Why is Nomura upbeat about Indian tyre industry? Apollo Tyres, Ceat & Balkrishna on its radar

    Global research firm believes that the Indian tyre industry is witnessing a phase of cyclical uptick in demand.

    The industry fundamentals are in a better shape now due to the demand and high utilization as well, analysts at the firm wrote in their report.

    It sees 8 percent volume CAGR over FY18-21.

    The segment is a good play on the back of healthy growth outlook, pricing discipline, and benign commodity prices, which will support margins.

    Further, the benign commodity prices could also lead to 20-25% EBITDA CAGR over FY18-21.

    Nomura expects strong demand scenario to keep utilization healthy.

    Among stocks, it has initiated coverage on Apollo Tyres with a target at Rs 288, along with Ceat and Balkrishna Industries.

    On Ceat, it neutral with a target at Rs 1,346. In case of Balkrishna Industries, it is also neutral with a target at Rs 1,008.


    Why is credit card usage on the rise?

    Clockwise from top: Sumit Bali, Ranjit Punja, Surya Bhatia, and Vijay Jasuja

    In the past couple of years, credit card outstanding has been increasing. It went up 35% in value during the April-October period in FY18. We ask experts about the increased focus on credit cards

    Sumit Bali, senior executive VP and head-personal assets, Kotak Mahindra Bank

    If you look at the overall lending market, there is hardly any demand from companies. A lot of repricing is happening, but there is no fresh demand coming in. It is the same story for home loans as well. These are two big segments going through a slowdown. On the large ticket loans, a lot of churn is happening. Borrowers with higher rates of interest are negotiating and getting lower rates or moving to other banks at a lower rate. Overall, that segment is not growing for the bank.

    However, the unsecured piece has been growing. Over the last few years, we have seen systemic change in unsecured lending. Today, you have a lot of information from the (credit) bureaus. Fintech companies give you a lot of data about a customer. Even if you don’t have a customer’s credit history, you can still onboard her based on other data about her. Based on the transaction history from her savings account, though she is a new-to-credit customer, a bank is now comfortable to lend. Also, post-demonetization, acceptance of card has grown.

    Another reason why personal loan is growing is that there is a segment now that is happy to consume now and pay later. Today if you want to go on a holiday or buy latest gadgets, the new generation is happy to take a loan. As consumers, you should use credit card sensibly because ultimately it will reflect on your credit history.

    Vijay Jasuja, chief executive officer, SBI Card

    Overall, credit card spends have increased 42% year-on-year. Our credit card outstanding growth has been 80% year-on-year. There are multiple reasons for the growth in spends. Firstly, the e-commerce boom has increased the spends on the cards. Secondly, the confidence level of consumers to use cards has gone up post-demonetization. Earlier, there was a concept that unless you have a credit history you will not be eligible for a credit card. But now individuals have a higher income in their first year of job itself. But they don’t have a credit history. Technically, they will be called new-to-credit customers. Another segment is the individuals in the tier 1 and 2 cities who see their peers using cards.

    The question is, will the bubble burst if credit card spends go up significantly? In the credit card asset portfolio, the credit card outstanding amount is of people who are away from the due date. There are customers who get their high-value spends converted to EMIs, which has also increased the overall credit card outstanding amount. Then there are people who don’t have sufficient liquidity to pay. They pay a minimum amount and revolve the facility with high interest. This is the segment (that is) risky. About 20-27% of our customers fall in the last segment and it is consistently the same. That means additional and new-to-credit portfolio are not bringing in additional risk.

    Ranjit Punja, co-founder and CEO, Creditmantri.com

    Largely, since the last downturn in the economy, lenders have become careful about who they lend to. They typically only lend to those who have demonstrated a good credit score. They have clamped down on bad credit customers. However, today, with a general upsurge in income, the  whole advent of e-commerce, the ability to pay online and digitally savvy customers has led to utilisation of more income. Banks have started believing that newer fintech models are probably the way to go in terms of underwriting. At this point, it is a drop in the ocean. Banks are making the underwriting journey simpler. There is a lot of data available digitally.

    Time will tell if that is a good way to look at lending. At this moment, the end users are enjoying the benefit. Typically, in the financial world, you see these ups and downs. You will see a bad credit cycle and then delinquencies. I am concerned with newer models that are not time tested.

    As a consumer you shouldn’t spend beyond your means. Credit card and unsecured loans tend to do that to you, especially for people who don’t have the discipline to borrow and repay. Credit card is a simple way to overspend. And interest rates are very high. Being credit wise is critical for someone who has not used a credit card ever. Our advice is to start small, display discipline and make sure you service you debt.

    Surya Bhatia, New Delhi-based financial planner

    The push by the government has helped India convert to a cashless economy. Meanwhile, none of the banks want to miss out on the retail population. The people in the higher income bracket were already having a credit card. Digital banks like Patym Payments Bank will give this a further push. The bigger banks want to have the bigger pie, which includes the HNI segment and those in the higher income group. But the real money in terms of volume is the young population. Everyone wants to grab hold of that population. The young millennials are the people who want to spend, especially digitally.

    There is also a bit of loyalty factor. For instance, I still hold the credit card that I got for the first time. In the last many years, I have bought two other cards and discarded them too. But my first credit card still continues. There is no specific reason why I hold on to it. Every bank wants to cash in on that population. The idea is to catch them young and to make them stick with you.

    Consumers have also changed. They are now spoilt for choices. In the early days, they used to pay for credit cards. Now there is no concept of paying for cards. For instance, if you spend a certain amount, most of the card providers waive off the charges.

    Logically, you should not have more than one card. And better still is stick to a debit card. Once you understand debit cards well enough, then may be opt for a credit card.


    Separating Your Personal and Business Finances: Why and How

    Why and How to Separate Your Personal and Business Finances

    New business owners may seek to keep things simple and co-mingle their business and personal finances. This is a BIG mistake. Here’s why, and what you can to do to appropriately separate your financial activities.

    Why and How to Separate Your Personal and Business Finances

    Why Keep Finances Separate?

    There are important financial, legal and tax reasons to separate your finances:

    • Financial. It’s difficult to know how well your business is doing if you can’t easily eyeball a bank balance devoted to your company. You may run into cash flow problems using a single account for business and personal expenses. Also, having a separate credit card for the company helps to build business credit scores.
    • Legal. If your business is a corporation or a limited liability company, you can lose the personal liability protection you sought by setting up such an entity by co-mingling your finances. The reason: If you don’t respect the separate legal status of the entity, creditors may not have to and can go after your personal assets to satisfy their claims. There’s a legal doctrine called “piercing the corporate veil,” which means courts can ignore your entity’s status for purposes of your personal liability for any claims against the business if you haven’t observed the formalities of a separate business entity.
    • Tax. For federal income tax purpose, the law requires you to keep good books and records. This can only be done if you have a business bank account into which you deposit income and from which you pay expenses. A rookie mistake is thinking you can remember what expense is for business, such as a meal, when it comes time to prepare your tax return; you can’t — and it can cost you tax deductions!

    How to Keep Finances Separate

    It’s really a no brainer. All that is needed to keep your business affairs untangled from your personal money matters is to have a separate business bank account and a separate business credit card. If you choose to use PayPal, also set up an account for your business.

    You also need separate accounting for your business income and expenses. So, for example, if you use Quicken or Mint.com to track your personal expenses, use a separate accounting solution, such as QuickBooks, for your business.

    To make sure you input expenses into the correct accounting solution, be sure to keep business receipts separate from personal expenditures. This can be done using separate files for paper receipts or separate online folders for e-receipts. Online options, such as Shoeboxed can help you keep track of business receipts.

    If you use a home office, business with personal matters can all too easily get mixed up. In order to claim a home office deduction, the space must be used regularly and exclusively for business. Incidental personal use may not kill the deduction, but it’s better to keep personal things out of the home office area.

    If you use a paid professional to prepare your tax return, ask that you receive separate invoices for services related to your business and personal income and expenses. For example, if you’re self-employed, an itemized bill enables you to take a business deduction for the cost of preparing Schedule C; the balance is deductible only on Schedule A if you itemize.


    Keeping your business and personal life separate is extremely helpful. It’s easy to do. It merely requires a little housekeeping to set things up properly, and then to follow through.