If you look at the P/E ratios of the NSE Midcap Index and Nifty Smallcap index, you will find that the NSE Midcap index has consistently traded at a lower P/E ratio than the small caps.

The reason for this is straightforward – it is because investors perceive that midcaps are riskier than small caps.

So, a low P/E ratio can be a warning sign, but the P/E ratio cannot use it in isolation to judge companies.

Before forming an opinion on a company, you need to look at other factors like return on equity, interest coverage ratio, debt levels and more.

(Read more about - Factors to be Considered While Choosing Ideal Stocks )

If not P/E, then what should one look at?

There are things you can look at. You can look at the return on equity, which measures profitability. You can look at book value, which measures assets relative to debt.

You can look at the profit margin, which is how much profit you're making relative to sales. And you can look at growth rates.

Some companies have very high P/E's and are also doing extremely well in profitability, asset turnover, and financial risk.

Those things tend to be overlooked as people focus on the P/E ratio alone.

The best way to figure out what's going on with a company is to go through that exercise of looking at all the different factors and then coming up with an overall assessment.

Now, we don't want to say there's no place for the P/E ratio because it tells you something about how expensive stocks are in general.

Still, it doesn't tell you anything about whether a company is cheap or expensive relative to its history or its competitors or its growth rate or its prospects."

‍Conclusion

Wrapping up, we conclude that you should consider P/E with the combination of factors before buying a Stock, like Return on equity, Asset relative to debt, profit margin etc.

Table of Contents

• Why NTPC Seeks Renewable Unit Investor Before Going Public (IPO)?
• AIM of NTPC.
• Upcoming NREL Renewable Power Projects.
• NTPC Research Report on Renewable Energy assets
• The current installed capacity of NTPC.
• Is it reasonable to buy NTPC stock in 2022?
• What is the Market Cap of NTPC?

Why does NTPC Need a Renewable Unit Investor for IPO?

The country's largest power generator, NTPC, is seeking a partner to help it plan the initial public offering (IPO) of its renewable energy subsidiary National Renewable Energy Lab (NREL).

According to officials aware of the developments. It will start looking for a partner from April 2022, which would help increase the value of its IPO. Although other SME-IPOs are lined up in 2022, the spark of issuing NTPC’s IPO is different from other IPOs.

The reason could be the popularity of NTPC as it is counted as India’s dominant power major with a presence in the entire value chain of power generating business.

If we look into the stock market research, India is the third-largest country that emits greenhouse gases (GHG) globally.

That affects its climate and threatens to reverse the development gains made in recent years. NTPC Seeks renewable units to produce 40 per cent of its total power from non-fossil fuels by 2030.

NREL has doubled its target for clean power generation to 60 gigawatts by 2032.

Experts recommend that NREL bear significant equity money to meet the target, and bringing investors on board would be beneficial.

AIM of NTPC

NTPC is India's most significant power utility with an introduced limit of 67,907.5 MW. It plans to turn into a 130 GW company by 2032. NTPC was established in 1975. NTPC aims to be the world's biggest and best power major.

NTPC has exhaustive Rehabilitation and Resettlement and CSR arrangements incorporated with its core business of setting up power projects and generating power.

NTPC focuses on creating dependable power at cutthroat costs in a supportable way by upgrading the utilization of various energy sources with imaginative eco-accommodating advancements.

Subsequently, NTPC adds to the country's monetary improvement and upliftment of the general public.

Upcoming NREL Renewable Power Projects

• This solar power park is the most ambitious renewable energy project. NREL is working on its mega solar power project in Khavda of Gujarat. With the capacity of 5 Gw of solar energy generation.
• NREL is also looking for other technologies, including solar, wind, biomass, and hydropower. It is also interested in exploring ways to generate clean energy from green methanol and green hydrogen.
• As per reports, NREL is looking to pilot a green hydrogen production project at Vindhyachal thermal power plant in Madhya Pradesh.

NTPC Research Report on Renewable Energy Assets

NTPC is very much situated to benefit from the predictable incomes generated by thermal assets and the development of sustainable power.

An AP/BV proportion of 1.5x for warm ventures brings about a valuation of Rs. 133,000 crore (close to current market capitalization) and no incentive for huge renewable energy (RE) growth plans.

Aside from settling ESG issues, NTPC hopes to market >5GW each year to deliver an 11 per cent CAGR in independent directed values.

RE limit focuses of 15GW/60GW by FY24E/FY32E (NTPC won 15% of RE offers in FY21) would make extensive worth.

Frequently Asked Questions about NTPC

The current installed capacity of NTPC?

The company's installed capacity is 67,907.5 MW (which includes JVs) 7 gas-based, own stations include 24 coal-based, 1 Wind 13 Solar, 1 Hydro, and 1 Small hydro plant.

Under the Joint Venture, NTPC has 9 coal-based, 13 renewable energy projects, and 4 gas-based Projects.

Is it reasonable to buy NTPC stock in 2022?

We are happy to say that the Indian stock market is currently trading at a very low price to its intrinsic value. Sooner or later, people will realize the fact that power stocks like NTPC are like annuity income for a long-term investor.

If one buys PNB or Bank of Baroda with a one-year time horizon, the investors will make a lot of money. I would still advise people to hold on to their stocks until the market comes down and then buy some more for the long term.

What is the Market Cap of NTPC?

NTPC, composed in the year 1975, is a large-cap company with a market cap of Rs 117475.11 Crore and is operating in the power sector.

Conclusion

Several well-known global companies, including energy companies, public companies and pension funds, have made significant contributions to India's renewable energy sector. The government wants more international companies to participate in achieving the clean energy goal.

प्रमुख केंद्रीय बैंकों द्वारा इस सप्ताह अपनी संबंधित बैठकों में अपनी मौद्रिक नीतियों को सख्त करने के बाद कीमती धातुओं में तेज़ी रही और सोने के भाव एक महीने की उचाई पर पहुंच गए। डॉलर जो आम तौर पर सोने के विपरीत चलता है, अमेरिकी फेड और यूरोपियन सेंट्रल बैंक द्वारा अपने कोविड-19 आर्थिक प्रोत्साहन को वापस लेने के बाद फिसल गया।

पिछले सप्ताह सोना 1 प्रतिशत और चांदी 1.7 प्रतिशत तेज़ हुई है। प्रमुख केंद्रीय बैंक उच्च मुद्रास्फीति को नियंत्रित करने के लिए मौद्रिक नीतियों को सख्त कर रहे हैं, साथ ही ओमीक्रॉन कोवीड-19 संस्करण के प्रभाव पर भी नजर रख रहे हैं।

मौद्रिक नीति में सख्ती सोने और चांदी के भाव के लिए नकारात्मक प्रभाव देता है, लेकिन बाज़ारो ने इस खबर को पहले ही भुना लिया था जिसके कारण कीमती धातुओं में तेज़ी रही और डॉलर इंडेक्स में दबाव बना। अमेरिकी फेड के साथ यूरोपियन सेंट्रल बैंक ने भी कोवीड राहत पैकेज में मार्च तक कटौती करने को कहा है।

इस बीच, यूरोपीय सेंट्रल बैंक ने 6 महीनो के लिए नियमित मासिक बांड-खरीद को बढ़ावा दिया जिससे कीमती धातुओं में तेज़ी रही। जबकि फेड द्वारा मार्च 2022 मे 0.75 प्रतिशत ब्याज दर बढ़ाने की योजना है। बैंक ऑफ़ इंग्लैंड ने अपनी ब्याज दरों में 0. 25 प्रतिशत की वृद्धि कर दी है।

जबकि बैंक ऑफ़ जापान ने सरल मौद्रिक नीति रखने के साथ आपातकालीन कोवीड -19 फण्ड को घटाने के सन्देश दिए है। केंद्रीय बैंकों के सख्त मौद्रिक नीति के आत्मविश्वाश से कच्चे तेल का रुझान पिछले सप्ताह तेज़ी का रहा और अमेरिका से  बेरोज़गारी दावे के आकड़ो में बढ़ोतरी दर्ज की गई जिसके कारण सोने और चांदी के भाव को सपोर्ट रहा है।

इस सप्ताह सोने और चांदी के भाव पर बुधवार को अमेरिका से जारी होने वाले कंस्यूमर कॉन्फिडेंस और गुरुवार को कोर पीसीई प्राइस इंडेक्स के आकड़ो का प्रभाव रहेगा।

तकनिकी विश्लेषण

इस सप्ताह सोने और चांदी के भाव में निचले स्तरों पर सपोर्ट रह सकता है। सोने में 48200 रुपये पर सपोर्ट और 49000 रुपये पर प्रतिरोध है। चांदी में 61400 रुपये पर सपोर्ट और 63000 रुपये पर प्रतिरोध है।

In December, CMS Info Systems Limited IPO was listed. Incorporated in 2008, CMS Info Systems Limited is India's largest cash management company in terms of the number of ATM points and retail pick-up points as of March 31, 2021.

The company is engaged in installing, maintaining, and managing assets and technology solutions on an end-to-end outsourced basis for banks, financial institutions, organized retail as well as e-commerce companies in India.

CMS Info Systems Limited Business Operates in 3 Segments:

1. Cash management services.
2. Managed services i.e. banking automation product sales, common control systems, and software solutions, etc.
3. Others i.e. financial cards issuance for banks and card personalization services.

In the first place, CMS integrated business platform is supported by customized technology and process controls.

In addition CMS enables it to offer its customers a wide range of tailored cash management and managed services solution.

The Company caters to a broad set of outsourcing requirements for banks, financial institutions, organized retail as well as e-commerce companies in India.

firstly, the demand for cash and cash related services in India has increased, banks and other participants in India are increasingly outsourcing their ATM operations and management.

Secondly, As of August 31, 2021, it has a network of 3,965 cash vans , 238 branches , offices to cover all of India's states , union territories and covering 97.04% of India’s 742 districts, 14,949, or 77.46%, Indian postal codes.

At last the revenue of the cash management market in India grew from approximately ₹10.0 billion in the Fiscal Year 2010 to approximately ₹27.7 billion in the Fiscal Year 2021, a CAGR of 10.88%

Outlook & Valuation:

Despite consistent growth in revenues, we saw a decline in FY21 which can be attributed to COVID-19. According to the company, the revenue in FY20 was Rs. 1388.29 Crores and fell to Rs 1321.92 crore in FY21.

However, the company has improved its net profit from Rs. 134.7 crore in FY 20 to Rs. 168.52 crore in FY 2021. Also the company has stable financial performance and increasing margins.

In the first place, the risk of market volatility needs to be considered right now on the back of rising cases from the omicron variant.

As the government focuses on digital payments, a further decrease in the use and availability of cash can have an adverse effect on business activities.

The IPO is priced at a PE of 19x to its FY21 EPS of Rs 11.09 and a P/BV of 3.24x on the NAV of Rs 66.52, which is in line with its listed peers. Thus we assign an "Avoid" rating to the IPO.

KEY MANAGERIAL PERSONNEL

• Shyamala Gopinath is the Chairperson and an Independent Director of the Company. She has been associated with the Company since November 13, 2017. In the past, she has served as the Deputy Governor of the RBI
• Rajiv Kaul is the Executive Vice Chairman, Whole Time Director and CEO of the Company. He is currently heading the Company and is responsible for the overall management of the Company. He has over 24 years of experience across technology, private equity and cash management industry.
• Pankaj Khandelwal is the President and Chief Financial Officer of the Company. He is currently responsible for the finance, legal as well as secretarial functions of the Company. He is a qualified chartered accountant from ICAI with over 27 years of experience.
• Praveen Soni is the Company Secretary and Compliance Officer of the Company. He has been associated with the Company since July 1, 2009. He has over 16 years of experience in secretarial as well as legal practices.
• Manjunath Rao Pare Parmeshwar is the President- Managed Services Business. He has been associated with the Company since July 6, 2012. He has over 34 years of experience in sales and marketing across sectors.
• Anush Raghavan is the President- Cash Management Business of the Company. He has over 14 years of experience in business management and business development.
• Sanjay Singh is the Chief Human Resources Officer of the Company. He has been associated with the Company since July 26, 2021
• Rohit Kilam is the Chief Technology Officer of the Company. He has over 20 years of experience in IT across sectors.

COMPETITIVE STRENGTHS

• Leading player in a consolidating market with strong fundamentals.
• Pan-India footprint with deep penetration in growing markets.
• Longstanding customer relationships with increased business opportunities.
• Integrated business platform offering a broad range of services and products.
• Track record of strong productivity and operational excellence.
• Experienced and highly qualified management team.

KEY STRATEGIES

• Drive operational efficiencies and increase profitability.
• Expand into business areas that create synergies with the current business.
• Enhancing the organizational capabilities.

KEY CONCERNS

• Company entire IPO proceeds (Rs 1,100 Crores) is Offer for Sale.
• India has moved to digitization post demonetization.
• The company business is highly dependent on the banking sector in India.
• Company business has affected by covid-19 pandemic and it can affect in future too.
• The company derives a substantial portion of its revenue from the limited number of customers.

Investing in stocks is not just about growing your personal wealth; it also plays a crucial role in supporting and enhancing the broader economy. Here’s how investing in stocks contributes to economic growth and development:

1. Capital Formation

When investors buy shares of a company, they provide it with the capital needed to expand its operations, develop new products, or enter new markets. This process of capital formation helps businesses grow and innovate, which can lead to increased productivity and economic growth.

Example:

• Reliance Industries: When investors purchase shares of Reliance, the company can use this capital to invest in its telecom or retail ventures, leading to expansion and job creation.

2. Job Creation

As companies receive investment through the sale of stocks, they often use these funds to hire more employees, expand facilities, or increase production. This directly contributes to job creation and reduces unemployment.

Example:

• Infosys: Investments in Infosys enable the company to grow its operations, which can lead to the creation of thousands of jobs in technology and related sectors.

3. Innovation and Technological Advancements

Investment in stocks allows companies to fund research and development (R&D) activities. This funding supports innovation and technological advancements, which can drive economic growth and improve living standards.

Example:

• Biocon: Investments in Biocon, a biotech company, support its R&D efforts, leading to the development of new medicines and therapies, which can have a positive impact on public health and the economy.

4. Enhancing Market Liquidity

Stock markets provide a platform for buying and selling shares, which enhances market liquidity. Liquidity refers to how easily assets can be bought or sold without affecting their price. High liquidity in the stock market facilitates efficient capital allocation and investment.

Example:

• Nifty 50: The Nifty 50 index includes top-performing companies in India, and its liquidity allows investors to buy or sell shares easily, supporting efficient market operations.

5. Wealth Creation and Consumer Spending

Investing in stocks can lead to wealth creation for individuals. When investors see their investments grow, they may have more disposable income to spend on goods and services, which boosts consumer spending and stimulates economic activity.

Example:

• HDFC Bank: When investors gain returns from HDFC Bank stocks, they might spend more on goods and services, contributing to economic growth.

6. Encouraging Savings and Investment

The potential for capital appreciation and dividends encourages people to invest rather than keep their money in savings accounts. Increased investment in stocks can lead to higher levels of savings, which provides more capital for businesses and contributes to economic stability.

Example:

• SBI Mutual Funds: By investing in SBI Mutual Funds, individuals can grow their savings and contribute to the capital available for business investments.

7. Supporting Government Revenue

Stock markets generate revenue for governments through taxes on capital gains and corporate profits. This revenue can be used for public services, infrastructure projects, and other economic development initiatives.

Example:

• Tax on Dividends: Dividends received from stocks are subject to tax, providing revenue for the government that can be used to fund public services and infrastructure.

8. Building Investor Confidence

A well-functioning stock market attracts both domestic and international investors. Confidence in the stock market can lead to increased investment flows, which support economic stability and growth.

Example:

• Foreign Institutional Investors (FIIs): FIIs investing in Indian stocks bring foreign capital into the economy, supporting business growth and economic development.

9. Facilitating Wealth Distribution

Stock markets can help in the distribution of wealth by providing investment opportunities to a wide range of people. This can reduce income inequality and contribute to a more balanced economic growth.

Example:

• Equity Participation: Companies offering Employee Stock Option Plans (ESOPs) allow employees to become shareholders, aligning their interests with company performance and distributing wealth more broadly.

Conclusion

Investing in stocks is integral to the functioning of a healthy economy. It supports capital formation, job creation, innovation, and market liquidity. By encouraging savings and investment, providing government revenue, and building investor confidence, stock markets play a vital role in economic growth and stability. Understanding these contributions helps investors appreciate the broader impact of their financial decisions on the economy.

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