Investment in Equipment Leasing @12% Post Tax yield-GRIPInvest

grip invest

When the topic of investing springs up in India, an elder in your family will advise you to put your money in a fixed deposit, saying, “Beta, FD sahirahega”.

But why so?

The answer is simple. The average Indian investor believes that bank deposits and government backed bonds are safer than other market related investments and therefore probably a recurring deposit or a fixed deposit is the right fit for their portfolio. However this means that their returns are just 5-6% per year. 

What if I told you that there are now investment options which have lower risk because they are not as heavily impacted by market forces and don’t have the same volatility of stocks yet are monetarily gratifying. 

I’m talking about leasing. 

How Does Investment in Leasing Work?

Through certain leasing platforms like GRIP Invest (add code 113 while signup for free registration and benefits), you can invest in assets like vehicles, furniture and electronic equipment which are leased to corporates and earn pre-tax returns in the range of 20%. What’s more, the process is completely online and hassle free.

Through these platforms, you can co-invest and become a partial owner of the asset, and earn monthly returns for the same. Let’s take an example, suppose three friends, A,B and C decide to invest in an asset. Each of them contributes Rs. 20,000 towards the investment, which means each of the friends are partial owners of the asset. Lease income earned on that asset is then distributed to each of the friends. Therefore, when an investment opportunity is listed on these platforms, you can co-invest small amounts with many other investors. Your investment will then be managed by the investment platform as depicted in the illustration below. 

grip invest

Now that you’re aware of how the avenue works, let me give you 4 reasons why you should seriously consider investing in it:

  1. Managed Risk: When it comes to leasing, the companies that are chosen by the investment platforms are steadfast and growing rapidly in their respective fields. As an investor you would have heard of these companies or may even be using their products and services. Now you can lease to them and actually make returns!  
  2. Strong Collateral: When you invest your money, you are investing in buying an asset like a vehicle, laptop etc. In a worst case situation, the investor can sell or re-lease the asset to recover their invested value.  
  3. Substantial Returns: Like most of you, I was also advised to invest in instruments which were absolutely safe and backed by government security. While I do agree that avenues like fixed deposit and government bonds are safe, leasing provides a brighter prospect to earn more returns – Leasing can comfortably give you a IRR of 20% on a pre tax basis. 
  4. Monthly Returns: Lease payments are made every month and hence as an investor you receive income every month that can then be re-invested in other investment opportunities. 

My Personal Experience with Leasing

I will provide analysis of recent deal on Grip Invest.You can find many companies like Furlenco and assets like Furniture,Air conditioner etc.

Deal : E-Scooter Leasing for Zypp

Grip risk management

Key Lease Terms

  • Title of the bikes will not transfer to Zypp and the bikes will be handed back in case of termination
  • Purchase price for the bikes is reduced by subsidy received under Govt. of India’s promotion scheme for electric vehicles
  • Complete compensation in case of loss of the e-two wheeler will also be the responsibility of Zypp
  • Zypp will be responsible for:
    • Valid registrations, consents or approvals required under all applicable laws, including the Motor Vehicles Act, and is solely liable for any liability arising under these laws,
    • All repair (whether routine or resulting from any damage or accident), maintenance and running costs of the bikes
  • Zypp will pay a security deposit equal to 3 months of lease income in the form of a bank guarantee. The same will be returned to Zypp at the end of the lease term or settled against the residual value paid by Zypp to purchase the vehicles
  • 0.5% of rental income earned is retained for management expenses and insurance costs of the lease. An additional 0.5% of the rental income earned is retained as Grip’s advisory fees.

Cashflow

  • Net IRR =12%~
  • Money Recovered in1 year = 50%~
  • Security = 3 Months Cashflow
  • Tax on Cashflow= 0%

Yield of Someone at 30% tax rate (factoring tax saving)= 12%/69% = 18%~

MonthCashflowIRRSecurityCashflow RecoveredPercentage Recovery
8/1/2020-2000012%1800  
9/30/2020600  2400 
10/31/2020600  3000 
11/30/2020600  3600 
12/31/2020600  4200 
1/31/2021600  4800 
2/28/2021600  5400 
3/31/2021600  6000 
4/30/2021600  6600 
5/31/2021600  7200 
6/30/2021600  7800 
7/31/2021600  8400 
8/31/2021600  9000 
9/30/2021600  9600~50%
10/31/2021600    
11/30/2021600    
12/31/2021600    
1/31/2022600    
2/28/2022600    
3/31/2022600    
4/30/2022600    
5/31/2022600    
6/30/2022600    
7/31/2022600    
8/31/2022600    
9/30/2022600    
10/31/2022600    
11/30/2022600    
12/31/2022600    
1/31/2023600    
2/28/2023600    
3/31/2023600    
4/30/2023600    
5/31/2023600    
6/30/2023600    
7/31/2023600    
8/31/2023600    
8/31/20232922    

CashFlow Analysis

Registration Process:

You can register using the link GRIP Invest (add code 113 while signup for free registration and benefits) ,browse the various investment opportunities.Once the deal is selected,payment is done and you become a partner of the investment in the asset.

Conclusion:

Leasing is a popular medium in western countries and it is slowly gaining momentum in India. The above points make this instrument competitive in the present scenario and perfect to reach certain financial goals.GRIP Invest(add code 113 while signup for free registration and benefits) is an interesting platform to provide exposure to asset backed Lending.

Randomwalk

I dabble in Quantitative finance,Analytics P2P investing,Derivative trading and Product development.My goal is to help people create low cost optimized portfolio .

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