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High Fixed Returns upto 13% in Short Term Investment with Trade Cred | Invoice Discounting Explained - YouTube
Channel: Asset Yogi
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Friends, we all know that in the stock market
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There are more returns in a long term investing
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But many people don't like the market risk, which means the ups and downs of the market
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They want fixed returns
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They can compromise a little bit on the returns
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The second challenge is that we have many options in the long term
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When we talk about 3 years, 4 years, or 10 years
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We can invest in stocks, we can invest in mutual funds
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We can invest money in FD, bonds and there is a provident fund, etc
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But if we talk about the short term where we want to invest for less than a year
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Then we have very limited options
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And in that too if we want good returns, then we have very limited options
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We have talked in the previous videos that we will cover fixed income securities
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What options do we have in that
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We will talk about an option like this in this video
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Its name is invoice discounting
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It is a financial instrument, in which we can invest money for the short term
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And can get quite good returns
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We will get 12 to 13% of interest here
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Many people ask that this invoice discounting is a new concept
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Absolutely not! It is not a new concept
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It exists for a long time
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Banks invest in this, HNI invests in this
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But now these products, like many products have been going online
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These products too have come online
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In this video, we are going to discuss what is invoice discounting?
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Why we can consider invoice discounting as an investment?
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How we can invest in this, how can we identify the deals?
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And what type of risks are involved in this?
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We will discuss that in detail.
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Because every financial instrument comes with some kind of risks
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And how can they be mitigated
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Hello, my name is Mukul
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And you are watching Asset Yogi
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he video is going to be very exciting, stay tuned with the video
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To watch the latest finance videos, please subscribe to the channel
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And with that press the bell icon and click on all button
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So that you will get the notification of the latest finance videos
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Friends if you want to learn about the stock market and mutual funds in detail
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Then you can follow our playlist
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Master investor series, mutual funds series and we have many more playlists
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You'll find the links in the description
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Firstly, let's understand the concept of invoice discounting
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Generally, small businesses use this facility when they require working capital
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Working capital means that the money required by them to run their business regularly
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To fulfill these requirements, they use the concept of invoice discounting
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Now we will understand this graphically
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See assume, there is a big company, for example, Coca Cola
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Let's say they procure a large number of things from different suppliers
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If we consider this as an example, then assume they take bottles from any supplier
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So this a seller which supplies bottles to Coca Cola
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It's possible that the supplies bottles to other companies
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Or supplies some other products
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So in this case, we will assume that he is supplying bottles to Coca-Cola
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And let's assume he is supplying bottles worth 100 Rs
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I am taking just a hypothetical example for the easy calculation
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If he is supplying bottles of 100 Rs
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You all may know that the credit cycle operates in the business
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Coca-Cola, a big company will not pay him immediately
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They say that we will do your payment after 90 days
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This 90 days period is a bit too much for this seller
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He requires the money today itself
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He cannot wait until 90 days
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In this case, he will go to some investor
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He takes money from the investor and says you can keep this invoice
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I will be getting this 100 Rs from Coca-Cola
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Take this 100 Rs from Coca-Cola, but give me my money today itself
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Now investor says that why should I give you 100 Rs
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I want to earn some interest because I am giving you money today
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I have to wait for 90 days
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So this investor says I will charge interest from you for this
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Seller says, sure, I have got no problem with paying the interest
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My requirement for money should be fulfilled today
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Investors say that I will give you 97 Rs
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The seller says okay, I have no problem with it
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Now, this figure of 97 Rs, how it has arrived?
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What he has done? He charged the interest of 12% per annum
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So it is charged 1% per month
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According to that, he charged 3 Rs for 3 months
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And gave him 97 Rs upfront
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In this way, both of their problems were solved
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The problem that was solved for the seller was that he got the money fast
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Who are these investors?
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These investors can be banks, they can be HNI which means High Net-worth Individuals
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Or if we talk, then they can be retail investors too
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And how retail investors can invest?
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We are going to see that very soon
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The money that investors get will be directly from the buyers
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Coca-Cola in this case, the buyer will give 100 Rs to the investor after 90 days
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What happened in this case?
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The investor got the money 100 Rs and he earned 3% interest in 3 months
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And seller's problem is solved as he got the money on today's date
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So this whole cycle operates in this way
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Let's come to our next question that why does it make sense
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of invoice discounting as an investment?
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The first reason is that this is a very good option for short term investment
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The options about which we talked about till now
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Like stocks, mutual funds, bonds, FDs
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In the long term, they provide good interest
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In less time, if we want good returns then it is a very good option
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The second is higher fixed returns
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This means when we talk about 12 to 13%,
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then they are very good returns if we talk about fixed returns
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We know about FD, which is considered to be a very safe investment
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We are getting 5 to 5.5% interest there
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The third reason is that it doesn't depend much on volatility
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Like in the stock market there is very much volatility
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It means there are very many ups and downs
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Those ups and downs aren't here, we are earning fixed interest here
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The fourth reason is a good way of diversification
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See I am not saying that invest all your money in this
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You can see according to yourself, how much you want to invest
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But it is worth a try because you don't want to invest everything in one instrument
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The fifth reason is that this is available online on today's date
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anyone can invest in this, retail investors too can invest
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Earlier these products were only available with banks or HNI
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This means they were available with High Net Worth Individuals
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All the big wealth managers used to cater to family offices or HNI
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But the minimum ticket size here is you can start with 50000, 1 lac Rs
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Let's talk about how can we invest in this product?
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For this, we will use India's number one invoice discounting platform
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We will use that, "TRADE CRED"
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Being number one is another thing, but the good thing about it is
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For the last three years, since it has been operational, it has 0 default rate
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See when we invest money somewhere then it is very important for us
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To ensure some safety
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First, credibility is very important here
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How to manage other risks, we will talk about it as well
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The second problem that arises when we buy a financial instrument
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Then their liquidity should be very good
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It means that if we want to sell it before maturity, then also we should have some option
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Then that liquidity is also maintained here because now that have many investors
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So this has become a marketplace
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However, they were catering to HNI till now
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More than 90% of investments that have been done on the platform is through HNI
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But now they opened their platform for retail investors also
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Let's go and see the demo of how to use this platform
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Before that, we will see the onboarding process that how to open an account quickly
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I have given you a link in the description for opening an account
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It is quite an easy process
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Here you have to fill in only 3 to 4 details
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Once you have clicked on the link, then you will see a page like this
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You can open an account as an individual also, as a HUF also
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You can open a partnership firm, if you have a private limited firm
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Then also you can open it, NBFC Bank
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Or you can open an account as an NRI also
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You will put your name here, email but you have to remember one thing
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Aadhar number, the one which is linked to your mobile number
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Put that only and by chance, your Aadhar is not linked to your mobile number
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Then firstly get it linked
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After that, you will fill in your date of birth, pan card, and then upload the copy of the pan in PDF
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With that the Aadhar that you have to put, you have to put the e-aadhar copy
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Take care of it a bit
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If you do not have an e-aadhar copy then you can download it also
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If you click on this link, then it will take you to the Aadhar website
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If you fill in your Aadhar number there, then you can download the copy from there
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There is a password in the e-aadhar copy
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You have to upload the password also here
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If you already have the scanned copy of e-aadhar, then it must contain the mobile number
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So you have to keep in mind that your Aadhar number should have a mobile number
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After that, if you have GST, then fill it in here
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After that click on the terms and conditions and submit
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And your account will be opened
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Once we have opened the account, we can log in to that
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If you go to the website, then go to investors, and if you click on login from here
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Then you can log in
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If you want, you can download the app also, it is available on the play store
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And it is available on the apps store in IOS
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You will log in, fill in here your pan, you can also log in with the password
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Or you can log in with the OTP
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Now, for example, I have already logged in
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Firstly you will get a dashboard here in which you will get an overview of investments
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In the beginning, you have to put some money in the wallet
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Then only you can invest
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So firstly you have to deposit, if you click on the deposit then you can submit your amount here
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And you can transfer the money from the UPI
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Otherwise, you can transfer the money with the help of NEFT and RTGS
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Then the money will be transferred to your wallet
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If you want to withdraw the money, you have some in your wallet
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Let's say you have sold some investment or your investment get matured
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Then you can click on withdraw, debit money
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You can add your bank account here, whatever amount you will put here
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When you click on debit money here, then the money will be in your account
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So this was deposit and withdrawal
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Now we will talk about how to do investment
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You will go to current deals, you will find all deals here
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For example, we can see a deal of Amazon here
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If you want to invest in this, then see what details will you get to see
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This is net IRR, which means approx 12% interest is promised here
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And this is the deal of supplier of Amazon
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Now see, Amazon is quite a big company, it will not default this easily
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Then it is relatively safe
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Deal duration means your money will be invested here for 82 days
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The minimum amount that you have to invest here is Rs 1,82,559/-
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So the total deal, here you can see the total amount is 28 million
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I.e 2.8 crores of money are being raised by the supplier
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Out of this, this much money is already invested which means Rs 9,98,2000 /- is already invested
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So if you want to purchase this deal then you can put the amount here
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We can see some more details here
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You can see the risks acknowledgment that what types of risks are there
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And I will talk to you about these risks in detail
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With that, you can also see the deal summary, how much net IRR is promised to you
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When is the tentative due date?
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When will you get the money after maturity?
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What is your investment amount?
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You can see that here
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And whatever you invest, what will you get on maturity
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Inclusive of all costs
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So what is the meaning of inclusive of small costs here?
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Whatever the operational cost is here, approx 1% is charged by TRADE CRED
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For their platform, the rest are the legal cost
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That money is deducted and after deduction, it is shown here in total maturity value
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Along with that, you can see the detailed deal report here
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This is important too and I'll suggest that you should see it
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You'll get to know about customers here, you'll know about vendors
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Here you'll get all the history that they have made full payment or not
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So you can see here, for example, this vendor has paid 72% before the due date
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In 127 days, 22% and after 7 days, less than 5%
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It is almost 5%
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There is no current overdue, so we can say this supplier is reliable
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Along with that, we can also see the financial summary
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See the revenue and operating profits are given here
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The revenue was 200 crores and the operating profit was approx 61 crores
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Its financial position is also good
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If we talk about risk mitigation, then it has no bad debts in the past 12 months
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With that, risk mitigation is also done in a way where
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The authenticity of the invoice is checked
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The supplier that is putting invoice on the Trade Cred platform
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First, it is verified with the buyers that mean it is verified by the Amazon
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Whether these goods are supplied or not
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You can also check this on your level
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In this way, you can explore all these deals
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There are many deals, there are many numbers of pages
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You can explore them also
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Let's also see by buying one deal
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For example, there is a supplier of ITC here who is raising money
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And the minimum amount that we have to invest here is 3 lacs
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Generally, this investment is started from 50000
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But you'll see that the deals require a minimum of 1 lac of investment
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For example, for this deal, we have to invest a minimum of 3 lacs
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I'll invest 3 lacs, after that I will click on buy
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So here I have to put OTP, I'll put that
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Then we will click on proceed
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See in this way, you'll get confirmation of purchase
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All the invoices here, who's against they are raising funds
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These amounts are small
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So these invoices are combined to raise the money
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So you'll get all the details here
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After that, you have to click on proceed
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So this deal will be reflected in your orders
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Let's close this now
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So this was the process of buying a deal
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Once the deal is purchased, means it has been put to execution
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After that, you can see all the deals in order history
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The ongoing deals, the deals that you have put recently, you can check that here
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After that deals requested for liquidation
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If you sell that deal before, means if the maturity date for example is 90 days
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If you liquidate it before, then you can check it here
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The deals that you have sold and your money is back
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You will see them here
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Completed deals, means the deals that are matured,
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And your money is back, repayment is done, you'll find them here
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Assume if we want to sell any investment before, before 90 days
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Then we will go to ongoing deals here, we will see all the deals here
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Then we can put a sell order here
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We will put a sell order from here
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These deals will be reflected on the main page
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This means they will be reflected on the current deals page
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If the deals are reflected on the current page, and when some investors want to invest in that
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He will invest from here
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We were talking about the same thing that how liquidity is ensured on Trade Cred
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Their data says that within 6 hours, almost 90% of their deals get liquidate
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They have that much traffic
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And the rest 100% of deals are liquidated within 3 days
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Now there are 1 or 2 buttons more, we will see them quickly
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See add users, if you want to add nominees, then you can add them here
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You can add a notification user if you want to send a notification to another user
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Then you can add the details here
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So this was the live demo of how we can invest in invoice discounting
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Now we have to remember one more thing here
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If we liquidate a deal, means we sell it before the maturity date
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For example, if the maturity date is of 90 days
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And we sell it after 50 days
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So it's not like it doesn't have any cost
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That too has cost
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And it depends on demand and supply
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Whoever investor comes, he may expect that he will get 1 or 2 % more interest
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So you were getting a 12% interest before
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It may remain 10 % only
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So ideally if we want to maximize our returns, then we should wait for the maturity date
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But if there is an emergency then we surely have the option to liquidate
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Along with this, Trade Cred also provides you with some deals
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Where they provide zero cost instant liquidity
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This means if you purchase in this kind of deal
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Then the cost of liquidation will be beared by Trade Cred
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So this was all about the platform
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How the deals are executed and how this whole process works?
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Now we will talk about major risks
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In this, there is a very big risk in everyone's mind
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that if the buyer or seller do defaults, then what will happen to our money?
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If they made a part payment, then what will happen to our money?
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If the payment gets delayed, then what will happen?
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If any seller does fraud, then what will happen?
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So mitigation is done for these risks
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See any financial instruments never come without any risks
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So the question that arises here is that
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what type of risk mitigation process does Trade Cred do?
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The first step in this is, you should work only with good brands
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Amazon, Coca-Cola, Godrej, Cipla, Metro
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Lots of great brands to work with here
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Many brands deal with consumer brands
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This means the product which is used daily
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They deal with them
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They require a lot of goods from the supplier daily
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They will not default their payments
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Otherwise, this will hamper their own business
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The seller should not do any fraud, they shouldn't put fake invoice
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For that, invoices are verified
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For example, if Amazon is the buyer then it will be verified from there
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Whether or not it is a genuine invoice
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After that only, the invoice gets uploaded on the Trade Cred platform
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Third, the money that comes from the buyer goes to an escrow account
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It doesn't go to the seller
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Escrow Account, their ICICI account, is maintained by Trade Cred
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For example, if the payment comes from Amazon
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then it is paid directly to the investor after 90 days
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Or whatever its maturity date is
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Fourth, the dual recourse mechanism is kept here
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For example, for any reason, if the buyer doesn't make the payment
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Then seller has to do it
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This means if Amazon doesn't pay for that invoice
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Then it is the liability of the seller to pay the investors
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And in which case, the buyer doesn't give money?
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Maybe in the case when the agreement between buyers and sellers,
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If the seller flaut on some terms, then only the buyer will not pay
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But these cases happen rarely but then also its seller's liability
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Fifth, we should also do some risk mitigation on our level
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As we have seen in the deal report, we can see in that
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How are the financials, how is the cash position
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How is the reputation of sellers and buyer
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Along with this, we can also see their repayment history
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If he has done some defaults
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If we see overall credibility, then Trade Cred has maintained good credibility in 3 years
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They have ensured zero defaults here.
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So I assume that it is a very good diversification of tool
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We should not keep our financial investments in one place
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Like HNI also use this tool
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So retail investors can also use that
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So if you want to diversify your investments,
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Then you can surely consider invoice discounting
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I am assuming that in this video you got a different type of knowledge
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If you liked the video then like and share it with your friends and family members
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They may not know about the invoice discounting
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This can be a very good tool for them too
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If you have any suggestions regarding the video of this channel
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Then you can comment it below
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And tell me about how was this concept and would you like to invest in this or not?
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If you haven't subscribed to the channel yet
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Then subscribe to the channel and press the bell icon
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To get the notification of the latest finance video
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We will meet in the next informative video
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Till then keep learning, keep earning
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And be happy as always
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