The Economic Times Wealth - July 25, 2022

26 Pages·2022·6 MB·English

T E T
HE CONOMIC IMES
HOW TO MAKE

YOUR TEEN
FINANCIALLY
ACCOUNTABLE
P15
www.etwealth.co | Ahmedabad, Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi, Pune | July 25-31, 2022 | 24 pages | `8
losing money
SPECIALTY
CHEMICALS
SECTOR
to inflation LOOKING UP
P8
Many of your investments could actually be losing
money. Find out what you can do to plug the leaks. P2
WHY THAT
COVETED
CRORE MAY NOT
BE ENOUGH
P11
SEEING
RETIREMENT
IN NEW
LIGHT
P14
cover ssttoorryy
02 The Economic Times Wealth July 25-31, 2022
By Babar Zaidi
STOP
T
he relentless march of inflation
slowed down in June, with con-
sumer inflation falling margin-
ally to 7.01% (from 7.04% in May)
and wholesale inflation down
to 15.18% from 15.88%. But this relief may
be short lived. Many economists say that
the move to bring several items under GST
will push up prices and fuel inflation.
For investors, high inflation means that
the goals they are saving for will become
that much more costlier in the future. You
might have factored in 6% inflation while
calculating your retirement needs 20 years
LOSING
from now. But if consumer prices continue
to rise at 7%, your requirement will be
higher than what you expect.
To avoid falling short, your invest-
ments must earn more than inflation.
Investments that do not earn more than the
inflation rate are actually losing money. If
you invested `1 lakh in gold 10 years ago,
MONEY TO your investment would be now worth `1.72
lakh. But there’s nothing to smile about be-
cause the 5.78% annual consumer inflation
in the past 10 years has reduced its value to
just `94,192. So while gold prices rose 5.6%
annually since 2012, you actually lost mon-
ey by investing in the metal (see graphic).
Money lying in the savings bank lost
more. The `1 lakh average bank balance
INFLATION
maintained in your savings account for the
past 10 years is now worth only `73,757. The
worst loss has been on the cash lying in the
locker: `1 lakh has become `54,882.
This loss is not easily discernible to the
average investor who is happy with the ma-
turity amount of his fixed deposits, NSCs
and life insurance policies. He also does
not see any decline in his bank balance.
Many of your investments could actually be losing
And the `1 lakh kept in the locker is intact.
money. Find out what you can do to plug the leaks. Don’t forget tax impact
Investors also fail to assess the impact of
tax on their returns. The interest from
fixed deposits is fully taxable at the slab
Inflation is rising unabated
15.88
14.87 15.08 15.18
Inf lation y-o-y (%) 13.83 14.27 13.68 14.55
13.11 13.11
CPI- Combined
(All India) (%) 12.07 11.57 11.64 11.8
WPI (%) 10.74
7.89 7.79
6.95 7.04 7.01
6.3 6.26 6.01 6.07
5.03 5.52 5.59 5.3 5.66
4.06 4.83 4.23 4.35 4.48 4.91
2.51
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2021 2022 2022 2022 2022 2022 2022
Source: RBI
Why WPI is Wholesale inf lation doesn’t Fuel, which has seen big Consumer inf lation gives Divergence is short lived. If wholesale
higher than CPI include services where prices rise, has a higher weight more weight to food, inf lation remains high, producers will
have not risen too much. in wholesale inf lation. where prices are stable. eventually pass on prices to consumers.
cover ssttoorryy
The Economic Times Wealth July 25-31, 2022 03
rate. In the 30% tax slab, this brings down Which investments
the effective returns significantly. A fixed
deposit that offers 7% returns will actually
yield less than 5% for an investor in that can beat inflation
tax slab. Factor in inflation and you will
understand the true extent of the loss.
Debt funds are seen as a better alterna- Returns from different investment options
tive to fixed deposits because of the favour-
in the past 10 years.
able tax treatment. If the investment is held
for three years, the gains are treated as
long-term capital gains and taxed at 20%
after indexation. Indexation takes into ac-
count the consumer inflation during the
holding period and accordingly adjusts the
purchase price upwards to lower the tax.
But the benefits of indexation have been
pared in recent years due to the low rise in
consumer inflation (see story on page 4).
Also, some goals may be getting costlier
at a faster rate than the overall consump- S
E
tion basket. For instance, education is get- AG
M
ting costlier by almost 10-12% compared to Y I
the 6-7% rise in food prices. And if you are TT
E
planning to send your children abroad for G
higher education, you also need to factor in
the exchange rate changes that will push
up your requirement in the future.
Countering infl ation
The good news is that the current high
inflation will not stay forever. Economists
expect the inflation rate to moderate after a
few quarters, aided by the rate hikes by RBI
and the statistical help of the base effect.
Even so, you need to ensure that your
portfolio stays ahead of inflation. Put the VALUE OF `1 LAKH INFLATION
INVESTMENT OPTION RETURNS (%) INVESTED 10 YEARS ADJUSTED VALUE OF
money idling in your savings bank ac- AGO (`) INVESTMENT (`)
count to good use. If you insist on retaining
liquidity, opt for a sweep-in bank account Bluechip stocks 15 4,04,556 2,22,028 Basket of well chosen stocks can
where money above a predetermined yield the highest returns.
threshold automatically flows into a fixed
deposit to earn higher returns. Diversified equity 12.5 3,24,732 1,78,219 If unable to pick stocks, go for eq-
More importantly, avoid keeping your funds uity funds for comparable returns.
savings in cash. They are losing value very
fast. Use them to buy gold or invest in some Balanced hybrid 9.5 2,47,823 1,36,010 Balanced hybrid funds take lower
savings product that will generate some funds risks but returns still well above
inf lation.
returns. Even a 5-6% return is better than
Conservative
earning nothing on cash. hybrid & equity 8.3 2,21,965 1,21,819 These funds deploy just 15-20% in
To be sure, many fixed income invest-
savings funds stocks but yield decent returns.
ment options have managed to generate
returns higher than inflation. The PPF
Provident Fund 8.5 2,26,098 1,24,087 This popular option has beaten
has generated 7.74% returns in the past 10
inf lation by a good margin.
years, which is way above the average con-
sumer inflation. But investors must factor
PPF 7.74 2,10,751 1,15,664 Interest rate has come down so this
in the inflation rate that applies to their
may not help in future.
personal lifestyle. The 7.01% consumer
inflation is the average for the entire coun-
Debt funds 7.5 2,06,103 1,13,114 Their post-tax returns are higher
try. For consumers in middle and upper than those from bank deposits.
income brackets, the inflation rate could
be higher because of a vastly different con- Fixed deposits, 7.5 2,06,103 1,13,114 Post-tax returns in higher income
sumption basket. The PPF, which is cur- NSCs brackets will be below inf lation.
rently offering 7.1%, may not suffice.
Consumer 5.78% Average consumer inf lation in past 10
Equity exposure can help inflation years. One must aim for higher returns.
This is where equity investments come in.
This asset class has the potential to gener- Life insurance 5.75 1,74,906 95,992 Stayed close on heels of inf lation. It
ate the highest returns in the long term. policies helps that corpus is tax free.
Even a thin 10-15% exposure to equities can
boost the overall returns of the portfolio. Gold 5.55 1,71,626 94,192 Yellow metal has lost its position as
Conservative hybrid funds, which allocate inf lation hedge. Has not kept pace.
about 20-25% to equities, managed to give
8.3% in the past 10 years. Balance in savings 3 1,34,392 73,757 Money idling in your bank account
A higher exposure to equities could earn account loses value over time.
more, but be mindful of the risks involved.
Equities are inherently volatile and could Cash in locker 0 1,00,000 54,882 Worst way to deploy money. Inf la-
even lose money in the short term. But in tion has almost halved its value.
the long term, equity investments are more
Returns are compounded annual pre-tax returns | PF, PPF, fixed deposits and NSCs figures take into account their historical interest rates
likely to beat inflation.
cover ssttoorryy
04 The Economic Times Wealth July 25-31, 2022
High inflation The CPI has been The Cost Inflation Index has
lower than usual risen slowly in recent years
FINANCIAL FINANCIAL
YEAR CPI-COMBINED YEAR CII YEAR CII
brings little
2012-13    9.90% 2001-02 100 2012-13 200
(Base year)
2013-14    9.30% 2002-03 105 2013-14 220
respite for 2014-15 5.93% 2003-04 109 2014-15 240
2004-05 113 2015-16 254
2015-16 4.91%
2005-06 117 2016-17 264
2016-17 4.52%
investors
2006-07 122 2017-18 272
2017-18 3.59%
2007-08 129 2018-19 280
2018-19 3.41%
2008-09 137 2019-20 289
The low consumer inflation has
2019-20 4.77%
2009-10 148 2020-21 301
led to a muted rise in CII and
2020-21 6.16% 2010-11 167 2021-22 317
pared gains from indexation.
2021-22 5.51% 2011-12 184 2022-23 331
Indexation takes into account How indexed cost is calculated
the inflation during the holding
period and accordingly adjusts Purchase price x CII of year of sale
the purchase price of an asset. Indexed cost =
CII of year of purchase
This can also reduce tax to zero.
By Babar Zaidi bonanza for investors. Suppose an investor this time round, the consumer inflation is sumer inflation has been low, so indexa-
purchased an asset for `100 in 2009-10. He not as high as it was in 2009-14. Consumer tion could push up the purchase cost to
H
igh inflation increases your sold it five years later in 2014-15 for `147, inflation has remained decidedly low dur- only `120. So even though there is stress
expenses, pushes up the cost pocketing compounded annual returns ing the past few years, averaging less than from rising prices, the investor gets only
of future goals and generally of 8%. But though his investment made a 4.7% in the past five years. As a result, the limited benefit from indexation. He makes
hurts your finances. But it gain of `47, he didn’t have to pay any tax. Cost Inflation Index (CII), the number used a profit of `27 and has to pay 20% tax on
also gives relief to investors That’s because indexation pushed up the for calculating the indexation, has also this capital gain.
by providing them with the indexation purchase cost to `162. Instead of paying moved at a tardy pace during this period. Indexation benefit applies to capital
benefit. Indexation takes into account the tax, the investor actually booked a loss of The CII is announced by the government gains from the sale of property, gold,
inflation during the investment period and `15 and adjusted that loss against other every year and is roughly 75% of the con- unlisted stocks and non-equity mutual
accordingly adjusts the purchase price of capital gains. “The indexation benefit is a sumer inflation rate. The indexed cost can funds. Listed stocks, equity funds and
an asset. During periods of high inflation, very useful tool for investors. It can be es- be calculated by the formula given above. equity-oriented balanced funds are not
this can reduce the tax to almost zero. The pecially beneficial during periods of high Suppose the investor from the earlier ex- eligible for this benefit.
last time inflation was so high, some inves- inflation,” says Sudhir Kaushik, CEO of ample purchased another asset for `100 in
tors even managed to gain a tax credit. tax filing portal Taxspanner. 2016-17. He sold it five years later in 2020-21 Down but not out
Between 2009 and 2015, consumer infla- Cut to 2021-22, when inflation is raging for `147, once again pocketing compounded Though the indexation benefit has been
tion was very high, which offered a tax once again. The only difference is that annual returns of 8%. But this time con- reduced by the prevailing low consumer
inflation, it still makes certain invest-
ments far more profitable for investors.
Low consumer inflation has deflated the indexation benefit
For instance, it makes debt funds far more
lucrative than fixed deposits. Gains from
% annual change in CII debt funds are treated as long-term capital
Asset
gains if the investment has been held for
purchased in 12.84
2009-10 (CII 148) for more than three years. These are eligible
`100 and sold fi ve years Asset for indexation and the post-indexation
later in 2014-15 (CII 240) purchased in gains are taxed at 20%. In stark compari-
for `147. High consumer 2016-17 (CII 264) son, the interest earned on fixed deposits
10.18
infl ation means indexed value 10 for `100 and sold fi ve is fully taxable at the marginal rate
of purchase is higher at years later in 2021-22 (CII
9.09 applicable to the individual. In the 30%
`162. Instead of paying tax, 8.70 317) for `147. But consumer
investor books `15 loss 8.03 infl ation has been low, so tax slab, this brings down the effective
and adjusts it against indexed value of purchase returns significantly. A fixed deposit that
other gains. is `120. Investor has to offers 7% returns will actually yield less
6.20 pay 20% tax on the than 5% for an investor in that tax slab.
5.74 5.83 `27 gain from the 5.32 The reduction in the impact of the in-
5 investment.
dexation benefit leaves taxpayers with no
3.81 3.67 3.54 4.27 3.94 4.15 4.42 choice. Till a few years ago, the investor
3.21 had the choice to either pay a flat tax of
3.03 2.94
10% on the gains with no indexation or go
for 20% tax after indexation. But that op-
tion has been removed and taxpayers have
to compulsorily go for indexation now.
0
2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018- 2019- 2020- 2021- 2022-
02 (Base 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Please send your feedback to
year) [email protected]
Graph shows annual % change in CII

review pprreevviieeww
06 The Economic Times Wealth July 25-31, 2022
product More companies providing
launches
:: Mutual Funds parents with health cover
ICICI Prudential Mutual Fund has
launched ICICI Prudential Nifty200
Momentum 30 ETF, an open-ended
fund that will track the Nifty200 Average sum insured in group policies increased from `3 lakh to `5 lakh per family.
Momentum 30 Index. The minimum
investment required is `1,000. The
NFO closes on 2 August. by Namrata Dadwal “Our parents have played an instrumen-
tal role in shaping our future and therefore,
DSP Investment Managers has About 75 million people above the age of 60 it is our moral responsibility to provide
launched DSP Nifty Midcap 150 in India suffer from some chronic disease, them with medical security at a time they
Quality 50 Index Fund. It offers according to the Longitudinal Aging Study. need it most. In a country where one out of
the option to invest in mid-cap Yet, health insurance penetration within five people have diabetes and a majority of
companies with the potential of this age group is amongst the lowest due to elders have pre-existing conditions, group
higher growth and profitability, lack of awareness, accessibility and afford- health insurance is the best option to extend
lower leverage and relatively ability. Fortunately, this scenario has begun comprehensive healthcare to the elderly,”
stable earnings. The minimum to change in recent years as companies are says Abhishek Poddar, Co-founder and CEO,
investment required is `500.
now increasingly providing Group Health Plum.
The NFO closes on 29 July.
Insurance (GHI) policies to their employ- The pandemic has also acted as a major
ees, which lets them include parents in the catalyst to fuel the rise of GHI adoption with
Edelweiss AMC has launched
health cover. parental covers. These policies are either
Edelweiss Focused Equity Fund,
a scheme that aims to create According to Plum, an employee health fully sponsored by the employer or volun-
a curated portfolio of 25-30 insurance platform, 30% of its corporate tary where the employees can decide to opt
stocks across three key investing clients have parental covers as part of their for parental coverage. Plum says that during
opportunities of brands, market GHI policies. Most of these companies are the past two years, it has also witnessed an
share gainers and innovators. first-time insurance buyers with an average increase in average sum insured in its poli-
The minimum investment employee strength of less than 100. The aver- cies from `3 lakh to `5 lakh per family.
required is `5,000. The NFO age age of employees in these businesses is 30 Including parental covers in group health
closes on 26 July. years while that of the parents is 57.5 years. insurance comes with several advantages
These numbers indicate that enterprises such as no age bar for parents, no pre-medi-
::
Insurance now have a strong sense of responsibility for their medical welfare. If an employee is cal check-ups required, coverage is applica-
Max Life Insurance Company has in safeguarding the health and wellbeing worried about the health of their parent, it ble from day one and it covers pre-existing
launched Smart Capital Guarantee of their employees and their families. Data could lead to a loss of peace of mind and per- diseases among others. Moreover, organi-
Solution. The product offers wealth shows that most parents around retirement formance, which, in turn, would affect the sations can customize their policies as per
creation through market-linked age are usually dependent on their children company’s productivity. their requirements.
returns, along with a guarantee on
premiums paid at maturity with
additional financial protection. It FPIs raise holdings in 30 Prashant Jain
offers choice of different premium
term options, comprehensive quits HDFC AMC
protection with death-benefits.
of the 50 listed PSUs
HDFC AMC has said Prashant Jain has
Manipal Health Insurance has tendered his resignation after staying
launched the ‘Switch On, Switch Off’ as CIO with the asset management com-
benefit in a new plan. The benefit pany for 19 years.
allows policyholders to switch off Foreign fund managers have reposed The board at the fund house has
their health insurance from the their faith in public sector companies approved the appointment of Chirag
second year onwards, for up to 30 after a hiatus. Even as they pulled `2.30 Setalvad as Head for Equities and
days while travelling abroad, and get
lakh crore out of Indian equities so far Shobhit Mehrotra as Head-Fixed in-
a discount on renewal premium. The
this year, 30 out of the 50 odd listed state- come. Both Setalvad and Mehrotra will
facility cannot be availed of in the
owned firms saw foreign ownership be reporting to MD & CEO Navneet
last 90 days of the policy year.
rising in the period. Munot, the AMC said in a BSE filing.
Foreign portfolio investors’ (FPIs) It was earlier reported that Jain had
::
Banking
stake in National Aluminium increased initiated talks with the management
IndusInd Bank and EazyDiner from 13.30% to 16.71% between over his resignation. At present, Jain
have launched EazyDiner IndusInd January and June, while in Hindustan manages Balanced Advantage, Flexi Cap
Bank Credit Card. It will provide Aeronautics, their stake rose from 3.15% and Top 100 funds at HDFC MF, apart
complimentary EazyDiner Prime to 5.56%. In Oil India, FPIs increased from an India-dedicated scheme under
membership that will offer their stake from 10.11% to 12.42%. exclusive mandate from a sovereign
guaranteed discount of up to 25% Similarly, these investors increased wealth fund. The development follows a
at select restaurants. This can be their stake in RCF, BEML, Chennai monopoly are valued at low PE multiples TOI report that suggested Jain had be-
clubbed with an additional 25% Petro, Engineers India, Shipping and have defensive business models with come India’s first fund manager to over-
discount of up to `1,000 every Corporation, Bharat Dynamics and attractive dividend yields. This has led to see `1 lakh-crore worth equity assets.
time a customer pays on the
Mazagon Dock, among others. increase in FPI holding.” Jain has the unique distinction
EazyDiner app via PayEazy.
As smart money chases value stocks, Some of the PSUs in which FPIs of being the first Indian fund man-
PSUs have managed to attract some of have increased stake, such as National ager to manage a fund for over 25 years.
Indian Bank has partnered with
Tata Motors to provide car loans these flows due to strong balance sheets, Aluminium, NMDC , SJVN , and Indian Launched in 1994, he has been manag-
for customers, who can avail of higher dividends, lower valuations, and Oil, are currently trading at a dividend ing Balanced Advantage Fund since its
the loan benefits across 5,700+ strong business prospects. yield between 5% and 11%, while majority inception. In an earlier interaction with
branches of Indian Bank. The “Fund managers globally have shifted of them, including GSFC , GNFC , National TOI, Jain had said that over 25 years ago,
bank can now provide financing strategy from growth to value stocks,” Aluminium, Oil India, RCF, Chennai Petro he was managing just around `120 crore
to customers mobilised through said Amisha Vora, joint MD, Prabhudas among other are trading at a PE ratio of worth of assets in this fund. In a quarter
310 Tata Motors Dealers. Lilladher. “Most PSUs that enjoy below 10 times. —Rajesh Mascarenhas of a century, the fund’s total assets have
grown by over 350 times.
review pprreevviieeww
The Economic Times Wealth July 25-31, 2022 07
Card for out-of-pocket medical expenses
Launched by QubeHealth, the card offers credit of up to `10 lakh with no interest, repayable within 2 years.
by Riju Mehta medical expense. While QubeHealth
PROS CONS
has tied up with over 11,000 hospitals,
If you are an employee with a monthly sal- clinics and diagnostic centres, the
ary of `15,000 or more and your company Cheaper alternative to credit It can only be provided card can be used at any medical outlet.
has tied up with QubeHealth, a Mumbai- card as it charges zero interest by your employer. You It is free for life, with the employee
based health/fintech company, you can rate and offers no-cost EMIs. Qubecard: cannot acquire it on not required to pay anything at all.
your own.
now use a card that charges no interest for “Only the employer has to pay an
medical spends. Based on the ‘buy now, pay Free of charge, with no annual How good annual subscription of `450 per per-
fee, interest or penalty. Credit amount can be
later’ concept, the card allows credit of up son on behalf of the employee,” says
is it? very low for lower
to `10 lakh per employee, exclusively for The EMIs can be restructured salary brackets. George. The credit line can be acti-
healthcare-related expenses. You have up to in case of cash shortfall. vated by downloading the app through
two years to pay back the amount through It’s not a substitute the employer, linking the employee’s
no-cost EMIs. EMIs can be spread over 2 years. for health insurance bank account and providing an ECS
“An individual can avail of credit that or top-up plans. mandate. It also doesn’t need to be
is 1-7 times his monthly salary and use the Usable at any medical outlet. linked to your salary account. “If a
If you change jobs,
card for himself, his family, even non-blood person leaves the company, the credit
Can be used for family, non- the new employer
relations or pets. However, it is not a retail line is frozen till the details of next em-
blood relations and even pets. may not offer it.
product and you can get it only through your ployer are updated,” says George.
employer, who needs to sign up with us,” On the flip side, the new em-
says Chris George, Co-founder and CEO is especially useful in India, where 63% of all expense, including medicines, ployer may not offer the benefit and
of QubeHealth, which launched the card healthcare spending is out-of-pocket expenditure diagnostics, physical and men- employees in lower salary brackets
in November last year. The company has (OoPE), according to the 2021 Niti Aayog report. tal health consultations, well- may be unable to avail of a high
tied up with 180 corporates and, by the end While 30% of the population remains uninsured, ness, dental or eye procedures, credit. Besides, it is no substitute for
insurance plans. However, it does
of next month, would have deployed 30,000 even for those who are insured, many procedures assisted pregnancy, hospital or
provide easy access to large sums in
cards giving `100 crore in credit line. are not covered and they pay from their pockets. clinic bills, physiotherapy, etc.
an eventuality at no cost, and hence,
Qubecard aims to ease the process of The card is powered by Visa and RuPay, and What it does not include is gym
it may be a good idea to opt for it.
out-of-pocket medical expenditure, which can be used to pay for any health or medical or spa usage, or any other non-
stocks
08 The Economic Times Wealth July 25-31, 2022
Specialty chemicals
sector looking up
Decent returns expected as China plus one strategy, favourable
demand-supply scenario and growth opportunities through import
substitution and exports will improve business prospects.
by Sameer Bhardwaj
S
trong demand from user indus-
tries, Chinese supply disrup-
tions, improved realisations and
increased global market share
will continue to support the
specialty chemicals sector. Reports from
ICICI Direct, Motilal Oswal, Edelweiss,
JM Financial and ICICI Securities have
maintained a positive stance on the sec-
tor. The reports were released in the
months of May, June and July this year.
Specialty chemicals are derivatives of
basic chemicals that are manufactured
for specific end-use solutions and are used
in a variety of products like detergents,
pet foods, soaps and cosmetics. According
S to an IBEF report, the sector is expected to
E
G grow at a CAGR of 12.4%, from $32 billion
A
YIM in 2019 to $64 billion by 2025. In 2022-23,
TT domestic demand and exports of specialty
E
G chemicals are expected to grow at 13-15%
and 10-12% respectively.
A Crisil report expects the industry to specialty chemical companies. According to a Aarti Industries
outpace its Chinese counterpart and dou- recent JM Financial report, Chinese chemical UPSIDE
ble its share of the global market to 6% by companies started facing production chal- POTENTIAL
12-month forward PE Current price (`) 1-year target price (`) 28.9
2026 from 3-4% in 2021. lenges from 2015-16 due to a breach of pollution %
China constitutes around 20% of the norms, the US-China trade war, Covid disrup-
26.6 735.6 947.8
global specialty chemical industry which tions and power rationing. As a result, Indian
is valued at $800 billion. Indian compa- companies started getting more orders, which
THE COMPANY’S PERFORMANCE ANALYSTS’ RECOMMENDATIONS
nies are gaining incremental market resulted in higher utilization and, in turn,
will be supported by robust demand BUY HOLD SELL
share due to the China plus one strategy led to better EBITDA margins. A majority of
from end-user industries, improved 15 3 6
adopted by US and Europe, says an ICICI them saw their RoCE and RoIC improve over
product mix, product diversif ication, a
Direct report. China plus one is a business the same period despite a jump in investments
rising share of downstream products, performance is expected in the com-
strategy adopted by global companies into newer business segments.
capacity expansion and opportunities ing years with the start of revenue
that aim at diversifying the business into The domestic companies also have ample
arising from import substitution. Plans from long-term contracts, increasing
other countries and refrain from invest- scope to derive the benefits of import substi-
of backward integration and the addi- utilisation at the recently commer-
ing only in China. Industrial lockdowns tution by manufacturing chemicals that are
tion of new chemistries and value- cialised plants, additional chlorina-
during China’s zero covid policy led to imported. Also, there are opportunities to
added products will provide additional tion capacity and expectations of an
severe supply chain issues which in turn capture export markets due to ongoing geopo-
growth catalysts. improvement in the margin prospects
dented the country’s reliability. litical tensions. Siddhartha Bhaiya, Managing
According to a report by AnandRathi due to increased share of high-margin
Such developments have generated Director & Fund Manager of Aequitas
that was released after the company’s products.
significant growth opportunities for Consultancy Pvt Ltd states, “Due to shortage
fourth-quarter results, a steady
domestic specialty chemical companies of gas across Europe amid ongoing Russia- BSE Sensex
as several global companies have started Ukraine war, the power costs of European 103.74
exploring alternative manufacturing des- players have increased considerably. The un- 100
Aarti Industries
tinations to de-risk their supply chains, affordable costs have forced the global players
86.28
which were earlier dependent on China. to reduce supply, which has resulted in a sig-
India has emerged as a beneficiary due to nificant increase in chemical prices. Indian
its cost competitiveness in manufactur- manufacturers can pocket this opportunity as
ing (easy availability of raw materials and the supply distortions will help capture export
low-cost labour), and technical expertise. markets whereas higher chemical prices will
Also, the shutdown of several chemi- improve revenue visibility.”
cal companies in China over the past few Other factors like a greater focus on back-
years due to environmental concerns ward integration, a rise in the R&D spending
has contributed to the growth of Indian and improvement in logistic activity are likely 22 July 2021 18 July 2022
stocks
The Economic Times Wealth July 25-31, 2022 09
to assist domestic specialty chemical com-
Rossary Biotech Sudarshan Chemical Industries
panies to hold meaningful market share
over the long run, adds the ICICI Direct
12-month Current 1-year target UPSIDE 12-month Current 1-year target
report.
forward PE price (`) price (`) POTENTIAL forward PE price (`) price (`)
To cater to the strong domestic demand 33.4 UPSIDE
and export potential, the companies are 28.8 850 1,133.4 % 18.2 441.3 574.3 P3OT0EN.1TIAL
increasing capacities and have laid strong %
capex plans. A recent Motilal Oswal re-
port says specialty chemicals companies IMPROVED PRODUCT MIX, ANALYSTS’ RECOMMENDATIONS THE COMPANY WILL
in its coverage universe have spent `8,800 synergy benef its from BUY HOLD SELL generate incremental ANALYSTS’ RECOMMENDATIONS
crore during 2014-15 and 2021-22 in capex acquired businesses—Unitop 4 1 0 revenues as the capex BUY HOLD SELL
and are likely to spend another `5,400 and Tristar—like new product is nearing completion in
10 0 0
crore in the next two years. Moreover, launches, R&D partnerships, the f irst half of 2022-
to clients, especially in
several companies are entering new cross-selling opportunities, 23. According to the
the formulation business. the company to witness a
chemistries while keeping their core com- strong volume and price management, the debt
However, the management gradual improvement in the
petencies unaltered in order to de-risk and growth and traction in textile is expected to decline in
expects margin improvement margins over 2022-23 and
diversify their product portfolios. specialty chemicals helped the coming years and the
from the second half of 2023-24, as the benef its of
Despite an increase in capex inten- the company to report cost reduction steps will
2022-23 on the back of capex start to materialise
sity, the sector is expected to witness an decent numbers in the fourth improve margins going
normalisation of the current with a higher share of high-
improvement in free cash flows in the quarter of 2021-22. forward. Focus on backward
scenario and higher capacity margin specialty pigments,
future. The JM Financial report expects According to a recent integration, strong global
utilization at Dahej. It has better operating leverage,
the EBITDA margins of most companies Nirmal Bang report, there network, robust liquidity,
guided for `2,000 crore and the company’s continued
to improve due to economies of scale and are short-term challenges and plans of launching high-
revenue and `250 crore ability to pass-on the raw
strong revenue visibility, which in turn regarding the pass-through margin products are the key
EBITDA for 2022-23. material price increases to
will result in higher operating cash flows. of the entire cost burden growth catalysts.
customers.
The strong FCF generation is likely to con- An Ind-Ra report expects BSE Sensex
BSE Sensex
tinue over 2022-23 and 2023-24. 103.74
However, an increase in crude oil prices 100 103.74 100
is likely to dent sector margins as most of Rossary Biotech Sudarshan Chemical
the feedstock or raw materials involved in 58.87
67.77
specialty chemicals are crude derivatives.
“Raw materials such as benzene, ethylene
and toluene, which are crude derivatives,
form around 55% of the overall cost struc-
ture,” adds the CRISIL report. Brent crude
has surged 35% in 2022 so far due to the
Russia-Ukraine war and lower OPEC out-
put. According to Bloomberg, Brent crude
will average over $103/barrel in 2022.
We list five companies from the spe-
cialty chemicals space that offer decent
price potential and highlight their future
prospects. 22 July 2021 18 July 2022 22 July 2021 18 July 2022
Anupam Rasayan PCBL
UPSIDE UPSIDE
POTENTIAL POTENTIAL
12-month forward PE Current price (`) 1-year target price (`) 21.1 12-month forward PE Current price (`) 1-year target price (`) 44.4
% %
31.3 741 897 10.7 111 160
HEALTHY GROWTH IN chemical CSM ANALYSTS’ RECOMMENDATIONS FAVOURABLE DEMAND-SUPPLY situ- ANALYSTS’ RECOMMENDATIONS
(custom synthesis and manufacturing) BUY HOLD SELL ation in the carbon black market will BUY HOLD SELL
due to China+ strategy, robust R&D, 7 0 2 provide strong growth opportunities. 5 0 0
and healthy operating cash f lows will Demand for carbon black is rising due to
boost the performance of the company. consistent innovation. It estimates the increased demand from the tyre industry According to a Sharekhan report, PCBL
Its acquisition of Tanfac industries has company’s EPS to grow at a CAGR of 33% and rising applications in plastic, inks, will be a key benef iciary of the revival
enabled backward integration, which will between 2021-22 and 2023-24. “Anu- paints, cables and f ibres. On the other in domestic tyre demand. Volume growth
provide inorganic growth opportunities pam has planned a capex worth `250 hand, supply is facing constraints from coupled with sustained EBITDA margin
and improve competitiveness. crore in order to execute the strong order China and Russia. Its capacity expan- would help drive a strong 10% EBITDA
A recent KR Choksey report is positive book where it expects asset turnover sion plan in Tamil Nadu and brownf ield CAGR over 2021-22 and 2023-24. A low
about the company’s prospects due to ratio of 1.75 times with an incremental capacity expansion at Mundra will drive net DE ratio of 0.2 times and healthy
its healthy order book, new product ROCE of 20% from these orders,” adds long-term volume growth. dividend yield of 4% are other strengths.
innovation, cost reduction measures and the report. BSE Sensex
BSE Sensex 100
103.74
103.74
100 PCBL
Anupam Rasayan
93.45
92.67
22 July 2021 18 July 2022
22 July 2021 18 July 2022 Current price as on 18 July 2022. BSE Sensex 12M Forward PE: 19.02. Source: Bloomberg.
fi nancial ppllaannnniinngg
10 The Economic Times Wealth July 25-31, 2022
COST OF ILLNESS:
STROKES
In the fifth part of this series on major
illnesses in India, Riju Mehta tells you
the cost of diagnosis and treatment for
strokes, so that you can ensure adequate
insurance and financial readiness.
S
E
G
A
M
YI
T
T
E
G
COSTS Treatment costs is. “Some patients may have to stay
for a couple of weeks in hospital as
What is a stroke? It is much easier and cheaper Transient Ischaemic Attack (TIA) it may require surgery, ventilator and
A stroke, also known as cerebral to prevent strokes than treat Course of treatment: Since this is caused ICU stay,” says Dr Gupta.
vascular accident (CVA) or brain them. If a stroke patient is by blockage, typically due to clots, the
attack, takes place when the supply not provided medical care treatment involves giving blood thinners Bleeding due to blood pressure: This
of blood to the brain is disrupted, re- immediately, the damage will to dissolve the clots. It can also involve involves treatment either through
sulting in damage to the brain cells require extensive treatment and long- angioplasty or surgery, which means medication or open surgery to control
and tissue. The blood flow can be term rehabilitation, pushing up the costs opening up the blood vessel by insert- bleeding. The blood vessel is typically
disrupted either due to an obstruc- signif icantly. ing a stent, and does not require long small and may not require repair.
hospitalisation.
tion in the artery or rupture of blood Doctor’s consultation fee (cid:122) Medication cost: `1,000-2,000
vessels. (cid:122) M edication cost: `1,000-2,000 (cid:122) Open surgery cost: `2-3 lakh
In India, strokes are among the (cid:122) N eurologist: `1,000-2,000 (cid:122) Angioplasty/stent: `2.5-3 lakh
leading cause of disability and Bleeding due to aneurysm:
Diagnostic tests
death, with 18 lakh stroke cases Ischaemic Stroke There are two ways to treat
reported every year, according The diagnosis needs to be car- Course of treatment: In an this involving either open
to the Indian Stroke Association. ried out quickly to reduce and emergency, there are two surgery or through an inter-
“As many as one in four people are treat brain damage. The faster main treatment courses to vention process known as
likely to suffer from strokes in their a patient is provided medical open up the blocked blood vessels. coiling. “The risk involved is
lifetime in India,” says Dr. Vipul care, the higher his chances of recovery. much higher in open surgery
Gupta, Chief, Neuro-interventional An easy way to recognise the symp- Thrombolytic drug: This involves medica- and may require a longer stay in ICU/
Surgery, & Co-Chief, Stroke Unit, toms is via the word ‘FAST’, especially tion for dissolving clots through throm- hospital. The intervention method is
Artemis Hospital, Gurugram. As for ischaemic strokes: F for Face, which bolytic drugs via an injection. These safer and most patients are treated
drugs are stronger than blood thinners using this method nowadays,” says Dr
per WHO data published in 2020, becomes asymmetrical, that is, one side
and can dissolve tough clots as well. Gupta.
India recorded 6.97 lakh deaths, or sags; A for Arm, which becomes numb or
8.23% of total deaths, due to strokes. can’t be moved; S for Speech, when the However, these must be administered (cid:122) Open surgery cost: `2-3 lakh
patient is unable to speak; and T for time, within 4.5 hours of a stroke and work (cid:122) Coiling cost: `3-10 lakh
Types of strokes only for smaller blood vessels.
which needs to be as less as possible for
(cid:122) C ost: `40,000-80,000
Depending on the reason for disrup- treatment to begin. Rehabilitation
tion of blood flow, strokes can be of In case of haemorrhagic strokes, the Course of treatment: The
Mechanical thrombectomy: In case of
two types: ischaemic and haemor- patient will develop an excruciating post-stroke rehabilitation
acute ischaemic strokes due to blockage
rhagic. “When the blood supply headache within minutes and will require may require nursing care
in larger arteries, another treatment
to brain is blocked due to a clot or immediate medical attention. and physiotherapy. It can
involves reaching inside the blocked
plaque in the artery, it’s known as be a short- or long-term
vessel and removing the clot through a
ischaemic stroke, while 20-25% of Blood tests: This is done for checking device known as stent retriever. This can process depending on the severity
strokes are haemorrhagic, which blood sugar, clotting of blood, etc. be done within 24 hours of a stroke and of stroke. It could range from a week
happens when a blood vessel bursts (cid:122) C ost: `1,000-3,000 helps reverse it by restoring blood f low. to lifetime of care. “In severe cases,
or is ruptured, leading to bleeding,” “This is the most effective the best option is to admit a patient
to a rehab centre, where proper
says Dr Gupta. CT Scan: The scan can help procedure the world over,
nursing care and physiotherapy can
Another stroke type is the tran- locate bleeding, diagnose though the awareness and
be provided. These are cheaper than
sient ischaemic attack (TIA) or a mi- access to it is low in India,”
ischaemic stroke, etc. hospitals and more convenient than
ni-stroke, where the blood supply is says Dr Gupta. It also requires
(cid:122) C ost: `1,500-3,500 treatment at home,” says Dr Gupta.
blocked temporarily, and is restored longer hospital stay, typically
However, there are very few good
when the blockage is removed. 4-8 days.
MRI: This also helps diagnose an is- centres currently in India.
Haemorrhagic strokes can occur (cid:122) C ost: `2-7 lakh
chaemic stroke and decide the course of (cid:122) Nursing: `50,000-1 lakh a month
either due to high blood pressure or
aneurysms, where swelling of blood treatment. Haemorrhagic Stroke (cid:122) Physiotherapy: `10,000-30,000
vessels causes rupture. Among the (cid:122) C ost: `2,000-7,000 Course of treatment: In this case, there a month
main causes of stroke are high blood are two types of treatments depending (cid:122) Rehab: `5,000-10,000 a day
pressure, heart disease, diabetes, Angiography: It involves the use of on the cause of bleeding. The f irst is (cid:122) Medication: `1,000-3,000 a
smoking and obesity. “If you control X-ray imaging and catheter inserted in where bleeding is due to blood pressure, month
these issues, you can reduce the the blood vessel to detect the size and and the second is due to aneurysms. The
stroke risk by 70%,” says Dr Gupta. location of blocks. patient’s treatment and hospital stay will All costs are for Delhi, are indicative and may
(cid:122) C ost: `5,000-10,000 depend on how extensive the bleeding vary for different hospitals/clinics and labs.