Differential Voting Rights (DVR)

A DVR is just like a normal share of a company, except that it carries less than 1 voting right per share unlike a common share. Such an instrument is useful for issuers who wish to raise capital without diluting voting rights. Investors who wish to invest only for dividends and capital appreciation and are not really bothered about voting rights find these shares attractive. The number of voting rights for a DVR differs from company to company. DVRs typically trade as a separate category of instrument and are available at a discount to the common shares of a company. The Companies Act, 2013 defines the eligibility of a company to issue such shares. This includes a dividend of at least 10% over the preceding 3 years and such shares shall not exceed 25% of the total post-issue paid up capital of the company. Several companies in India including Tata Motors and Pantaloons have issued DVRs.

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Sum-Of-The-Parts (SOTP) Valuation

Several businesses operate as a cluster/bundle of businesses rather than one business. For example, ITC, L&T and other corporations have different business under one umbrella.The best way to value these businesses is to value each business separately and then do the sum of those valuations. This method of valuing a company by parts and then adding them up is known as Sum-Of-The-Parts (SOTP) valuation .

THESIS ON CENTRAL DEPOSITORY SERVICES (INDIA) LIMITED (CDSL)

Central Depository Services (India) Limited (CDSL) is very good stock to hold for long-term investors and I am presenting a thesis on it which is as follows: · Its fundamentals are very strong and impressive which can be understood from the following points: Ø It is a debt free company. Ø It has delivered a good profit growth of 24.10% CAGR over last 5 years. Ø It has been maintaining a healthy dividend payout ratio of 42.69%. Ø It has a healthy Cash from Operations. Ø It has a healthy ROE and ROCE of more than 20%. Ø It has a very healthy Operating and PAT Margins of 75.51% and 58.55% respectively as per the financials of F.Y. 2020-21. · The penetration to equity markets in India is still very low as roughly about 3% of India’s population invests in equity markets as compared to 55% in US, which suggests that there’s lots of headroom for India’s stock marketplace p...

UNDERSTANDING ESG FRAMEWORK

Most investors focus on the profit generating ability of a business to make investment decision. However, over the last few years, the societal discussions about companies and businesses have also started focusing on sustainable development, and corporate social responsibility. This has given traction to investment theme that is focused on Environment, Social and Corporate governance (ESG). Initially this framework was used by handful of “Impact” investors. But this framework has gradually gained traction as these frameworks also provide commercial value. Under this framework investors evaluate companies based on these criteria: (i) How does the company’s activities affect the environment? Companies with low carbon emission and low contributors to pollution rank better than others. (ii) What are the activities that the company perform in terms of social development? This includes focus on human rights, gender equality and many such social factors. Companies that contri...

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