Investing Basics - Feel free to ask the most basic questions


(sarthak kumar) #777

I have a question regarding buybacks.

If promoters are not participating, would that increase the acceptance ratio of retail shareholders or would it remain unaffected.

Also, when does a buyback have to be approved by shareholders.

Thanks


(EL) #778

Its not possible and not safe to hedge all your position.
Companies usually only hedge their receivables or payables or in most cases net exposure on their balance sheet

Future Revenue or future costs are usually is not hedged atleast not long term. There was a case of many companies in South America that went bankrupt during gulf oil crises when they hedged their oil revenue.
When a company hedges a position usually they have to provide 10 or 20pc margin for the hedge. Hence if you are forward selling $10m of oil, you pay a margin of say $1m
If the price goes a lot against you, then you have to come up with extra margin. Although your cost of production will still mean profit but in the short term the company has a big liquidity problem

Due to this generally its not considered wise to hedge a lot of forward revenue or cost. Around 3-6 months is probably safe

As rates increase or decrease, as revenues are not hedged, the companies margins will get affected and share prices reflect this


(Niraj) #779

Found a couple of articles. I think should help a little on clearing on buyback of shares.

Have put them in order from latest to oldest.


(suhagpatel) #780

Infosys announced buyback @ 800/Share. The buyback will be done through open market route and not typical tendering process.

While i am aware how tendering process works, i wanted to know how the buyback will work in open market case.

I did search and found out that we have to sell the shares in open market during the dates announce by company. My query is if i sell the shares in open market and the price on that day is say 700/share, how the company will come into picture to accept those shares and what price i will be paid considering max buyback price of Rs. 800/Share.

Regards,
Suhag


(sarthak kumar) #781

I went through the articles but couldn’t find the answer.


(sarthak kumar) #782

I have a question regarding buybacks.

If promoters are not participating, would that increase the acceptance ratio of retail shareholders or would it remain unaffected.

Also, when does a buyback have to be approved by shareholders.

Thanks


(sarthak kumar) #783

I want to know from where we can download audio of conference calls. One source I am aware of is stockadda. But shouldn’t they also be available on the company websites or some official source.

Thanks


(EL) #784

Does anyone know how record day and settlement for cash based trading works

So if record date for determining rights or dividend is 15th Feb and I sell on 15th Feb, does it mean I am still eligible to apply for rights issue as I have to only deliver the stock later on settlement date

Would appreciate if anyone knows how it works

Thanks


(aswin) #787

This is a query on taxation of debt funds:

If a person invests in a debt fund in their parent’s name who doesn’t have any income, how will the profits (say 1 lakh) be taxed in the following two scenarios?

  • Sell within 3 years leads to STCG acc to tax bracket- so no tax
  • Sell after 3 years leads to LTCG, 20% with indexation. In this case the person will end up paying tax.

Thus selling after 3 years is counter-productive for such individuals, correct? Or am I missing something?


#788

I think there is no tax if the total income from any and all sources fall below the basic exemption limit. So it does not matter, how a person has generated income if it is below 2.5 lacs and 3 lacs (if they are senior citizens).


(Mayank Goel) #790

Hello.
Similar kind of buyback was done by DCM Shriram last year. What they did was they selected the time duration in which they will buy fixed no of shares i.e. Allocated capital / 450. However, since it is open market and hence the price can go lower or higher than Rs. 450. In such scenario I noticed that big retailers, fund mangers, etc. sold their holdings in the buy back period along with some retail investors. For DCM shriram, buy back price was Rs. 450. When buyback started the market price was Rs. 300. They continuously bought the shares almost each day and published the no of shares bought and remaining on their website. Once they reached the allocated capital limit or number of shares, whichever is earlier, they stopped. For DCM shriram, the allocated capital was not fully utilized and hence later on they had given the dividend to the remaining shareholders.:slight_smile: Also note that for DCM shriram the price went higher than 450 also. I myself sold @465.
Happy investing.


(Harsh04) #791

Hello…

I am quite a novice at investing and still finding my legs in the accounting world…

Question - Why is the figures of “Depreciation & Amortization expense” differ in P/L statement and cash flow statement ?

From P & L Statement :

From Cash flow statement

  • This is from GNFC’s AR 2014-15

Thank you


(Bhupesh) #792

Can some one explain this or point to some guide. What is the difference between these three and why so big price difference between these?


(Lokesh) #793

These options have different Expiry, June 2020, 2022, 2023.
The longer the duration to expiry, higher the time premium for uncertainty you are carrying.


(Dinesh Sairam) #794

As Lokesh put it, these three options expire each a year apart. The longer the duration, the more chance of the Option expiring “In The Money” and hence higher the premium (Price) of the Option.

Think about it this way. Say, you want to short a stock. You’re already convinced that the stock is bound to fall. But there’s a problem. You don’t know when the stock will fall. Given this scenario, for which Option would you pay more? The one expiring in 3 months or the one expiring in 3 years? Obviously, the one with 3 years’ expiry, becasue there’s a higher chance that the stock will fall within 3 years than it will within 3 months (Assuming no other Inside Information, market manipulation or anything of the sort).


(Bhupesh) #795

Thanks, I did not realized we have multiple year options available. Got confused if it has any thing to do with weekly options approved recently.


(Amit Jain) #796

@rupaniamit

Is it correct to think that, if Debtor days are increasing, then the company will be able to have that much lesser inventory turnover, and hence lesser operating profits, FCF and RoE.

As a solution, a company could use short term debt to fund the increasing debtor days and bring a balance to the other ratios. This will, however, affect the margins. Hence, if the nature of the business is such tht the margins are small to begin with, then taking on additional debt will not help the bottom line.

For ex. Harita Seating has OPM 6%. Debt costs upwards of 8%. So it makes no sense for it to take on any debt.

A humble request. Pls use minimum accounting jargon in your replies. :slight_smile:


(Amit Jain) #797

@dineshssairam

For Tata Chemicals.
It has a good OPM of 20% even better it was able to reduce it debtor days from 85 to 45 in 3 years. That is a good improvement, right? These numbers are one of the best. Management now has spare cash to cause more sales.

But not quite, its Sales figures have been falling for past 3 years. Then what is the strategy?


(Dinesh Sairam) #798

I don’t follow the Chemicals space or really any Commodities company. So take my opinion with a pinch of salt.

  1. Yes, Tata Chemicals has improved their Cash Conversion Cycle largely owning to a drastic improvement in Receivables Days.

  2. Yes, the company has also been able to generate a good amount of Cash in its Balance Sheet.

  3. But no, they have not deployed to Cash into Fixed Assets, which leads to Sales generation. Their Fixed Assets have actually reduced over the 3 year period. So, the fall in Sales isn’t a surprise.

I have no idea why any of this happened though. I’m answering from a purely theoretical perspective.


(Mahendra243) #799

FII/FPI 28-Jan-2019 6678.52 6455.08 +223.44
DII 28-Jan-2019 3717.26 3624.94 +92.32

If both the FLL and DLL bought today…how come the nifty sensex and midcaps corrected that much today…I dont think retailers can bring market down…any clues?