Nasscom 10,000 Startups

• Software industry lobby group Nasscom opened a facility for startups in Visakhapatnam, where technology entrepreneurs with innovative ideas will be nurtured, mentored and funded.

• The startup warehouse at Sunrise Tower will provide co-working space for start-ups, to be housed for six-month incubation terms. Entrepreneurs can also lease co-working spaces on daily/weekly basis.

• It will also hold regular meet-ups and workshops to teach founders entrepreneurial skills in marketing, besides giving them access to early-stage mentors. 

• Nasscom’s technology partners Google for Entrepreneurs, Microsoft Ventures, Amazon Web Services and IBM Cloud will also hold periodic sessions to educate budding entrepreneurs.

• Nasscom signed an in-principle agreement with the Andhra Pradesh government on Tuesday for its 10,000 startups initiative in Visakhapatnam. The initiative aims to scale up the startup ecosystem in India by 10 times over the next 10 years.

• Since its beginning in April 2013, Nasscom has incubated 140 startups, of which 25 have been funded. It has set up startup warehouses in Bengaluru, Kolkata, Navi Mumbai, Pune, Kochi, Gurgaon and Hyderabad. 
• http://10000startups.com

The Next Big IPO's

Infibeam

Online shopping portal Infibeam Incorporation will hit the capital markets on March 21 to mop-up Rs 450 crore through an initial share plan, becoming the first e-commerce firm to tap the IPO route. 

The company has fixed the price band at Rs 360-432 per equity share for the IPO.

The initial public offer (IPO) will conclude on March 23, as per the latest update available with capital markets regulator Securities and Exchange Board of India (Sebi).

As per Draft Red Herring Prospectus, Gujarat-based Infibeam plans to come out with public issue of equity shares worth up to Rs 450 crore. Infibeam competes with Flipkart, Amazon, Snapdeal and others in the e-commerce space.

Started in 2007, Infibeam runs several e-commerce services like Infibeam.com, BuildaBazaar, Incept and Picsquare. It has proposed to list its shares on the NSE and BSE.

Infibeam plans to utilise the IPO proceeds towards setting up of cloud data centre and shifting and setting up of registered and corporate office of the company. Besides, the funds will be used for setting up of 75 logistics centres, purchase of software and for other general corporate purposes. 

Health Care Global Enterprise (HCG)

HealthCare Global Enterprises initial public offerings (IPO) is going to hit the capital market on March 16. The company has fixed a price band of Rs 205-218 for its IPO. The issue will close on March 18. The company got the Securities and Exchange Board of India, or Sebi, nod in November 2015.

About the company: HCG is a specialty healthcare provider focused on cancer and fertility. Under the HCG brand, the company operates the largest cancer care network in India. Under the Milann brand, the company operates fertility centres. The HCG network consists of 14 comprehensive cancer centres, including its Centre of Excellence in Bengaluru, 3 freestanding diagnostic centres and 1 day-care chemotherapy centre, across India. The HCG network operates through a “hub and spoke” model where the HCG Centre of Excellence in Bengaluru serves as a hub to the other cancer centres. The company has four Milann fertility centres in Bengaluru.

About the offer: The IPO comprises fresh issue of up to 1.16 crore equity shares and an offer for sale of up to 1.82 crore shares by its existing shareholders. The offer, which closes on March 18, would constitute up to 35.03 per cent of the company’s post-offer paid-up equity share capital.

Objective of the offer: The proceeds of the issue will be used towards purchase of medical equipments, investment in IT software, services and hardware, prepayment of debt of around Rs 147 crore and other general corporate purposes.

Outlook: The company’s operations have been growing on top lines, but bottom line were in negative. However, its model of cancer and fertility treatment under HCG and Milann brands are expected to generate positive earnings going forward. Moreover, the issue is offer for sale, the amount raised would go to the selling shareholders and on the valuation front, the issue looks pricey. An investor who has high risk appetite can opt the issue.

Bharat Wire Ropes

The initial public offer (IPO) of Bharat Wire Ropes will open on 18 March 2016 and conclude on 22 March 2016. The company, a speciality wire ropes manufacturing company, aims to raise Rs 70 crore through its IPO. The offer would also include reservation of equity shares worth Rs 3.5 crore for subscription by eligible employees.

The Mumbai-based firm has priced the offer in the band of Rs 40-45 per share. Proceeds of the issue would be utilised for setting up a manufacturing plant at Chalisgaon, Maharashtra and for other general corporate purposes.

4 Capital Goods Stocks Revive

The Budget has benefited the capital goods sector. Excise duty reduction from 12.5 per cent to six per cent on certain components required for the manufacture of pumps. Or imposition of 12.5 per cent duty on import of road construction equipment. Both will benefit the segment.

The scrips of :

      1.       Cummins India

      2.       Crompton Greaves

      3.       Lakshmi Machine works (LMW)

      4.       Thermax 

      5.       Voltas

have gained by two to 10 per cent due to these measures.

Also, the excise duty cut might provide some relief to their revenues, though not very significant. However, for some like Cummins India, which saw an excise duty outflow of Rs 304 crore in FY15, this might halve.

Taking into account the Budget amendments and the overall operating environment for the segment, stocks such as Cummins India, Crompton Greaves, LMW and Voltas emerge as favourites. These are either market leaders or among the top entities in the segment they operate. So, even if dull market conditions pinch their earnings in the near term, most of them dominate, making them well-positioned to wade through these challenges. The stock price correction in recent months provides an attractive entry point to these.

Crompton Greaves: Having maintained its third position in the domestic motor market, Crompton Greaves’ domestic power and industrials business has seen a healthy 28 and 12 per cent return on equity, respectively, in a tough demand scenario. Sale of its distressed international power units will bring needed respite to its revenue in FY17 and lower debt.

Cummins India: Despite difficult times, Cummins has expanded its revenue growth from its core segments, namely, power generation and industrials by 23 per cent and six per cent year-on-year, respectively, so far in FY16. Due to its strong presence in the medium and high horsepower engines segments, Cummins will benefit from capital expenditure revival in sectors such as infrastructure, mining, railways and defense, and is one of the best stocks to play the domestic capex cycle recovery.

LMW: Being a market leader with a little over 60 per cent share in the domestic textile machinery sector, LMW also managed to grow its exports, despite a weak global demand situation, by a little over seven per cent year-to-date in FY16. Almost debt-free, with cash of Rs 900 crore in FY15, the order book is also healthy at Rs 2,580 crore. LMW will continue to provide a high margin of safety and an economic moat to investors.

Voltas: A dominant presence in the cooling solutions segment has helped Voltas grow its revenues by 8.3 per cent in FY16, though its profits have come under pressure due to weak execution of the electro mechanical projects (EMP) division, mainly focused on foreign markets, such as in West Asia. While its order book dipped 11 per cent over a year in the December’15 quarter, it trades at attractive multiples, considering the strong performance of the unitary cooling products business and likely recovery in the EMP segment (from this quarter).

Investors get tax relief on Investment Gains.

Investors get tax relief on investment gains:

In a move that is likely to reduce litigations between investors and the income-tax department, the Central Board of Direct Taxes recently allowed investors to decide whether income from sale of securities is to be treated as business income or capital gains. Earlier, the assessing officer (AO) was used to make this decision. So, if there were a large number of trades or profit-booking, the AO could classify it as business income and tax it at the highest rate of 30 per cent plus applicable cess.If the gain is classified as capital gains, there is no tax.

Henceforth, if the assessee wants the income from sale of security after 12 months to be treated as capital gain, the assessing officer (AO) cannot dispute it. An important caveat: Once an assessee has chosen a certain mode of tax treatment, he can’t change it in subsequent years. Says Suresh Surana, founder, RSM Astute Consulting Group: “This is a serious statement from the government towards its commitment to reducing litigation."

However, there is still scope for AOs to dispute the treatment of short-term gains. High-frequency traders, day traders and others who churn their portfolios a lot might still find themselves embroiled in disputes. 

A large number of disputes arise on the subject of treatment of gains from sale of securities as capital gains versus business income due to two key reasons. One, the income tax Act does not contain specific guidelines on how to classify an investment - as capital asset or as stock-in-trade. A lot is left to case-by-case interpretation. Two, there is a wide difference in tax rate between the two modes of treatment, which provides incentive for litigation. If income is classified as long-term capital gain, the applicable tax rate is zero. On short-term capital gain (for securities held for less than a year) the rate is 15 per cent (plus cess and surcharge). On the other hand, if the AO treats it as business income, he can impose a tax rate of 30 per cent (plus surcharge and cess).

Investors can take a few precautions to reduce the possibility of disputes. One way is to invest in equities for the long term (more than a year). Second, as Rajesh H Gandhi, partner, Deloitte Haskins & Sells, suggests: “There should be no disparity between how an income is treated in your books and the tax treatment you ask for it." That is, don’t indulge in opportunistic flip-flops, asking for the income to be treated as capital gain when you make gains (so you pay zero tax) and as business income when you make losses (so you can offset the loss against business gains, or carry them forward). Three, if you have invested your own funds, have documentary proof to back up your claim. If you have multiple streams of income and income from sale of securities is only one of them, it will be easier for you to get your claim accepted that the income be classified as capital gain.

The clause that once you have chosen a particular mode, you can’t switch to another in subsequent years is significant. In the future, if the government imposes a tax on long-term capital gains, you will remain stuck with this mode of treatment. Do consult a tax expert before making this choice once and for all.