In response to a letter written by the financial services secretary to the labour secretary, retirement fund body EPFO said it disagrees with the finance ministry’s proposal to encourage its subscribers to shift to New Pension System (NPS) and said that the NPS does not provide better returns than its Employees Pension Scheme-1995. “If we take return of EPS as indicative return on the fund managed under EPS, then the annualised return for the period May 2009 to May 2013 will be 10.47%, which on the face of it, is higher than the return declared by NPS in its scheme for the central government,” EPFO said.
The finance ministry had written to the labour ministry, “The subscribers of EPS may be given an option to either remain with EPS or join NPS with the same contribution as NPS is self sustaining pension system, a good substitute for EPS and would be beneficial for subscribers as they would get decent returns and adequate pension wealth. The government would be free from any open ended and financially unsustainable liability of EPS.”
EPFO disagreed saying that the EPS scheme provides social security for lower-income group in their old age and pension to dependents, in case of death of the subscriber. Subscribers can withdraw their contribution towards pension while withdrawing their EPF money. There is a lock-in period of 15 years in NPS.
Moreover, EPS subscribers get bonus of two years on completion of 20 years of service and there is provision of commutation or part withdrawal also. That is not available in NPS.
In an overall financial literacy survey carried out by MasterCard, called the MasterCard’s Index of Financial Literacy, India ranks the lowest in basic money management skills among Asia-Pacific countries. India scored a meagre 50 points, while New Zealand retained its top ranking in basic money management with the index at 77 points. On overall financial literacy, New Zealand continued to rank number one with a score of 74 index points, ahead of Singapore and Taiwan. India and Japan were at the bottom with 59 and 57 points,
respectively. Interestingly, Myanmar ranked high in terms of financial planning (one of the components which involves saving and planning for the unexpected events and retirement) with the highest score of 88 index points. In terms of investment knowledge, China topped the ranking with a score of 68 points, while India showed a slight improvement with a score of 57 points compared to 55 points in the previous survey.
With the falling rupee, Pidilite may incur higher raw material cost and thus would find it difficult to sustain its first quarter margins, says Nomura
There is a slowdown in the chemicals and adhesives market and Pidilite Industries is expected face the slowdown in revenue growth. Although the company benefitted from fall in raw material prices, for Pidilite, sustaining its first quarter margins look difficult owing to raw material price rise ahead, says Nomura Financial Advisory and Securities (India) Pvt Ltd.
In a research note, Nomura said it believes that (Pidilite) margins in Q1 peaked as they benefited from a fall in raw material prices and a change in product mix. However, prices of VAM, one of the key raw material for Pidilite is likely to increase from second quarter due to depreciation of rupee against the US dollar and amidst a moderating growth scenario, the company would find it challenging to protect margins, the note said.
Nomura continues to acknowledge Pidilite’s ability to innovate, strong brand, penetration in Tier- 3/4/5 towns and cities and strong relationship with carpenters and plumbers.
The company’s stock currently trades at a one-year forward P/E multiple of 23.8x (in line with its three-year average and 13% premium to its six-year average) which appears in the fair value zone to Nomura analysts. They have forecasted the company’s return on equity as below:
Nomura said it remains optimistic on long-term prospects of spending on construction chemicals and adhesives. Pidilite's ability to identify niche demand and accordingly innovate new products should drive long-term growth, it added.