Is investing in IPO or REIT or MSTC beneficial for you?
Are you thinking of investing in MSTC or REIT or IPO? So, for this, you will need to first study all the possible outcomes, their benefits. It will all help you in making efficient investment. So, first let us see what MSTC, IPO and REIT is.
What is IPO?
IPO stands for Initial Public Offer. It is basically a way by which a company approaches market and raise funds. An investor has to apply for IPO. After applying, you will get the allotted IPO shares. These shares will make you shareholders or part owner of that particular company.
Why should you invest in IPO?
It is a diversified group of making an investment. After indulging with an IPO, your company can have a good exposure. It will provide your company very low state of capital. This IPO scheme will provide you maximum money. This money will be more than the money you get with any other investment platform. The largest example of IPO is of the Alibaba Group (2014). This company raised about 25 billion dollars. Basically, in IPO, company sells and public receives the company’s stocks. IPO gives one more advantage. In IPOs, the public company will help you in attaining a good management.
Even in the upcoming IPO 2019, many large companies may be seen investing in IPOs. These companies are Precision Biosciences Inc, LYFT Inc, Genfit and many more. In 2018, Aavas Financiers Limited made an IPO investment. This company had issue price of Rs. 821. The closing price at the listing day was Rs. 773.15. Afterwards, the company gained a profit of about 40%. There are many such examples of profits and losses in IPOs.
What is REIT?
REIT is an investment trust where you can invest your money in real estate. REIT stands for Real Estate Investment Trust. Investor’s money is used by REIT in buying and selling properties. REIT is basically of many types. These types are usually based on different property assets. REITs of different assets purchase their respective type of assets. Basically, the average investors or the top investors, both can easily invest in REIT. This idea of investment benefits every type of investors. There are certain points that every REIT investor should keep in mind before investing.
Why should you invest in REIT?
The major advantage of investing in REIT is that it provides dividend income. If you want a passive income source, then it is a god option. Embassy REIT is a type of REIT which involves the properties of Embassy groups. It offers a good rate of shares at about Rs.300 per share. REIT is a comparatively easy platform for your investments. Many of the millionaires have reached there with real estate. Moreover, the total returns of REITs are quite good. You can get a good income by investing in them.
The total revenues of REIT in 2016 were about Rs. 13,970.16 millions. And, those in the year 2017 were Rs. 14,849.20 millions. Hence, the profits are also increasing every year. The profit in 2016 was Rs. 931 millions. In 2017, it increased to Rs. 1770 millions. And, again the profits increased to about Rs. 2,851 millions at the end of 2018. So, it is beneficial to invest REITs.
But, if we look at the negatives. Then, we can get them too. The returns of REIT in the form of net cash surplus or pure yield are not upto the point. It is somewhere around 7.4% to 8.3% which will be actually paid out. This yield is almost similar as the returns of bank FDs. If we compare, then RBL Bank’s FD yield is also 8.3%. It is exactly similar as those of REIT. So, it is not very beneficial to invest in real estate.
What is MSTC?
MSTC is a well known Public Sector Unit. It stands for Metal Scrap Trade Corporation. It is a governmental organization for e-commerce and the bulk raw material trading. This e-commerce service provider conducts online auction platforms. These auctions are mainly for government. Also, entities under government control can participate in it. It is a country wide organization.
At Rs. 128, the market cap of this company will be something around Rs. 900 Crore. And, the company’s EV will be around Rs.650 crore. MSTC has the constantly changing financial performances every year. So, we cannot predict the upcoming MSTC IPO margins. They can go anywhere between -7.7% to -1.1%. Also, these margins can be even higher like 6%, in the upcoming MSTC. The main point to notice here is the improvement of collection cycle.
The chances of getting a grand expansion or growth in MSTC are very very less. The company is comparatively more indulged in trading only. The fluctuating financial performance does not give us signs of investing here. Also, the collection cycles affects the financials adversely. Hence, it is not recommended to invest in MSTC.