Bond investing is much like a game of musical chair in which bond prices move to the tune of interest rates. Sometimes you might feel that you have no control over what happens to your bond portfolio with the future movements in interest rates.

But familiarity with ‘bond laddering’, an investment strategy, could help deal with what is called reinvestment risk.

How Bond Laddering Works

  • ~ A bond investor might purchase both short-term and long-term bonds in order to disperse the risk along the interest rate curve. That is, if the short-term bonds mature at a time when interest rates are rising, the principal can be re-invested in higher-yield bonds.
  • ~ If interest rates have hit a low point, the investor will get a lower yield on the reinvestment. However, the investor still holds those long-term bonds that are earning a more favourable rate.
  • ~ Essentially, bond laddering is a strategy to reduce risk or increase the opportunity of making money on an upward swing in interest rates. In times of historically low interest rates, this strategy helps an investor avoid locking in a poor return for a long period of time.


  • ~ The face value of each bond might be same. 
  • ~ For example, a bond portfolio of Rs10 lakh may have 10 different bonds of Rs1 lakh each maturing after one year, two years, three years and so on. 
  • ~ In such a situation, your bond portfolio would actually look like a ladder in which every year some of your bonds would be maturing, generating a steady cash flow. 
  • ~ This cash flow, if you so like, can be reinvested again to create another rung of a bond ladder. 

This kind of strategy ensures that your entire bond portfolio does not mature on the same date. 


By taking the total amount you plan to invest and dividing it equally by the total number of years for which you wish to have a ladder, you will arrive at the number of bonds for this portfolio or the number of rungs on your ladder. The greater the number of rungs, the more diversified your portfolio will be and the better protected you will be from any one company defaulting on bond payments.

Height of the Ladder

The distance between the rungs is determined by the duration between the maturity of the respective bonds. This can range anywhere from every few months to a few years. Obviously, the longer you make your ladder, the higher the average return should be in your portfolio since bond yields generally increase with time. However, this higher return is offset by reinvestment risk and the lack of access to the funds. Making the distance between the rungs very small reduces the average return on the ladder, but you have better access to the money. Well, reinvestment risk of a bond is something that arises due to future movements in interest rates.

Other Benefits of Bond Laddering

Bond laddering offers steady income in the form of those regularly occurring interest payments on short-term bonds. It also helps lower risk, as the portfolio is diversified because of the various maturation rates of the bonds it contains.

In effect, laddering also adds an element of liquidity to a bond portfolio. Bonds by their nature are not liquid investments. That is, they can’t be cashed in at any time without penalty. By buying a series of bonds with different dates of maturity, the investor guarantees that some cash is available within a reasonably short time frame.

Bond laddering rarely leads to outsized returns compared to a relevant index. Therefore, it is usually used by investors who value the safety of principal and income above portfolio growth.

It is a lot like ‘not putting all your eggs in the same basket’. Likewise, your entire bond portfolio should not mature on the same date.

To Sum Up

What: Bond laddering is an investment strategy that tries to minimize the risk associated with the future movement in interest rates.

How: A bond portfolio using laddering would consist of bonds having same face value maturing on different dates at a regular interval. 

Why: Bond laddering strategy is useful because it helps in minimizing the reinvestment risk.




  • ~ Some people put their money in a bank account; some make investments in stocks and bonds. 
  • ~ Different people follow different strategies to keep their money on the move. 
  • ~ All of them consciously or unconsciously realize time is the biggest enemy of idle money. 
  • ~ But what makes a rupee in our hands today worth more than a rupee tomorrow?
  • ~ What is so different about currencies made of paper that the value of the same amount of money diminishes with time….? 
  • ~ So, the concept of time value of money always influences our decision about what we intend to do with our money.


  • ~ You need not be a philosopher to understand the concept of time value of money.
  • ~ A ₹2000 note today in our pocket is worth more than a ₹2000 note that we may get after five years. All of us intuitively know that. 
  • ~ But let’s try to understand what actually makes the present value of money worth more than the value of the same amount of money after five years.


  • ~ Money is just another name for new opportunities. 
  • ~ The money that you have now can open the doors for many opportunities. Different uses of money may have different advantages. 
  • ~ Some of these opportunities may look very small but some of them might really put you on the fastest track to the future.

Here’s a new term for you to know!

  • ~ If you invest your money now, you would earn a return which would make your money grow in the next five years. 
  • ~ But the problem is you can choose only one of the many equally advantageous opportunities. All of us try to use our money for the best possible opportunity. 
  • ~ The advantage that we forego by not putting our money in another possible opportunity is what is called the Opportunity Cost of Money. 

For example…

  • So, if you are investing your money in a 10 year bond that pays you 9% interest, then you are foregoing an opportunity of putting the same money in a 10 year term deposit that pays you 7% interest. 
  • In this case, your actual advantage is only the 2 percentage points more interest that you earn on your investment in bonds. 
  • But always remember that different opportunities have different risks. Investment in bonds may be riskier than investment in term deposits. 
  • So you should always compare the risk adjusted return to find out whether you are gaining or losing in making a particular use of money.

It is better to eat your breakfast before inflation eats your money!

  • ~ Today you can buy two pizza’s for ₹300, but maybe after five years you would be able to buy only one with the same amount. 
  • ~ So you have to think if I give you an option of either taking two pizza’s today or one pizza after five years, which option would you choose…?

How can you use the concept of time value of money to make intelligent decisions about your money…?

  • ~ The first thing you must keep in mind is that you should never keep your present money idle. 
  • ~ Money has to grow with time. Invest it in stocks or bonds so that the return is good enough to at least preserve its present value. 
  • ~ And still better, take the mutual funds route to take advantage of professional fund management services.

To Sum Up

  • ~ If you invest Rs. 5 lakhs now, what should its worth be after 30 years if you are earning 10% return per annum compounded annually? 
  • ~ For your knowledge, let me tell you that Rs. 5 lakhs would be worth Rs. 87.24 lakh after 30 years. Almost appreciated by 16 times.
  • ~ The concept of time value of money says that the value of money at present is worth more than the same amount of money in the future. 
  • ~ By making appropriate investment decisions, we can make money grow with the passage of time. 

Common Mistakes

Common Mistakes


Have you invested your money  in insurance plan to get a return in future..?

 Big mistake!

Out of 100 people,95 have made this mistake.

Very few people understand the difference between term plan, endowment plan, etc.


Are you paying minimum amount due on credit card…?

If yes, you are trapped in credit card mystery.

On the other side, very few people really enjoy the benefits like free lounge access, buy one get one movie ticket, etc.


Everyone has come across the formula of compounding but very few people really understand its power.

This is the reason people do not start saving early and hence lost out on the power of compounding.

Albert Einstein said that power of compounding is the eighth wonder of the world.


You will find every Tom, Dick and Harry giving stock tips over Facebook, Whatsapp and TV.

Unfortunately, a lot of people fall in trap of these people and invest money without any knowledge.

What is the end result..? They lose everything!


Moving from 2BHK to 3BHK just because you have got a good hike, upgrading your car because you have got some bonus are some of the examples of lifestyle inflation destroying financial lives.


From Amazon’s “Great Indian Sale” to Flipkart’s “The Big Billion Days”, everyone is encashing on the  weakness of Indians buying things just because it is on discount.

Funny things is now you will find such sales every other month.


Instagram and Facebook are introduced as Social Media Platform but they are actually destroying the entire social fabric.

Facebook and Instagram are more of a marketing platform where people post stuff just to get some likes and companies promote their product and services.


5 days work and 2 days party: This is the new culture in India.

Pubs are jam-packed on weekends where people would spend a bomb on drinks.

By the end of the month, they are left with no money.


Very few people keep a track of their expenses.

Most of them just dont know where the money is gone.


Not having any extra money in the case of an emergency results in embarrassing situations of borrowing money from friends and relative.

Some people even break their investments and make a big mistake.


People are losing out the lifetime savings because they did not take  medical insurance.

One accident can shatter all financial dreams. Better be insured.

Healthcare cost is rising and it is impossible to manage it without insurance.


People do not know why they need to save money because they don’t know their financial goals.


Some people would invest all their money in real estate, some would invest all the money in gold, some would just keep it in locker, some would invest all the money in the stock market.

 Very few people understand the right way of diversifying the investments.


Thanks to our hippocratic society!

People save their entire life just to spend all the money on random relatives who only bother about the food and arrangements.


Gold worth lakhs is kept in lockers only to be used once or twice a year.

This is resulting in the money getting blocked and hence not getting any returns on it.


Traditionally, people have been risk –averse.

They would just have an FD and live on 6-7% annual interest.

Some would just keep the cash at home.


Having a car is not an asset because it consumes fuel and has a maintenance cost.

Its price will only depreciate in the future.

Car is a necessity but people spend a lot of money and even take the loan to buy a luxury car over and above their budget.


A lot of people confuse economic spending with being cheap.

An economic spender does not compromise with quality but does his research well enough to buy the product or service at the lowest rate.


“I will invest tomorrow.”

But the problem is that tomorrow never comes


A fancy car, a fancy house, a fancy watch, a fancy vacation.

People want fancy stuff and willing to pay a premium irrespective of the value it generates.


“I can’t wait for my wealth to grow. I want to double my investments in 6 months. I need to invest in the stock market.

A lot of people lose their lifetime of savings because they don’t have the patience to understand the investment option and would blindly trust anyone with their investment.


I don’t know  anything about investment. Please manage my money.”

Unfortunately, a lot of people are dependent upon others with their hard earned money.

This is the reason we have a lot of self proclaimed experts giving stock market tips.


Discussions related to money are considered as a taboo in Indian families.

Nobody really discusses money matters.


People blindly invest their money in penny stocks, day trading, futures and options.

They eventually lose all their hard earned money.

What is the root cause..? GREED


Rather than learning new stuff and growing the skillset, people end up wasting time on Social Media and YouTube.


Instead of spending what is left after investing, people invest what is left after spending.

This results in undisciplined investment.


Lack of Knowledge about personal financial management.


Have you made a Will?

We are always saying to ourselves “ I will do it soon….”

But When ?

Your small decision of Will drafting can change everything for you and your Family.

“Do it Now” “Sometimes Later Becomes Never”



Asset Allocation is at the heart of personal finance 

  1. What is asset allocation all about…..?
  2. If asset allocation means diversification, then may I ask what is diversification……?


  • Let’s look at the example of “Emirates”.
  • It is one of the finest airlines.
  • It also provides a very unique service.
  • The different air-hostesses in the air-craft are  proficient in different languages. Some speak French, some speak Mandarin, some speak Spanish, some speak Swahili, some speak Hindi depending upon the sector they fly.

How does this help…?

  • Since it is an international airlines, it flies across the world and has passengers from all over the world.
  • On some sectors knowing English alone  does not work. Perhaps only French works in that sector. Hence the hostesses who speak French ensure that all is well.
  • On some other sector perhaps knowing “Hindi” is essential and so on and so forth.
  • Clearly different languages work in different sectors and having a staff knowing different languages ensures that all is well all the time.

Similarly in investments, not all asset classes work at all the time. Hence if one were to invest all his savings in a single asset class then certainly it won’t be “all is well” all the time.

It is prudent to invest in several asset classes such as equity, fixed income assets, gold, other commodities, real estate, etc. because some asset class or the other will work for you by giving reasonable returns at all times, and all would be well at all times.

Asset Allocation is therefore at the heart of “Financial Planning” . It is the starting point towards designing your portfolio


Commercial Paper & Treasury Bill

Commercial Paper & Treasury Bill

A Commercial Paper (CP) is an unsecured, short-term debt instrument issued by a Corporation, in the form of promissory note or in dematerialised form, typically for meeting short-term liabilities. 


A Commercial Paper (CP) is 

1. A money-market instrument

2. Issued by corporates and Financial Institutions

3. To garner money from the market

4. To meet short term needs.

When & why was it introduced in India?


  1. It was introduced in India in 1990.
  2. It was aimed at providing high rated corporates with a borrowing option.
  3. So while they could borrow from a bank, now with the help of a Commercial Papers, they could also borrow from the open market.
  4. Since Commercial Paper is used to borrow directly from the market, the rate of interest is lesser as compared to the banks. 



  1. A commercial paper is a lower cost alternative to borrowing from a bank. 
  2. However not all organisations are in a position to issue Commercial Papers.
  3. Only reputed organisations whose papers have a good rating
    can borrow directly through Commercial Papers and save money.



  • ABC Group are the owners of a large retail stores.
  • They want to raise funds from the market to purchase merchandise.
  • If they go to a bank for a loan, they would have to pay 10% interest on the loan.
  • But from the open market they could perhaps get  the loan at only 7%.
  • Hence by resorting to an instrument like Commercial Papers, the organization gains 3%.



  1. By issuing Commercial Papers the organisation borrows directly from investors and by-passes the banks.
  2. As a result, it gets to borrow at a lower rate from the market as compared to what the banks would have charged.
  3. This process is also called Financial Disintermediation or in other words getting rid of the mediator.


So who is eligible to issue Commercial Papers?

  1. Corporates
  2. Primary dealers 
  3. Satellite Dealers
  4. All-India Financial Institutions (FIs)


And who can invest in CPs?

  1. Individuals
  2. Banking companies 
  3. Non-Resident Indians (NRIs) and 
  4. Foreign Institutional Investors (FIIs) etc. 


For what maturity periods are CPs issued…..?

  • CPs can be issued for maturities between a minimum of 15 days and a maximum of up to one year from the date of issue.
  •  CP can be issued in denominations of Rs. 5 lakh or multiples thereof. 
  • Amount invested by single investor should not be less than Rs. 5 lakh (face value). 
  • Therefore it is used to fund the working capital or current requirements of organisations.


  • However, one important point to note is that the borrowed amount can only be used to fulfill current requirements. It is not meant be used for purchase of  fixed assets, such as a new plant. 
  • Commercial Papers is usually issued  at a discount from face value and rarely range longer then 270 Days.
  • It is mandatory for CPs to be credit rated by approved Credit Rating Agencies as may be specified by RBI from time to time.

Treasury Bills

What Treasury Bills are…

  • Treasury Bills or T- Bills are exactly the same as CPs.
  • Except that while CPs are issued by corporates, T- Bills are issued by the Government of India for financing its working capital needs.
  • T-Bills issued by Reserve Bank of India are for 91 Days, 182 Days and 364 Days T-bills.
  • T-Bills are Zero Coupon securities and are issued at discount and redeemed at face Value on Maturity.
  • T-Bills are Secured.



On a lazy Sunday night you and your family are relaxing on a couch watching your favorite TV show. 

Suddenly, someone rings your door bell. You open the door and it’s your long distance relatives who have made a surprise visit.

While you can’t show your displeasure but you still welcome them and offer a cup of tea or coffee. However, your wife whispers to you that there is no milk at home and all the neighborhood shops would be closed. 

So, now you are left with no option but knock your neighbour’s door to borrow some milk for your guests with an intention to return it next day once the shop reopens.

At least your friendly neighbour becomes your savior and saves you from embarrassment…..

Similarly, in the money market, call money serves as a savior to banks facing temporary cash crunch and lends them overnight money to avert the shortage situation…

What  is  Call Money…?

  • Call money relates to day-to-day funds requirements of banks. When one bank faces a temporary cash crunch, it borrows from another bank that has surplus cash for a period of one to fifteen days. Typically, banks borrow to bridge temporary shortfall in funds. This borrowing and lending is on unsecured basis.
  • When money is lent for one day or on overnight basis it is known as “Call Money” and, if it exceeds one day to 14 days is referred to as “Notice Money” and “Term Money” refers to borrowing/lending of funds for fixed tenure for 15 days upto 1 year.



  • The call money market is the most important segment in the Indian money market. In this market, only Schedule Commercial Banks, Co-operative Banks(other than Land Development Banks), Payments Banks, Small Finance Banks and Primary dealers (PDs) are allowed to both borrow and lend.


  • Banks have to maintain a mandatory minimum cash balance known as the cash reserve ratio (CRR). They also have to maintain sufficient liquidity for their day-to-day operations. 
  • Also, banks sometimes need to borrow funds to meet a sudden demand which may arise due to large cash withdrawals during festivals, long bank holidays and cash supply at ATMs etc. Any surplus / shortfall could be met through call money route.


  • The interest paid on call money is called call rate. Eligible participants are free to decide on what the interest rates would be. This is very liquid money market and is the main indicator of the day to day interest rates. If the call money rates fall, this means there is a rise in the liquidity and vice versa.
  • Also, the call money rates have implications on the monetary policy. If the call rates consistently trade at levels which are not in line with the RBI’s policy rates then RBI may conduct Open Market Operations (OMO) to infuse or suck liquidity from the market.
  • Simply put, call money serves the purpose of meeting the short-term liquidity requirement of banks. 

What Is Arbitrage

What Is Arbitrage?

Arbitrage describes the act of buying a security in one market and simultaneously selling it in another market at a higher price, thereby enabling investors to profit from the temporary difference in cost per share.

Arbitrage is a widely used trading strategy and probably one of the oldest trading strategies to exist. Traders who engage in the strategy are called arbitrageurs.

Let me tell you a story about a “Chaiwala”! He was truly chaalu or shall we say, “Extra Smart”!! He would provide tea at ₹ 5 per cup and his cost of preparing the same was ₹ 4. Thus, he made a profit of ₹ 1. But he was not happy with making a profit of just ₹ 1. So he thought about how he could increase his profit.

It was then that he had a brainwave out of the blue! He identified a Government canteen which offered tea at ₹ 2. BIG IDEA! Wasn’t it?  He could now simply buy tea for ₹ 2 and sell it for ₹ 5 and make a much better gain of ₹ 3! This buying of a thing in one market and selling in another market at a higher price is known as “Arbitrage”.

Similarly, if arbitrage opportunities exist, stocks too can be purchased in one market at a lower cost and sold in another at a higher cost.

So, for the next few days, our Chaiwala had a field day earning happily as he served his daily chai.

But Alas! Such arbitrage opportunities do not last long. As information flow increases and the arbitrage opportunity gets known, it soon starts to disappear. And this is exactly what happened in the case of our “chaiwala”.

The chaiwala had an assistant who one day spilled the beans about the “arbitrage” advantage being enjoyed by the chaiwala. Soon after that, the chaiwala was rounded up and he confessed about the arbitrage opportunity he had spotted.

Since his customers, in a sense, had been paying a fair price all this while since ₹ 5 had been the standard retail price in all canteens, the chaiwala was forgiven but was warned against adopting this practice again.

So, the arbitrage opportunity too vanished in thin air as the very next day, he was back in his own canteen making tea at ₹ 4 and selling it at ₹ 5.

Thus, it’s important to understand that “arbitrage” opportunities are short-lived. It is essentially a short window of opportunity that can be exploited by taking action at the right time. As information flow gets efficient, this opportunity vanishes as we saw in the case of the chaiwala.



  1. Arbitrage occurs when a security is purchased in one market and simultaneously sold in another market, for a higher price.
  2. The temporary price difference of the same asset between the two markets lets traders lock in profits.
  3. Traders frequently attempt to exploit the arbitrage opportunity by buying a stock on a foreign exchange where the share price hasn’t yet been adjusted for the fluctuating exchange rate. 
  4. An arbitrage trade is considered to be a relatively low-risk exercise.

How to value your business?

How to value your business?

There are several ways to determine the value of your business.

  • Asset based approach

Asset based valuation is the form of valuation in business that focuses on the value of the company’s assets or the fair market value of its total assets after deducting liabilities. Assets are evaluated and the fair market value is obtained. The key here is determining fair value, especially of assets since fair value may differ significantly from acquisition value (for non-depreciating assets) and recorded value (for depreciating assets).

There are two types of asset: tangible and intangible. Tangible assets are the physical things belonging to your business, such as your business premises, stock, land and equipment. Intangible assets are any non-physical assets, such as your business brand, reputation and intellectual property including copyrights and patents.

To get the Net Book Value (NBV) of your business, you subtract the costs of your business liabilities (such as debt and outstanding credit) from the total value of your tangible and intangible assets. Things which you never paid for may form part of the value, as would a unique way of doing business that gives your company an advantage.

Balance sheet figures can’t be equated with value due to historical cost accounting and the principle of conservatism. Simply put, relying on basic accounting metrics doesn’t paint an accurate picture of a business’s true value.

  • Discounted Cash Flows

Discounting future cash flows is a quantitative business valuation method. Business owners use information from the company’s income statement to value their company. Companies usually report their earnings as income before interest, taxes, depreciation and amortization (EBITDA). This number is essential for valuing a company using the discounted cash flow method.

Business owners must forecast future years’ EBITDA when using the discounted cash flow method. 

Discounted Cash Flow = Terminal Cash Flow / (1 + Cost of Capital) # of Years in the Future

The benefit of discounted cash flow analysis is that it reflects a company’s ability to generate cash. However, the challenge of this type of valuation is that its accuracy relies on the terminal value, which can vary depending on the assumptions you make about future growth and discount rates.

  • Market Capitalization

Market capitalisation is the total value of all outstanding shares of the company’s stock. It is calculated by multiplying the stock’s current share price and the number of shares outstanding. 

Market capitalization provides an idea of the size of the business and makes it easy to identify peers within a sector.

Market capitalization demonstrates that share price alone tells you little about a company’s overall value. Just because a stock has a high share price does not necessarily mean the company is worth more.

Market capitalization omits some important facts in the overall valuation of a company. Most importantly, it does not take into consideration the company’s debt.


To calculate enterprise value, add the company’s market capitalization to its outstanding preferred stock and all debt obligations, then subtract all of its cash and cash equivalents. 


  • Enterprise Value

The enterprise value is calculated by combining a company’s debt and equity and removing the amount of cash it’s currently holding in its bank accounts (since it’s not part of its actual operations).


Enterprise value can be calculated by adding debt to equity and subtracting cash.

Enterprise Value = Debt + Equity – Cash

Example: Suppose consider a company had a market capitalisation of ₹51 Crores, its balance sheet showed liability of ₹13 Crores. The company also had about 5Crores in Cash in its account, giving an enterprise value of ₹59 Crores. (i.e. ₹51Crores + ₹13Crores – ₹5Crores = ₹59Crores)

  • Entry valuation

An entry valuation framework model values a business by working out how much it would cost to establish a similar business. Essentially, it’s asking “if my business didn’t exist, how much money would it cost to start it from scratch, right now?”

A good way to get an accurate estimate is to create a list detailing start-up costs, the price of acquiring tangible assets, employing and training staff, establishing a customer base, and developing products and services.

You might be able to save some of your hard-earned cash if you set up your business in a cheaper location or opt for more cost-effective equipment. After working out these savings, subtract them from your projected start-up costs. 

  • Present Value of a Growing Perpetuity Formula

A growing perpetuity is a kind of financial instrument that pays out a certain amount of money each year, which also grows annually. Imagine a stipend for retirement that needs to grow every year to match inflation. The growing perpetuity equation enables you to find out today’s value for that sort of financial instrument.

The value of a growing perpetuity is calculated by dividing cash flow by the cost of capital minus the growth rate.

Value of a Growing Perpetuity = Cash Flow / (Cost of Capital – Growth Rate)

So, if someone planning to retire wanted to receive ₹6,00,000 annually, forever, with a discount rate of 10 percent and an annual growth rate of 4 percent to cover expected inflation, they would need ₹1,00,00,000 the present value of that arrangement.


Why to value the business?

Valuing business is a great way to examine the financial health and moneymaking potential of the business. There are plenty of other benefits that come part and parcel with valuing the business:

  • 1. A valuation also offers the opportunity to consider and manage the company’s risk profile. Valuation is not about determining what a company is worth in the hands, but instead its transferable value.

  • 2. Valuations can be performed on assets or on liabilities. They are required for a number of reasons including merger and acquisition transactions, capital budgeting, investment analysis, litigation and financial reporting.

  • 3. The true value of an assets may not be shown with a depreciated schedule and if there has been no adjustment of the balance sheet for various possible changes, it may be risky. By having proper valuation of business that will help make better business decisions.

  • 4. The valuation is usually needed when required to negotiate with banks or any other potential investors for funding. Professional documents of the company’s worth are usually required since it enhances credibility to the lenders.

  • 5. Valuation can give a clearer overview of the financial health of the business, which can help to pinpoint underperforming areas and focus on the approaches that are working well.

  • 6. Business owners can know the worth of their shares and be ready when to sell the business and to ensure no money is left on the table and get good value form the business.

  • 7. If there is a plan to sell a business, it is wise to come up with a base value for the company and then come up with a strategy to enhance the company’s profitability so as to increase its value as an exit strategy. Your business exit strategy needs to start early enough before the exit, addressing both involuntary and voluntary transfers. 

More risk in the business, lower the multiple can be expect to be achieve. To work out the unique multiple, you need to accept that there is some guesswork and subjectivity involved. Unfortunately, there is no set way of finding a designated multiple. Instead, there are a few basic rules of thumb to follow:

  1. Research your industry. What multiples have other businesses like yours sold for?
  2. How healthy is your business’s financial history?
  3. Is it stable enough to request a higher multiple?
  4. What situation will the business be left in once you depart (if you are selling)?
  5. Do you have any contracted income guaranteed over the coming years?
  6. How expansive is your customer base, and how strong are your supplier relationships?

Valuing your business isn’t just about offering a snapshot of the profit and loss of your business, it can give a detailed overview of your company’s chances of sustainability over a prolonged period of time, so it’s definitely something that you should consider.


Top-up Plan & Super Top-up Plan in Health Insurance

The value of health is vital for every human on Earth.  ‘Health is wealth’ is a world-famous proverb concerning health. Health is the biggest Wealth in Life. There is strong perspective that, unless a person is Healthy, it’s difficult for him/ her to enjoy. Money doesn’t have a value unless it is really enjoyed. Simply the Possessions of money or things don’t make an individual Rich, It’s the Good Health.


Most of us go about our lives without securing our medical expenses in totality. In my experience, the average medical cover opted or provided by an employer is generally in the range of ₹3 Lakhs to ₹5 Lakhs. Do you really think this cover is sufficient? What if the claim amount is more then the cover amount? Can you afford to pay the medical expenses out of your pocket? Do you agree that the medical expenses are increasing at a very fast rate every year?


Also, it is not practically possible for everyone to increase the premium of their existing plan, or buy another Health Insurance policy. Needless to say, there’s a need for higher coverage, and that’s where top-up or super top-up plan comes in.


Top Up Plan and Super Top Up Plan:


A top up plan offers additional coverage to the insured who already have an existing medical insurance plan without the need to buy an additional policy. This plan covers expenditure that may arise out of a single illness; this is over and above the existing base cover.


A super top plan offers medical cover when a single claim does not go beyond the threshold limit of the insurance cover but multiple claims do. A super top plan would consider the total of all hospitalisation bills that are submitted, regardless whether they are for a single illness or multiple ones.


Take an Example of Mr. Z. Mr. Z has basic health insurance of ₹5 Lakhs. 

In case Mr. Z buys a top-up plan of ₹ 10 Lakhs with ₹ 5 Lakhs Deductible or he buys a Super top-up plan of ₹ 10 Lakhs with ₹ 5 Lakhs Deductible. 

What happens if there is a 

  • A.Single Claim of ₹14 Lakhs
  • 1.Top-up Plan

Basic Health Insurance plan will cover ₹5 lakhs. Top-up plan will cover the remaining ₹9 lakhs as it exceeds deductible.

  • 2.Super Top-up Plan

Basic Health Insurance plan will cover ₹5 lakhs. Super Top-up plan will cover the remaining ₹9 lakhs as it exceeds deductible.

  • B. Two Claims of ₹4 Lakhs each
  • 1. Top-up Plan

Basic Health Insurance will cover for the ₹4 lakhs of first claim and ₹1 lakh of second claim. There will be no claim pay-out from Top-up Plan, as the individual amount of the claim does not exceed ₹5 lakhs.

  • 2.Super Top-up Plan

Basic Health Insurance will cover for the ₹4 lakhs of first claim and ₹1 lakh of second claim. Super Top-up will cover the remaining ₹3 lakhs.                                                                                        

  • C.Two Claims one claim of ₹8 Lakhs and another claim of ₹4 Lakhs
  • 1. Top-up Plan

Basic Health Insurance will pay ₹5 lakh from first claim Top-up Plan will pay the remaining ₹3 lakhs for the first claim. No claim is payable for second claim as it does not exceed the deductible limit.

  • 2. Super Top-up Plan

Basic Health Insurance will pay ₹5 lakh from first claim Super Top-up will cover the remaining ₹3 lakhs for the first claim and ₹4 lakhs for the second claim.

When to opt for a Top-up Health Insurance Policy:

Individuals can opt for a top-up or super top-up policy under the following circumstances.

  1. When their regular health insurance policy doesn’t offer adequate protection. In such cases they can choose one of these plans to enhance their protection.
  2. When they want to increase their cover without having to pay higher premiums. The premium for a top-up or super top-up plan is cheaper than the premium for a normal plan with the same cover, helping them save money.

How to decide?

Both of these plans have their own benefits. In the long run, a super top-up plan is a cost-saver and offers coverage for wide range of illnesses. It is especially beneficial for senior citizens who have frequent medical expenses that can be covered due to cumulative coverage. However, factors such as your premium outgo, budget and medical history should be considered before opting for either plan.


  1. Is it necessary to have a regular health plan? It is not mandatory to have an existing regular or group Mediclaim to buy a top-up or a super top-up plan.
  2. Is it necessary to buy a top-up plan or a super top-up plan from the same company?  No, it is not necessary. 
  3. Why are top-up plan or super top-up plan cheap? The deductible limit makes these plans cheaper when compared to regular plans. Higher the deductible threshold limit, lower the premiums of the top-up or super top-up plan.
  4. Can I top-up a family floater policy? Yes, top-up and super top-up policies come as individual and floater plans. 
  5. No claim bonus & top-up plans: If you have accumulated no claim bonus (for claim free years), top-up / super top-up plan will pay the claim amount over and above the regular plan’s sum amount plus no claim bonus amount. Top-up plans generally do not offer No Claim Bonus.
  6. Most of the top-up / super top-up plans work on reimbursement basis. They will pay the claim amount after the insurer gets the details of the medical bills, to access whether the policyholder has paid the deductible limit by himself or through any existing health insurance policy.
  7. Are there any top-up / super top-up plan for parents / senior citizen? Yes, some companies offer.
  8. IS there any income tax benefits on top-up / super top-up plan? Yes, the premiums paid on top-up / super top-up plan are eligible for Income deduction under section 80D.
  9. What are the important things to watch out before buying a top-up / super top-up plan? It is advisable to go through policy wordings of any health insurance plan. Understanding the important points like the duration for pre-existing disease, scope of cover, if day-care procedures are covered, cover for pre-post hospitalisation expenses, etc.