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New Companies Act -2013 and Company Deposits – Updated Rules and Regulations:


Ministry Of Corporate Affairs have notified new Companies Act which has come up with updated rules about Deposits being accepted by company acts.Non-Banking finance companies accepts deposits under different rules (RBI Act 1934) and this new act will not applicable to NBFCs.

Currently deposits are being accepted under Companies Act 1956 (Acceptance of Deposits ) rules 1975. (Sections 58A,58AA and 58AAA) and now deposits can be accepted through new companies act 2013.

This new act is expected to come in existence from April 01, 2014 .

Following are few important points about New Company Act:

  1. Eligibility for accepting deposits : Earlier company with net owned fund of min Rs.1 crore was able to accept deposits.As per new company law 2013,a company with minimum net worth of 100 Crore or minimum turnover of Rs.500 crore shall be able to accept the deposits.so many small size companies will out of race.
  2. Credit Rating : It will compulsory for Companies to obtain Credit Rating from recognized credit rating agency.Currently Credit rating is compulsory for NBFCs but not for company deposits.
  3. Security : As per earlier rules,company deposits were of unsecured nature.But now company deposits may be either unsecured or secured.Company need to mention it specifically whether deposits are Secured or UnSecured.In case of secured deposits,Deposits up to Rs.20,000 need to be secured through deposit insurance and further deposit amount need to be secured   via creating charge of physical assets  in favor of depositors through appointment of Deposit Trustees.
  4. Shareholder resolution :If company is looking to accept deposits only from members then ordinary resolution is necessary.If company is looking accept deposits from public then special resolution from shareholders needed.
  5. Deposit Receipt issuing time line : Earlier this time line was 08 weeks now deposit receipt need to issued with in 02 weeks from date of cheque realization.
  6. Deposit Repayment Reserve : Companies will need to create deposit repayment reserve and amount in deposit reserve shall not fall below 15% of  deposits maturing in the financial year at any time.This reserve need to be created up to april 30 of every year and this fund can not be used for any other purpose except repayment of deposits.

Recently few companies were started avoiding repayment of public deposits and Overall,new act will safeguard the interests of depositors.

Shriram City NCD Issue April 2014 @11.75% – To Open On April16, 2014:

Shriram City Union Finance – RBI registered Deposit taking Non-Banking finance company – NBFC will raise Rs.200 crore through public issue which will open on April 16, 2014.This issue will offer highest rate of interest@11.75% for period of 60 months.

Details of Shriram City NCD issue April-2014 are as follows:

About shriram City Union finance:

  • Shriram city started its operation in 1986.
  • Floated its Equity IPO in  1994.company listed at NSE and BSE.
  • Different basket of products like – Two wheeler loan and vehicle loans,Gold Loan,Personal loan,Auto Loans ,Home loans ,MSME segment loans etc.
  • Market share of around 40% in small loan segment.
  • Focused on serving the non-corporate component (proprietary units and partnership firms) of the Micro,Small and Medium Enterprises (MSME) through small ticket loans.
  • More than 1000 business outlets across India.
  • Good Capital Adequacy ratio of 23% against minimum RBI requirement of 15%.

Imp Issue Dates:

  1. Issue Open Date:April 16, 2014
  2. Issue Close Date:May 16,2014.

Interest Rates – HNIs & Retail Individual Investors:

Series Tenure –Months Interest Rate per annum Interest payment frequency
I 24 11.00 Annual
II 36 11.50 Annual
III 60 11.75 Annual
IV 24 11.00 Cumulative
V 36 11.50 Cumulative
VI 60 11.75 Cumulative

This issue offers above six different options both Annual interest and cumulative mode…for tenures of 24,36 and 60 months.

Security : NCD issue is secured – company have offered 100% security cover on outstanding amount any time during tenure of NCD in the form of immovable assets and future receivables of company.

Credit Rating : AA from CARE.

Shriram City annual sale Report for Last 05 Years- In Crores:

dyerware.com

Shriram City – Annual Profits From Operations – In Crores:

dyerware.com

Shriram City – Profit After Tax – for Last 05 Yrs in Crores:

dyerware.com


Profit for last 03 quarters in current financial year:

Quarter ended Profit after tax-PAT – in Crores
June 2013 117.42
Sept-2013 127.20
Dec-2013 129.09

One can observe that company have reported growth in terms of annual sale,Operational profits or net profits after paying taxes.

One can not deny that finance companies are always exposed to credit risks i.e. bad loans.Though credit risk is the integral part of operations of such companies,Overall a good issue with better credit rating,increasing profits- to invest a small portion of overall fixed income portfolio.

 

CPSE ETF March2014 -Goldman Sachs AssetManagement – RGESS Compliant Tax Saving Scheme

Goldman Sachs Asset Management -have come up with RGESS -Rajiv Gandhi Equity Saving Scheme – compliant CPSE ETF – Central Public Sector Enterprises .CPSE Index will be launched by NSE on March 18,2014 to facilitate Govt disinvestment in 10 bluechip CPSE stocks

CPSE index constituent stocks includes:

  1. ONGC
  2. GAIL India Limited.
  3. Coal India Ltd.
  4. REC Ltd
  5. Oil India Ltd.
  6. IOCL
  7. PFC
  8. Container Corporation Of India Ltd
  9. Bharat Electronics Ltd
  10. Engineers India Ltd.

One can more details about CPSE index at NSE website - Here.

CPSE ETF by Goldman Asset Management – will open for Retail individual investors on March 19 and closes on March 21, 2014.

This ETF will be listed on NSE and BSE on or before April 11,2014 and thereafter investors can buy-sell through demat account only.

Loyality Units:Investors shall be eligible for 6.66% i.e one unit for every 15 units loyality units from allotment date for one year period.For loyality units ,investor must have continuously held the units and lower unit balance  from allotment will be considered.

CPSE ETF-discount offered by GOI:5% discount on reference market price of the underlying stocks.But investors should not consider it as upfront gain of 5%.You can refer to presentation for which link has given below.

Presenation of CPSE ETF Goldman Sachs

should you invest:

Apart from RGESS tax benefit, discount and loyality units ,this index constitutes more oil,Gas or power sector stocks. Its always difficult to take any sector specific call.Also govt owned companies have their own concerns .Investing in this ETF ,means investing sector specific PSUs which can be avoided.

 


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