CONTENT

Broker's Best 14

Cover Story 24

Rajesh Tambe Research Partner Suresh Rathi Securities

Special Report

20

Fund's Focus
Sandip Sabharwal CEO-Portfolio Management Services Prabhudas Lilladher

23

Small-Cap Corner

82

PF Cover Story

90

PLUS
Company Index..................6 Reco. Review ........................7 Portfolio Guide .................. 16 Databank ........................... 38 Market Moves .................... 72 Technicals........................... 84 Letters to Editor .............. 104 Informed Intelligence....... 106 Readers Can Access Complete Databank On Our Website www DSIJ.in

Explore Value In Small Cap Companies

Analysis
Jubilant Life Sciences

86

Jubilant Future
Low Priced Scrip Premier Explosives Choice Scrip

10

Engineers India

12

Hot Chips Sterlite Technologies Marico

105

QUOTE FOR THE FORTNIGHT

4
Dalal Street Investment Journal

The safest way to double your money is to fold it over and put it in your pocket.
July 4 - 17, 2011

Kin Hubbard
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From the Editor

Most Valuable Company-Race Begins

had written about the need for the BSE to change the constituents of the Sensex in my previous editorial. We are happy to state that the BSE has partially acted on the same by announcing the removal of Reliance Infra and Reliance Communication from August onwards and will be replacing it with Coal India and Sun Pharma. At the same time, there is another change that may take place and that is about Indias most valuable company. Today, Reliance Industries is the number one company in terms of its market cap which stands a little below `3 lakh crore. The company has held the number one position for quite some time but its position is now under threat. The gap between the number one position and that of the second position is shrinking. Also, there is not much of a difference between the next three companies with TCS, Coal India and ONGC running neck to neck. With Reliance Industries underperforming on the bourses and the other companies improving their performance, there is a bright chance that in the coming months it may lose its coveted position. Just for sharing some information, Tata Motors was the highest market cap company in 1996 but today does not feature amongst the top ten companies in terms of market capitalisation (it ranks 21 now). In fact, only four companies from the 1996 list feature in todays Top 10 list. Those days Reliance Industries used to be at number three, just below Hindustan Unilever. So, a lot has changed in the last 15 years. The other companies which have moved out from the Top 10 list include Hindustan Unilever, Tata Steel, Bajaj Auto, Hindalco and Grasim. In fact during those days Coal India, TCS and Bharti Airtel were not listed but today feature in the Top 10 list. The trend that is emerging now is that an increasing number of companies featuring in the Top 10 list are those who came out with an IPO in the last one decade or so. We strongly believe that this trend would continue even in the future where some of the closely held companies would tap the market to dethrone the existing leaders. In other words, when the large companies tap the market they have a potential to create wealth for the investors, like Coal India did last year. There have been a total 13 companies in the last two years that tapped the IPO market with an issue size of more than `1,000 crore of which only three are quoting above their offer price. Our cover story therefore takes a look at the valuations of these companies with clear suggestions on the next line of action for the investors. The pledging of shares by the promoters has become another area of worry for the investing fraternity. In the last few days many of the companies took a huge beating in their market cap due to the pledged shares scare. Readers would recollect that way back in March 2009, through our cover story titled Sword Of Damocles, we had warned our readers of the danger of pledged shares by the promoters. Since then Dalal Street Investment Journal, the only magazine in the country to do so, continues to provide information on the promoters pledged shares through its databank so that our esteemed readers can take informed investment decisions. Our most recent story on pledged shares is on page number 20. Check it out!

managingeditor@DSIJ.in

an increasing number of companies featuring in the Top 10 list are those who came out with an IPO in the last one decade or so. We strongly believe that this trend would continue even in the future where some of the closely held companies would tap the market to dethrone the existing leaders.

SUNIL DAMANIA Managing Editor

www.DSIJ.in July 4 - 17, 2011 Dalal Street Investment Journal

Spotlight Analysis
UCAL

Fuelling Growth
UCAL has been a very significant players in the auto component industry for quite some time. The future prospects of the company look bright given the capability of the management to scale itself up

t has been a name to reckon with in the Indian auto component space. UCAL Fuel System offers comprehensive Fuel Management Systems for the auto sector. The company also manufactures pumps, emission control parts and various components for both ferrous and non ferrous material. From high pressure die casting to precision machined parts of micron level accuracy, UCAL produces the best the industry needs. Driven by technology the company has been historically offering new and better solutions to its customers. With its expertise in automotive components, the UCAL Group provides end-to-end solutions from product designing to analysis, prototyping, testing and validation services to its customers. It has one of the most advanced R & D centers in the industry. located in Ambattur, Chennai which is recognized by the Department of Scientific and Industrial Research, Government of India. The Manufacturing facilities in 5 locations - 3 in Tamil Nadu, 1 in Pondicherry and one in Haryana are state of the art facilities which the company has built over a period of years. The company has, since been a preferred supplier for some of the top OEMs such as
July 4 - 17, 2011

Maruti Udyog, Hyundai, Cummins, Bosch, Mikuni, General Motors, TVS Motor Company, Bajaj Auto, Suzuki, Yamaha, Hero Honda Motors, etc. Do these core strengths reflect in the financials of the company? The company reported a net profit of Rs 7.77 crore for the quarter ended March 2011 against Rs 2.57 crore during the same period last year. On the whole it ended FY11 with a net profit of Rs 22.20 crore against Rs 7.56 crore last year. The companys US subsidiary has done well last year and this is a good sign especially since UCAL had been struggling with that American acquisition for some time. Another fact that adds strength to UCAL is the fact that it has been reducing its debt. Its core business has been growing well

which has added a punch to its FY11 performance. A significant factor about UCAL is that till now almost 95 per cent of its revenues have been generated in the domestic market. This means that the company is yet to tap the international markets from its side. With Indian manufacturing skills particularly in the auto components space being talked about globally, the company is sure to benefit from the demand that emanates from abroad. For now the stock has been performing quite well and this has largely been due to the support that its financial performance has been providing. The management is quite upbeat about its future growth prospects and has been able to deliver in the past as well.
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Dalal Street Investment Journal

Funds Focus

Uptrend Ahead
Factors that are plaguing the markets currently are set to dissipate from the second half of the current fiscal. There looks to be a good chance of a forward push in the market from thereon

SANDIP SABHARWAL
CEO-Portfolio Management Services Prabhudas Lilladher

GLOBAL FACTORS

The markets at this point of time are getting influenced more by global developments.
WATCH OUT FOR GREECE

Events to watch over the next couple of weeks will be the direction which the bailout of Greece takes and the extent of correction in commodity prices.
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he results season for the March quarter got over by May and was largely on expected lines. However, there was a lot of divergence of performance among different companies within particular sectors too. As such it provided a good opportunity to reallocate assets from underperforming to outperforming companies. Overall the markets at this point of time are getting influenced more by global developments as most of the domestic factors that were negative for the markets have been already factored in. The key will be to watch the results season for the quarter ended June 30 which will give a much better idea about the health of the corporate sector in light of the rising costs and the slowdown in the economy. The downside risk to the equity markets is very low at this point of time and it looks like the February/ March lows of the markets will hold and form the base for a strong upward movement over the next one year. The events to watch over the next couple of weeks will be the direction which the bailout of Greece takes and the extent of correction in the commodity prices. Going forward, sectorally we believe that it is time to look at those sectors that benefit from a commodity price correction. The slowdown in the global economy combined with the refusal of the US Federal Reserve to go in for a fresh round of quantitative easing (QE) is likely to result in a significant correction in commodity prices over the next few months. Therefore, sectors like banking, capital goods and infrastructure among the large-caps and airline and tyre

stocks among the mid-caps look good. The biggest trigger will obviously be the lower input costs due to the commodity prices coming down as well as the fact that in my view the rate hiking cycle of the RBI has come to an end. The consensus view among economists is that there will still be further rate hikes but looking at the global growth picture, slowdown in China and the likelihood of a severe sell-off in global commodities I believe that the RBI might not hike rates any further. These factors will have two impacts. Due to the input costs coming down the margin picture for the companies will improve from the second quarter of the current financial year and also into the next year. Secondly, due to the interest rates stabilising and possibly coming down, the downside risks to economic growth as well as the impact of high interest costs on corporate results will start receding. The markets are setting up for a very strong upward spiral in the second half of 2011 and there is likely to be a reversal of the buy developed markets and sell emerging markets trade in this time period. At this juncture when there is there is total apathy towards equities, it is a good time to build a portfolio of strong large and mid-cap stocks. Valuations are cheap relative to the growth prospects, especially in midcaps where valuations look similar to the 2004 levels. Investors who build a strong long-term portfolio at this point of time without bothering about the immediate two to three weeks should create good returns over the DS next two years.

(As told to Dalal Street Investment Journal. The magazine may or may not subscribe to the views expressed in the article. Wish to comment on this article? Send your feedback to comment@dsij.in)
July 4 - 17, 2011 Dalal Street Investment Journal

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[ C O V E R S T O RY ] very bull market has always witnessed a torrent of IPOs. In a secular bull market, companies of all sizes and with all kinds of businesses jump on to the bandwagon of garnering funds to support their future business plans. It happened in 1988, 1994, 2000 and again in 2007. The trend is so strong that one finds them being discussed all over the place. They form the hottest topic around workplaces, cocktail circuits and neighbourhoods, enthralling every segment of investors who bet on them in the hope of making big bucks. All this sounds fairly good when the markets are rising. Huge listing premiums have provided good gains for those who have flipped their allotments for some quick gains. In fact listing gains have become a phenomenon as far as the IPOs are concerned. But what happens to those who continue to hold stocks bought in an IPO and do not exit on listing? How do investors having a long-term perspective of the market benefit from holding these stocks? The real problem for those who continue to hold on to the stocks subscribed to in IPOs begins when the market tide turns over. In a bull market valuations are not something that investors pay particular attention to. It is only in weaker times that issues crop up, thereby pulling down stocks to more realistic levels. The market is presently in more or less a similar situation. It has been struggling to find a meaningful direction with many worries on the macro-

economic front plaguing it for quite some time now. In fact the scene for the IPOs is not very encouraging even globally. According to a Reuters report, a record USD 58 billion in withdrawn IPOs in Asia and muted market debuts are expected to force listing hopefuls to cut valuations to win over investors in the worlds top region for offerings. Investors who have bought into recent IPOs and who continue to hold those stocks have been facing a big dilemma of what to do with these stocks, many of whom have not been able to deliver value as perceived by the shareholders. Investors are wondering as to when their investments will deliver value, if at all. We have tried to simplify their job by answering this question for them. If you look at the period between January 2009 and December 2010, a total of 93 companies have come to the market with either their initial public offerings or follow-on public offers. What we have done is to analyse the prospects of the stocks of those companies which came up with IPOs of more than Rs 1,000 crore in size during these two years. The reason for doing so is that investors are bound to be more stuck up in large-sized companies where the euphoria is often the highest. We have deliberately excluded companies - particularly PSUs which came up with their FPOs - because in those cases the price discovery was already in place. This left us with 13 companies which came to the market to garner more than Rs 1,000 crore
Issue Price `36

during 2009 and 2010. Among the 13 companies that are a part of our list, as much as four companies have seen their issues being subscribed by more than 40 times than what was on offer. Put together, these 13 companies have raised a whopping Rs 41,500 crore among themselves. Of them, ten have listed at a premium to their issue price while three went in at a discount at the time of listing. If you look at their current market price, the situation is starkly the opposite. Only three are presently trading at a premium to their issue price while the remaining ten are trading at a discount. Except for the three that are still trading at a premium to their issue price, the performance of the remaining is something that should worry their holders in a big way. What should shareholders be doing in these circumstances? Is the deep discount to the issue price an opportunity to buy more? Should you be getting rid of these stocks and park your money in much better opportunities that are probably available in the current market? Or should you just hold on to your nerves expecting better days ahead? What follows are elaborate answers to these questions so that you can make the right decision. As a continuation of this story we are also presenting a primer on what and how other companies that came up with the IPOs are doing. This should provide a wake-up call to our readers who have been holding on to the stocks so far.
CMP `23.40 Change Over Issue Price -35%

NHPC
t a time when power sector IPOs were being cold shouldered by investors, NHPC showed lot of promise. Investors were comfortable to see a government owned power-company tapping the primary market. However their expectations met with an anti climax on the listing day as NHPC listed at a premium of just 10 per cent over an issue price of `36. Currently trading at of `23, the scrip is down 36 per cent. The obvious question is what went wrong? A deeper look at NHPC shows that, the problems had started even
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NHPC Project Details With Earlier Comple on Date vis a vis Revised Commissioning Date
Identied projects For IPO Subanasiri Lower Uri II Chamera III (HP) Parbati III (HP) Nimoo Bazgo (J&K) Chutak (J&K) Teesta Low Dam (IV) (WB) Total Capacity (MW) 2000 240 231 520 45 44 160 3240 Earlier Completion Date Dec-12 Feb-11 Aug-10 Nov-10 Aug-10 Feb-11 Aug-11 Revised Commissioning Date Aug-14 Dec-11 Aug-11 Jan-12 Oct-11 Aug-11 Dec-12 Delay (months) 20 10 12 26 13 6 16

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Cover Story
before it came out with an IPO. According to media reports dating back to 2008, a senior NHPC executive had said that contractor issues and a huge exodus of employees; mainly engineers, to private power players had affected their projects leading to delays. Most of its projects got delayed by as much as one to two years while those that had yet to go off the ground were expected to be delayed too. Incidentally these were the very projects for which NHPC came out with an IPO. Despite these concerns NHPC went ahead with its IPO and raised around `6038 crore at very steep valuations (`2012 crore went to the government, while the balance `4026 crore came to NHPC) firming up plans of commissioning a massive 3240MW by December 2012. Did it deliver on its promise? In the last 19 months, NHPC has managed to commission only 120MW, taking its total capacity to 5295MW as on March 31, 2011. This categorically means all the identified projects have been delayed further. According to the prospectus NHPC had intended to commission 1240MW by December 2011, but that is unlikely to happen with overall delays ranging 6-26 months (refer table on NHPC project details with revised commissioning schedule). In fact as on March 31, 2011 NHPC has utilised only 40 per cent of the IPO proceeds. `2394.40 crore is still lying
SCRIPS MOVEMENT
40

35

30

25

20

S O N D J F M A M J J A S O N D J F M A M J 2009 2010 2011

in banks. The company has come up with various reasons for project delays, but wasnt the company aware of these issues when they came out with the IPO. No wonder the scrip is down by 36 per cent. We feel the scrip is still expensive at an EV/MW at `7.59 crore its FY11 figures compared to a six and half times bigger peer such as NTPC, which is available at EV/MW of ` 5.21 crore. Investors would might as well sell out the counter and invest elsewhere.
Issue Price `100 CMP `110.20 Change Over Issue Price

Adani Power
in July 2009 to fund two of its four power projects, Adani Power became part of the list of mega IPOs and an even more selective list of the mega power IPOs. Despite the fact that the investors had burnt their fingers in other power IPOs, Adani still managed a handsome response with an oversubscription of 51x. But a very subdued listing with a listing gain of just around five per cent, and the sluggish movement of the scrip till date, clearly shows how wary investors still are about power stocks. The only consolation for investors in this case is that, at a CMP of `110, it is still above its issue price with returns of 11 per cent. Certainly not much, but still good enough considering that most other peers still are trading substantially below their issue prices. So what is the differentiating edge that keeps Adani above its issue price? The execution capability of the company is what makes it different.

10%

successfully

raising

about

`3016.52 crore through its IPO

Adani has been successfully commissioning its projects in line with what it had promised in its IPO prospectus. As of June 2011, the company has built a total operational capacity of 2640MW. This we believe is quite commendable considering that its peers, especially the PSUs have faced execution problems. In fact the utilisation of funds as on March 31, 2011 shows that the company has fully deployed the issue proceeds in the projects they were raised
SCRIPS MOVEMENT
150 140 130 120 110 100 90 80
AS O N D J F M A M J J A S O N D J F M A M J 2009 2010 2011

for. Thus, effectively Adani Power should have a total operational capacity of 6000MW by FY12, with the balance 600MW spilling over to the next fiscal. Besides, what augurs well for this company is that it not only received the maximum coal allocation possible for its Mundra and the Tiroda project, but also has a long term power purchase agreement (PPA) for more than 80 per cent of its capacity. This will help it start generating incremental revenues as soon as more capacities start coming on stream. However, the only concern is the valuation. At FY11 numbers an EV/MW of `15 crore is quite steep when compared to its peers. However, we believe the scrip is trading at a premium on account of its on time commissioning of capacities, good revenue visibility due to long term PPAs, fuel tie up etc. But despite this no fresh exposure is advised at the current levels, though those who are invested already can stay put for a longer term.
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[ C O V E R S T O RY ]

SJVN

Issue Price `26

CMP `21.25

Change Over Issue Price -19%

art of the Government of Indias, disinvestment plan, SJVN was yet another mega issue that hit the capital markets during April May 2010. At an issue price of `26 (price band `23-26) and with 41.5 crore equity shares on offer, the PSU successfully raised about `1079 crore. But the only difference between this Category 1 Mini Ratnas IPO and the other PSU issues was that the entire proceeds from the SJVN issue were to go to the government, thus making it purely an offer for sale from the government of India. Apart from a Category 1 Mini Ratna status, there was nothing unique that SJVN brought to the table for investors. Established as a joint venture between the Government and the State Government of Himachal Pradesh, SJVN is a hydroelectric power company, which develops and operates Nathpa Jhakri Power Station (NJHPS). With an aggregate capacity of 1500MW located on the Sutlej River in Himachal Pradesh (HP), SJVN supplies power to

Himachal Pradesh and various states located in the Northern region of India. The company is also currently constructing the 412MW hydroelectric Rampur Project in Himachal Pradesh and is expected to be commissioned in 2013 resulting in a total capacity of 1912MW. Thus with no immediate massive capacity expansion plans like its peer NHPC, SJVN looked a more plain vanilla bet, which has been doing decently over the last few years.
SCRIPS MOVEMENT

At an issue price of `26, SJVN was available at EV/MW of `7 crore, which was at par with what NHPC was trying to command and even at a higher premium to that of NTPC. No wonder the scrip never took off. It gave a mere 7.69 per cent gain on listing. At a CMP of `21.25, the scrip is down by more than 18 per cent. So where does it go from here? At the current level though the valuations have corrected, we still believe it is better to stay away as we dont see this scrip going anywhere and may continue to underperform as there are no major triggers. Apart from the existing 1500MW, the only 412MW capacity that is expected, will be commissioned after more than a year and that too if the project completes on time. Apart from that the other projects the prospectus mentioned are in a developmental stage. The lack of triggers makes it sensible to avoid a fresh exposure. What does one do with the existing shares? Hold on for some more time.
CMP `67.00 Change Over Issue Price -33%

JSW Energy
SW Energy, a Mumbai-based power generation company also engages in transmission, power trading, mining, and equipment manufacturing. It is considering expansion into renewable energy and distribution. It
SCRIPS MOVEMENT

Issue Price `100

got listed on the bourses in January 2010 after a draft RHP withdrawal in July 2008 due to unfavorable market conditions. The company through its IPO raised `2673.27 crore which
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was subscribed 1.68 times. At present the company is trading at `67 which is 33 per cent below its issue price of `100. For FY11 the company reported a modest growth of 13 per cent on a YoY basis in its bottomline which stood at `841.82 crore. This increase in the net income for FY11 was despite a revenue growth of 82 per cent on a YoY basis (`4294 crore for FY11 vs. `2355 crore in FY10) reflecting the erosive impact of higher fuel prices and weak merchant tariffs. Though, it continues to remain on track to commission 3140 MW of power capacities by FY2012, its capex on the development portfolio beyond that remains negligible. Availability of coal continues is a major concern for the company. The management recently indicated that supplies from Sungai Belati will most probably not materialize, thus further increasing JSW Energys dependence

on spot purchase of imported coal. JSW Energys excessive leverage to spot markets coupled with the fact that 60 per cent of the power is likely to be sold in the short-term market remains a cause of concern. Beyond the current portfolio of projects under construction aggregating to 3140 MW (of which 2,030 MW has already been either commissioned or synchronized), there is a limited visibility on the development portfolio of 9.5 GW. At present on the valuation front the company trades at a P/E of 12.79 times its FY11 earnings. A major cause of concern that remains is the percentage of merchant sales which was as high as 67 per cent in FY11. A drastic decline in the tariffs is playing a spoilsport for the company as the major projections that the company has made are based on high merchant prices. At present investors should refrain from taking a fresh exposure to the counter for the time being and
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Market Moves
Most of the negatives as of now have been factored into the market, but the bigger worry will unfold over the next fortnight. With the results season in the offing, it would be better to watch out for any negative signals at the beginning itself says Shailendra Lotlikar.

All Is Not Well Yet

he last few trading sessions have seen the Sensex and the Nifty move up decisively, particulary after the fortnight began on a very weak note. The past fortnight (the time between when we closed our last issue and now) the markets have ended in the positive with the Sensex rising by an overall 360 points and the Nifty moving up by 98 points. Another factor that adds strength to the positive bias is that institutional investors have been net buyers in the market over the past fortnight. FIIs were net buyers to the tune of Rs 175.48 crore while domestic funds bought a much higher amount of equities during the past fortnight totalling to Rs 1017.50 crore. Considering the weakness that has been prevailing in the market for quite some time now, this should certainly help in Index 15-Jun cooling down BSE - 100 Index 9,528.22 some nerves. While all this BSE - 200 Index 2,259.94 looks to be so BSE - 500 Index 7,118.06 far so good, NSE - CNX 100 5,389.10 it hasnt really NSE - CNX 500 4,423.00 been a smooth S&P CNX Nifty 5,447.50 ride for the Sensex 18,132.24 market. Regular worries of inflation and higher interest rates took some kind of a backseat during the past fortnight. Two big events shook the market during the initial part of the fortnight were fears of abolition of a tax advantage on capital gains with Mauritius and rumours about shares pledged by promoters of certain companies being sold off by their lenders. Stocks of many companies which figured on this list got hammered mercilessly over the next couple of days after the rumours started spreading. The contagion has been arrested for now, but it could throw up some nasty surprises if not investigated properly. As if all this was not enough the Meteorological department came up with a warning about the probability of a below-normal monsoon this year. On the global front, Europe has again come to haunt the market. The uncertainty over the bailout of Greece has been one of the biggest factors

that has played out on the market psyche over the past fortnight. But the market has responded well to the clarity that has emerged on that front. Greek lawmakers are likely to approve austerity measures in a bid to secure international funds to prevent what is looked at as the Euro zones first sovereign default. Once that happens at least a part of the worry would be behind us. The negatives are just not abating. But the market somehow seems to have changed its mood at least for now chugging to whatever little it can. That little, came in the form of a bailout of Greece which helps dissipate worries on the Euro zone front at least for the time being. Macro economic factors remain a key concern. Do not forget, inflation is down but not out. It continues to be a key concern as 27-Jun Change far as the Indian 9,628.17 1% economy is con2,274.30 1% cerned. The gov7,135.87 0% ernment hiked prices of Diesel, 5,451.30 1% cooking gas and 4,439.35 0% kerosene during 5,526.60 1% the past fortnight. 18412.41 2% This will surely have a cascading impact on prices of other goods and services and in turn push up overall inflation. So, it is just about time that inflation will again raise its ugly head to come and haunt the market. For now, after a prolonged pain and downtrend the market is gradually trying to find its feet again. The short run up of the past fortnight should hopefully translate into an intermediate rally as the market has already factored in most of the negatives that have cropped as of now. But we are heading into the results season once again. It remains a very crucial factor as far the future direction of the market is concerned. The impact of rising interest rates are expected to be felt on the performance of India Inc going forward. Will the June quarter be the beginning of it? It would be good to bear this in mind as your stratDS egise for the next fortnight.
(Wish to comment on this report? Send your feedback to comment@dsij.in)
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Given todays stressful life that all of us live, Vishesh Sharma feels that the best idea is to have an healthy insurance policy that will take care of any emergency or critical illnesses instead of getting into a financial dark hole at the most crucial moment
ood health is the basis of all happiness in life. If you remain healthy all things in life can follow and be taken up smoothly. A persons health is the only real asset that he/she can count on. Most of us lead very hectic lives, trying to juggle between work and home. All the stress, travelling, long hours and irregular eating habits make our lifestyle very

susceptible to illnesses. The 21st century is a fast-paced one where there is little time to exercise and this is further complicated by factors such as pollution and stress. No wonder the number of people suffering from health problems is on the rise. Healthcare has also become very expensive and as such, it becomes difficult to bear the increasing costs if you are hit by an illness, which requires attention other than that
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of your general physician. All these factors combined make it important to procure a health insurance plan and maintain it regularly. In the absence of an appropriate health insurance, being sick or meeting with an accident can cause considerable financial trouble. Hospitals providing the latest medical facilities and state-of-the-art infrastructure charge exorbitant rates. Health insurance is the only tool that can help at large in such circumstances. It may seem like an expense today, but it helps in protecting against a future expenditure that may be considerably higher and uncalled for. A medical insurance or health insurance policy is a way to safeguard your health from the impact of illnesses as it helps reduce the financial impact as well as the mental pressure associated with an illness. Health insurance in India is normally a comprehensive health cover, covering nearly all illnesses and injuries requiring minimum 24 hours of hospitalisation. A typical health insurance policy does not cover any medical expenses that are routine in nature or for convenience like routine health check-ups, cosmetic surgery, plastic surgery, aesthetic treatment and so on. There is a certain waiting period with regards to pre-existing diseases (PEDs) or some named illnesses like cataract or hysterectomy for a defined period of two years to four years, says Kamal Gupta, an insurance agent.

Various Options Available

As soon as you decide to buy health insurance, the next step is to finalise what exactly you want to buy, and from whom. As of now the various options available for a common man include the following: Individual Health Plan (IHP) These are the so-called traditional health insurance covers, commonly known as mediclaim policies. They mainly cover hospitalisation expenses, provided it is for at least 24 hours. The expenses for hospital bed, nursing, surgeons fees, consultants fees, cost of blood, oxygen and operation the-

Questions To Ask Before Opting For A Plan

Are you willing to be limited to a network of doctors and hospitals? How much are you willing to spend on premiums? How do you feel about your primary care doctor making referrals to specialists for additional care? Are you good with keeping records and filing claims or do you want it to be handled for you? Are there chronic health conditions or disabilities in your family that need to be considered? Do you travel a lot or spend time at two homes, or can you be reasonably certain you will only need nearby medical care? Will you need coverage for a family member in college? Once you determine whats most important to you in a healthcare plan, you can talk to an agent to discuss plans and compare quotes. atre charges are the usual inclusions in this plan. However, unlike the past, most plans now come with sub-limits for each of these heads. They usually do not cover pre-existing diseases or complications arising from them for the first four years of the policy. Family Floaters (FF) These can be seen as a next step of the IHPs for a family. The benefits remain largely the same, but the sum insured can be availed by any or all members of the family and not a single person. A FF can be bought by an individual who becomes the proposer along with spouse, dependent children of up to 25 years of age or even unmarried, divorced, widowed daughter and dependent parents. Even a parent-inlaw can be covered. Critical Illness Plan (CIP) This plan provides financial assistance if the insured develops a serious ailment such as cancer or has a stroke. Each cover has a list of ailments, usually 9-12 of them. One can get it in the form of a rider attached to a life insurance cover, or as a stand-alone policy from either a life insurer or a non-life insurer. If critical illness occurs, it pays the entire sum insured and the policy terminates. This can happen only once for any particular illness. To get the payout, the insured has to survive for 30 successive days after the diagnosis. No claim can be made during the first 90 days of the inception of the policy.
July 4 - 17, 2011 Dalal Street Investment Journal

The Perfect Health Plan

Many a people believe that a good healthcare plan should pay for necessary care without leaving you with lots of debt or high out-of-pocket costs. Health insurance is supposed to protect you in case of a catastrophically expensive illness and not simply cover your routine costs as a generally healthy person. And many individual plans do not come close to the objective. So while opting for a health plan, keep in mind the following: Ensure that the medical expenses incurred on hospitalisation for more than 24 hours are covered by the insurance company. If you have a cashless policy, the hospitalisation expenses are directly settled between the hospital and the insurance company. An insured person can receive a tax exemption on the premium paid, up to a significant amount each financial year. This means that while you are safeguarding yourself, you are also reducing your tax burden and saving money. Try to insure yourself for treatments received prior to hospitalisation and during the recovery period. Go for a floater plan which covers the entire family under one policy and allows the coverage of the medical insurance policy to be shared among the family members. In an ideal case, an individual may need a health cover of `3-5 lakh and thus a floater plan of `10-15 lakh for a family of 3-4 should suffice. It is indeed not at all advisable to even go for a larger plan, say a cover of `20 lakhs or more. You would be paying a very high premium for a higher medical insurance policy that could instead be used for building a corpus, says a financial planner.
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