The Rain of IPOs – Paytm & LIC IPOs on their way!

Hey everyone. I hope you all are doing well. As we are enjoying this monsoon season of 2021, the SEBI has also contributed by providing opportunities to Indian companies to rain their shares in the open market through IPOs.

Let’s get some brief knowledge about it!

Initial Public Offering (IPO): where the basic meaning of the first word ‘Initial’ stands for the starting or the beginning, ‘Public’ concerning the people as a whole and ‘Offering’ is something offered to someone.
Therefore, IPO is the term where companies offer their shares to the public in an open market for the very first time.

There was a time when several companies came into the picture in this category. Got listed themselves. But many of us remained unaware of them, their name or their business model.
But now the time has changed. Numerous IPOs are being listed on the Indian Stock Exchange every month since 2020. Most of them have brought a drastic change in the market.

With some facts & figures let’s try to learn more about the newly listed companies in detail.

Name Date (2021) Change as per date
Indigo Paints Limited20-22 Jan75%
RailTel Corporation of India16-18 Feb16%
MTAR Technologies Limited3-5 Mar82.60%
Easy Trip Planners Limited8-10 Mar13.50%
Anupam Rasayan India Limited12-16 Mar-6.30%
Laxmi Organic Industries Ltd15-17 Mar19.62%
Kalyan Jewellers India Limited16-18 Mar-15%
Nazara Technologies Limited17-19 Mar81%
Barbeque Nation Hospitality Ltd24-26 Mar-2.03%
Macrotech Developers Limited7-9 Apr -10%
Shyam Metalics and Energy Ltd14-16 Jun24%
Krishna Institute of Medical Sciences Ltd16-18 Jun22%
India Pesticides Limited23-25 Jun22%
GR Infraprojects Ltd7-9 Jul105%
Clean Science & Technology Ltd7-9 Jul98.27%
Zomato Limited14-16 Jul52.53%
Tatva Chintan Pharma Chem Ltd16-20 Jul94.99%
Glenmark Life Sciences Limited27-29 Jul4.30%
Rolex Rings Limited28-30 Jul31.39%
Exxaro Tiles Limited4-6 Aug10.25%
Devyani International Limited4-6 Aug51%
Krsnaa Diagnostics Limited4-6 Aug8.35%
CarTrade Tech Limited9-11 Aug-1.12%
Nuvoco Vistas Corp Ltd9-11 Aug-14.91%
Aptus Value Housing Finance10-12 Aug-6.00%
Chemplast Sanmar Limited10-12 Aug1.66%
List Till 28/08/2021

With the above information, you might conclude that IPOs are too good as they have shown great returns on their listing date. But that’s not the whole truth.
First of all, the allotment of shares during this process is entirely on your luck.
And secondly, one should understand the reason for the public issue. Is the company raising funds to clear their debts, enhance the technology, improve manufacturing or other departments? Or is IPO to give exit to existing shareholders and no money going into the company?

Several conditions designed by SEBI, the regulatory body of the Indian stock market, have to be followed by any of the company which wishes to apply for issuing their shares to the general public through IPOs. Every investor should be aware of those before applying for any of the IPO.

Through our Telegram channel, we update investors about upcoming IPOs and provide our view if one should subscribe for an IPO or skip it. We also share other investment ideas there. You may join this channel by clicking the link below.

Let’s end this blog here with a glimpse of upcoming IPOs and good wishes if you plan to apply for any of these companies.

Name Expected DateIndustry Type
Ami Organics Limited1-3 SepChemicals
Vijaya Diagnostic Centre Limited1-3 SepDiagnostic
One 97 Communications Ltd. (Paytm)2021Mobile Commerce Platform
Nykaa2021E-Retail Services
Seven Islands Shipping Limited 2021 Seaborne Logistics (Shipping)
Go Airlines (India) Ltd. 2021 Transport Activities
Fincare Small Finance Bank Ltd. 2021 Financial Services
ESAF Small Finance Bank Ltd. 2021 Financial Services
Fino Payments Bank Ltd. 2021 Monetary Services
Chemspec Chemicals Ltd. 2021 Manufacturing of Chemicals
Shriram Properties Ltd. 2021 Real Estate
Keventer Agro Limited 2021 Food Products
Sapphire Foods India Ltd. 2021 Restaurants, Bars, Canteens
VLCC Health Care Ltd. 2021 Personal Care Products

The Interest Rate of 5% in Capital Gain Bonds is Equivalent to 13.39% Invested Elsewhere

Capital Gain Bond (54EC)

Whenever anyone sells an asset (Land or Building or both) and has capital gain arising from it, he has to pay capital gain tax to the government. A short-term capital gains tax of 30 per cent is applicable for those in the highest tax bracket on selling a property within two years of purchase. A long-term capital gain tax of 20 per cent becomes applicable if sold after two years of purchase. 

One way to save taxes on long-term capital gains arising from the sale of immovable property is by investing the profit in specified tax-saving bonds under section 54EC of the Income Tax Act.

But as Capital Gain Bonds bear an interest rate of only 5%, is it wise to invest capital gains in these bonds and block your capital for 5 years? Or is it better to pay the capital gain tax and invest the balance sum in an alternate asset that gives better returns? 

Have a look at the comparative analysis for a person in the income tax bracket of 30%:

So effectively, the total money you would have at the end of 5 years would be the same if you deposit your Capital gains in Capital Gain Bonds @ 5% or if you pay capital gain tax now and invest the balance amount @ 13.39%. These calculations do not consider the income generated on reinvestment of interest pay-out received during these five years and surcharge/cess payable on Taxes.

What are Capital Gain Bonds (54EC Bonds)

As per the Income Tax Act, 1961, any long term capital gains from the transfer or sale of real estate would be taxable. Such gains are exempted from capital gain tax if invested in capital gain bonds specified in section 54EC of the income tax act, subject to the upper limit of Rs.50 Lakh in a Financial Year (FY).

Following are the main feature for 54EC Bonds:
Rate of Interest: 5.00% p.a. payable annually
Min Investment: 1 Bond (Rs 10,000)
Max Investment: 500 Bonds (Rs 50,00,000) in a Financial Year
Taxation: Interest is taxable, but no TDS is deducted
Redemption: Automatic Redemption after 5 Years
Mode of Holding: Physical or Demat

Who issues Capital Gain Bonds?

The eligible bonds under Section 54EC are issued by:
REC (Rural Electrification Corporation Ltd), 
PFC (Power Finance Corporation Ltd), 
NHAI (National Highways Authority of India) and 
IRFC (Indian Railways Finance Corporation Limited).

Why invest in 54 EC bonds?

The profit that arises on the sale of Capital Asset (land or building or both), known as long-term capital gains, attract Capital Gains Tax. However, long-term capital gain tax can be saved by investing the profit in the capital gain bonds specified under section 54 EC.

What is the maturity period of Capital Gain Bonds (54EC)?

Capital Gain Bonds (54EC) are redeemable after 5 Years.

Is there a lock-in period for Capital Gain Bonds (54EC)?

Yes, there is a Lock-in period of 5 Years in 54EC bonds (effective from April 2018), and they are non-transferable. However, in case of the death of the bondholder/beneficiary, the transmission of bonds to the legal heirs is allowed.

How do I buy Capital Gain Bonds (54EC)?

Our team at TR Capital can assist you in buying Capital Gain Bonds issued by all four issuers. Though it is advisable to buy these bonds in demat form, we can assist you in buying these bonds in both demat form or physical form as per your choice.

What are the charges for buying Capital Gain Bonds (54EC)?

We do not charge anything from the investors for applying Capital Gain Bonds (54EC).

Are Capital Gain Bonds (54EC) Safe?

The government backs 54EC bonds; hence the risk factor associated with buying 54EC bonds is mitigated. The 54 EC bonds are AAA rated by ICRA and CRISIL.

What is the Time limit to invest in Capital Gain Bonds (54EC) after the sale of Capital Asset (Land or Building or both)?

The profit from the sale of an asset should be invested in Capital Gain Bonds within 6 months from the date of sale.

When is the interest paid for Capital Gain Bonds (54EC)?

Interest is paid every year on the following dates:
PFC- 54EC Bonds: on 31st July
REC- 54EC Bonds: on 30th June
IRFC- 54EC Bonds: on 15th October
NHAI- 54EC Bonds on 31st March

Is interest received on 54EC Bonds tax-free?

Interest earned on bonds is taxable. However, TDS is not deducted at the time of payment of interest. 

What is the minimum investment amount in Capital Gain Bonds (54EC)?

The minimum investment in 54EC bonds is 1 bond of Rs. 10,000.

Is there any maximum limit of investment in Capital Gain Bonds (54EC)?

The maximum investment allowed in 54EC bonds is 500 bonds (or Rs 50 lakhs) in a financial year.

What is the procedure in the eventuality of the death of an investor?

Bonds are not transferable; however, they can be transmitted to the nominee in the event of the bondholder’s death. The interest accrued from the bond after the date of transmission shall be taxable in the hands of the nominee. The nominee shall hold the bonds till maturity.

Usha Verma
Equity Advisor, TR Capital
B.Com., CA IPCC (Intermediate)

Sovereign Gold Bond 2021-22 Series I

Details of Sovereign Gold Bond 2021-22 Series I
Opens on: 17-May-2021
Closes on: 21-May-2021 
Issue price: Rs. 4,777 per gram
Discount: Rs. 50 per gram (if you apply online)
Net price after discount: Rs 4,727 per Gram

Date: 15-May-2021

Sovereign Gold Bond (SGBs) are government securities denominated in grams of gold and issued by the Reserve Bank of India (RBI) on behalf of Govt. of India. The Bonds bear an interest @2.50% (fixed rate) per annum on the initial investment amount. Interest will be credited semi-annually to the investor’s bank account, and the last interest will be payable on maturity along with the principal. In consultation with the Reserve Bank of India, the Government of India issue Sovereign Gold Bonds in multiple Tranches every year.

On 12-May-2021 Ministry of finance issued the Calendar for issuance of Sovereign Gold bonds in 6 tranches from May 2021 to September 2021

S.No.TrancheDate of SubscriptionDate of Issuance
1.2021-22 Series IMay 17-21, 2021May 25, 2021
2.2021-22 Series IIMay 24-28, 2021June 01, 2021
3.2021-22 Series IIIMay 31- June 04, 2021June 08, 2021
4.2021-22 Series IVJuly 12-16, 2021July 20, 2021
5.2021-22 Series VAug 09-13, 2021Aug 17, 2021
6.2021-22 Series VIAug 30- Sept 03, 2021Sept. 07, 2021

Who is eligible to invest in Sovereign Gold Bonds?

Individuals, HUFs, trusts, universities and charitable institutions can apply Sovereign Gold Bonds.

  • Only resident Individuals 
  • Joint holders are also allowed
  • Guardian can also make an application on behalf of a minor

What is the maturity period of Sovereign Gold Bonds?

8 Years

Is there a lock-in period for Sovereign Gold Bonds?

No, there is no lock-in period. Sovereign Gold Bonds are tradable on NSE and BSE. These are tradable only if held in Demat form.

Are Sovereign Gold Bonds safe?

These are issued by RBI and have a sovereign guarantee. Fixed interest @ 2.5% p.a. is paid semi-annually at the issue price of the Bonds. The maturity amount depends upon the market price of gold at the time of maturity. However, the quantity of gold purchased in terms of weight remains the same.

How do I apply Sovereign Gold Bonds?

  • You can apply Sovereign gold bonds yourself from our MO Investor app.
  • You can also call our trading team, and they can apply on your behalf.

You get the discount available for online application in both ways.

What are the charges for buying Sovereign Gold Bonds?

We do not charge anything from investors for applying Sovereign Gold Bonds.

What is better between applying Sovereign Gold Bond through a stockbroker or a Bank?

Both us and banks do not levy any charges on applying Sovereign Gold Bonds. We ensure that you received your bonds in your Demat account.
Unlike shares, which, even if issued in physical form, can be converted to demat form at a later date, Sovereign Gold Bonds, once issued in physical form, can not be converted to demat form at a later date. Physical bonds are not tradable, and the investor will have to hold them till maturity.

Is investment in Sovereign Gold Bond better than physical gold?

  • Risks and costs of storage are eliminated.
  • The bonds can be held in Demat Form, eliminating the risk of loss of scrip etc.
  • Capital gain on Sovereign Gold Bonds is tax-free if held till maturity.
  • GST @ 3% charged on buying physical gold is not charged on buying Sovereign Gold Bonds.

Is there any Tax Benefit on buying Sovereign Gold Bond over Physical Gold?

In the case of Individual, No Capital Gain arises on Redemption on Maturity (i.e. after 8 Years) of Sovereign gold bonds.

On selling bonds after holding them for more than 3 years, Capital gains are subject to Long term capital gain tax of 20% after providing indexation benefit, which is similar to taxation on Physical Gold.

Can I hold Sovereign Gold Bonds for more than 8 years?

No, Bonds are automatically redeemed on maturity, and the amount is directly credited to the investors’ bank account. However, the capital gains on bonds are tax-free at the time of maturity.

Can I convert Sovereign Gold bonds to physical gold?

No, these bonds can not be converted to physical gold. An investor can sell these bonds in NSE and BSE if he wish to sell before maturity. Or the money is credited to the investors’ bank account on maturity.

Is interest received on Sovereign Bold Bonds tax-free?

No, interest received on Sovereign Gold Bonds is taxed as normal income.

Is GST levied on buying Sovereign Gold Bonds?

There is no GST on Sovereign Gold Bonds.

What is the minimum investment amount in Sovereign Gold Bond?

Sovereign Gold Bond is issued in the denominations of 1 gram of gold and multiples thereof. The Minimum investment in a Sovereign Gold bond is 1 Gram.

Is there any maximum limit of investment in Sovereign Gold Bonds?

  • For individuals: the maximum limit of investment in Sovereign Gold Bond is 4 kg per year.
  • For Hindu Undivided Family (HUF): the maximum limit of investment in Sovereign Gold Bond is 4 kg per year.
  • For trusts and similar entities: the maximum limit of investment in Sovereign Gold Bond is 20 kg per year. 

In the case of joint holding, the limit applies to the first applicant. The annual ceiling will include bonds subscribed under different tranches during initial issuance by Government and those purchased from the secondary market. The ceiling on investment will not include the holdings as collateral by banks and other Financial Institutions.

What is the procedure in the eventuality of the death of an investor?

If Sovereign gold bonds are held in a Demat account, bonds are also transferred along with other shares and bonds to the Demat account of the nominee. The process is very simple. The nominee has to approach his DP (mostly the same as his stockbroker) and submit the death certificate of the Demat account holder.

For bonds held in physical form, the process is a bit tedious. The nominee/nominees to the Bond may approach the respective Receiving Office with their claim. Officer will recognize the claim of the nominee/nominees in terms of the provision of the Government Securities Act, 2006 read with Chapter III of Government Securities Regulation, 2007. In the absence of nomination, the executors or administrators of the deceased holder or claim of the holder of the succession certificate (issued under Part X of Indian Succession Act) submitted to the Receiving Offices/Depository. The above provisions are applicable in the case of a deceased minor investor also. In such cases, the Bond title will pass to the person fulfilling the criteria laid down in Government Securities Act, 2006 and not necessarily to the Natural Guardian.

By Usha Verma
NISM certified in Equity derivatives and Currency Derivatives
B.Com., CA IPCC(Intermediate)

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