CONSULTATION PAPER DEPARTMENT OF DEBT AND HYBRID SECURITIES

 

📢Announcements

Sebi has released a Consultation paper on expanding the scope of the Sustainable Finance framework in the Indian securities market Click here to provide your comments.

CONSULTATION PAPER
DEPARTMENT OF DEBT AND HYBRID SECURITIES –POD I

OBJECTIVE
1.1.The objective  of  this consultation  paper is  to  seek  comments, views and suggestions from the public on the proposals related to expanding the scope of sustainable finance framework in the Indian securities market.

1.2.The Hon’ble Finance Minister  in  the  budget  announcements  for  FY  2023-24, inter-alia,made an announcement to simplify,ease and reduce the cost of compliance for participants in the financial sector through a consultative approach.

1.3. Accordingly, to align the process of review with the budget  announcement, a working  group  for review of compliance requirements under SEBI  (Issue  and Listing   of   Non-Convertible   Securities)   Regulations,  2021(hereinafter ‘NCS Regulations’) was formed, which recommended certain measures  to promote the ease of doing business for issuance of non-convertible securities.

1.4. One of the recommendations of the working group was to redefine “green debt security” as “sustainability-linked security” as sustainability-linked security would cover a wider spectrum of sustainable finance instruments whereas green debt securities  appear  to only  reflect  the  instruments  related  to  environmental sustainability.

1.5. Further, SEBI is in receipt of representation from market participants including Confederation  of  Indian  Industry  (CII) to  expand the  scope  of  regulatory framework pertaining to sustainable finance to Include social Bonds, Sustainable Bonds  and  Sustainability-linked  Bonds in addition  to  existing Green  Debt Securities as a mode of raising sustainable finance,in line with global practices.

1.6. it is   also   noteworthy   that   the  Hon’ble  Finance  Minister  in  the  budget announcements for FY 2024-25, inter-alia mentioned that taxonomy for climate finance  for  enhancing  the  availability  of  capital  for  climate  adaptation  and mitigation  will  be developed.

1.7. Building on all these feedback and developments, it is proposed to provide for a framework for Social Bonds, Sustainable Bonds and Sustainability Linked Bonds,Further, it is also proposed to introduce the concept of Sustainable Securitised Debt Instruments.

1.8.The detailed proposals and consultation matters are mentioned in Paragraph 3 to 5 of this consultation Paper.

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Different Types of Returns in Investment

 

💴Different Type of Returns in Investment :-

💰Absolute return

Absolute return refers to the total return a mutual fund has earned over an entire period of time.

✅For instance, if one invested Rs 10,000 20 years back and has now grown to Rs 2 lakh, the absolute return of the investment would be an incredible 1,900 per cent returns. But this tells only half the story, as the Rs 10,000 investment grew to Rs 2 lakh over 20 years.

Key point: Absolute return is a useful metric for investments less than a year old.

💰Compound Annual Growth Rate (CAGR)

CAGR, a fancy way of saying annualised return, measures a fund's yearly return over a long time.

✅Let's take the previous example where Rs 10,000 fund investment grew to Rs 2 lakh over 20 years. In this case, the annualised return is 16.16 per cent. That's still healthy but far more sober than a 1,900 per cent absolute return, right?

Moral of the story:
Absolute returns should be considered if your investment is less than a year old, whereas CAGR comes in while checking an investment's returns over more than one year.

💰Extended Internal Rate of Return (XIRR)

XIRR may sound exotic but it simply measures returns if you staggered your investments over a period of time. SIP is a great example.

✅While CAGR calculates the annualised returns of a one-time investment, XIRR is a better choice to calculate SIP/SWP (systematic withdrawal plan) returns.

Let's now understand trailing return, another metric that measures an investment's performance.

💰Trailing return

Trailing return, also known as point-to-point return, calculates returns between two dates.

✅For example, a one-year trailing return is from August 1, 2023, to August 1, 2024. A five-year trailing return is from June 1, 2019, to June 1, 2024.

Weak point: Trailing return does not convey anything about the consistency or volatility of the fund.

💰Rolling return

Rolling return provides a comprehensive view of a fund's performance over time.

To calculate three-year annual rolling returns over 10 years, you would take the following steps:

√ Calculate the return from Year 1 to Year 3
√ Then, from Year 2 to Year 4
√ Continue this process until you calculate the return from Year 8 to Year 10.

✅Key point: Rolling return shows how consistent a mutual fund has been over a period of time.

Sovereign Gold Bonds Redemption Aug, 2024

 

🎁Sovereign Gold Bonds: 

📢RBI fixes the final redemption price at Rs 6,938 for the SGB August 2016 issue.

🥉The gold bonds were issued at a price of Rs 3,119 per gram in August 2016 by the Reserve Bank of India (RBI). The RBI has designated August 5, 2024, as the final redemption date for the scheme.

🥈The Reserve Bank of India has announced the final redemption price for Sovereign Gold Bonds (SGBs) issued on August 5, 2016. The central bank has fixed the final redemption price at Rs 6,938 per gram, which is 122 percent higher than the issued price. The gold bonds were issued at a price of Rs 3,119 per gram in August 2016 by the Reserve Bank of India (RBI). The RBI has designated August 5, 2024, as the final redemption date for the scheme.

🥇Adjusting for interest, specifically set at 2.75% payable semi-annually on the initial investment amount (issue price), the absolute return totals a little over 144%. When annualised, this equates to a return of approximately 12% CAGR. The final interest amount accumulated on the bonds will be disbursed directly to the holder's bank account, in addition to the redemption amount.

🎖️SGBs are issued by the government of India with a tenure of 8 years. The SGB August 2016 issue is reaching maturity, necessitating redemption. Unlike the optional redemption offered by the Reserve Bank of India at the end of the fifth year, the redemption of this bond is mandatory.

🏅According to official sources, at present, the government does not have immediate plans to introduce a substitute for the SGB scheme if the decision is made to cease its operation.

🥉The future of the scheme will be deliberated upon during a meeting scheduled in September 2024. This meeting will align with the RBI's borrowing calendar meeting, where key decisions regarding the scheme will be taken.

FIRE

 

FIRE

🕺Let's Explore the term F.I.R.E., or Financial Independence, Retire Early.

Hey there, hustlers and go-getters! Today, we're diving into a movement that's been gaining serious traction lately – F.I.R.E., or Financial Independence, Retire Early.

It's about taking control of your finances and designing the life you want on your own terms.

🎁What is F.I.R.E?

it's all about building up enough investments and passive income streams to cover your living expenses, allowing you to ditch the traditional 9-to-5 grind and embrace a life of freedom and flexibility. Sounds pretty sweet, doesn't it?

🎀The Importance of F.I.R.E

F.I.R.E. isn't just a trend; it's a radical shift in how we think about work, money, and life. It empowers you to take control of your financial future and break free from the conventional work cycle. Instead of working until you're 65 or older, you can achieve financial independence much earlier, giving you the freedom to live life on your terms.

🎋How To Achieve F.I.R.E

But how do you actually achieve F.I.R.E.? It's all about living below your means, investing like a pro, and cutting down on unnecessary expenses. Here are some key steps to get you started:

Live Below Your Means: Focus on frugality and conscious spending. Track your expenses and cut down on non-essential items.

Invest Wisely: Educate yourself about different investment options. Consider low-cost index funds, real estate, or other income-generating assets.

Boost Your Savings Rate: Aim to save a significant portion of your income. The higher your savings rate, the faster you'll reach financial independence.

Create Multiple Income Streams: Diversify your income sources through side hustles, passive income streams, or part-time work.

📕The 4% Rule

One of the key principles of F.I.R.E. is something called the "4% rule." Essentially, this rule suggests that if you withdraw no more than 4% of your investments each year, your portfolio should theoretically last for at least 30 years. Of course, this rule isn't set in stone, but it's a good starting point for planning your financial independence journey.

✂️Overcoming Hurdles

Now, we know what you're thinking: "But what about healthcare? What about unexpected expenses?" From exploring affordable healthcare options to building up emergency funds, there are strategies to help you navigate these potential hurdles. Here are some tips:

Healthcare: Research affordable healthcare options such as high-deductible health plans with Health Savings Accounts (HSAs).

Emergency Fund: Build a robust emergency fund to cover unexpected expenses without dipping into your investments.

Insurance: Consider various insurance policies to protect against unforeseen events.

🧒The Freedom of F.I.R.E.

once you've achieved F.I.R.E., you're free to pursue your passions, travel the world, or simply enjoy a more relaxed lifestyle without the constraints of a traditional job. The possibilities are endless.

Fire we should Hire👍

Changes Landscape in EV and Space Sector of India

 

A big changes going to happen in the Automobile/EV industry and space sector of India with entering of Elon Musk in India.

The Indian government this week amended its foreign direct investment (FDI) policy in the space sector to attract investors in the satellite manufacturing and launch vehicles segments.

Musk was planned to land in India for a visit on April 21-22 to meet with Prime Minister Narendra Modi as well as executives of Indian space companies, but he postpones India trip; to visit later this year, the Indian government this week amended its foreign direct investment (FDI) policy in the space sector to attract investors in the satellite manufacturing and launch vehicles segments.

The American billionaire is well-known for his ambitious—and audacious—space exploration endevours through his company SpaceX and his desire to establish a human colony on the Red Planet.

Now, another one of his space-related businesses may get a shot in the arm from India with the government close to finalising approvals for Musk’s satellite internet project Starlink.

The government has allowed up to 74% FDI for satellite manufacturing and operation, and satellite data products under the automatic route. FDI beyond 74% for these activities will require prior government approval. Previously, India allowed FDI for satellite operations through the government approval route only.

The government has also permitted FDI up to 49% for launch vehicles and associated systems, creation of spaceports for launching and receiving spacecraft under the automatic route. Again, FDI beyond 49% will require government permission. Besides, the government has allowed 100% FDI for manufacturing of components and systems or sub- systems for satellites, ground segment and user segment without prior approval.

Musk’s association with India is likely to go beyond space, into the fast-growing sector of electric vehicles where his company Tesla dominates the world and is now about to enter the South Asian nation.

Musk, who is also CEO of electric vehicle maker Tesla, could announce a $2-3 billon investment in setting up a manufacturing unit in India during his visit, if all goes well.

Tesla has expressed interest in entering the Indian market over the past few years, but was reluctant due to steep import duties. However, with the government recently easing its EV policy, it is now presumed that Tesla will finally make its much-awaited India entry. The new policy reduced import tariffs on EVs priced above $35,000, provided the manufacturer invests at least $500 million and sets up a factory within three years.

But Tesla is not the only carmaker eyeing India’s fast-growing EV market. China’s MG Motor and BYD have already established a presence in India. Vietnam-based VinFast has announced plans to set up a Rs 16,000 crore EV manufacturing plant in Tamil Nadu. And now, Tata Motors is doubling down on India.

List of Top Credit Rating Agencies (CRA) and a Quick Guide on Credit Ratings

List of Top Credit Rating Agencies (CRA) AND a Quick Guide on Credit Ratings

//Credit Rating Agencies (CRAs)//

Credit Rating Agencies (CRAs) assesses, calculates and assigns the credit ratings to the companies, organizations and enterprises. It performs a detailed analysis of financial instruments of various entities. CRAs help lenders and investors determine the potential risk involved in lending money to a particular borrowing entity.

//Credit Ratings//

It depicts the risk involved with investing in debt instruments. The rating scales used by the Credit Rating Agencies are scaled from ‘AAA’ to ‘D’, wherein ‘AAA’ stands for highest ratings and ‘D’ as lowest or Bad Credit Rating.

Similarly, as the  credit score range which is defined by the credit bureaus, wherein any score above 750 and as close to 900 is considered good by the potential lenders.

You may have heard of the CIBIL score which shows how good an Individual is at managing their borrowings. Similarly, Companies who want to borrow get a grade or score known as ‘Credit Rating’. These Ratings are assigned by independent agencies known as ‘Credit Rating Agencies’.

There are 7 Credit Rating agencies in India of which CRISIL, CARE, ICRA and India Ratings are the top ones.

1. Credit Rating Information Services of India Ltd. (CRISIL)
2. Investment Information and Credit Rating Agency of India (ICRA) Ltd.
3. Credit Analysis and Research (CARE) Ltd.
4. Acuite Ratings & Research Ltd.
5. Brickwork Ratings India Private Ltd.
6. India Ratings and Research Pvt. Ltd.
7. INFOMERICS Valuation and Rating Private Ltd.

//What do the agencies look at while assigning a Rating?//

*Quality and strength of Promoter
*Financial strength – Profitability, Net Worth, Ability to Service Debt
*History of borrowing and servicing the loans
*Competition of the Industry and Economic conditions

//What is the rating that is appropriate for Investing?//

Credit ratings are broken down into Investment Grade and Speculative or Junk Rating. Credit ratings from AAA to BBB- are Investment Grade and lower than that are Non-Investment Grade.

In India, the Securities and Exchange Board of India (SEBI) is the primary authority that approves or regulates Credit Rating companies in India and their various functionalities.

AIF Related SEBI Circular Standardization of the Private Placement Memorandum (PPM) Audit Report

 

AIF Related Circular

Standardization of the Private Placement Memorandum (PPM) Audit Report

In terms of Regulation 28 of SEBI (AIF) Regulations, 2012 and
Clause2.4 of SEBI Master Circular SEBI/HO/AFD/PoD1/P/CIR/2023/130 dated July 31, 2023(Master Circular) it is mandatory for AIFs to carry out an annual audit of compliance with the terms of Private Placement Memorandum (PPM).

In terms of Clause 2.4.2 of Master Circular, AIFs are required to submit Annual PPM Audit Reports to the Trustee or Board of Directors or Designated Partners of the AIF, Board of directors or Designated Partners of the Manager and SEBI, within 6 months from the end of the Financial Year.

In order to have uniform compliance standards and for ease of compliance reporting, standard reporting format for PPM Audit Report applicable to various categories of AIF has been prepared in consultation with pilot Standard Setting Forum for AIFs (SFA).

The said reporting format shall be hosted on the websites of the AIF Associations which are part of SFA within 2 working days of issuance of this circular. The associations shall assist all AIFs in understanding the reporting requirements and in clarifying or resolving any issues which may arise in connection with reporting to ensure accurate and timely reporting.

The PPM audit reports shall be submitted to SEBI by AIFs online on the SEBI Intermediary Portal (SI Portal) as per the aforesaid format.

Link of Full Circular is given below:

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