MUMBAI: Owning shares of Google is probably one of the best bets on the buzzing e-commerce and new-age business space. But, for a small retail investor from India, purchasing a Nasdaq-listed Google may prove to be a tedious task. In addition to the ordeal of opening a trading account, he also has to wade through a complex web of high transaction costs, compliance and tax rules.
Still, there is a simpler way for such investor to gain exposure to the Google story: invest in PPFAS Long Term Equity Fund (PPLTEF) or Motilal Oswal MOSt Shares NASDAQ —100 ETF (MNasdaq) Google constitutes about 8% of the corpus of PPFAS Long Term Equity and MNasdaq. While the MNasdaq's exposure to Google mirrors the stock's weightage on the Nasdaq 100, it was PPFAS Long Term Equity's move to raise its holding in Google that surprised many given that it is a value-focused equity mutual fund with target asset allocation at least 65% of its corpus in Indian equities.
So, why is PPFAS excited about Google at this juncture? As the number of users grows, thanks to cheaper smart phones and faster internet, Google's earnings are expected to advance steadily. "Google has been conservative by charging its high R&D expenses to its profit and loss account each year. This ensures much more earnings upside, if the new ventures deliver in future," says Rajeev Thakkar, chief investment officer, PPFAS Asset Management Company, which has invested in shares listed overseas, such as British American Tobacco, Nestle, 3M Co in the past.
s "According to Bloomberg estimates, the peer set including Facebook Inc, Twitter Inc, Baidu and LinkedIn Corporation, is trading at an average 2014E EV/EBITDA of 42.9 times. Google is trading at 13.0 times, much lower than the industry average, which makes it inexpensive," said Hemendra Aran, CEO and Founder, Aranca, a global research and analytical firm says Google's unrivalled positioning as 'innovator' and its significant reach would keep it ahead of its peers in the mediumto-long term, he said.
But, investors need to keep in mind a few things while putting money in these funds with a specific intention to gain exposure to Google. While PPLTEF is treated as an equity fund for tax purpose and attracts no tax if units are held for more than one year, Mnasdaq ETF attracts 20% tax on long-term capital gains post indexation for units held more than three years. Otherwise, investors pay short-term capital gains at the marginal rate of tax.
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