InfoEdge: No EPS Growth, But Great Stock Price!

Info Edge (NAUKRI) continues to astound me. They're literally flatlining EPS for the last six quarters, and yet, command a P/E of 35!

To talk less and show more, here's a graph of their revenues, stock price and PE/EPS comparison.

(Click for a larger image)

• Revenues have flattened since Jan 2008, and aren't recovering much at all.
• "Other Income" forms a substantial part of their profits even today. The most recent quarter had 14.74 cr. of net profit, and they had "other income" of 8.35 cr. The business literally hinges on the other income figure!
• They have around 320 cr. in the bank, going from their recent financial statements. That is generating most of the other income - at 8% yield you'll get about 6 cr. per quarter of income.
• Other income is useful, but paying 35 P/E for a company whose biggest contributor to the bottom line has been other income for the past four quarters is, in my opinion, crazy. They might as well return the money to investors if they aren't using it. (The cash comes to Rs. 115 per share)
• Look at the EPS - it's flat throughout. The last two quarters add up to a measly Rs. 10.27, and the earlier financial year was Rs. 21.87. No serious growth in EPS since last year.
• But as you see the stock price and went up beyond 800 and a P/E ratio of nearly 40 - it has since dipped to 770 and p/e of 35. But such a high P/E for a stock which has barely grown in the last two years - very surprising.
• Like in 2007-08, the annual report for 2008-09 also contains a scary piece of information: If option grants were calculated using "fair value" versus "intrinsic value", profit would have been lower by Rs. 10.8 crores and the EPS would have been Rs. 17.91, nearly 1/5th lower than the 21.67 they reported.
• Insiders have been consistently selling over the last year. Some Info Edge insiders seem to have sold between 5-20% of their holding over the last year, but note that usually insider sells don't mean much to stock prices.

Maybe people expect great things of Info Edge, but it's been a disappointing set of results so far. The stock meanwhile doesn't give a damn; it's near 1 year highs. But at some point all this optimism must translate into numbers, no?

Rediff Personal Finance, ELSS and everything else

I seem to be gravitating heavily towards Rediff recently. I discovered that their articles, especially the ones from Personalfn.com, seems to be direct, to the point and very common sensical. Good work guys keep it up. I do have a few rejoinders to their articles and my blog helps me post those ideas pretty easily.

Today I found an article on ELSS, how does it help the common man due to the 80C tax savings rule but goes even further to understand how to pick out of the whole bunch of ELSS funds that is currently available in the market and makes specific suggestions on how to go about doing it.

Do not put all your funds into a single scheme; have a mix of fund houses as well as schemes.

[Via rediff: Personal Finance]

Now I have some amount of personal experience with ELSS that I wanted to share with all of you. I have been a regular investor in ELSS schemes from 2002 and so come 2005, I had the ability to actually pull my money out since the three year lockin was complete.
Now here is the interesting part - I had actually chosen 3 years ago to use the dividend option with dividend reinvestment so over the three years the fund had reinvested all the earned dividends back into the fund. The only problem is that when I tried to sell all my holding, I was told that I cannot do it since the dividends were invested at a later point in time and those units cannot be withdrawn now and that they need to go through the three year lock in period. That does make sense when we look at it but 3 years ago when ELSS was a blip in investor's radar, the people who were selling it didn't think up of this problem and neither did I.

The flip side is that I did withdraw a significant portion of the money at the beginning of 2005 and now the remaining money has grown a lot better than the money I withdrew thanks to the spectacular performance of the ELSS funds over the one year boom in the Indian stock market.

So the moral of the story folks is that opt for the "GROWTH" option if you don't want to keep track of all the pesky dividends which will pay dividends which will pay dividends etc., for ever (hopefully)

Best Dividend Paying stocks with highest dividend yield

In any case, if what matters to you is how much dividend you get per amount of money invested, then you should look at 'Dividend yield'. Here are some good stocks which have good dividend yields as of July 2010. I have also made sure that the stocks have some good fundamentals like ROE of 15%+, high interest cover, and good future prospects.

Dividend yields, at the time of writing this post (july 2010). I will update this list every quarter.

Name of the Company / Stock	Dividend Yield
SRF Ltd.	6%
HCL Infosystems	4.6%
NIIT Technologies	4%
Tamil Nadu Newsprint and papers	4%
J K Lakshmi Cement	3.9%
Ballarpur Chini Mills	3.5%
Graphite India	3%
Castrol India	2.9%
Tata Steel	2.8%
GE Shipping	2.8%

My personal choice (also considering the future growth prospects of the company, and not just dividend yield)

1. Graphite India
2. Tamil Nadu Newsprint and Paper ltd.
3. NIIT Technologies (this stock will be risky if debt crisis in Europe worsens).
   

List of best, highest dividend paying stocks in India with not just highest dividend payout ratio, but strong fundamentals

As mentioned above, Dividend yield is price dependent, and you must check the latest price to get correct idea of dividend yield in the above list. However, a dividend payout ratio is something which is price independent and reflects the policy of the company in paying dividends. Below is a list of stocks with high dividend payout ratio.

In compiling the list below, I have not just focused on the dividend payout ratio, but also on other key financial ratios which ensure that the company is sound and safe, and has good growth prospects. Here are some of the factors that have been considered.

1. Dividend payout ratio of at least 30%. This is the ratio of dividend distributed by the company to the total amount of profit after tax earned.
   
2. Market capitalization of 500 crore+
   
3. Interest cover of 3 or above.
4. ROE of 15% or above.
5. Qualitative factors which focus on future growth and prospects for the company.
   

So here is the list. I think these stocks really make a good investment option.

Typically, well established FMCG companies top the list of high dividend paying stocks, as can be seen in the list below. However the list of good dividend paying stocks mentioned below also includes companies from other sectors like Pharma, IT, consumer durables, Power/Energy, etc.

1. Hindustan Unilever (HUL) - This is the biggest FMCG company in India. It has a dividend pay out ratio of about 65% - 85% ! one of the highest in the industry. Other positives for this stock include - less sensitive to economic downturns, low debt, highest ROE (over 120% - indicating a highly efficient business model), and decent growth. However, note that recently HUL has been losing market share to Godrej Consumer Products, especially in rural areas. So although I wouldn't put all my money on this stock, this is definitely a stock you want to have in your portfolio if you are focusing on dividend.
2. Tata tea - Again, one of the good FMCG stocks to have in your portfolio. Dividend payout ratio of over 75%.
3. Castrol India - This is a debt free company with a dividend payout ratio of over 75% on average. Other attractive numbers - ROE of over 70%, almost debt free. The company has been growing at modest pace of 10% in the past 3 years (due to recession), however bottom line has grown by over 30%.
4. Nestle India - Again, a good FMCG stock with average dividend payout ratio of over 70%.
   
5. Godrej Consumer Products Limited (GPCL) - Godrej has better growth prospects than Hindustan Unilever, I think. It is also a good dividend paying stock, with dividend payout ratio of over 65%.
6. ITC - Indian Tobacco Company - average dividend payout ratio of about 65%, in 2009, it was 94%!.
7. Glaxo Smithkline Pharma (GLAXO) - a good pharmaceutical company, with dividend payout ratio of over 60%. I had mentioned this stock in the list of best stocks to invest in 2009, and it has indeed given over 2 times the index returns.
   
8. HCL Technologies - A good IT stock. Dividend payout ratio of over 60%. However, note that IT stocks are in general vulnerable to slowdown in Europe, US.
9. Clariant Chemicals - This is also a good value stock. Dividend payout ratio of over 60%.
   
10. Alstom Projects India - This is one stock I am planning to put my money on, not just for its high dividend payout ratio of 35%-40%, but also because this is one company which is going to benefit by the possible 'nuclear energy boom' in the country. With the Indo-US nuclear deal passed, India will see lot of investments in building Nuclear reactors. Alstom is one (of the several other) players to be benefited by this.
    
11. CRISIL - Crisil is the leading credit rating agency in India with a market share of over 60%. Crisil has a dividend payout ratio of around 45%. Must have stock in your portfolio.
12. Blue Star - Blue star is the market leader in India in commercial air conditioner business. It has a dividend payout ratio of over 35% and a highly efficient business model with ROE of nearly 50%. Moreover, with increasing summer temperatures throughout india, Air conditioners is something you can bet a portion of your money on.
    

The above is not an analysis or recommendation to buy the stocks, but it is certainly a good list from which you can pick your 'best dividend paying stocks'. I myself own several of the above stocks. Especially the last 3 stocks in the list are not exactly 'best dividend paying', but they are good dividend paying stocks which have one of the best growth prospects.

Funds during an emergency - how do we get it?

We all need emergency funds in our life. We never know when we need it but we all know that we need it some time or other. There was a detailed post on CNN some time back on how to get hold of emergency funds when we need them. I have adapted it to the Indian context since a lot of avenues that we have a are very specific to personal financing in India. So without much ado here is my list.

1. Tap emergency funds : You did save for the rainy day somewhere didn't you? This would be the right time to start using it. If you have not started doing this as a habit. It might be worth doing something like this after you get out of this crisis. So what is next, let us look forward.
   
2. Sell long term equity investments : Long term equity investments are investments over a year's timeframe. They have most probably given you handsome returns given that stock market has done well for quite some time now. So far the sources of emergency funds that we have looked at were
3. Ask parents for a gift : If your parents were planning to give you a gift in cash / money, this would be a good time to do it. Gifts from parents wont be taxable and would help you tide over the current crisis.
   
4. break into a FD : Fixed deposits can provide the next level of quick access to money that comes with some penal interest for early withdrawal. You probably wont lose the principal but definitely a large portion of the interest when you do this one.
   
5. Take a loan on Jewels : Jewel loans are not a pawn broker domain anymore. Many banks will help you with a jewel loan. All that jewelery you have lying around in a locker can actually come in handy. Talk to your bank and close the transaction right there from your locker to the banker's locker. Gold has in recent times appreciated well so this option makes it even more worthwhile.
   
6. Borrow on your PPF : Your public provident fund could be a good source of income from the third year onwards of establishing the account. The loan amount
   should not exceed 25 per cent of the balance in your PPF account at the end
   of the preceding financial year.
7. Loan against shares : This is an option that comes with specific risks. If the stock under lien goes down in value, the institution providing the loan will automatically liquidate it and you will be responsible for tax implications on the same. This option also has a higher cost associated with it as compared to some of the previous options.
   
8. Loan against property : If you hold property that is not in lien already , then you can go for a loan against property. This is low on our options list since this option is probably going to take some time to work and not exactly going to help in an emergency situation.
   
9. Personal loan : The ubiquitous personal loans with their so called low rates are your next best option if you have reached down so far in selecting a source for your funds. There are quite a few options available but none of them can be qualified as cheap. The costs are just "structured" well so you can never find them :)
   
10. Cash advance on your credit card : You got to be kidding right? This is really not a real option given the cost of this loan.
    

Hope this helped you in coming to an easy conclusion on what are your sources of money. Good luck.

Keeping track of things - Personal financial calendar

Keeping track of one's financial events always a good thing and my challenge has always been remembering dates - as a teen I couldn't remember a single girl's birthday and now as an adult, I cannot remember the maturity dates of my FMPs and my bond expiry dates. Given this, I decided to institute an universal distributed calendar on Google where I can have all key financial events entered in there. I picked google calendar since it allows for a centralized calendar, allows addition of tasks from remote software clients and also integrates with Outlook. So here is my setup and how I use it. YMMW.

1. Mozilla Sunbird at home with remote google calendar configured at home
2. Outlook calendar at work synced to google calendar one way (I dont want my work events to get into this calendar) using Google calendar sync
   

This setup allows me to have all personal events uploaded by me or the family into google calendar and they appear in my outlook and further google calendar can also send SMS messages as alerts to events prior to the actual date based on configuration. We are further able to use Mozilla sunbird as a good solid client on our home computer to be able to add events to the google calendar. So enough about technology - how do we use this setup you may ask. Well here is what my calendar contains today

1. Repeated Events
1. Credit card payment reminders
2. School fees and other such stuff
3. Reminders of events at school (I never said you have to use it only for finance !)
4. Insurance payments
   
2. One off Events
1. FD maturity dates
2. Other long term investment maturity
3. Completion of any investment plans (STP/SIP etc.,)
4. PPF event dates (5 years, 7 years etc.,)
5. Other key events that you want to remember

This is a big relief off our minds as a family since all important actvities are being tracked by an external system and I get a sync up of the data on my outlook and my wife gets SMS alerts of events. The idea stems from GTD to get things out of our collective minds and have a system to track it.

Planning your personal backup

Planning a backup of all important aspects of your life is an activity that we all have to perform for our lives to ensure that information pertaining to us is easily available and accessible to key family members and ourselves at the time of need. The aspect of backup sounds daunting but it is really a one time effort that you can invest into and the incremental keeping track is very minimal in nature. The peace of mind and returns in provides us far outweigh the time and effort we have to invest into getting ready. Let us explore the mechanisms of backup and then understand specific aspects of our life and how you can back them up.

Scan all original documents
Always scan all original documents and keep good quality color scanned images secure and easily accessible. Refer to my past post on truecrypt, specifically on points 3 and 4 in that post for further details on how to store this information securely. Ensure that you have a scanned copy of the entire document and store
that away for all future use (for example, to make photostat copies, all you have to do is take a black & white print out of the scanned
image and viola you are done!)

Property
First, when you buy the property ensure that you apply for a registered copy of the title deed. This is typically a duplicate copy of the title deed except the document is registered by the registrar and has a unique document ID similar to your original document. This registered copy is a useful backup for the original document. The second step as soon as you complete the registration is to follow the scan all documents paradigm. After completing the two, you need to store this document in a secure location like a safe deposit box in the bank.

Financial Information
A while back I had outlined a method for managing one's financial data in a secure fashion. The process and the tools outlined there would be best served. Secondly, in many cases you can dispense with the physical delivery of statements and opt for electronic delivery so that managing them and archiving physical statements can be completely dispensed with. Electronic delivery also helps in easy management including creating of backup copies.

Insurance
Insurance plans dont require a special backup beyond the usual scan and store paradigm. What is key is the fact that such information storage should be documented and made available to various members of the family.

Your home
We all tend to collect expensive and not so expensive artifacts around our home. While many of us understand the importance of taking an insurance coverage to cover this risk, we probably dont take adequate steps to catalog and manage information related to these assets. One of the best ways to keep track is thorugh Photo+video log of your entire home. All rooms, all expensive items such as furniture, jewelery and other items that you have listed in your insurance. Catalog the pictures using a simple database and add market values to each item. Whenever you buy something expensive, take a picture and add it to the database along with its value so that this list of items is kept up to date and managed constantly.

Your vehicles
Most of the original paperwork related to your vehicle such as the title and the RC book should be managed digitally.

Your work
Most of our work has its own enterprise class backup systems (right?) so I am not really referring to your work here but more along the lines of your benefits at work. For example your last PF statement or the VPF statement or the pension plan or medical benefit plan that you have whose details must be stored at home and information about where it is kept and how it should be used should be shared with your spouse in case there is a reason to use these plans and you are not around.

Your education
Sit down one of these days and scan all those old marksheets and degree certificates. Your better half will have all sorts of comments to pass about your marks and maybe even help you in the scanning process!

Your PC/Laptop
You should buy one of those massive drives that sells for peanuts these days to backup your home computer/laptop. Just use something as simple as synctoy and the Windows scheduler to do data backups completely. Now that is the easy part. The harder part is that when your PC crashes and you end up re-installing the operating system, you dont have a clue where those pesky driver disks are for your favourite USB based paintball shooter device! Now either you can save up all the driver disks carefully your look at Drivemax I have personally not used this software but I have heard people sing praises about it on how it saved their lives. This does make OS re-installation easier.

So there it is folks. My idea of making sure you have adequate backups for various things in life. Do you think there should be more? Do comment and let me know.

Double dipping on the cost of inflation index

Our economy has the concept of cost of inflation index that allows the common man to factor in inflation on long term asset sales. The way it work is by leveraging a Cost of inflation index (CII) that is a number that is notified each year by the government starting from year 1981-1982. The way to use this number to calculate your inflated cost is as follows

• Inflated cost of purchase = original cost of purchase *(CII for the year of purchase/CII for the year of sale)
• Capital gains tax = 20% * (Actual sale price - Inflated cost price)

Now I did a quick math to see what is the inflated cost price for a two year window and you can see the results yourself below. The cost price varies between 22% increase to a lowest of 7%. So what is the big deal do you say? Well if you consider the fact that if you have say a debt investment for a period of > 365 days timed right say buy on March last week and then sell on April of the following year in the first week, you can double dip on the CII effectively allowing you to get this fabulous 7% to 22% inflation of your purchase cost. Given that debt funds will return about 8%-10% in that time period, we have effectively managed to avoid the tax to be paid on this return.