Arun Pudur: From Bengaluru to billions

Recently, Wealth-X listed Indian businessman Arun Pudur as the world’s 10th richest individual under 40; top on the list was Mark Zuckerberg of Facebook. 

Arun Pudur, whose net worth is estimated at over four billion dollars, is the CEO of Celframe, which makes world’s second most popular word processor after Microsoft, among other things. Based in Kuala Lumpur, Arun Pudur has diversified into several sectors including mining and real estate.     

In an exclusive interaction with Tarannum Khan of Deccan Herald, the reclusive billionaire, who says he does not give interviews as they intrude into his personal space, opens up. 

He talks about his humble beginnings in Bengaluru, the milestones in his sensational success, the city which made him, his parents and the qualities that propelled him to the top. 

A shorter version the interview appeared in the Panorama section of the Deccan Herald.

You were born in Chennai, when did you shift to Bengaluru?

When I was in my sixth standard, my family decided to move to Bengaluru as my father spent nearly seven to eight months in a year there. When we came to Bangalore, we stayed in Rajajinagar and then moved to Basaveshwarnagar before buying a place in HBR Layout. I stayed there till 2003, when I shifted overseas. 

When I lived there, there was nothing in HBR Layout. Now I am told it’s a central part of the city.

When you were born, your family felt, you had a great destiny to fulfil...  

My father always used to talk about us being Tirupathi Iyengars, one of the three families, who were the high priests at Tirumala. Though we never managed the temple, we always knew greatness was within us. 

My mother always used to say that I was the lucky one in the family. After I was born, my father’s career skyrocketed. He passed away just three months ago. My mother always instilled in me that I was born for greatness. 

Your parents wielded a considerable influence on your growth...

My father Sri Ranga, was a cinematographer, who was known for his work in the 16 mm movies, which typically tend to be artsy and low-budget movies. He had built quite a reputation in Kannada and Tulu industries and thanks to him I knew everyone in the industry - be it Vishnu uncle, Ambareesh uncle, even Dr Rajkumar and his sons.

I remember when Shivrajkumar stopped his car on a road and touched the feet of my father. I was shocked that my father, who was just a normal guy at home, commanded that kind of respect in the industry.

He did produce a few movies and television serials. But I asked him to retire early as the movie industry is a really tough business and every Friday fortunes are made and lost. I didn’t want him to be stressed out.

My mom was a housewife, who was my teacher as well. She was a disciplinarian, who made sure that we did our chores ourselves, including washing clothes and utensils.

But she was there 24x7 for me and now, I understand, the value she brought to my life. She taught me the way I should grow.

Now I have chefs, cleaners and a dozen people helping me run the house. But my mom used to do everything on her own. 

I have a brother as well, who runs his own consulting business.

While stuyding in Bengaluru, you seemed to have stayed away from well-known schools…

When we moved to Bengalurufor my sixth standard, it was already August. So my father had to scramble to find a school. 

Though I was supposed to go to National School in Rajajinagar, the cut off date to transfer had passed. So I joined St Anns Matriculation School. I had never been in a co-ed before, so it was a shock when I saw girls sitting in the classroom. 

I had to learn Kannada as well. I think in my entire life it was the only time I failed in a subject.  I am very proud to say that in a matter of six to seven months, before the end of annual exams, I had mastered Kannada, and scored my usual, between 80 to 95 per cent. 

The choice of college was also unconventional…

In SSLC, my results were fantastic, so I could have picked any course or college. Typically for Bangalore, everybody was pushing me to take science. But the entrepreneur bug had already bitten me and I wanted to do commerce instead of science. 

While I was looking at St Joseph’s and other colleges, my mother wanted me to come home for lunch everyday as we were not allowed to eat outside.

So, I joined the Nijalingappa College in Rajajinagar, which was nearby. Though everyone said it was notorious, the year I joined, a new principal took over and he turned my college years into the strictest time of my life. 

Literally, we were not allowed to do anything at all; only in the last year, that is when I was in the third year of B com, we could have a college day. 

I was pretty studious and attendance was very important for me. I would sit right on the front bench everyday. College days are the best memories one has in a life and my longest-lasting friends are from this college.

 

You have been away from Bengaluru for a long time; what are your memories of the city... 

It brings joy whenever I think of my days in Bangalore. The City was extremely cold until early 2000. Coming from Madras in the ’80s, where it was scorching hot, I took to wearing sweaters in Bangalore. 

Whenever I travel overseas, and whenever I wear a sweater, the first thing that comes into my mind is Bangalore. If anyone asks me where I am from, my immediate answer is not Malaysia, not Chennai, but it’s Bangalore, India. 

I remember the time with my friends when we used to ride in our kinetic Honda and drive down to Bannerghatta or the Tumkur road. 

And of course, the one-by-two coffee or tea... Though I was not allowed to have tea or coffee at home, when I was out with my friends, we used to have by-two tea, and I think that’s a very Bengaluruthing to have. 

There were some bad experiences as well; when we were staying at Rajajinagar, the Cauvery riots happened. We saw how the National School was looted. 

I have not visited Bengalurufor a very long time. My parents went back to Chennai as that was where they were born and brought up. But I am in touch with few of my closest friends through Whats App and Viber. 

What turned you into an entrepreneur? 

I think curiosity, the zeal to solve problems and take on challenges. If you ask any of my school or college mates, they will tell you that I used to look forward to examinations, which may sound very funny, but that’s true. 

I never wanted to work for anybody. In my entire life I have spent just one year working for a company in Jayanager. It was a training company. When I had joined the company they had a turnover of five to six lakhs a year. When I left after nine months, I had brought up the turnover to one crore a year.

I was working to open franchises for this training centre. That guy had promised to pay me for every few centres set up, but he did not keep his word. 

I have seen top CEOs of multinational companies, who retired with very little to their name. They were running 120 and 130 billion dollar companies and now may have a personal fortune of 30 to 40 million dollars. And that was what I didn’t want to be. 

You began your career at the age of 13 in a garage, fixing kinetic Hondas... 

We opened the garage for a guy who was working for a shop near our house; he became a friend of us. He was from Tamil Nadu and could not speak Kannada. As we could speak Tamil, though we are Telugus, he became close to us. 

He told me there was good money in garage. So we coaxed our mother and borrowed a few thousands to fund the garage at Rajajinagar, just a stone’s throw away from National school. But he disappeared after five or six months and we were stuck with the garage.

When I began my career in the garage, we had no training.  There was no Google at that time or any no manual. I had just had observed how this guy used to fix bikes and picked up from there. 

But whenever a bike or a scooter used to come with a problem, I was on my own.

We used to solve problems on the fly and became good at that. I really loved it. I could open and fix back the engine, almost the entire vehicle, in about one hour and fifteen minutes, without any specialised tools.

Sai scooter garage became famous and even scientists from ISRO started coming to us. That is where I think I got the taste of business. That is where I learnt sales, marketing, customer handling, problem solving, managing human resources and financial management.

Running the garage was not a financial necessity to our upper middle class family. But I still ran it till my first year or second year PUC. 

I would come back from school, finish homework and then open the garage. On Saturday and Sunday we were open full. It helped me not to get into wrong company, wasting my time, or you can say, chasing girls.

My priority was to show much business I could generate, how much money I could give my mother. My mother, who managed the finances of the house, would keep all the money. We would consider ourselves lucky to even get 10 rupees from her. But I loved the business. That’s why I went into it.

But we decided to close the garage because of my studies; my father wanted me to perform very well in college. 

But you started breeding dogs after that...

From my aunt in Chennai, I found out about breeding dogs, and she gave me a Boxer to kick start my business. I started breeding boxers and Rottweilers. I have delivered hundreds of puppies, cut their umbilical cord and taken care of them. Though there was no formal training, I learnt how to manage them. Any dog lover would tell you that a dog will not allow anyone near the puppies unless she trusts you with her life.

Then I used my marketing skills to sell the puppies for up to Rs   20,000, which was good money in the mid ’90s. I was in this business till the end of my final degree. 

You started Celframe after graduating; how difficult were the early days… 

We opened the first office of Celframe at Lalbagh road. Prior to it, I had done one venture with my brother, which had failed.

Funding is a problem when you are not a big brand or don’t have a big family name behind you. Because of my age, I worked with wrong people, who took advantage of my naivety. I lost quite a bit of money - my own money and also the money of some of my initial backers. But I bounced back and it made me understand people better.

What were the major turning points in your career?

Everything was a turning point - opening the garage, breeding dogs, starting a technology company. But the biggest jump or spike in my revenue happened - if you consider money to be metric of success - when we released our first product called Celframe office. 

It is now considered to be the Number 2 office suite in the world by way of sales. Not many people know that Microsoft office makes more than 60 billion dollars annually. When I launched my office suite, companies like Sun had failed in this product category. Even IBM’s Lotus notes had not made a big impact. Coral is still there but its sales are very small. 

It is said you were one of the few people the Redmond giant could not smother...

It was more of a David and Goliath kind of situation. Being a monopoly Microsoft used every tool in its arsenal to bring us down. They made sure that no Original Equipment Manufacturer like Dell, HP or IBM would ever buy our products and pre-load them on their PCs. 

I will not use the word bully but that is the word everybody uses when it comes to dealing with American tech firms. They use patent, money and media to bring down any small company that may look like a threat.

How did you survive that? 

In this industry, partners and distributors get one or two per cent on every deal they make. I decided to give away 40 percent of my revenue and make them partners in success. We treat customers with respect and customise the way they want. 

I focused my business more on the public sector as private companies cannot bully the government.  We managed to implement our product in several governments in Asian and African regions. 

We made it a policy to promise a 50 per cent reduction in the tech cost of customers using our products. That is, if they are paying 100 million dollars to a competitor, we would deploy our software for just 50 million. We would increase the price over three to four years and by this time they would have realised that we were a fantastic company to work with. We also supported them very well. 

That was the biggest hurdle I crossed in business. But now with the mobile ending the old monopolies, things are moving forward amazingly.

You have also made you mark as an investor...

I have diversified into gold mining, coal business, oil and gas, real estate, venturing with top companies. I am looking to build a casino and start an airlines in South Africa. 

It’s said that my fortune is four billion dollars but with my diversification it has grown nearly five to six times in the last two to three years. 

I am a very cautious investor. You want me in, you need to show me why should I invest money. I would like to know the entire story and the people before I do business. I turn away from a deal if the pressure is too much for me to invest money into it. 

I invest only if I can get a majority control on that company. I don’t like to be a minority partner as I am very passionate about what I do. I get involved in minute details from the start to the end. The running of the company is done by CEOs whom I trust. But I get involved in major decisions. If a problem needs solving, I am there in the front. I don’t like to sit back and let my people take the hit. 

You say your upbringing taught you the value of money

There was a time when I used to buy jets like buying candies. I had eight private jets of my own. I once tried to sell one of my jets and found that I had lost about 40 percent of what I had actually paid. Then I realised that these toys, homes or yachts, do not add much value to you. 

I took the hit, got rid of jets and houses, and reinvested them back into my businesses. I also turned whatever jets and yachts I was left with, into a rental business. 

This lesson, appreciating the value of money, was taught by my parents. The strongest reason for my success was the foundation I had when I was young. 

What are your future plans? 

I am excited about several ventures we are pursuing. We started a technology company called Browsify corporation a few months ago. We are setting up one of the largest mines in South Africa.

I am looking for partners to bring Celframe products to India. It’s ironical that most of the governments use my product, but the Indian government does not. India is still reliant on the investments coming from the US. China did a phenomenal job supporting local companies such as Alibaba.

Though I am known globally for my technology company, very few people know that I have a group company called Pudur group. We are going to make the information public sometime later this year.

You left Bengalurufor Kuala Lumpur, when the whole tech world was coming here…   

I was brought here in 2002 or 2003 by someone I knew in Bangalore. Though the business with him didn’t work out, and I lost quite a bit of money, I loved the way the government was moving over here.

The quality of people, though more expensive than India at the time, was very good. The access to banking was much better; if I needed money, I could always rely on my bank without having my father to co-sign as age was not a barrier. 

As I grew, I was given tax exemptions. I have not paid tax in the past eight to nine years. I do pay income tax, though a small amount.

Government is straightforward; if you need an approval, it gets done on time. Malaysia compared to Singapore is a bit slow, corruption does exist here as well. 

The support from the government is phenomenal. As it is a small country, they act pretty fast. They can change rules very fast in the interest of the nation.

The production of six major oil companies since 1999!

To understand the production of oil must first know that it is not oil production issue, but fluid and oil equivalent!Whether for global oil production, or production of a large company, it is always about liquids is not oil.Liquids production includes conventional oil (precious!) But also:- Synthetic Fuels : BTL (Biomass to Liquid), GTL (Gas to Liquid), CTL (Coal To Liquid) ...- Shale oil: TOL : Tight Oil)- The oil sands and heavy oils (below 10 ° API)- Condensate (above 45 ° API)Production BOE (Barrel Of Oil Equivalent) is a kind of sandwich book in which we add the production of liquid and gas production. Gas conversion barrel Boe this fact on a "spa" and non-financial, yet oil is much easier to carry and use than gas.For example, the company x has a production of 6 million barrels BOE, 3 million of liquids.Translation: half of its production is gas and the other half are liquid, from its liquid is only part of conventional oil.On the chart below if you can observe the evolution of production combine six major oil companies.

You will notice that production From (liquid plus gas) had two peaks in 2006 and 2009, the 2009 summit is slightly higher than the peak of 2006.
Liquids production also has two peaks, one in 2006 and one in 2009. But the 2009 is lower than that of 2006 as liquids production decline since 2006.

Liquids production of the six major companies is +/- 9% of world oil production. The rest is produced by national companies (especially) or smaller companies (some). Even if they are "only" 1 / 10th of the world production have his companies, most centenarians, who have the technical and financial capacity to adapt. And despite rising prices in 2008 and 2011-13 production BOE down a bit, their liquid production decline and probably much lower than their conventional oil production tremendously!For clarity, I have excluded a lot of information, remarks that explanation and this graph. It should be noted that the highlights:1 despite the growing share of natural gas production Boe decreases.2. The liquid share in production Boe is becoming weaker. She represented 63-4% in 1999-2001, today it is only 50%.His big companies are the most dynamic part of the oil production, liquid production fell in an environment (increase in 2008 and 2011-13). This is indicative of the "fragility" of world oil production.
"Believed in oil, fall is not a reason to fear but an opportunity to buy"

John D. Rockefeller 1839-1937

Very Useful

Very useful article for value investors especially so for the graphic description of the concept of Margin of Safety. When you read Seth Klarman's seminal text 'Margin of Safety' this graphic description would surely aid your understanding.

 

Margin of safety are the 3 most important words in investing.

Here’s an image that explains it very well.

Margin of Safety

But do you really understand what margin of safety means?

Here are some definitions and references to a few greats.

Margin of safety is the difference between the intrinsic value of a stock and its market price. Another definition: In Break even analysis, margin of safety is how much output or sales level can fall before a business reaches its break even point. – Wikipedia

A principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value. In other words, when market price is significantly below your estimation of the intrinsic value, the difference is the margin of safety. This difference allows an investment to be made with minimal downside risk. –Investopedia

A margin of safety is achieved when securities are purchased at prices sufficiently below underlying value to allow for human error, bad luck, or extreme volatility in a complex, unpredictable and rapidly changing world. – Seth Klarman

You have to have the knowledge to enable you to make a very general estimate about the value of the underlying business. But you do not cut it close. That is what Ben Graham meant by having a margin of safety. You don’t try to buy businesses worth $83 million for $80 million. You leave yourself an enormous margin. When you build a bridge, you insist it can carry 30,000 pounds, but you only drive 10,000 pound trucks across it. And that same principle works in investing. –Warren Buffett

The Single Most Important Factor

Simply put, you practice margin of safety by buying an investment at a lower price than the valuation.

However, when margin of safety is mentioned, most investors link it to quality over price. Buy a quality asset that will be around for 20-30 years and you are set. But quality isn’t mentioned once in the above definitions.

Quality doesn’t ensure safety.

High quality assets can be risky, while low quality assets can be safe.

In all four quotes, there is only one common theme that addresses safety.

The price you pay.

Not the business, not how shareholder friendly the management is and certainly not the growth upside.

Margin of safety is all about price. Margin of safety is designed to make you money by not losing money.

Rule No.1: Don’t lose money

Rule No.2: Don’t forget rule no.1

This is Buffett’s adaptation of margin of safety for the masses.

Bottom Up Investing

I admit it. I speculate here and there.

Who doesn’t? When you think that Apple Inc. (NASDAQ:AAPL)’s iWatch will be a hit, it’s speculating.

When you come up with theories of how Tesla will revolutionize the car industry, that’s speculating.

But a margin of safety investment framework starts with assessing risks and the downside before focusing on potential returns.

Our disciplined risk aversion throughout 2011 enabled us to avoid dangerous temptations and remain focused on investments in our areas of strength and competitive advantage. – Seth Klarman

Outside of investing, it’s a fundamental core to many applications. Funny how it gets so out of whack when applied to investing.

In engineering, people have a big margin of safety. But in the financial world, people don’t give a damn about safety. They let it balloon and balloon and balloon. It’s aided by false accounting. – Charlie Munger

Valuation is Most Important

Valuation is important, but every valuation method has assumptions.

I use multiple valuation methods to cover my bases because I don’t believe a single valuation method is suitable for every company.

You wouldn’t use a hammer to fix everything in your home. You may need a drill, a saw, a broom. That’s how valuation should be.

Here are my methods of choice:

• a DCF for companies with strong and consistent cash flows
• Reverse DCF to find out what assumptions the market is pricing in
• the Graham formula to find the intrinsic ranges using EPS and for growth stocks
• EBIT multiples for relative valuation using EV/EBIT
• Absolute PE to calculate what information the current PE is providing
• Earning Power Value to value the competitive strength and to calculate a no growth value based on earnings strength
• A net net calculation where I want to figure out the asset value of a stock

However, no matter how few variables there are in your favorite stock valuation method, you always end up making assumptions.

But what if those assumptions go wrong? How do you limit the damage?

It comes back to the price you pay.

Valuation is the closest thing to the law of gravity that we have in finance. It is the primary determinant of long-term returns. However, the objective of investment (in general) is not to buy at fair value, but to purchase with a margin of safety. This reflects that any estimate of fair value is just that: an estimate, not a precise figure, so the margin of safety provides a much-needed cushion against errors and misfortunes. When investors violate [this principle] by investing with no margin of safety, they risk the prospect of the permanent impairment of capital. – James Montier

Take Tesla for example. Awesome car. Awesome company. Awesome CEO.

However, for all the grand plans and world changing ideas being introduced, as an investment, there is a real risk of loss. 10 years down the line, Tesla may very well be worth $1,000, but today, the valuation has zero margin of safety.

As value investors, margin of safety is a familiar concept. Sure it’s misunderstood at times, but outside the small community of value investors, margin of safety is a foreign language.

If you were to distill the secret of sound investment into three words, we venture the motto,MARGIN OF SAFETY.

Plans and Acts of PM

Since last few days, I have seen quite a few jokes on Narendra Modi i's foreign visits.... and all people are curious why Narendra Modi visits so many countries, and what is India achieving from it. . 

Narendra Modi is no greenhorn in politics and statecraft. . . He has already achieved more for Gujarat in his tenure as CM there than any Indian state ever had. . . Few hidden (because the main stream media will purposely ignore them) achievements are given below: . . 

1. BJP Govt. convinced Saudi Arabia not to charge “On-Time Delivery Premium charges" on Crude Oil – Young Petroleum Minister Dharmendra Pradhan & External Affairs Minister Sushma Swaraj sealed the deal. Saved the country thousands of crores... . . 

2. India will build 4 Hydroelectric power stations + Dams in Bhutan (India will get lion's share in Green energy that will be produced in future from these projects) . . 

3. India will build Biggest ever dam of Nepal (China was trying hard to get that) – India will get 83% Green energy produce from that hydro power station for free – in future. . . . . 

4. Increased relationship with Japan and they agreed to invest $ 30 Billion in DMIC (Delhi – Mumbai Investment Corridor). That's Rs 200,000 crores by today's exchange rates..... . . 

5. Increased strategic relationship with Vietnam and Vietnam has now agreed to give contract of Oil exploration to ONGC-Videsh (UPA was not ready to take this at all because they were worried about China – and getting into a conflict of interests on south China sea). The UPA had always been on the backfoot about every aspect of foreign policy. . . 

6. Increase Oil Imports from Iran, despite the ban by USA. . Iran agreed to sell in Indian Rupees and it saved our Forex, not just for now, but protected India from future currency fluctuations. India also gets to build “Chabahar” port of Iran, encircling Pakistan. Because we well have exclusive access for our Naval ships in this port. . . 

7. India – Australia (NaMo is first PM to visit Australia after 28 yrs), despite Australia being a major supplier of Coal & Uranium. . . NaMo was able to convince Tony Abbott and now Australia will supply Uranium for our energy production. . . . 

8. China leaning President Rajapakse lost elections in Sri Lanka – Remember UPA lost “Hambantota” port development – read latest report of CIA, where they mention RAW has played a major role in power shift of Sri Lanka. Now Modi has confirmed he is visiting Sri Lanka in April. And Sri Lanka has backed out of Chinese contract and shifted to Indian project managers. . . 

9. With China, as Trade Deficit was increasing, NaMo forced their hand. Anti-Dumping will come soon so China will invest heavily into India. – China has already committed $ 20 billion Investment in India. That's nearly ₹140,000 crores. . . . 

10. On Security – I think adding Ajit Doval to his team is the best decision by NaMo. See the recent tie-up with Pentagon, Israel & Japan. . . Remember I. K. Gujaral as PM stopped RAW’s offensive operations in foreign countries. . Now see how we stopped the Terror Boat and listen to his words … “Any Mumbai like attack from Pakistan and Pakistan will lose Baluchistan!" That's the language of deterrence that I want to hear as an Indian. We won't hit first, but if you do, we surely won't turn the other cheek.... . . . 

11. India approved the border road in the NorthEast and around India- China border – Remember just because of China’s opposition, the ADB (Asian Development Bank) didn’t give us funds during UPA regime and UPA held that file under “Environment Ministry control – Remember the infamous “JAYANTHI TAX "? No one bothered about the disastrous effect on our armed forces. . . . 

12. India managed to bring back 4,500+ Indians from War zone in Yemen and also brought foreign nationals of 41 different countries, which put India’s name onto the highest platform globally in conducting that rescue mission – PM Narendra Modi specially talked to the new Saudi Arabian king Salman and told him to allow Indian Airforce planes to fly – as Saudi Arabia was attacking on Yemen and Yemen skies was declared NO-FLY Zone: thanks to this we got an assured clear window of a few hours and guys guess who coordinated this? Ajit Doval, Sushama Swaraj and Gen V K Singh. All in person.... When was the last time you ever heard of ministers involved personally in such efforts that didn't fetch thousands of crores?? Guess the religion of those rescued?? But it isn't secular to mention that most of those rescued from Yemen or earlier from Iraq weren't Hindus at all.. . . 

13. India’s Air defense was getting weaker by the day, UPA was very happy to let it happen despite repeated specific inputs from the armed forces, NaMo renegotiated Rafale fighter Jets deal with France personally and bought 36 Jets on ASAP basis. At better than rack rates. No middlemen, no commissions... . . . 

14. For the first time after 42 yrs Indian Prime Minister visited Canada not to attend some meeting but as a specific state visit, in a Bilateral deal, India was able convince to Canada to supply Uranium for India’s Nuclear reactors for next 5 years. It will be of great help to resolve India’s Power problems. . . . 

15. Canada approves visa on arrival for all Indian tourists. . . . 

16. Till recently we were exclusively buying Nuclear Reactors from Russia or USA and it was much like beggar kind of situation because they were worried about usage of Nuclear reactor for some other use. So only what they opted to give us, we could get. . Now Narendra Modi was able to convince France and now France will make Nuclear reactors with the latest technology in India. On MAKE IN INDIA efforts.. with collaboration with an Indian company as a partner. . . 

17. During 26th Jan. visit of Barack Obama, NaMo convinced USA to drop rule of Nuclear fuel tracking and sorted out Liabilities rules which now open the gates for next 16 Nuclear power plant projects. . . . Isn't this good enough to improve the lot of India?? . . 

The Psychology of Human Misjudgement- By Sanjay Bakshi

GOOD READ

http://www.valuewalk.com/wp-content/uploads/2015/05/thepsychologyofhumanmisjudgment-121216055830-phpapp01.pdf

Information in beautiful- Key players relationships

THIS MAKES LOT OF THINGS CLEAR...

http://www.informationisbeautiful.net/visualizations/the-middle-east-key-players-notable-relationships/

GST Highlights

Highlights of New Proposed Goods & Service Tax (GST) 

1. The basic principal governing behind GST is to have single Taxation System for Goods and Services 

across the country. Currently Indian economy has various taxes on Goods and services such as VAT, 

Service Tax, Excise, Entertainment Tax, Luxury Tax Etc. now in the new Proposal of GST; we will be 

having only two taxes on all goods and Services as follows: 

a. State Level GST(SGST) 

b. Central Level GST (CGST) 

2. In case of Central GST, following Taxes will be subsumed with CGST which are at presently levied 

separately on goods and services by Central government: 

a. Central Excise Duty 

b. Additional Excise Duty 

c. The Excise Duty levied under Medicinal and toiletries preparation Act 

d. Service Tax 

e. Additional Custom Duty (CVD) 

f. Special Additional Duty 

g. Surcharge 

h. Education Cess and Secondary and Higher Secondary education Cess 

3. In case of State GST, following taxes will be subsumed with SGST; which are priestly levied on goods 

and services by State Governments : 

a. VAT/ Sales Tax 

b. Entertainment Tax (unless it is levied by local bodies) 

c. Luxury Tax 

d. Tax on lottery 

e. State Cess and Surcharge to the extend related to supply of goods and services. 

4. The basic principal for subsuming of taxes in GST is provided as follows: 

a. Those taxes which commences with import / manufacture /production of goods or provision 

of services at one end and the consumption of goods and services o other end. 

b. The taxes, levies and fees which are not related to supply of goods & services should not be 

subsumed under GST. 

5. Taxes on items containing alcohol and petroleum product are kept out of GST. They will continue to 

be taxed as per existing practices. 

6. Tax on Tobacco products will be subject to GST. But government can levy the extra Excise duty over 

and above GST. 

7. The Small Taxpayer: The small taxpayers whose gross annual turnover is less than 1.5 Crore are 

exempted from CGST and SGST. 

8. Input Tax Credit (ITC): Taxes Paid against CGST allowed as ITC against CGST. Taxes paid against SGST 

allowed as ITC against SGST.  

9. Cross utilization of ITC between the Central GST and State GST would not be allowed. Exception: Inter 

State Supply of goods and services. 

10. PAN based identification number will be allowed to each taxpayer to have integration of GST with 

Direct Tax. 

11. IGST Model and ITC: 

a. Center would levy IGST levy ( CGST + SGST) 

b. The ITC will be allowed in this transaction will be SGST, IGST, CGST as applicable. 

c. Appropriate provision will be provided for consignment or Stock transfer. 

12. GST Rate Structure: 

a. Two Rate Structure 

b. A lower rate for necessary items and goods of basic importance 

c. Standard rate for goods in General 

d. Special Rate 

13. Exports are fully exempted with Zero rates.

Fundamental trade idea

Hindalco and Hindustan Zinc can be a good buying opportunity and can be added at lower figures.

Prices of Aluminium and Zinc on Mcx have risen by 11% and 16% respectively from 1st April till 5th May.

So traders who have missed the commodity run in these base metals can take the opportunity to trade in equity markets.

This is how initial money is made in commodities and then we move to stock specific.