If you cannot see risk in the article tagged here….please stick to bank deposits, PPF and LiC classic endowment policies (at least let the nation benefit).

http://m.thehindu.com/business/Industry/tiruvarur-surprises-uk-company-with-quick-investments/article9108106.ece

I hate to admit that I have not read beyond this article…but let me tell you where is the risk…

State Bank of India pays 7.5% p.a. interest on a 3 year F D. Anybody paying more than that is SCREAMING “HELLO DUFFER anything more than this is risk premium”. So this great company is charging you a risk premium.

This is a FULL EQUITY PRODUCT compulsorily convertible into UNLISTED EQUITY SHARES and the conversion will happen after a few years AND you are buying an EQUITY prodpruct without liquidity, and worse, without even a prospectus.

This is a complex equity structure meant for the HIGH END equity investor with an INVESTMENT ANALYSIS team consisting of Chartered accountants and lawyers.

Such a product is reaching a small investor in a small town just means a legal loophole is being exploited.

“Tiruvarur was a real eye-opener for us as we were able to raise the money quite comfortably through an independent financial advisor,” said Aditya Kanoria, Chief Executive Officer – India, Red Ribbon Plc.

Risk is in the coupon, in the conversion, in the remuneration of the advisor, …and in the regulator loopholes.

We believe this is a low-risk product with an attractive interest rate and so have hence invested in it,” said 50-year-old Sowmi, a part-time lecturer at A.D.M College for Women, Nagappattinam. She has invested Rs.10 lakh in the debentures.

Risk is in this lecturer of philosophy (she needs to be philosophic to write off a future loss, right?) not understanding what she is saying.

The project of course has the risk of not being able to tie up all the money, execution risk, management risk, sales not being profitable, …and of course the shares not being listed.

Ha, enjoy yourself.

 

 

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  1. Subra Sir, it is just publicity piece for a bigger float. It is hard to raise money now a days. It must be friends and families investing in the venture and getting some free press time!

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