Highlights of Rajiv Gandhi Equity Saving Scheme, 2012 Scheme
a) Benefit of this Scheme is available for “new retail investor”.
“New Retail Investor” means:
i. Any individual who has not opened Demat account or
ii. Any individual who has opened Demat account but not made any transaction till the date of notification of scheme.
b) The deduction under this Scheme shall be available to individual investor whose Gross total income for the financial year is less than or equal to Rs. 10,00,000.
c) Maximum Investment Amount: Rs.50,000. Further, Investment can be made in eligible securities in more than one transaction.
d) Deduction Allowed: 50% of Investment amount.
e) Existing demat account holder shall submit a declaration in “Form A” to the depository Participant.
f) There will lock in period of 3 year in which 1 year will be fixed lock in period. During the lock in period they are not permitted to pledge or hypothecate any eligible securities. Further, in fixed lock in period investor cannot sell the shares.
g) As per the scheme structure, investments can be made in BSE-100, CNX 100 group shares, Navratna, Maharatna, Miniratna public-sector undertakings and the initial public offers of PSUs.
Meanwhile Microsec Research has identified and recommended RGESS investors 10 ‘safe’ blue chip stocks which can give 18-21 per cent annualized returns in three years:
1) Aditya Birla Nuvo:
We see strong growth in almost all major segments. Any positive policy framework (both on telecom & financial sectors front) shall be key triggers for the stock. Due to diversified nature of the company, the stock does not get a high PE rating. However, any demerger or restructure of business verticals can trigger a very strong upward movement in the stock. At current market price, ABNL is trading at FY13E and FY14E, P/E multiple of 12.3x and10.1x.
2) Bharti Airtel:
The emerging regulatory clarity is likely to be positive for the Indian telecom sector. Bharti, being the leader in the space, will remain the key beneficiary of the same, in our view.Bharti is currently trading at EV/EBIDTA of 8.13x, which is lower than its peer group average. We believe that at current valuations, the company is attractively priced and can be a good investment bet from a long term perspective.
3) Coal India:
Availability of rakes/day has improved substantially from CY12, which will aid CIL in solving the logistics bottlenecks. The targeted sales volume by CIL requires ~193 rakes/day in FY13E. For the first two months of FY13, actual availability has been ~182 rakes/day. The proposed benefit sharing framework under the new Bill will increase the tax incidence on the mining entities which intends to levy a tax of 26% on coal mining profits. But this will help Coal india take the benefit of getting the forest clearance faster.
4) Engineers India:
EIL is trading at FY13E and FY14E, P/E multiple of 12.2x and10.2x, respectively. Historically in the last 3 years, EIL has traded at 1-year forward P/E band of 15.2x. Government’s announcement of Cabinet Committee on Infrastructure where they are likely to review 47 projects (some of them held by ONGC, RIL, Cairn), indicates that the government has realized the severe slow-down in the capex cycle and the need to revive investment cycle in the hydro-carbon space.
With reform announcements here to stay, increased activity in the Hydro-Carbons vertical and given the strong market position of EIL in this vertical, we are confident that for any revival in this space, EIL would be the biggest beneficiary.
5) Hindustan Unilever:
HUL has strong brand leadership with No.1 position in segments like soaps, haircare, homecare, laundry, skin care, deodorants etc. and No.2 position in oral care and tea which clearly denotes its strong brand leadership. Palm oil prices have lost 22% so far this year and are further expected to be weaker because of a record build-up in Malaysian stocks. This in turn is expected to improve the EBITDA margin of HUL going forward.
6) Larsen & Toubro:
L&T is the best play on domestic industrial and infrastructure recovery with sustained competitive and scalability advantage that separates it from the rest. While we expect L&T to meet FY13E growth guidance, sale of non-core business and revival of non-infrastructure businesses over next 2-3 years would be key value drivers.
The stock currently trades at a P/E of 18.8x &16.1x its FY13E & FY14E earnings respectively on a consolidated basis. With encouraging guidance in its order intake and sales growth for FY13 in this tough market condition, we recommend buy on the stock.
7) LIC Housing Finance:
Despite an overall slowdown in industry due to high mortgage rates and high price level specially in Tier 1 cities, LIC Housing has still been able to grow at higher rate than industry and increased its market share. The outstanding mortgage portfolio of the company in FY12 was Rs 63,080.15 crores as against Rs 51,089.84 crores in FY11, registered a growth of 23.47%.
The share of developer loan has declined to 5% in FY12 from 10.9% in FY10. However, the management expects to bring its loan book back to its historical level. The company’s move is likely to improve business margins. Generally, developer loans yield are 3-4% higher as compared with the individual loans.
NMDC’s realizations are expected to improve due to its shift to import parity price mechanism from net back pricing mechanism to match the international benchmarked iron ore prices. So far, NMDC’s domestic iron ore prices were at more than 100% discount to the international benchmark prices. The difference in both the prices has come down to ~50% at $80/tonne.
9) Tata Chemicals:
On account of the strong urea demand scenario along with the assurance of 12-20 per cent post tax return from government, Tata Chemicals is likely to double its urea capacity at Babrala unit at an estimated cost of $850 million that may help to generate stable cash flow. The plant may commission in three years.
Tata Chemicals is currently trading at P/E of 10.9. We believe that at current valuations, the company is attractively priced and can be good investment bet from long term perspective. However, erratic monsoon and adverse global scenario impede our optimism a bit.
10) Tata Consultancy Services:
Key number to pick from TCS’ Q3 FY2013 results was the attrition level of 11.2%. The reported attrition level is the lowest in its peer group. Additionally, the company is consistently reporting ex-trainees utilization levels of more than 80% since Q3 FY2010. In addition, these factors helped TCS to sustain its operating margins above 26% levels since then.
In Q3 FY2013, TCS announced dividend of Rs 3 per share, which was its 34th consecutive quarterly dividend. The company’s initiatives to reward shareholders provide its investors consistent periodical returns.