With the travel season going to start soon, tour operators have started coming out with innovative promotional schemes. While all of them are offering discounted packages, Lifestyle Holidays, a Mumbai-based tour operator, has gone a step further. The company is offering holidays in exchange for stocks.
And to lure customers who are suffering from pangs due to the recent stock market crash, the tour operator is offering a 10 per cent premium on the existing share price. The money is used as a payment towards a holiday package. The stocks can be used to finance the holiday, either fully or partly. The remaining has to be paid in cash.
But there is a catch. The company only accepts stocks of the top 72 companies, or blue chip stocks. These include Bharat Petroleum Corporation, Colgate Palmolive, HDFC Bank, Infosys Technologies, Reliance Industries, Tata Consultancy Services and Wipro.
"The future existence of this offer depends on the stock market to ensure financially viability," said a company official. This means, if there is a sharp rally in the market, the company may stop this scheme.
If you are game for the bargain, it will take two days for the share transfer procedure. And this will attract brokerage fee, stamp duty and service tax. All this has to be borne by the customer.
Agreed, the scheme is innovative and lucrative. But investment advisers believe that it makes little sense to swap assets (shares) accumulated over time for an expense (holiday).
"Selling shares of a blue-chip company only reflects that you don't believe in it," said Gaurav Mashruwala, a certified financial planner.
Financial planners believe that investing in equities is a long term process. And investors have to make a lot of effort. One has to study its business, balance sheet, profit and loss account and the trust the management. It does not make sense to liquidate such stock just for a foreign holiday.
Mashruwala compared this situation with the fable of the goose that laid golden eggs. "Stocks are the goose and the returns the golden eggs," Mashruwala said. According to him, investors can use the returns from the stocks, for instance dividends, for such expenses. Selling equity is equivalent to killing the goose.
In a well-constructed portfolio, every company has a role to play. These shares could have been purchased for various reasons. It could have been for a sector exposure or as a correlation to another stock. Liquidating them means compromising on the quality of the portfolio.
Also, the 10 per cent premium paid to the customer only works as a 10 per cent discount on the package. This discount further reduces if you consider the charges involved in the transfer.
The share transfer is an offline transaction. This means, the transferred stocks are not routed through a stock exchange.
Lifestyle Holidays is a part of non-banking financial company called Bulls & Bears Finance Limited. They also have a broking house by the name of V Jethalal Ramji Share Brokers.
These stocks are transferred using the services of the broking house. The company said that it plans to hold on to these shares once it procures them from interested sellers.
The only people who can possibly go for this offer are the ones who trade shares. "Many traders sell stocks to book losses and incur short-term capital loss," said Suresh Sadagopan, director, Ladder7 Financial Advisory.
This loss is allowed to be carried forward for several financial years. In the future, this short-term capital loss can be set against short-term capital gains in equities.
Once they have sold the stocks at loss, the traders can buy them back from the stock market.
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