HBF Direct Ltd is in the process of business scale-up in Pan India and overseas. Moreover, HBF Direct Ltd going to launch it’s IPO on the BSE platform in the next 12 months. Before IPO HBF has decided to expand its business all over the globe.
For the expansion program, HBF Direct Ltd has budgeted to raise Rs. 2 Crore initially in two phases.
Phase -I of Rs. 50 Lakh & Phase -II of Rs. 1.5 Crore.
Term - 5 year,
(Cumulative Non-Convertible Preference shares on fixed dividend on 15% )
Considering the expectation and need of recurring income especially during this pandemic breakdown everyone needs recurring Income on his/ her investment.
HBF Direct Ltd has come up with the lucrative Investment opportunity for the Investor in the form of Cumulative redeemable preference share on which HBF will pay a dividend of 15% p. a. every year up to 5 years and at the end of the 5th year, the principal amount of Investment shall also be returned to the Investor.
Illustration: Suppose, if you Invest today (Year-2021) Rs. 10,00,000 in Preference share, then you will receive 15% dividend every year up to Year-2026 and Rs. 10,00,000 in Year-2026.
About HBF Direct Limited
HBF DIRECT LIMITED, a public limited company, is an emerging financial advisory organization run by a team of financial planners and Management Consultants. HBF Direct Ltd. strives to offer the right business advisory services to businesses to help them grow and leverage opportunities presented by today’s complex global economy.
Our Team provides the best in class services in the field of Gap Analysis, People Management, Fundraising & IPO Advisory, Corporate Finance & Legal Advisory, Start-up consultancy. Additionally, we also assist in strategy development and the day-to-day operations of a business.
More about Prefrence Shares:
1. What's great about preference shares
- you are guaranteed of dividend
If you own Equity shares, you are not automatically entitled to a dividend every year.The profit will be paid just if the organization makes a benefit and proclaims a profit.This isn't the situation with preference shares. An preference investor is qualified for a dividend each year.
- What occurs if the organization doesn't have the cash to pay dividends on preference partakes in a specific year?
The dividend is then added to the next year's dividend. If the company can't pay it the next year as well, the dividend keeps getting added until the company can pay.
These are known as cumulative preference shares.
Some preference shares are non-cumulative - if the organization can't pay the dividends for one specific year, the profit for that year slips.
- They get priority over equity shares
Equity shareholders get a dividend only after the cumulative preference shareholders get theirs.
Preference shareholders are given a preference over the rest. That's why it is called a preference share.
2.What's not good about preference shares
- 1. They are not easily available
Usually, preference shares are most commonly issued by companies to institutions. That means, it is out of the reach of the retail investor.
For example, banks and financial institutions may want to invest in a company but do not want to bother with the hassles of fluctuating share prices.
In that case, they would prefer to invest in a company's preference shares.
Companies, on the other hand, may need money but are unwilling to take a loan. So they will issue preference shares. The banks and financial institutions will buy the shares and the company gets the money it needs.
This will appear in the company's balance sheet as 'capital' and not as debt (which is what would have happened if they had taken a loan).
- 2. They are not traded on the stock exchange
of course, is the fact that they aren't traded on the markets.equity shares are traded in the markets and their prices go up and down depending on supply and demand for the stock.
But, that does not mean the investor is stuck with his shares. After a fixed period, a preference shareholder can sell his/ her preference shares back to the company.
You can't do that with equity shares. You will have to sell your shares to any other buyer in the stock market. You can only sell your shares back to the company if the company announces a buyback offer.
As you see, preference shares are not really stocks -- they have many features of bonds, such as assured returns.
In fact, they are like fixed income instruments -- their value remains the price at which the company issued them, while their dividends are fixed, just like interest payments.
|Types of Preference Shares||Description|
|Convertible||These shares can be readily converted into equity shares.|
|Non-convertible||Though these types of preference shares cannot be converted into common stock, they are still prioritised over them.|
|Redeemable||Typically, these shares come with a maturity date. On maturity, the company repurchases its shares from the investors at a fixed rate and ceases their dividend.|
|Non-redeemable||These shares cannot be redeemed in the lifetime of the company. Notably, they come with a fixed rate of dividend.|
|Participating||Besides extending dividends, participating preference shareholders are also entitled to surplus profits of the company.|
|Non-participating||These shares do not entitle shareholders to any surplus profit but offer them the promised dividends.|
|Cumulative||In the event of loss, a company is liable to pay the shareholders’ outstanding dividends.|
|Non-cumulative||The non-cumulative shareholders are not entitled to receive dividends in arrears.|
|Adjustable||In case of this share, the rate of dividend is not fixed and gets influenced by prevailing market rates.|
What separates them
To comprehend Preference shares, you should initially comprehend what dividends are.
When you purchase shares, you don't put resources into the securities exchange. You put resources into the value offers of an organization. That makes you an investor or part-proprietor in the organization.
Fortunately, since you possess some portion of the advantages of the organization, you are qualified for an offer in the benefits these benefits create.
On the off chance that you sell the offers for more cash than you picked them for, the benefit you make is called capital appreciation.
You could also make money with dividends.
Usually, a company distributes a part of the profit it earns as dividend.
Difference Between Equity Shares and Preference Shares
Some of the features of the various types of preference shares are similar to equity shares in general; they are two distinct entities. This table highlights the basic differences between equity shares and preference shares.
|Parameter||Preference Share||Equity Share|
|Definition||It offers preferential rights in terms of receiving dividend or capital amount.||It represents shareholders’ ownership in a company.|
|Rate of dividend||Dividend payout’s rate is fixed.||Dividend payout’s rate fluctuates with more earnings.|
|Dividend payout||Preferred stockholders are given more priority over common stockholders during dividend payment.||Shareholders avail dividend only after other liabilities have been paid.|
|Bonus shares||Shareholders may receive bonus shares against current shareholdings.||Shareholders may receive bonus shares against their shareholdings.|
|Capital repayment||Capital repayment is made before equity shares.||Capital is repaid at the end.|
|Voting rights||Shareholders do not enjoy voting rights.||Shareholders avail voting rights.|
|Participation in management||Shares do not come with management rights.||Equity share allows shareholders to partake in company management.|
|Convertibility||Preferred stocks can be converted.||Equity stocks cannot be converted.|
|Arrears of dividend||Shareholders may receive a cumulative dividend.||Shareholders are not entitled to avail cumulative dividends.|
|Types||Preference shares and its types include, convertible, non-convertible, participatory, non-participatory, cumulative, non-cumulative, etc.||They are simply classified as ordinary or common stock of a company.|
|Issuance||It is not mandatory to issue preference shares.||Companies must issue equity shares.|
|Suitability||It is considered suitable for investors with low risk-taking capacity.||It is considered for investors who can take risks.|
Contact for more information
Date - 12 jul 2021, Term 5 years (Example on 10,00,000/- Capital)