Rajiv Gandhi Equity saving scheme was introduced last year which has the dual benefits of understanding and investment in Select Equities and also enjoying tax benefits for selected investors. The guidelines of the same are given here.
As per the scheme structure, investments can be made in BSE-100, CNX 100 group shares, Navratna, Maharatna, Miniratna public-sector undertakings and the initial public offers of PSUs. There will be a lock-in period of three years.
Microsec Research has identified 10 companies among the list of securities approved for RGESS. Mostly all stocks are blue chip stocks which are safe and carry fundamental potential. These stocks are expected to give 18‐21% annualized return in 3 years.
1) Aditya Birla Nuvo:
Buy rating is given for ABNL. ABNL is USD4.5 bn diversified business conglomerate having presence in Financial services (Life insurance, Asset management, NBFC, Private Equity, Broking, Wealth management and Insurance borking), Telecom, IT & ITes, Fashion & Life style and Manufacturing. Company’s financial services business is ranked amongst top 5 private fund managers in India and telecom business is ranked 10th globally with regards to total minutes of use on network.
2) Bharti Airtel:
We rate Bharti Airtel Ltd (Bharti) a ‘BUY’. Our rating underpins Bharti’s leading position in the Indian telecom space, its ability to generate healthy free cash flows, and emerging regulatory clearance in the sector. However, its high debt levels and expected cash outgo for spectrum impede our optimism a bit.
3) Coal India:
We recommend Coal India a “BUY”. Coal India is the single largest coal producer in the world, sitting on huge reserves of 18,862.9MT, out of which 10,595.1MT are proved reserves and 8,267.8MT are probable reserves. With robust growth in dispatches and better rake availability, higher realizations from shift to GCV (Gross Calorific Value), price hikes, increased production and clarity on FSA clauses, improved blended realizations from setting up 20 new coal washeries with a combined capacity of 111.1MT during the 12th plan, we expect CIL to post better margins.
4) Engineers India Ltd:
EIL is a leading engineering consultancy company, principally focused on the oil & gas and petrochemicals industries in India and Overseas. It has also diversified into other sectors including non‐ferrous mining, metallurgy, infrastructure, fertilizer, power (solar & nuclear), water & waste management etc. EIL currently has a highly skilled & professional employee base of 3,500 people of which 82% are with technical and professional qualifications.
5) Hindustan Unilever Ltd:
We recommend Hindustan Unilever LTd. (HUL) a BUY. It has strong rural penetration, sustained brand power, strong distribution newtork, continuous product innovation and domestic consumption story. Hindustan Unilever is India’s largest fast moving consumer goods company, with leadership in Home & Personal Care Products and Foods & Beverages. HUL’s brands spread across 20 distinct consumer categories.
6) Larsen & Toubro Ltd:
Larsen and Toubro (LT) is India’s largest engineering and construction (E&C) company. Apart from its core construction activity, LT is making significant inroads into a diverse range of products and services through its subsidiaries and manufacturing JVs in power BTG, forging and shipbuilding. The company is also involved in various developmental projects on BOT basis in roads, ports, railways and power. Exports contribute 18% of the order intake.
7) LIC Housing Finance Ltd:
LICHFL is one of the leading players in the mortgage market. The company which has been in existence since 1989 is promoted by “Life Insurance Corporation (LIC)”. The main objective of the company is to provide long term finance to individuals for purchase/construction/repair and renovation of new/existing flats.
NMDC is India’s largest iron ore producer and exporter, presently producing about 27MT of iron ore from its 3 fully mechanized mines in Chattisgarh and Donimalai Iron Ore Mines in Karnataka. With ~40% market share in the iron ore producing industry, substantial high quality iron ore reserves, addition and expansion of mines leading to higher volume growth, superior margins backed by low cost of production, foray into value added projects and improved realization in future, NMDC IS likely to grow at a CAGR of 13.48% in terms of revenue and 12.67% in terms of PAT over FY12-16.
9) Tata Chemicals:
On account of the strong urea demand scenario along with the assurance of 12-20 per cent post tax return from government, Tata Chemicals is likely to double its urea capacity at Babrala unit at an estimated cost of $850 million that may help to generate stable cash flow. The plant may commission in three years. Tata Chemicals is currently trading at P/E of 10.9. We believe that at current valuations, the company is attractively priced and can be good investment bet from long term perspective. However, erratic monsoon and adverse global scenario impede our optimism a bit.
10) Tata Consultancy Services:
We rate Tata Consultancy Services Limited (TCS) a ‘BUY’. Our rating underpins the company’s strong growth in business volumes, GNDMTM for better catering of customers’ needs, nonlinear growth drivers, industry low attrition levels, high employee utilization, and its history of rewarding shareholders. However, recent appreciation of INR vis-à-vis USD could pose near term headwinds for the stock.