In a business where the buying & selling price is fixed by the government, how is that the sugar stocks are rallying so much?

A thread 🧵 to learn how the sugar sector works. Do re-tweet and hence us educate more investors (1/n)

- Sugar is made out of Sugarcane
- The government fixes buying price (FRP – Fair & Remunerative price) for the mill from the farmers at 2.850/Kg
- Selling price is also fixed at Rs. 31/Kg (MSP – Minimum selling price) (2/n)

Lets understand the sector,

- Sugarcane purchased by the mill is crushed to remove the juice (exactly like you have sugarcane juice at a hotel)
- Juice is heated & boiled to remove sugar (3/n)

- The juice can be boiled upto 3 times to remove sugar. Each time it is boiled, sugar is removed, than some water is added and boiled again to remove more sugar (4/n)

- There are 2 by-products as well. The residue left behind after the boiling process is over is like a gum/paste called molasses & the fiber/stem of the sugarcane after juice is extracted (5/n)

Learn about the STEEL SECTOR in this thread

The demand for steel is generally only 1.2 times the GDP & there is no significant growth in our GDP but still the sector has rallied relentlessly, lets try & understand

Do ‘re-tweet’ & help us educate more investors (1/22)
#Investing

The metal sector is broadly divided into 2,
-Ferrous is a category of metal that has Iron in it, Steel as an example
-Non-Ferrous is a metal, which does not have Iron content, Aluminum, copper, lead, nickel, Zinc etc.
This thread focuses on Ferrous & hence Steel (2/22)

To start, lets understand with how steel is made (its important).
Iron ore is mined, it is then first converted to Iron & Iron is then converted to Steel. There are 3 processes of making steel
-Blast Furnace
-Scrap Metal
-DRIP/Sponge
We will discuss all three (3/22)

After writing on Banking & Paints, this thread focuses on the 'Logistic Sector'. Idea is to give a small start to the retail investors looking at investing in this space from where they can build on.

This thread covers,
- Macro
- Business Model
- 3PL & 4PL
- Valuation (1/n)

Logistics business macro

-14% of India’s GDP is spent on Logistic
-Organized market is 42%
-Growing at 10-15%
-Employs 2.2 cr
-Achieved Infrastructure status
-FY 14-18 attracted 1,00,000 cr FDI (2/n)

What’s the business?

Logistic is traditionally seen as a warehousing & transportation business where goods, needs 2b transported 4m point A to B using Road, Rail, Ship or Air & can be stored at multiple warehouses before the consumer receives the product (3/n)

The business landscape is changing fast with newer competition and technology is challenging the older business models. 3PL (3rd party logistics) & 4PL is one such change in the business of logistics, will discuss about the same ahead. (4/n)

Listed companies involved in the business may or largely may not own the Trucks, Rails, Aircraft, Ships, Warehouses etc., but uses outsourced services of other vendors and the listed companies manage the logistics from point A to point B (5/n)

Amongst other performance details, what we miss out while selecting an actively managed mutual fund is the AUM.

In equity, moderate the better. In debt, higher the better.

#investing

(Thread) With Kotak launching its International REIT Fund of Fund NFO, it is worth revisiting our old thread on Real Estate Investment Trust (#REIT). The Idea is to educate readers on REIT & share our view on the Kotak #NFO

Do ‘re-tweet’ & help us educate more investors (1/n)

What’s a REIT?

Lets say I am a RE developer, K Raheja. I like a land in Mumbai & Hyderabad 4 some commercial development. I decide to buy it. Where will I get the monies 2 buy & construct it?
1. Self
2. Bank, NBFC, MF - Debt
3. Partner – someone else investing as Equity (2/n)

So I invest some monies, got some 4m banks & MF’s & I also got Blackrock to invest 2 buy the land & make the business park called 'Mindspace'. I constructed around 23-mn sq ft with multiple building & I started leasing them out to companies who wanted rented office premises (3/n)

There comes a point where I needed more monies to build new building, pay off the loans etc., where do I get the monies? So I decide to do an #IPO. Not of the entire company K Raheja but only this project called Mindspace. So I formed a trust or corporation (4/n)

I commit to payout 90% of my rent income to the shareholders proportionately as dividends & I will use this IPO money to invest a minimum 80% in completed real estate, which is generating rent & will use 20% in constructing new Real Estate or lend to some other developer (5/n)

A basic premier on the banking sector, demystifying commonly used terms,
CASA
Wholesale Banking
Net Interest Income (NII)
Cost of Liability
Advances Growth
Gross v/s Net NPA
Provisions
SLR/CRR
Capital Adequacy Ratio
Net Interest Margin (NIM)

Do hit the 're-tweet' (1/n)

Banking, as a business is simple to understand, you borrow money (liability for the bank as the bank needs to pay back) and lend (asset for the bank as the bank is expected to receive it bank), the difference between the borrowings & lending is banks income (2/n)

Where all can they borrow from?

(a) Savings Account (SA)
(b) Current Account (CA)
(c) Fixed Deposit (FD)
(d) Recurring Deposit (RD)
(e) Certificate of Deposits (CD)
(f) Bonds etc. (3/n)

Whom do they lend?
(a) Retail - Housing loan, auto loan, personal loan etc.
(b) Wholesale (Institutional Lending) – Commercial Papers (CP) & other Corporate Loans

P.S. – “HDFC Bank is now increasing focus on wholesale lending”, hope you now understand what that means (4/n)

How does the bank profit?

So lets say the average borrowing cost of the bank (also know as the cost of liabilities) is 4.54% & average lending cost is 8.54%, the difference 8.54% - 4.54% = 4% is called the Net Interest Income (NII). HDFC Banks Cost of Liability is 4.54% (5/n)

𝐀 𝐩𝐫𝐢𝐦𝐞𝐫 𝐨𝐧 𝐁𝐥𝐨𝐜𝐤𝐜𝐡𝐚𝐢𝐧 & 𝐂𝐫𝐲𝐩𝐭𝐨𝐬 🧵

I still everyday meet investors who think Bitcoin & Blockchain are the same & this thread is specifically for them

Do re-tweet & help us educate more invetsors ☺

#Investing #Cryptos #Bitcoin (1/n)

(Q1) Lets start with what was historically used as a method of payment?

- Barter system, you give me a cow and I give you 100 kgs of rice (2/n)

(Q2) So why dint we continue with the barter system?

- It was difficult to transact in fractions
- What if I want only 50 kgs of rice? I cant give you half a cow right?
- This is the prime reason for the introduction of smaller units of payment method we now call as coins (3/n)

(Q3) How did Gold coins get shortlisted for the job?
- It was malleable & portable
- It was non corrosive, could be stored for a long time
- It was a perfect combination of abundance & rare
- Plus it was eye catching & visually appealing (4/n)

(Q4) What about paper currencies?
a) When paper currencies were introduced, it was decided that a country could only print as much currency as the gold reserves they have but this was withdrawn in 1971 bcoz of which the central banks could then print as much money as they wanted

Is US going to default on its debt?

This 🧵 will surely help you understand. Do ‘re-tweet’ & help us educated investors (1/13)

How does a country run?

Assume a country to be like a company, which has income & expenses. Income source can be tax collections & expense can be government employee salaries, defence sending’s, social security schemes etc. (2/13)

Generally, most economies are running a deficit; their income is less than expense. So if your income is 100 and expense is 105, where do you get the 5? You borrow!

Similarly US has been borrowing & the total debt today roughly stands at a whooping $28.5T. (3/13)

Deficit in the last 2 years has gone up significantly because of COVID + the government wants to spend more; a $3.5T spending package is what they are trying to get an approval for + older debt is coming up for maturity (4/13)

Okay, so I am saying they will raise more debt for the deficit of COVID, the new package & paying older debt off?

Ideally a yes but they are not allowed to borrow more! (5/13)

Does increase in Inflation & hence interest rates lead to a fall in equity? While theoretically yes, practically the last 20 years of data shows otherwise

Please ‘re-tweet’ 🧵& help us educate more retail investors

#Investing

Lets start with basic, y does inflation ⬆️?
Most feel bcoz of higher demand & lower supply but that’s nt the only factor. Imagine there is a shortage of laptops wrt the demand, but there is no liquidity in the market (people don’t have monies) will the price of laptop ⬆️? No

So, Inflation takes place because the demand supply situation is accompanied by high liquidity, people have the monies to spend and hence the price goes up. Inflation does not take place only because of the demand supply gap (3/n)

Its RBI’s job to keep inflation under check. What role does RBI play? RBI is comfortable keeping Inflation between 2-6% currently. So if Inflation is increasing, how can RBI control it? Can RBI do anything to demand & supply? Nothing (4/n)

So the only tool available with RBI to control inflation is controlling liquidity. If RBI is able to reduce liquidity in the market, less money will chase the goods and hence Inflation can be expected to stabilize. (5/n)