Friends, as you know we bring 2-3 videos on this channel every week on financial knowledge
And a lot of viewers
Comment a lot and ask us some really good questions
And there are some questions that we feel we should have a detailed discussion on
And because of that we have started a new initiative
Which is called #AskGroww
Through which, we will make a video every Tuesday
In which, we will choose some comments from last week's videos
And discuss in detail about them
So that you can learn from those comments
And we get a habit that whenever we get a question in mind related to a video
So, we write #AskGroww
Ask the question there
So that we can make a detailed discussion about that
The first question that one of our viewers asked was
Was that when one company launches its IPO, it get the most money
So what is the benefit a company gets for launching its IPO
And after that when its share go and start trading in the market
What is the benefit the company gets?
So, I will answer this question
With an example
We had made a video on Saudi Aramco
Maybe you would've seen that video but if you haven't
The link to that video is in the description below, you can go and watch that video
The biggest reason for Saudi Aramco to launch their IPO was for them to prove their value in the market
You must know that when a company launches its IPO
After that, its shares start trading in the share market
If I talk about a company, consider company A
Its IPO is going to launch at Rs 100
Today, its IPO was listed
And after that its share starts trading
And its share increases increases in just a few months from 100 to 150
And as soon as a company's share price increases
Then, the company's overall value increases
So consider that the company's share price increased from 100 to 150
So the value of the company also increases from 1000 to 1500
So the biggest benefit that the company has is
That the company gets a fair value when it trades in the market
And if the company's value increases
So in further rounds if the company needs to raise money
Then the company will get a higher valuation
And in that case, the company, its investors, will have a higher cash inflow
And the second part of this question was that, why does a company pay dividend when it doesn't have any benefit of paying dividends?
Now I will answer this question in great detail
That one company's owners are of different kinds
Like some are promoters
And some are retail investors like you and I
And when a company pays its dividends, the benefit is not only for retail investors
But even the promoters have a benefit
And apart from this, when a company
Consider that you work in some company
What does that company do to retain you?
To retain you, that company rewards you at the right time
In the same way, a company to retain its shareholders
Gives them dividends
Because if the shareholders are retained
There won't be volatility in the company
And in any company when the volatility is less,
The company gets a direct benefit
The second question that was asked was that
If I buy a company's share, who is going to give me dividend, a day before the ex dividend date
And sell it after the payment date
So, can I book profit
So I will answer this in detail
That ex dividend date is that date
If you buy a share a day before that date
So you will get dividend
But the second part of this question was that
That if I sell it after the payment date, I will earn that much profit
But this doesn't happen
Because ex dividend date is that date if you bought a day before that,
Then you will get the dividend but on the ex dividend date or the days after that
The share price of the company goes that much lower
As much as the dividend that the company has paid
So because of that, for the next few days, you will not get much profit
We do not deny the possibility that you can't make profits but this is what we call arbitrage
And the chances of this happening are very low in the fair market
So if you think that you can book a dividend and get out
So this is very impossible an extremely difficult
So, I will tell you again
If you want to invest anywhere, then invest for the longer horizon
And if you get dividend from there
Then that will be your extra income
The third question we got from one of our subscribers was what is intrinsic value and how can we calculate it?
So intrinsic value is that value
It is the fair price at which the company should trade its shares
Now there are lot of methods to calculate the intrinsic value
For example, if I name one method, it is called DCF
Which stands for Discounted Cash Flow method
This is very common and very critical
Through which we predict the company's cash flow in the coming years
And we discount it to find out the fair value of the company
We will make a video on this in the coming days and explain it in great detail
After this there is another method, method of comparables
What happens in this is that we find out the competitors of the company in the industry
We compare the company with its competitors and try to find out the fair value of the company
So that we can find out whether the company is overvalued or undervalued
There is a third method where we use ratio to find out the fair value of the company
We made a video on this, whose link is in the description
In which we explained in great detail how you can choose a good stock
In which you basically keep some ratios in mind
Which helps you in choosing a good stock
The fourth question that was asked was how can we analyse any industry
Which can help us decide
Whether we should invest in that stock or not in that industry
To analyse any industry there is a very famous theory which we can use
Which is mainly taught in schools and in many other places using which
A lot of people analyse the industry
And the name of this theory is Porter five forces theory
This tells us about five forces using which
We can see in different ways how the industry is
In porter five forces there are mainly five forces through which you can analyse the industry
Firstly,
Threat of new entrance
Threat of new entrance tells us that in that industry
How difficult or easy is it for a new competitor to enter that industry
A company becomes more lucrative when it belongs to some industry
Where the threat of new entrance is very low
Which means that the barrier to entry over there is very high
If I give you an example so, an example for this is the airlines industry
The threat of new entrance is very less in the airlines industry
Because it is a very capital intensive industry
A company must have a lot of capital if they want to enter this industry
The second thing is competition among existing players
This tells us how much the competition is in the industry
And where the competition is very high
There the pricing power that the company has becomes very low
Because of which the company cannot get a lot of profit from there
So you should pay attention that where you are thinking of investing
That company should belong to such an industry
Where the competition is not at its peak
In this theory the third important thing is bargaining power of suppliers
If I explain this with an example , then in the auto sector
There are a lot of suppliers
Who supply products like gears, tires
So you should select such a company where the bargaining power
Of the suppliers is not that much
The fourth parameter is bargaining power of buyers
So you should select such a company that belongs to such an industry
Where the bargaining power of buyers should not be that much
And the last thing is threat of substitutes
Which is, how easy it is for them to replace the products of your company
So you should choose a company whose threat of substitutes is very low
The last question that we got from a subscriber was that how can we analyse a company in the pharma sector
So I will answer this question with three points
As you know that the biggest market for Indian pharma companies is in the US
And whenever something happens in the US these companies are directly or indirectly impacted
And there is an agency in the US called FDA
Who go and analyse at the right time whether the drugs that the Indian pharma company is making
Whether they are relevant there or not
And the conditions of the drug making plants
And whenever in the FDA observation, something comes out to be wrong, the Indian pharma companies start to go down
So whenever you analyse a pharma company
You should see which products they make
And if their biggest market is in the US
So the competitors should go and see when their FDA observation had come out
And what came out in the FDA observations
Second important point
Like I just told you that the biggest market is in the US
So the direct dependency of the Indian pharma companies is on currency
So whenever the currency goes up and down, the net profit of the companies
And margins are directly affected
So you should look whenever the Indian rupee goes down
And the dollar goes up, the companies benefit a lot
Because their profit always comes out in dollars
So whenever you analyse a company in the pharma sector
You should definitely see the volatility of the currency
And see how the currency can perform in the coming time
Third point, if I talk about drugs then in India there are mainly two types of drugs
First, generic and second specialty drugs
And if I talk about the industry then mainly in the industry
Only generic drugs are made in India
But a lot of competitors and a lot of companies
Are trying to move from generic drugs to specialty drugs
Because of which they put a lot of their money in R&D
And it is very good when a pharma company put their money in R&D
So you should always see that whichever company you're planning on investing
Which belongs to the pharma sector
How much of their expenditure is in R&D
And their R&D expenditure should be good
And you should also compare their results whether they have added new products in the recent times
You can comment down below and use #AskGroww and ask us any question
We will try to answer every question properly
And in the coming video on next Tuesday
We will try to do a detailed discussion on some of your comments
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Because we put up 2-3 videos every week on financial knowledge
And apart from this
We will try to answer all your queries if you use the #AskGroww
So from today the comment section becomes very important for you
Because using the comment sections, you can ask us and you can learn a lot from each other as well
Happy investing!