Tax Sale Surplus Fund Disclosure: Fill & Download for Free

Let me invite you on a journey around the world: From the high streets of London … to Zhengzhou, a booming Tier II/III city in China … to Apple’s corporate headquarters in sunny California … to the Emerald Isle … and finally back here to Lower Manhattan.As we travel on this journey, I will try to explain how the money flows from that point-of-sale purchase to my brokerage account when the company pays out its quarterly dividend.This journey is interesting because it helps shine a light onto the increasingly complex and globalized world in which we live.(1) Retail — the Apple StoreI walk into the Apple Store on picturesque Regent Street in London’s posh Mayfair district. 15 minutes later, I stroll out with a base-level 64 GB iPhone X for £999[1][1][1][1].The money starts to flow as soon as I successfully input the PIN for my Barclaycard into the payment terminal:The U.K. has a 20% value-added tax[2] (similar to a sales tax in certain states in the U.S.) which means £167 comes right off the top to fund government and public expenditures.Since the iPhone was purchased with a credit card, another 3% or so is taken out by the payment processing companies, leaving the retail operation with a net total of £803 collected. If I had paid with cash, there would be some indirect cash handling expense that the retail operation would absorb (probably higher than 3%).For illustrative purposes, let’s say that Apple targets 20% retail margins to cover the costs of its beautifully designed Apple Stores. This means that the store is allocated about £161 per iPhone to pay for that expensive Regent Street rent, store employee salaries, Apple Geniuses, utilities, depreciation on the store’s capital improvements, etc.This leaves £642 that ultimately flows to Apple’s UK entity.(2) Manufacturing — A Globalized Supply ChainNow we need to hop on a Cathay Pacific flight from London to Hong Kong with a quick layover before transferring to a Dragon Air flight to Zhengzhou, a city in China that is about the size of New York City’s five boroughs … that many of you have probably never heard of.Don’t worry, though. These days even the locals simply refer to it as “iPhone City”.Zhengzhou is the capital of the densely populated, relatively impoverished Henan Province whose industrial economy had historically been centered around light textiles and food processing. Situated at the transition between the North China plain and the Qinling mountains, it is about a 4–5 hour (around 900 km) high-speed train ride from Shanghai.This is where Apple’s Taiwanese contract manufacturing partner Foxconn decided to locate its second major industrial operation after its main Shenzhen complex. With generous support from the local government, Foxconn spent hundreds of millions of dollars building out factory operations in an area that was specifically set up to export consumer electronics. For example, it is located in a “special bonded zone” that is legally considered foreign soil under Chinese regulation (doing it this way helps makes the logistics more efficient).In August 2010, the first lines at Foxconn’s Zhengzhou factory began production[3][3][3][3]. A little over eight years later, it produces around half of all of the iPhones in the world, churning out upwards of 500,000 per day.Along with 350,000 employees who work at the factory (during peak times), tens of millions of components from all around the world and other regions in China stream into Foxconn’s Zhengzhou factory on a daily basis. Many of the semiconductor components are designed in one part of the world only to have their ECAD designs[4][4][4][4] electronically transmitted to Taiwan’s chip foundries for fabrication.Here is a summary of how the bill of materials (BOM) breaks down:My recently purchased base-level 64 GB iPhone uses an estimated $370 worth of materials and components[5]. Adding in around $35 in assembly and logistics costs and we are looking at a total BOM cost of around $405.The biggest cost item is the OLED display from Samsung, making up around 27% of the BOM. This is because Samsung is the dominant supplier of advanced OLED screen technology and is able to command premium prices[6]. It is also why Apple is pushing so hard to foster greater competition in the industry[7].Another notable component is the RF chipset supplied by Qualcomm. While a relatively modest 4% of the BOM, what is not included in the table above are additional 4G licensing fees that are paid separately by Apple. I’ll come back to this in the next section.Many of the other discrete analog and digital semiconductor components primarily supplied by U.S., German and Japanese fabless semiconductor designers are often fabricated in chip foundries in Taiwan (e.g. TSMC).Notably, China’s value-add to the BOM is relatively low and mainly comprised of more labor-intensive elements or less advanced components like the lithium-ion battery, packaging or simple accessories like the standard white Apple headphones. Overall I estimate China’s contribution to the BOM at around 13%.Okay, we’ve spent enough time in the “iPhone City”. We now need to catch our Air China flight from Zhengzhou to San Francisco via Beijing. We are heading to Silicon Valley.(3) Corporate — One Apple ParkThis is where the magic happens.Apple’s recently opened new headquarters[8][8][8][8] occupy 2.8 million sf in Cupertino, in the heart of Silicon Valley. Built at a construction cost of around $5 billion, it houses 12,000 highly compensated[9][9][9][9] employees.It is here (well, technically nearby at the old Apple Campus) that the iPhone and other Apple products were conceived and designed. It is where corporate executives like Tim Cook make big decisions about the next versions of existing product lines, the next advertising campaign, or how the company should allocate the product development dollars.And this is where — at this very moment in late 2018 — executives are likely debating whether it makes strategic and financial sense to diversify Apple’s manufacturing base outside of China by setting up another “iPhone City” in places like Vietnam[10][10][10][10].These corporate expenses are primarily fixed costs that you can amortize across the entire global revenue base of the company. As an example, in FY2018, Apple’s R&D expenses totaled $14.2 billion, or 5.4% of revenue. If we break it down on a per-unit basis, this comes out to something like $41 per iPhone sold [see Note i]:Between the £642 ($813) that flows into Apple’s UK corporate entity and the $405 BOM, you have $407 that flows back to Apple Inc. This money will be used to pay for:Corporate costs including sales and marketing, product development and general and administrative costsThese costs are mostly comprised of employee compensation, whether in the form of salary, bonus or stock-based compensation.Rent for all of the leased office space around the world; maintenance and depreciation for its owned properties.Spending is heavily concentrated in Cupertino/California although Austin, Texas[11] is rapidly turning into Apple’s version of “HQ2”[12].Apple also spends heavily on brand advertising.Global licensing fees / QualcommAs I alluded to above, Qualcomm is entitled to collect royalties on any device that connects to a 3G or 4G network (which includes basically all smartphones).This is because of patents and intellectual property that it created (and acquired) over the years, primarily around a “channel access method” called code-division multiple access (CDMA) on which almost all modern wireless standards are based today.Moreover, the licensing agreements that it negotiated many years ago stipulate that it collects a percentage of the entire “final sale” price of the smartphone — so as these devices have gotten more complicated (and more expensive) over time, Qualcomm has collected more revenue.As you might imagine, this is causing a lot of friction along a number of fronts — many companies are questioning why Qualcomm should collect the same percentage (or any percentage at all) on peripheral components that have nothing to do with wireless.This is one of the primary reasons why so many other companies are focused on building their own IP portfolios for the next generation of wireless standards (5G). This article from Macro Polo[13] discusses the whole saga in detail and I would recommend reading it if you have time.In any case, what this means for Apple is that it has to pay 3.5% of the final sale price of the iPhone to Qualcomm (with “final sale price” capped at $400 to $500[14]).After paying off all of its corporate expenses and (reluctantly[15][15][15][15]) cutting a massive check to Qualcomm, there is $281 left. This equates to 27% of the net revenue collected on Regent Street. Apple’s overall operating margin is 27% … so this passes the sanity check [see Note ii].(4) The Tax Man“We all know this deal is as certain as death and taxes.” — from Meet Joe Black, one of my all-time favorite movies.Apple is enormously profitable. In its last fiscal year (FY2018: 12 months ending 9/30/2018), it generated $72 billion of earnings before taxes. That is $72 followed by 9 zeroes. And the Tax Man is salivating at the sight of all of that taxable income.Historically, the U.S. corporate tax rate was 35%. Under the 2017 Tax Cuts and Jobs Act, the corporate rate was lowered to 21%. Including state-level corporate taxes, the average corporate tax rate is 26%[16][16][16][16]. Apple is a U.S. company headquartered in California, so all we have to do is multiply the $72 billion by 26% and call it a day, right?Wrong.In FY2018, Apple provisioned $13.4 billion in corporate income taxes, which comes out to an 18% effective tax rate. That’s 8% lower than the prevailing rates. How is this possible?The reason is that tax rates are different all around the world, so multi-national corporations (and their accountants) are always trying to figure out how to legally lower the amount of taxes they have to pay. For uber-profitable companies like Apple, the stakes are massive — each 1% reduction in your effective tax rate is $700 million of additional net income.Technology companies are especially good at this, because much of what they are selling is “intangible” (i.e. software, intellectual property, etc.) and they also tend to sell globally which means the flexibility of multiple tax jurisdictions to play with. So even though the IP assets that Apple develops are mostly created in Cupertino and the United States, from a legal and tax perspective, the IP is actually located outside of the country.This is why instead of flying to Washington, D.C. where the IRS’ headquarters are located, we are now boarding an Aer Lingus flight to Dublin, Ireland.Photo: Sharp Magazine: The Travelling Man — Dublin, IrelandIn the aftermath of World War II, while most of Western Europe boomed on the back of the Marshall Plan and post-war reconstruction, Ireland was held back by its “economic nationalism” resulting high tariffs and import substitution policies. Its economy stagnated and the country entered the 1980s with high levels of public debt, 20% unemployment and a public sector that accounted for a third of the workforce[17][17][17][17].Economic reforms starting in 1987 led to reduced public spending, lower taxes and increased competitiveness — especially for global capital. The government made a major effort to lure technology companies such as Intel and Microsoft. In the 1990s, its economy finally began to pick up and soon people were talking about Ireland as the “Celtic Tiger”[18][18][18][18]. In less than three decades, Ireland went from being one of the poorest countries in Western Europe to one of its wealthiest.One of the areas that helped Ireland attract so much foreign investment was favorable tax policy. Without getting into the details[19][19][19][19], Ireland enacted policy that made it possible for companies to shift profits on intangible assets like software and patents from higher-tax locations to lower-tax ones. For global technology companies like Apple, this is the main reason why its effective tax rates are so much lower than the prevailing tax rates of its primary tax domicile in the United States.And this is the reason why wee little Ireland features so heavily in Apple’s annual report[20][20][20][20]:When Apple sells its products overseas, the vast majority of the profits remain offshore. Bringing this cash onshore would require Apple to pay something called a “repatriation tax” to the IRS. Leaving it offshore means that it can delay its payment. Instead, this cash can be used for overseas acquisitions, or perhaps they can wait for the U.S. government to issue periodic “repatriation holidays” to try to coax that money back home. But more often than not, the offshore cash is parked in government and corporate bonds [see Note iii].Out of approximately $257 billion in cash (and equivalents, including bonds) held by Apple, about 93% of it is sitting offshore[21][21][21][21].In any case, the corporate income taxes that Apple does pay — mostly from profits on its U.S.-generated revenue — comes out to about $39 per iPhone. This leaves $243 in after-tax profits.(5) The ShareholdersTime to head home. I hop on a United flight from Dublin to John F. Kennedy Airport. I head home, fire up my PC, log onto Quora on one screen and my trading platform on another.This is where we wrap up our journey following these money flows around the world.The $243 in after-tax profits belongs to the bondholders and equityholders in the company. More accurately, nearly all of it ends up with the equityholders.Let’s start with the bondholders: Apple has about $115 billion in outstanding bonds that pay lower rates than the U.S. government (less than 3%). It pays out about $3.2 billion in interest expense, which is actually more than offset by over $5 billion it earns from interest income on all of its offshore bonds.Now some of you might be wondering why such a profitable company like Apple needs to issue bonds. This is where we turn our attention to the shareholders (disclosure: I am one of them).The reason is because Apple wants to return capital to shareholders by repurchasing its shares. However, to repurchase its shares, it needs to use onshore cash and as we learned above, getting that offshore cash onshore means paying the repatriation tax.But some enterprising investment bankers figured out a while ago that instead of repatriating the cash, Apple could come up with the cash by issuing onshore bonds that are indirectly collateralized by all of that offshore cash (and all of the other assets of the business). Because it’s Apple, the interest rates are almost negligible. Now Apple can take this newly raised onshore cash and buy back its shares without having to pay the repatriation tax.On top of share buybacks, Apple pays dividends on a quarterly basis. In FY2018, Apple paid out close to $14 billion in dividends. November 8th, 2018 was the most recent ex-dividend date for Apple shareholders[22][22][22][22]. The cash showed up in my brokerage account a week later. For every share you held prior to that date, Apple paid out 73 cents.Since announcing its original Capital Return program in 2012[23][23][23][23], Apple has returned approximately $249 billion to its shareholders via share buybacks and $74 billion via dividends. These share buybacks have allowed Apple to reduce the number of shares outstanding by 25% since 2012. This creates value for shareholders because it means that one share you hold today entitles you to a much larger share of future profits than one share that you held back in 2012 (split-adjusted, of course).The vast majority of Apple shares are held by Americans, either directly or indirectly via index funds, mutual funds, hedge funds or their pensions. This means that Americans have disproportionately benefited from the enormous amount of value created (and partially returned) by Apple over the years.SummaryThank you to the brave few that have stuck with me on my journey all the way to the end. Your reward is the last, and most important table — how all the various money flows get split up by country:As you can see very clearly, the United States takes the highest share of economic value-add. This is even in the scenario we imagined above where the iPhone is sold overseas (i.e. the U.K.) in a jurisdiction that charges relatively high consumption taxes.For iPhones that are sold here in the United States, the fraction of economic value-add that circulates back into the American economy is over two-thirds once you factor in the retail operations.Think about that for a minute: Apple has 132,000 employees (note: this figure includes many lower-paid retail workers), many of whom are located overseas. Yet the American economy is able to capture over 70% of the economic value of an iPhone. Foxconn has well over a million people in China working to assemble iPhones and other Apple products — yet is only able to capture 13% of its value. Let’s keep this in perspective next time we hear complaints about how advanced economies are getting “screwed over” by globalization.Finally, one of the big ironies is despite the massive surplus value that Apple clearly creates for the American economy, the way that global supply chains and international trade accounting work, Apple products actually add to our bilateral trade deficit with China[24][24][24][24]. This is why it is so important to understand how the money flows really work — so that you can avoid enacting trade and other policies that can end up completely backfiring.Explanatory Notes[Note i] The average ASP per iPhone sold was $766, not the £999 retail price. 5.4% of $766 is $41.[Note ii] On top of hardware sales, Apple also collects significant ancillary revenue: its 30% cut of iOS apps and in-app purchases, search fees from Google[25][25][25][25], etc. Operating margins on iPhones sold in the store should also have slightly lower margins than those sold online due to lower overhead costs. Finally, margins on iPhones are typically higher than margins on iPads, Macs and other Apple hardware products.[Note iii] With the passage of the Tax Cuts and Jobs Act of 2017, changes in the tax system have reduced the disincentive for companies to repatriate taxes back to the United States[26][26][26][26]. Following this, Apple announced that it was going to start repatriating its cash over an 8-year period[27][27][27][27]. While it seems likely that this change the onshore/offshore cash dynamic, history has shown how the amazing creativity of investment bankers and accountants when it comes to creating new and sophisticated tax structures.Footnotes[1] iPhone Xs UK release - Best deals, prices and how to pre-order new Apple flagship[1] iPhone Xs UK release - Best deals, prices and how to pre-order new Apple flagship[1] iPhone Xs UK release - Best deals, prices and how to pre-order new Apple flagship[1] iPhone Xs UK release - Best deals, prices and how to pre-order new Apple flagship[2] VAT rates[3] How China Built ‘iPhone City’ With Billions in Perks for Apple’s Partner[3] How China Built ‘iPhone City’ With Billions in Perks for Apple’s Partner[3] How China Built ‘iPhone City’ With Billions in Perks for Apple’s Partner[3] How China Built ‘iPhone City’ With Billions in Perks for Apple’s Partner[4] Electronic design automation - Wikipedia[4] Electronic design automation - Wikipedia[4] Electronic design automation - Wikipedia[4] Electronic design automation - Wikipedia[5] IHS Markit Teardown Reveals What Higher Apple iPhone 8 Plus Cost Actually Buys[6] Samsung's OLED iPhone display supply dominance challenged[7] China breaks into Samsung's OLED dominance[8] Apple Park - Wikipedia[8] Apple Park - Wikipedia[8] Apple Park - Wikipedia[8] Apple Park - Wikipedia[9] How Much Is The Average Salary Of An Apple Employee? | Cult of Mac[9] How Much Is The Average Salary Of An Apple Employee? | Cult of Mac[9] How Much Is The Average Salary Of An Apple Employee? | Cult of Mac[9] How Much Is The Average Salary Of An Apple Employee? | Cult of Mac[10] Glenn Luk's answer to Is Vietnam likely to implement the economic system that China currently uses and the Asian Tigers as well as Japan formerly used?[10] Glenn Luk's answer to Is Vietnam likely to implement the economic system that China currently uses and the Asian Tigers as well as Japan formerly used?[10] Glenn Luk's answer to Is Vietnam likely to implement the economic system that China currently uses and the Asian Tigers as well as Japan formerly used?[10] Glenn Luk's answer to Is Vietnam likely to implement the economic system that China currently uses and the Asian Tigers as well as Japan formerly used?[11] Apple is spending $1 billion on a new campus in Austin[12] How did NYC woo Amazon to Long Island City?[13] From Windfalls to Pitfalls: Qualcomm’s China Conundrum - MacroPolo[14] Qualcomm's patent deals aim to ease Apple, regulator tensions, exec...[15] Chinese court upholds Qualcomm's complaint that Apple infringed on two patents[15] Chinese court upholds Qualcomm's complaint that Apple infringed on two patents[15] Chinese court upholds Qualcomm's complaint that Apple infringed on two patents[15] Chinese court upholds Qualcomm's complaint that Apple infringed on two patents[16] US Corporate Income Tax Now More Competitive | Tax Foundation[16] US Corporate Income Tax Now More Competitive | Tax Foundation[16] US Corporate Income Tax Now More Competitive | Tax Foundation[16] US Corporate Income Tax Now More Competitive | Tax Foundation[17] Economy of the Republic of Ireland - Wikipedia[17] Economy of the Republic of Ireland - Wikipedia[17] Economy of the Republic of Ireland - Wikipedia[17] Economy of the Republic of Ireland - Wikipedia[18] Celtic Tiger - Wikipedia[18] Celtic Tiger - Wikipedia[18] Celtic Tiger - Wikipedia[18] Celtic Tiger - Wikipedia[19] Ireland as a tax haven - Wikipedia[19] Ireland as a tax haven - Wikipedia[19] Ireland as a tax haven - Wikipedia[19] Ireland as a tax haven - Wikipedia[20] https://s22.q4cdn.com/396847794/files/doc_financials/quarterly/2018/Q4/10-K-2018-(As-Filed).pdf[20] https://s22.q4cdn.com/396847794/files/doc_financials/quarterly/2018/Q4/10-K-2018-(As-Filed).pdf[20] https://s22.q4cdn.com/396847794/files/doc_financials/quarterly/2018/Q4/10-K-2018-(As-Filed).pdf[20] https://s22.q4cdn.com/396847794/files/doc_financials/quarterly/2018/Q4/10-K-2018-(As-Filed).pdf[21] Are you a robot?[21] Are you a robot?[21] Are you a robot?[21] Are you a robot?[22] Apple Inc. (AAPL) Ex-Dividend Date Scheduled for November 08, 2018[22] Apple Inc. (AAPL) Ex-Dividend Date Scheduled for November 08, 2018[22] Apple Inc. (AAPL) Ex-Dividend Date Scheduled for November 08, 2018[22] Apple Inc. (AAPL) Ex-Dividend Date Scheduled for November 08, 2018[23] Apple Announces Plans to Initiate Dividend and Share Repurchase Program[23] Apple Announces Plans to Initiate Dividend and Share Repurchase Program[23] Apple Announces Plans to Initiate Dividend and Share Repurchase Program[23] Apple Announces Plans to Initiate Dividend and Share Repurchase Program[24] Glenn Luk's answer to What can the US do to bring back 25% of the manufacturing being outsourced in China right now in 10 years?[24] Glenn Luk's answer to What can the US do to bring back 25% of the manufacturing being outsourced in China right now in 10 years?[24] Glenn Luk's answer to What can the US do to bring back 25% of the manufacturing being outsourced in China right now in 10 years?[24] Glenn Luk's answer to What can the US do to bring back 25% of the manufacturing being outsourced in China right now in 10 years?[25] Google is paying Apple billions per year to remain on the iPhone, Bernstein says[25] Google is paying Apple billions per year to remain on the iPhone, Bernstein says[25] Google is paying Apple billions per year to remain on the iPhone, Bernstein says[25] Google is paying Apple billions per year to remain on the iPhone, Bernstein says[26] Evaluating the Changed Incentives for Repatriating Foreign Earnings[26] Evaluating the Changed Incentives for Repatriating Foreign Earnings[26] Evaluating the Changed Incentives for Repatriating Foreign Earnings[26] Evaluating the Changed Incentives for Repatriating Foreign Earnings[27] Apple's plan to repatriate $285 billion in cash to the US could be a big boost for investors[27] Apple's plan to repatriate $285 billion in cash to the US could be a big boost for investors[27] Apple's plan to repatriate $285 billion in cash to the US could be a big boost for investors[27] Apple's plan to repatriate $285 billion in cash to the US could be a big boost for investors

The Great Indian Banking & real estate Scam:I want to bring attention to a disturbing nationwide organised scam that you are a familiar with, but most don’t quite understand the “fraud” part of it. And like some of my answers do, it may ruffle some feathers. But truth must be told. Here it is:Do these pictures seem familiar to you? Go to the outskirts of any major city in India, (for example take Noida & Gurgaon which are on the outskirts of Delhi), you see miles & miles of semi built structures that just stay dead still & never get completed. All these buildings started in different years, but surprisingly, they all face “financial trouble” just after the basic structure is built. Why don’t we see buildings that stop in-between, say after 4 floor or 8 floors?The answer is an organised scam played by the state governments, builders, banks & accounting bodies. This is how it works -The builders sell you construction linked plan. You assume that it's a fair plan as the builder will charge money as and when the construction progresses and it is in builder’s interest to complete the project with speed. Looks fair for all ? But this is exactly where the catch is!The so called “construction linked plan” is a sham designed by the agencies listed above, backed fully by the government and banks. Let's look at the reasons:What is the scam here ? The payment plan is designed in a way that you have to pay 90% of the price of flat “at the laying of the top floor of the building”. By this time the builder has spent only 50% of the project cost. Most of the money is needed later in the finishing work - electrical wiring, plumbing, flooring, paints, lifts / elevators, external work, parking, basements, government permissions for water, sewage, power, etc. You get the logic here. Now the builder is sitting on neat 40% profit (90% - 50%) and all that he is left to “earn” from you is 10%. Why would he spend another 30% money just to recover 10% from you? He stops work right here! You’re thinking — he should not stop because there is a timeline to deliver the project. But wait, what if he misses the deadline of delivery? There must be some penalty, right? Check the agreement - ah well,……… keep searching! So if developer delays the project, there is no penalty due on his part (or at best it is princely sum of Rs 5 per sq feet per month…. which comes to a meager 1% interest!). But if you delay his payment, interest charged is 12% to 18%. Ever heard of one sided agreements? Which business would not seize this opportunity to “borrow” free money without interest?Why did the banks & RBI support it The befitting supporting actor award here goes to the banks & RBI. They lend “you” the money on “your” credit report. Banks don’t finance the builders for land purchase. They are also very shy on financing the builders for construction (rates are more than 15% to 18%). But wait, consumers can always borrow at 10% & “pay” the builder. So essentially, the consumer is “financing the builder” in the name of “purchasing the apartment”. Oh & did I tell you the best part? This money is without any interest for the builder as we see above. So a developer to whom no bank lends money below 18% and that too is seen very risky, can “get easy finance from the same banks” at 0% interest rate, all in the name of consumers! While RBI could have set this right just by changing the construction linked payment schedule through banks, it chose to sit aside with eyes shut, while the banks & builders continued to fleece customers.Where did the money go ? Well, democracy is an expensive way to run governments, especially in developing countries. Every state government has been enjoying the party with builders & this was a “legal” way to pull huge credit money from the banking system on the books of the “reasonably wealthy middle class” who was sold the idea of buying a house as it “appreciates forever” with tax breaks. Builders diverted money to the political parties to get further favors on land & permits. Secondly, the builder has used this surplus 40% “profits” to buy new land parcels so as to launch more projects & collect even more surplus interest free money. The land prices were assumed to be appreciating forever as more and more money was being pumped out of the banks. The music had to stop some day. Seems like it has.What about the consumers? The “middle class” consumer will continue to pay his monthly installment to banks, while their money has been siphoned off by the builders, political parties, government officials and the banks. The apartment that was sold as 40 lacs will eventually cost 60 to 70 lacs considering the delayed possession, not to mention some cases where money is lost forever. You dare not default since you are just a retail consumer. Don’t dare to become an industrialist who can default & live happily ever after. State governments are all hands in, trying to keep existing projects out of RERA. Even if these are included in RERA, try fighting the legal battle to get decision from regulators. Then move to Appellate Tribunal (yes, this comes before the High court), then the High Court & finally Supreme Court. Can you hold till 20 years or rather take the apartment on builder’s terms, whenever he feels like offering the same to you?Talk of organised banking loot by the government, this is it. If it feels like your story also, you're not alone. But please never assume that property prices don’t fall. Staying on rent is not that bad.And don’t you ever buy into the hype !Afterthought and updates -I thank readers for positive feedback and questions on this article. Since lot of you have asked this, I must add how life would change after RERA for “new projects”. Well if the legal channel is too prolonged, there is no point of fighting the legal battle as time is money & builder doesn’t pay penalty. So outlook is not bright & I’ll quote examples.Have the builder agreements been revised anywhere ? Even if these are, there might be fine print about “force majeure” which allows builder to get away with delay in case of “circumstances beyond his control”. Check your agreements. Also, has the payment schedule changed ? Now to argue this, please follow legal process, will you ?Finally, as far as “pro-activeness to prevent misleading advertisements under RERA” is concerned, a very prominent National level builder published half page print advertisement in major newspapers recently about a new launch with all fancy imaginative pics (RERA allows only actual site pictures for advertisements). No action on the builder so far. Why? Below the advertisement (in micro font size) company stated the disclaimer: “…….. the said information should not be construed as an advertisement under the applicable laws ( RERA). Nothing on this material, constitutes advertising, marketing, booking, selling or an offer for sale, or invitation to purchase………….” Can you beat that?Every major builder website that you go on has all the fancy pictures of the apartment that will never materialize. But hey, you can’t raise this aginst them. Why ? Because as you visit the website, a window pops up where “every possible disclosure” is made & you “accept” to visit the website. Now the builders are free of any liability. If this alll what RERA was trying to achieve by “only actual site pictures” , the what was the noise about ? And if you still hope that politics will play out against the builders, think of this ? Who can only vote in a “rich” minority. but who provides money to the government ? So who is likely to win ?A quick status check on RERA:Some states such as Uttarakhand, Orissa and Bihar have adopted the central RERA rules, more specifically around the keeping the funds collected from buyers in an escrow account. The Uttar Pradesh RERA rules are silent, which builders have taken advantage of to siphon off funds. Good luck Noida !The biggest issue is the lack of execution of RERA orders by builders and multiple forums for grievance redressal.A mere RERA registration does not guarantee that a project will be delivered on time. All under-construction projects are still in a limbo, despite RERA. That is where most money is blocked. New launches ? Lets talk in a couple of years. We’ll see.There are also instances where realty companies have given different timelines to homebuyers and the authority. can you beat that ? So if they delay the project, the authority may say that the project is on track as pper their timelines. Recall that fancy advts “are not a part of sales agreement or promise of delivery”. What is the point of RERA then ?Meanwhile, I’m yet to meet a person who got justice under RERA. Are you still hopeful ? I’m less optimistic on this.Feel free to mail or write to me on twitterHonest - Unbiased - Simplified, as always.

Investment/Disinvestment RationaleCentrum Capital Limited is an investment banking company. The Company offers a range of financial services in the areas of equity capital market, private equity, corporate finance, project finance and stressed asset resolution. The Company's segments include Advisory and Transactional Services, Trading in Bonds, Forex business, Travel and Tours, Treasury and Housing Finance Business. Its Advisory and Transactional Services segment consists of investment banking, broking activity, portfolio management, wealth management and realty/infrastructure advisory services. Its Trading in Bonds segment comprises purchase and sale of bonds and government securities in secondary market. Its Forex business segment comprises money changing services. Its travels and tours segment provide travels and tours related services. Its Treasury segment provides liquidity for business and manages investment of surplus funds.Recent DevelopmentsTied Up With Laxmi Vilas Bank to Provide Wealth Management Services to HNI ClientsConclusion:CENTRUM CAPITAL LTD is trading at INR 75.05. The fair value of the share based on discounted cash flow is INR 116.1. Estimated Price based on earnings estimates of Mar,18 is INR 66.45.If your return expecation is 10% in next 6 to 12 months of this analysis dated 26 Oct, 2017, buy and hold Centrum Capital LtdFor financial year ending on 30 Jun 2015, CENTRUM CAPITAL LTD has reported1 Sales Growth : 28.23%2 Profit Increased : 82.44%3 Margin Improved : 0.30%4 Borrowings Increased : 18.32%5 Share Price Decreased : -2.35%For financial year ending on 31 Mar 2016, CENTRUM CAPITAL LTD has reported1 Sales Degrowth : -10.67%2 Profit Reduced : -42.64%3 Margin Declined : -0.36%4 Borrowings Increased : 31.69%5 Share Price Decreased : -21.12%For financial year ending on 31 Mar 2017, CENTRUM CAPITAL LTD has reported1 Sales Growth : 74.41%2 Profit Increased : 14.72%3 Margin Declined : -0.22%4 Borrowings Increased : 17.13%5 Share Price Increased : 209.73%For financial year ending on Mar-18 E, CENTRUM CAPITAL LTD is expected to report1 Sales Growth : 25.00%2 Profit Increased : 58.68%3 Margin Improved : 0.12%4 Borrowings Increased : 28.71%5 Share Price Increased : 52.27%6 Estimated Share Price : INR 66.45For financial year ending on Mar-19 E, CENTRUM CAPITAL LTD is expected to report1 Sales Growth : 21.88%2 Profit Increased : 18.49%3 Margin Declined : -0.02%4 Borrowings Increased : 23.07%5 Share Price Increased : 18.49%6 Estimated Share Price : INR 78.7Below are some of the Financial Ratios for CENTRUM CAPITAL LTD for financial year ending on 31 Mar 2017:Net Income/Sales is 0.00Net Income/Pre Tax Income is 0.40Pre Tax Income/EBIT is 0.56EBIT/Sales is 0.02Sales/Assets is 6.22Assets/Equity is 3.36Return on Equity is 09%Return on Assets is 03%Retention Based Growth Rate is 09%Market Capitalisation is INR 1814 croresAdd: Debt is INR 391 croresLess: Non Current Investments is INR 51 croresEnterprise Value is INR 2155 croresNet Profit is INR 30 croresAdd: Interest is INR 60 croresLess : Tax Savings on Interest is INR 36 croresLess : Other Income is INR 8 croresFirm Profits is INR 46 croresSales is INR 6987 croresAdd: Other Income is INR 8 croresTotal Income is INR 6995 croresFirm Margin is 01%Enterprise Value to Total Income is 0.31 (below 2 is better)Enterprise Value to Total Income to Firm Margin is 47.33 (below 15 is investments friendly)Price to Earning is 60.46 (below 18 is investments friendly)Price to Book Value is 5.43 (below 2 is investments friendly)Debt to Equity is 1.17 (below 2 is investments friendly)Free Cash Flow to Firm is INR 27 croresFree Cash Flow to Equity is INR -32 croresPrice to Earning Growth is 4.11Quantamental Reports - Research Wings*Page 1*Introduction about the company - This information is available online on the company's website or reuters*Page 2 and 3*This section is the summary of last 2 Years, current years and next two years estimated major growth rates and degrowth rates.This section also have a summary of all the analysis about previous years important ratios. Most of the definitions can be found on investopedia.Newly introduced concepts in these section are explained below:*Enterprise Value* is Market Capitalisation Add: Debt Less: Non Current Investments*Firm Profits* is Net Profit Add: Interest Less : Tax Savings on Interest Less : Other Income*Total Income* is Sales Add: Other Income*Firm Margin* is Firm Profits divided by Total Income*Enterprise Value to Total Income* is Enterprise Value divided by Total Income (below 2 is better)*Enterprise Value to Total Income to Firm Margin* is Enterprise Value to Total Income divided by Firm Margin (below 15 is investments friendly)Historically have observed that company's with Enterprise Value to Total Income to Firm Margin *less than 15* have outperformed the market and also have delivered return over and above 25% annually.*Page 4 - 5* - What If Analysis - ProjectionsThis section contains the projection of abridged profit and loss account, abridged cash flow statement, abridged balance sheet, financial ratios and also a section for assumtions on sales growth and EBITDA margins.There is also a section which show impact of unfavorable or favorable profit growth with unfavorable or favorable price to earning ratio on the stock prices. This reflects the sensitivity of the investments in that stock.*Page 6-7* - Extended Financial Ratio analysis for past 10 years and next 5 years projections.*Page 8* - Charts of important Extended Financial Ratio analysis and price of the stock for past 10 years and next 5 years projections.*Page 9* - Discounted Cash Flow - Fair Value Price analysis using prevailing market beta and prevailing risk free rate. This should be above current price to make the stock investible.*Page 10* - Technical Analysis and 200 Weekly Moving AverageSee the trend line and Moving averages on the charts for better understanding of the stock price moves.200 weekly moving average analysis -when stock crosses 200 weeks moving average levels and its 100 weeks moving average should be below 200 weeks moving average.It has been observed historically that once the stock crosses this specific technical analysis parameter, the stock tend to deliver more than 100% returns and subsequently delivering more than 900% returns in 5 to 10 years time frame subject to it sustaining above it 200 weeks moving average of weekly low price.The stop loss in this case shall be the lower of 200 weeks moving average of lows on the day of breakout or 200 weeks moving average of lows on the day of current.DISCLAIMERLEGAL DISCLAIMER and GENERAL DISCLOSURESThese reports and documents have been prepared by Tharendra Lunia.They are not to be copied, reused or made available to others without prior permission of Tharendra Lunia.They should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.The information contained in the reports has been obtained from sources that are considered to be reliable. 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