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Transcript of Adarsh Final Report
COMPANY PROFILE
INDIABULLS SECURITIES LTD.
Indiabulls Securities Ltd. was taken under reference to analyze the securities of
various sectors. It is a subsidiary of Indiabulls Financial Services Ltd., and is one
of India’s largest brokerage and distribution house. Over the years Indiabulls
Securities has been one of the leading investment service providers catering to
the needs of various investor categories both institutional and non-institutional.
The Private client group (PCG) of the Company provides value added investment
advisory services to high net worth individuals, NRI investors, trusts, corporate
and Banks. The investment product range offered by PCG covers equity
investment and equity trading, equity derivatives, portfolio management, IPOs
and Mutual funds. The Company has a full fledged research division involved in
macro economic studies, sectorial research and company specific equity
research combined with a strong and well networked sales force which helps
deliver current and up to date market information and news.
Indiabulls Securities Ltd., Depository Participant with National Securities
Depository Limited (NSDL) and Central Depository Services Ltd. (CDSL)
provides dual benefit services wherein the investors can use the brokerage
1
services of the Company for executing the transactions and the depository
services for settling them. Under the Portfolio Investment Scheme offered by the
Indiabulls Equity Analysis - the retail arm of Indiabulls Securities Ltd.,
offers online (through www.indiabulls.com) and offline services, its well-
researched expertise and financial products to the retail investors.
Indiabulls Securities Ltd., also an Approved Intermediary under the
Securities Lending Scheme, 1997, facilitates clients to borrow and lend
securities.
Indiabulls Securities Ltd, one of India's largest brokerage and distribution house
is a 100% subsidiary of Indiabulls Financial Services Ltd.
Indiabulls Financial Services Ltd. is a public company and listed on the National
Stock Exchange, Bombay Stock Exchange, Luxembourg Stock Exchange and London
Stock Exchange. The company ranks at 82nd position in the list of most valuable
companies in India has a market capitalization of approx US $ 800 million. The
consolidated net worth of the company is approx US $ 400 million. Three Engineers
from IIT Delhi have promoted Indiabulls. The company strives for rapid growth in
profits, leadership in the retail marketplace and better returns to its shareholders.
2
Indiabulls, along with its subsidiary companies, offer consumer loans, brokerage
and depository services, personal loans, home loans and other financial products
and services to the retail markets.
Indiabulls Resources Ltd, a 100 per cent subsidiary of Indiabulls Financial
Services Ltd., has been established with the objective of evolving as an
independent oil company over time. The immediate short-term goal is to partner
with oil companies who are willing to come to India and bid in the current NELP-6
round.
Through its group companies, Indiabulls is also engaged in real estate
development. The company is in the process of developing modern commercial
complexes in the heart of Mumbai.
Indiabulls Estates Pvt Ltd. the real estate arm of Indiabulls Financial
Services, will set up an integrated township spread across 100 acres in Sonepat,
15 km from Delhi.
3
HISTORY OF THE FIRM
Indiabulls Financial Services Limited was incorporated on January 10, 2000 as
Orbis Infotech Private Limited at New Delhi.
The name of the Company was changed to Indiabulls Financial Services
Private Limited on March 16, 2001 due to change in the main objects of our
Company from Infotech business to Investment & Financial Services business.
It became a Public Limited Company on February 27, 2004 and the name of
the Company was changed to Indiabulls Financial Services Limited.
Indiabulls has over 640 branches all over India. The customers of Indiabulls are more
than 4,50,000 which covers from a wide range of financial services and products
from securities, derivatives trading, depositary services, research & advisory services,
consumer secured & unsecured credit, loan against shares and mortgage & housing
finance. The company employs around 4000 Relationship managers who help the
clients to satisfy their customized financial goals. Indiabulls entered the Real Estate
business in the year 2005 with its group of companies.
Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay
Stock Exchange and Luxembourg Stock Exchange. The market capitalization of
Indiabulls is around USD 2500 million (29th December 2006). Indiabulls and its
4
group companies have attracted USD 500 million of equity capital in Foreign Direct
Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are
the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs,
Merrill Lynch, Morgan Stanley and Farallon Capital.
5
OBJECTIVE
Year 2000-01: One of India’s first trading platforms was set up by Indiabulls Financial
Services Ltd. with the development of an in-house team.
Year 2001-03: The service offered by Indiabulls was increased to include Equity,
F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research.
Year 2003-04: In this particular year Indiabulls ventured into Distribution and
Commodities Trading business.
Year 2004-05: This was one of the most important years in the history of Indiabulls. In
this year:
Indiabulls came out with its initial public offer (IPO) in September
2004.
Indiabulls started its Consumer Finance business.
Indiabulls entered the Indian Real Estate market and became the first
company to bring FDI in Indian Real Estate.
Indiabulls won bids for landmark properties in Mumbai.
6
Year 2005-06: The world renowned investment banks like Merrill Lynch and Goldman
Sachs increased their shareholding in Indiabulls. It also became a market leader in
securities brokerage industry, with around 31% share in Online Trading. The world’s
largest hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for
Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing
Finance Ltd. In the same year, the Steel Tycoon Mr. LN Mittal promoted LNM India
Internet venture Ltd. acquired 8.2% stake in India bulls Credit Services Ltd.
Year 2006-07: In this year, India bulls Financial Services Ltd. was included in the
prestigious Morgan Stanley Capital International Index (MSCI). The company also
received an “in principle approval” from Government of India for development of multi
product SEZ in the state of Maharashtra.
7
Securities & Derivatives
Broking
Mortgage & Housing
Finance
Consumer Financing
Financial Products
Distribution
Secured Financing
Diversified Business Group of India bulls
8
National Stock Exchange
The two major stock exchanges in India are National Stock Exchange (NSE) and Bombay
Stock Exchange (BSE).With the liberalization of the Indian economy, it was found
inevitable to lift the Indian stock market trading system on par with the international
standards. On the basis of the recommendations of high powered Pherwani Committee,
the National Stock Exchange was incorporated in 1992 by Industrial Development Bank
of India, Industrial Credit and Investment Corporation of India, Industrial Finance
Corporation of India, all Insurance Corporations, selected commercial banks and others.
The National Stock Exchange (NSE) is India's leading stock exchange covering various
cities and towns across the country. NSE was set up by leading institutions to provide a
modern, fully automated screen-based trading system with national reach. The Exchange
has brought about unparalleled transparency, speed & efficiency, safety and market
integrity. It has set up facilities that serve as a model for the securities industry in terms of
systems, practices and procedures.
Trading at NSE can be classified under two broad categories:
Wholesale debt market
Capital market
Capital market: A market where debt or equity securities are traded.
There are two kinds of players in NSE:
9
Trading members
Participants
NSE has several advantages over the traditional trading exchanges. They are as follows:
NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since inter-
market operations are streamlined coupled with the countrywide access to the
securities.
Delays in communication, late payments and the malpractice’s prevailing in
the traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with
the support of total computerized network.
10
NSE Nifty:-
S&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the
economy. It is used for a variety of purposes such as benchmarking fund portfolios, index
based derivatives and index funds.
Bombay Stock Exchange:-
The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was
established as "The Native Share & Stock Brokers Association" in 1875. It is the first
stock exchange in the country to obtain permanent recognition in 1956 from the
Government of India under the Securities Contracts (Regulation) Act, 1956.
SENSEX :-
The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that
subsequently became the barometer of the Indian stock market.
SENSEX is not only scientifically designed but also based on globally accepted
construction and review methodology. First compiled in 1986, SENSEX is a basket of 30
constituent stocks representing a sample of large, liquid and representative companies.
The base year of SENSEX is 1978-79 and the base value is 100. The index is
widelyreported in both domestic and international markets through print as well as
electronic media.
11
The Index was initially calculated based on the "Full Market Capitalization" methodology
but was shifted to the free-float methodology with effect from September 1, 2003. The
"Free-float Market Capitalization" methodology of index construction is regarded as an
industry best practice globally. All major index providers like MSCI, FTSE, STOXX,
S&P and Dow Jones use the Free-float methodology.
The SENSEX captured all these events in the most judicial manner. One can identify the
booms and busts of the Indian stock market through SENSEX.
The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of
BSE National Index (Base: 1983-84 = 100). It comprised of 100 stocks listed at five
major stock exchanges. The Exchange launched dollar-linked version of BSE-100 index
i.e. Dollex-100 on May 22, 2006.
The values of all BSE indices are updated every 15 seconds during the market hours and
displayed through the BOLT system, BSE website and news wire agencies.
All BSE-Indices are reviewed periodically by the "Index Committee" of the Exchange.
12
Introduction:-
Indiabulls is India’s leading Financial and Real Estate Company with a wide presence
throughout India. Indiabulls Financial Services Limited was established in the year 2000
by three promoters all of whom are engineers from Indian Institute of Technology, New
Delhi, and has attracted over Rs 700 million of investments from venture capital firms,
private equity funds and institutional investors.
History:-
Indiabulls Financial Services Limited was incorporated on January 10, 2000 as
Orbis Infotech Private Limited at New Delhi.
The name of the Company was changed to Indiabulls Financial Services
Private Limited on March 16, 2001 due to change in the main objects of our
Company from Infotech business to Investment & Financial Services business.
It became a Public Limited Company on February 27, 2004 and the name of
the Company was changed to Indiabulls Financial Services Limited.
Indiabulls has over 640 branches all over India. The customers of Indiabulls are more
than 4,50,000 which covers from a wide range of financial services and products
from securities, derivatives trading, depositary services, research & advisory services,
consumer secured & unsecured credit, loan against shares and mortgage & housing
finance. The company employs around 4000 Relationship managers who help the
clients to satisfy their customized financial goals. Indiabulls entered the Real Estate
business in the year 2005 with its group of companies.
13
. The market capitalization of Indiabulls is around USD 2500 million (29th December
2006). Indiabulls and its group companies have attracted USD 500 million of equity
capital in Foreign Direct Investment (FDI) since March 2000. Some of the large
shareholders of Indiabulls are the largest financial institutions of the world such as
Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.
Growth of Indiabulls:-
Year 2000-01:One of India’s first trading platforms was set up by Indiabulls Financial
Services Ltd. with the development of an in-house team.
Year 2001-03: The service offered by Indiabulls was increased to include Equity,
F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research.
Year 2003-04: In this particular year Indiabulls ventured into Distribution and
Commodities Trading business.
Year 2004-05: This was one of the most important years in the history of Indiabulls. In
this year:
Indiabulls came out with its initial public offer (IPO) in September
2004.
Indiabulls started its Consumer Finance business.
Indiabulls entered the Indian Real Estate market and became the first
company to bring FDI in Indian Real Estate.
14
Indiabulls won bids for landmark properties in Mumbai.
Year 2005-06: The world renowned investment banks like Merrill Lynch and Goldman
Sachs increased their shareholding in Indiabulls. It also became a market leader in
securities brokerage industry, with around 31% share in Online Trading. The world’s
largest hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for
Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing
Finance Ltd. In the same year, the Steel Tycoon Mr. LN Mittal promoted LNM India
Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd.
MISSION
15
Indiabulls securities limited: business comprises of Securities & Derivatives
broking.
Indiabulls Credit services limited: business comprises of personal loans, secured
and unsecured loans, and housing and auto loans.
Financial products distribution: distribution of mutual funds and insurance
products.
Indiabulls commodities Pvt ltd: deals with commodity brokerage business
Indiabulls Realities limited: is into development of Real estate and mining.
Indiabulls housing loans: is into mortgage of properties and housing loan business.
Organizational Structure of Indiabulls
16
The organizational structure of Indiabulls is Functional, which consist of several
departments.
Functioning Online: serving clients primarily through an Internet based relationship
targeted towards clients who value anytime, anywhere access and can be serviced at low
incremental costs.
Functioning Offline: serving clients primarily through an office based relationship
targeted towards clients who value physical interaction.
Online & offline business consist of following departments
Administration
Operations & Service quality
Technology
Finance
Corporate affairs
Human resources
Marketing
Corporate communications
Legal
17
Director-Online Director-Offline
Finance CorporateAffairs
HumanResources
TechnologyOperations &Service
Administration CorporateCommunication
Legal
Customer Service
Recruitment Marketing Training
Sr. Vice President
Regional Manager
Branch Manager
RelationshipManager
Department based Organizational Structure
18
Department based organizational Structure of
Indiabulls
Regional Hierarchy of Indiabulls
19
Senior Vice President
Regional Manager
Branch ManagerSenior Sales Manager
Support System Sales Function
RM/SRM
ARM
Local ComplianceOfficer
Back OfficeExecutive
Dealer
20
Regional hierarchies of Indiabulls
Key Positions
21
Chairman
Real Estate
CFO & President
Securities Consumer Finance
Executive Director Chief Executive Officer Executive Director
“Key Positions”
Products and Services of Indiabulls
Indiabulls offer the following products and services in the financial markets:
Stocks
Options and Futures
Depository Services
Commodities
Insurance Products
Mutual Funds
Bonds and Debt Products
Services
Commercial Vehicle Loans:
In April 2006 Indiabulls started Commercial Vehicle Finance under the flagship of
Indiabulls Credit Services Ltd. in order to provide refinance to its commercial vehicle
clients.. Mortgage Loans:
22
Consumer Finance:_
Indiabulls is a retail focused organization that fulfills the credit needs of a large
percentage of population in India. The key aspect of Indiabulls business model is to
provide an extremely unique customer experience.
23
VISION
Trading requires Opening a Demat account. Demat refers to a dematerialized account.
You need to open a Demat account if you want to buy or sell stocks. So it is just like a
bank account where actual money is replaced by shares. We need to approach the
Depository Participants (DP, they are like bank branches), to open Demat account.
A depository is a place where the stocks of investors are held in electronic form. The
depository has agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details of all
accounts held is like the depository. And the DPs are the branches that cater to
individuals.
There are only two depositories in India –
The National Securities Depository Ltd (NSDL) and the
Central Depository Services Ltd (CDSL).
24
SWOT ANALYSIS OF THE FIRM
STRENGTHS:-
Integrated technology platform: - Since the launch of their website,
www.indiabulls.com their online trading platform, they have invested in building
a technology platform. They have also developed software called “power
Indiabulls”. Their trader terminal is an application which allows customers to
trade on both the BSE and the NSE, has features like live intra-day tick by tick
charts, historical charts, price alerts and other features.
Pan India distribution network: - They have 640 branches across India.
These branches help in customer acquisition as well as customer service.
Relationship manager facility: Every customer is provided with a
relationship manager, where in the customers can contact these managers at
anytime of the day to get information on the market or get their queries clarified.
Growth rate: - The Company is growing at a very rapid rate, from 25 branches
in the year 2003 it has grown to 650 branches in the beginning of 2007. Not only
25
. They have a customer base of more than 450,000 and over 4500 relationship
managers. Indiabulls has been rated as the “Fastest Growing Large Cap
Company” in India in a report by Business Today magazine in April, 2006.
Power Indiabulls has developed into brands: - Indiabulls.com and
power Indiabulls which is their software are well known brands amongst retail
investors across India..
Strong sales and marketing teams that deliver market leading
product innovation: -. These managers offer personalized services to their
customers and help to build strong and continuing relationships with them. The
marketing associates help the company in client acquisition at minimal cost and
they also help the company and its subsidiaries in increasing their penetration into
smaller towns and cities.
Strong banking relations and credit ratings: - Indiabulls has banking
relation with some of the major banking institutions in the country such as HDFC
Bank, ICICI Bank, Standard Chartered Bank, etc, for easy mobilization of funds
of the customers.
26
Strong market presence and increased market share: -
Their growing client base and market share have increased their market presence
and brand recognition has enhanced their profitability. Their brand and
profitability
A the flexibility for them to invest in the business and technology systems these
attributes in turn has a positive effect on the growth of the company.
WEAKNESSES :-
Lack of a banking arm: - Indiabulls does not have a banking arm of its own
which otherwise would have helped the company to a large extent. Whereas a few
of its competitors like HDFC securities, ICICI securities, Kotak securities, etc
have their own banking arms which make the transactions easier and simpler.
Loss of relationship managers leads to loss of clients: - Their business
is dependent on the team of relationship managers who directly manage client
relationships..
OPPORTUNITIES :-
27
changing demographics with higher disposable income: - India is one of the
fastest growing economies in the world. It has a large and rapidly growing middle class of
300 million people with increasing levels of discretionary income available for
consumption and investment purposes. The options they
The options they have for investments are fixed deposits, post office deposits etc,.
This gives them a limited interest rate on their investment; where as the stock
market provides a good scope for making good returnsRapid penetration of
internet and computers: -Technology is vastly used in stock market trading.
Now, with the use of the computers and internet the stock market trading has
become fast. The traders can place orders through the internet and execute them.
This saves the time of the investors, who earlier had to make calls to their brokers
in order to trade
Market size and Characteristics : -India is a large and growing economy
with rapidly expanding financial services sector. The sector has witnessed a
transformation over the last decade as a result of the economic liberalization
which started in 1991. India is the world’s 12th largest economy in dollar terms
and the 4th largest in PPP terms.
Diversified business model : -Our Company and our subsidiaries offer various
financial services and products ranging from equity, F & O and wholesale debt,
insurance and IPO distribution, depository services to cater to the specific needs of
28
the retail and institutional investors thus providing all these services in a single
platform
THREATS :-
Economic slowdown : - Terrorist attacks and other acts of violence or war,
including those involving India or other countries could adversely affect national
economy or world economy as a whole. Such act may also result in a loss of
business confidence. Travel restrictions as a result of such incidents may have
adverse affect on the ability to operate effectively. This will result in an economic
slowdown (example: the 9/11 attack on the World Trade Centre, New York).
Political instability in the country : - The government of India has pursued
the policy of economic liberalization, including relaxing restriction on the private
sector.
Volatile movement in market indices : - The Indian stock market is very
volatile in nature and is capable of shedding or gaining several points in a single
day
Competition: - Indiabulls faces significant competition from companies
seeking to attract client’s financial assets, including traditional and online
29
brokerage firms, mutual fund companies, etc, which are having a wide presence
and strong brand name..
Substitutes: - Various alternative forms of investment including fixed deposits
with banks and post offices etc act as substitutes to retail broking products and
services. The stock market is very unpredictable with fluctuations; this may
prompt many people to invest in fixed deposits, posy office deposits, etc in order
to avoid risk.
Low product differentiation: - The retail broking services provided by the
various companies are homogeneous with very low product differentiation. This
does not allow the company to freely fix their prices due to the threat of
competition, which in turn reduces their profit.
30
Indiabulls SecuritiesTrading Products
Cash Account Intraday Account Margin Trading
PRODUCT DECTAILS
Trading Products of Indiabulls Securities
31
Trading Products of Indiabulls securities
Indiabulls Securities provide three products for trading. They are
Cash account
Intraday account
Margin trading (Mantra)
Cash account provides the client to buy 4 times of cash balance in his trading account.
Intraday product provides the client to buy 8 times of his cash balance in the trading
account.
Mantra account – called as margin trading, is a special account to buy on leverage for a
longer duration
32
OUT LOOK FOR FUTURE:
Income from Online business : The contribution of revenue from Online business
have grown from Rs. 31.85 million in FY 2002 to Rs. 242.26 million in FY 2004 and
from 24.05% of total business in FY 2002 to 34.85% of business in FY 2004. The rapid
growth of the online business is driven by growth in total clients, increasing product
flexibility and quality, enhanced online-only features such as portfolio analysis and
updates, streaming tickers, enhanced product offering of Power Indiabulls.
Brokerage
Equities
F&O
Income from Offline Business: The offline business unit has one of the widest
branch networks in India with a pan India presence with large market share. The revenues
have grown from Rs. 96.02 million in FY 2002 to Rs. 447.25 million in FY 2004 and
have changed from 72.52% of total business in FY 2001 to 64.34% of business in FY
33
2004. The rapid growth of the Offline business is driven by growth in total clients,
increased geographical presence
Brokerage
Equities
F&O
Wholesale Debt Markets
RESEARCH OBJECTIVE
In today’s globally competitive world, where investments play a vital role both for the
investors as well as the economy, the financial markets should work to the best of its
capacity.
A detailed study on the working of stock exchange has been conducted keeping in mind a
few objectives.
Primary objectives:-
To know the basic concept of the stock exchanges in India and its need in the
development and growth of the economy.
The stock exchanges incorporate growth for stocks, brokers, investors and the
economy, yet the investors are unable to vest confidence in the same. In light of
34
this, we wanted to glow a candle in the dark to have adequate reasons for the
same.
Our objective also was to grab the opinions of the investors about the working of
the stock exchanges in India and suggestions for improving the same.
Secondary objectives:-
To study the working of stock exchanges in India. (N.S.E., B.S.E.)
To analyze the dealings, methodology, and code of conduct with stock brokers.
To review the growth and performance of the stock exchanges.
To recommend the methods for improvement to boost the confidence of the
investors.
Such a study would go a long way in identifying the key problem
areas and would help us in giving our recommendations for
improving the working of the same.
35
RESEARCH METHODOLOGY
Mainly exploratory research was carried out for both primary and secondary
research.
Primary Research:
Structured and disguised questionnaire was used to probe individuals
for information. Personal In-depth interviews were conducted to
understand the mindset of the general public. These questionnaires
have been analyzed through ratios, averages, graphs and other
statistical tools.
Secondary Research:
36
Secondary data was also collected through various sources like newspapers, books,
magazines, Internet, stock exchange guidelines, etc. and used for certain aspects of the
research like customer’s perception,
current working, pros and cons of the working and other information.
RESEARCH DESIGN
The stock exchange has been defined under Section 2(3) of the securities contract
(Regulation) Act 1956 as “ any body of individuals’ whether incorporated or not,
constituted for the purpose of assisting, regulation or controlling the business of buying,
selling or dealing in securities.” The securities, which are traded in the stock market, are
defined under section 2(b) of the Act as:
Shares, scrip’s, stock, bonds, debentures, debentures stock or other marketable
securities of a like nature in or of any incorporated company or other body
corporate;
Government securities; and
37
Rights or interest in securities.
DATA COLLECTION METHOD
Related income comprises revenues earned from market related activities such as
transaction charges, service charges and interest levied on customer transactions. These
charges are dependent on trading volume, number of transactions completed and any
ledger debit amount in the client account.
Income from other Sales including Insurance, Mutual Fund Sales and Other Products
Other income comprises revenues earned from sale of third party products such as
Insurance, Mutual Funds and new services such as Research Services. Revenues are a
38
function of volume of mutual funds sold, the type of fund sold (active managed equity,
passive fixed income etc.) and the commissions paid on the funds sold.
Segment wise Sales of Indiabulls securities
for March 20010(in Crore)
39
Segmentwise Sales of Indiabulls Securities For March 2005(in Crore)
1.93, 2%
0.84, 1%
9.88, 9%2, 2%
99.65, 86%Brokerage IncomeIncome From Depository ServiceIncome From other Financial ActivityInterestTransaction Charges
Segment wise Sales of IndiaBulls Securities for year
2008Segment wise Sales of Indiabulls securities for March
2010(in Crore)
40
Segmentwise sales of Indiabulls Securities For March 2006(in Crore)
261.11, 82%
23.06, 7%9.08, 3%
3.57, 1%
21.16, 7%
Brokerage Income Income From Depository Service
Income From other Financial Activity Interest
Transaction Charges
Financial Ratio Analysis of Indiabulls Securities Ltd
Profitability ratios:
41
Indiabulls Securities Ltd. Mar 2008 Mar 2009 Mar 2010
Per cent (Non-Annualized) 12 months 12
months
12 months
-
Margins ratios (%)
-
As % of operating income
PBDT 43.05 44.75 58.76
PBT 41.45 42.87 56.7
PAT 25.92 27.25 37.49
PBDT (NNRT) 43.01 44.52 58.72
PBT (NNRT) 41.41 42.63 56.66
PAT (NNRT) 25.88 27.02 37.45
-
Corporate tax as per cent of PBT 35.83 33.69 32.47
-
Returns ratios (%)
-
As % of total assets
42
PBDT 18.95 31.35
PBT 18.15 30.25
PAT 11.54 20
PAT (NNRT) 11.44 19.98
Operating cash flow 77.78 65.19
-
As % of net worth
PBDT 53.48 128.77
PBT 51.23 124.25
PAT 32.57 82.16
PAT (NNRT) 32.29 82.07
Operating cash flow 219.53 267.75
-
As % of capital employed
PBDT 47.39 58.11
PBT 45.39 56.06
PAT 28.86 37.07
PAT (NNRT) 28.61 37.03
Operating cash flow 194.53 120.82
43
-
Appropriation of profits (as % of
PAT)
Dividends 3.89 19.66 0.52
Equity dividends 0.44 2.27 0.07
Preference dividends 3.44 17.39 0.45
Retained profits 96.11 80.34 99.48
-
Dividends / net worth 6.4 0.43
Equity dividends / equity capital 3.98 0.45
Equity dividends / equity cap. & sh.
prem.
3.98 0.45
Liquidity ratios:
Indiabulls Securities Ltd. Mar 2008 Mar 2009 Mar 2010
Times (Non-Annualized) 12 months 12 months 12 months
44
-
Short term liquidity
-
Cash / current liabilities &
provisions
0.67 0.86 1.7
Quick ratio 1.6 0.86 1.89
-
Medium to long term liquidity
-
Current ratio 1.776 1.141 2.137
Solvency ratio 1.567 1.561 1.269
Debt equity ratio 1.237 0.848 2.056
-
Interest incidence (%) 11.42 19.13 11.67
-
Interest cover
-
PBIT / interest 3.63 4.01 5.2
PBIT (NNRT) / interest 3.63 4 5.2
Operating cash flow / interest -2.99 11.97 8.91
45
-
(Rs. Crore)
Current assets 231.47 261.19 914.49
Current liabilities 130.34 228.86 427.87
Working capital 101.13 32.33 486.62
Net worth 83.34 108.43 181.77
Reserves & surplus 20.24 45.33 163.94
Asset utilization ratios
Indiabulls Securities Ltd. Mar
2008
Mar 2009 Mar 2010
Times (Non-Annualized) 12
months
12 months 12 months
-
Efficiency ratios
-
Operating cash flow / total assets 0 0.78 0.65
Operating cash flow / gross fixed
assets
0 17.46 14.15
46
Operating cash flow / capital
employed
0 1.95 1.21
-
Operating income / total assets 0.42 0.53
Operating income / GFA / leased
assets
9.51 11.58
Operating income / capital
employed
1.06 0.99
-
PBDT (NNRT) / total assets 0.19 0.31
PBDT (NNRT) / gross fixed assets 4.23 6.8
PBDT (NNRT) / capital employed 0.47 0.58
-
PBT / total assets 0.18 0.3
PBT / gross fixed assets 4.05 6.56
PBT / capital employed 0.45 0.56
-
PAT / total assets 0.11 0.2
PAT / gross fixed assets 2.57 4.34
47
PAT / capital employed 0.29 0.37
Interpretation
Profitability Ratios: Profitability is the net result of a number of policies and
decisions. The ratios examined thus far provide useful clues to the effectiveness of firms
operations.
48
Liquidity Ratios: liquidity ratios deal with firm’s ability to pay off its debts. It
includes
Current ratio: The current ratio is calculated by dividing current assets by
current liabilities. The current ratio of Indiabulls securities is 1.776, 1.441, &
2.137 for year 2004, 2005 & 2006 respectively.
Current ratio= current assets / current liabilities
Quick ratio (acid test ratio): The quick ratio is calculated by deducting
inventories from current assets and then dividing the remainder by current
liabilities. The quick ratio is a measure of the firm’s ability to pay-off the short-
term liabilities. A large part of the firms current assets are tied up in slow paying
debts. The industry average for Acid test ratio is 2.1, but for Indiabulls securities
quick ratio is 1.6, 0.86 & 1.89 for year 2004, 2005 & 2006 respectively, which is
less than Industry average. The quick ratio should be high which indicates the
company’s ability to pay-off short term obligations.
Debt equity Ratio:
Debt equity ratio is the related contribution of creditors and owners of the business in its
financing.
4.4 Financial performance Year on Year
49
Market share of Indiabulls on NSE trading Volumes
50
Increasing Market Share of Indiabulls on NSE Trading Volumes Increasing Market Share of Indiabulls on NSE Trading Volumes (1)(1)
(1) Source: NSE data from NSE website (Equity Segment)
22.3%
17.5%
18.8%
21.9%
30.7%
2.2%
5.5%3.4
%1.1%
1.9%
0%
5%
10%
15%
20%
25%
30%
35%
FY2002
FY2003
FY2004
FY2005
FY2006
Share in Online Trading
Share in Total Trading
(1)
Market Shares of Top Brokers on NSE Market Shares of Top Brokers on NSE (2)(2)14%
20%
35%
24%
12%
7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Top 5 Top 10 Top 25
FY02 FY05
UNDERSTANDING CAPITAL MARKET
Project Framework
51
An Outlook on Indian Stock Market
Capital Market Derivative Segment
Intraday Delivery Futures Options
52
SAMPLING
DERIVATIVES:-
By far the most significant event in finance during the past decade has been the
extraordinary development and expansion of financial derivatives. These instruments
enhance the ability to differentiate risk and allocate it to those investors most able and
willing to take it
Definition:
Derivatives are instruments whose value is ‘derived’, in whole or in part, from the value
of one or more underlying assets.
History of Derivatives:-
The history of derivatives is surprisingly longer than what most people think. Some texts
even find the existence of the characteristics of derivative contracts in incidents of
Mahabharata. Traces of derivative contracts can even be found in incidents that date back
to the ages before Jesus Christ. However, the advent of modern day derivative contracts is
attributed to the need for farmers to protect themselves from any decline in the price of
their crops due to delayed monsoon, or overproduction.
53
The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan
around 1650. These were evidently standardized contracts, which made them much like
today's futures.
The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was
established in 1848 where forward contracts on various commodities were standardized
around 1865. From then on, futures contracts have remained more or less in the same
form, as we know them today.
Derivatives have had a long presence in India. The commodity derivative market has been
functioning in India since the nineteenth century with organized trading in cotton through
the establishment of Cotton Trade Association in 1875. Since then contracts on various
other commodities have been introduced as well.
Exchange traded financial derivatives were introduced in India in June 2000 at the two
major stock exchanges, NSE and BSE. There are various contracts currently traded on
these exchanges. National Commodity & Derivatives Exchange Limited (NCDEX)
started its operations in December 2003, to provide a platform for commodities trading.
The derivatives market in India has grown exponentially, especially at NSE. Stock
Futures are the most highly traded contracts on NSE accounting for around 55% of the
total turnover of derivatives at NSE, as on April 13, 2005.
54
Understanding Derivatives:-
The primary objectives of any investor are to maximize returns and minimize risks.
Derivatives are contracts that originated from the need to minimize risk.
The word 'derivative' originates from mathematics and refers to a variable, which has
been derived from another variable. Derivatives are so called because they have no value
of their own. They derive their value from the value of some other asset, which is known
as the underlying.
“Derivatives are specialized contracts which signify an agreement or an option to
buy or sell the underlying asset of the derivate up to a certain time in the future at a
prearranged price, the exercise price. The contract also has a fixed expiry period
mostly in the range of 3 to 12 months from the date of commencement of the
contract. The value of the contract depends on the expiry period and also on the
price of the underlying asset.”
For Example:-
A farmer fears that the price of soybean (underlying), when his crop is ready for delivery
will be lower than his cost of production.
Let's say the cost of production is Rs 8,000 per ton. In order to overcome this uncertainty
in the selling price of his crop, he enters into a contract (derivative) with a merchant, who
55
agrees to buy the crop at a certain price (exercise price), when the crop is ready in three
months time (expiry period).
In this case, say the merchant agrees to buy the crop at Rs 9,000 per ton. Now, the value
of this derivative contract will increase as the price of soybean decreases and vice-a-
versa.If the selling price of soybean goes down to Rs 7,000 per ton, the derivative
contract will be more valuable for the farmer, and if the price of soybean goes down to Rs
6,000, the contract becomes even more valuable.
This is because the farmer can sell the soybean he has produced at Rs 9000 per ton even
though the market price is much less. Thus, the value of the derivative is dependent on the
value of the underlying.
56
Difference between Commodity Derivative & Financial Derivative
If the underlying asset of the derivative contract is coffee, wheat, pepper, cotton, gold,
silver, precious stone or for that matter even weather, then the derivative is known as a
commodity derivative.
If the underlying is a financial asset like debt instruments, currency, share price index,
equity shares, etc, the derivative is known as a financial derivative.
Derivative contracts can be standardized and traded on the stock exchange. Such
derivatives are called exchange-traded derivatives. Or they can be customized as per the
needs of the user by negotiating with the other party involved.
Such derivatives are called over-the-counter (OTC) derivatives. Continuing with the
example of the farmer above, if he thinks that the total production from his land will be
around 150 quintals, he can either go to a food merchant and enter into a derivatives
contract to sell 150 quintals of soybean in three months time at Rs 9,000 per ton. Or the
farmer can go to a commodities exchange, like the National Commodity and Derivatives
Exchange Limited, and buy a standard contract on soybean.
The standard contract on soybean has a size of 100 quintals. So the farmer will be left
with 50 quintals of soybean uncovered for price fluctuations.However, exchange traded
derivatives have some advantages like low transaction costs and no risk of default by the
other party, which may exceed the cost associated with leaving a part of the production
uncovered.
57
In India we have several derivatives, two of the most famous derivatives traded on
National stock exchange are
Futures
Option
Futures and options are traded on the NSE platform, with a normal IndiaBulls trading
account the client get the access to trade in the F&O contracts.
58
Futures and Forwards
As the name suggests, futures are derivative contracts that give the holder the opportunity
to buy or sell the underlying at a pre-specified price some time in the future.
They come in standardized form with fixed expiry time, contract size and price. Forwards
are similar contracts but customizable in terms of contract size, expiry date and price, as
per the needs of the user.s
Options
Option contracts give the holder the option to buy or sell the underlying at a pre-specified
price some time in the future
An option to buy the underlying is known as a Call Option.
An option to sell the underlying at a specified price in the future is known as Put
Option.
In the case of an option contract, the buyer of the contract is not obligated to
exercise the option contract. Options can be traded on the stock exchange or on
the OTC market.
59
Futures Terminology
Spot Price: the price at which an asset trades in the spot market.
Futures Price: the price at which the futures contract trades in the futures
market.
Contract Cycle : The period over which the contract trades. The index futures
contracts on the NSE have a one-month, two-month and three-month expiry
cycles which expire on the last Thursday of the month. On the Friday following
the last Thursday, a new contract having a three-month expiry is introduced for
trading.
Expiry Date -the date specified in the futures contract. It is the last Thursday of
the month
Contract Size : the amount of asset that has to be delivered less than one
contract. For instance, the contract size on NSE futures market is 100 Niftiest. It is
prescribed by NSE for stocks. Each stock had a different lot size.
Basis – the futures price minus the spot price. There will be a different basis for
each delivery month for each contract. In a normal market, basis will be positive.
This reflects that futures prices normally exceed spot prices.
Cost of Carry – the storage cost plus the interest that is paid to finance the
asset less the income earned on the asset.
60
Initial Margin – the amount that must be deposited in the margin account at
the time the futures contract is first entered into. These margins are prescribed by
the exchange. It varies from stock to stock.
Marking to Market – the adjustment made at the end of each trading day to
the investor’s margin account to reflect the investor’s gain or loss depending upon
the futures closing price. It is the difference between today’s closing price and
yesterdays closing. The MTM profit /loss are credited to the client account on day
to day basis. Thus we call this a T+0 settlement.
Maintenance Margin – somewhat lower than the initial margin; the balance
in the margin account must never become negative and in case it does, the
investor receives a margin call that must top-up the account to the initial margin
level before trade commences the following day.
61
Difference between Long Position & Short Position
A long position is an agreement to buy. You take a long position on a stock when
you are bullish or have a feeling that the stock will move up.
A short position is an agreement to sell. You take a short position on a stock when
you are bearish or have a feeling that the stock will move down.
62
Long => Buy
SHORT => SELL
There are around 152 companies which are underlying for future and options in
NSE. There are
index Futures (Nifty futures, Bank Nifty, CNX IT futures)
Stock Futures (Infosys futures. ITC futures, etc linked to specific stocks)
Index options (linked to indices)
Stock option (linked to specific stocks).
Option Contracts
The owner of an option has the OPTION to buy or sell something at a predetermined
price. Option provides the buyer of the contract the right but not the obligation to
exercise.
Or
You buy a call option when you are bullish or have an upward target.
63
Right to BUY / OWN – CALL OPTION
Right to SELL / WRITE – PUT OPTION
You buy a put option when you are bearish or have a downward target.
Options Terminology:-
Stock options – options on individual stocks. A contract gives the buyer the
right to buy or sell shares at the specified price
Buyer of an option – the one who by paying price (premium) buys the right
but not the obligation to exercise his/her option on the seller/writer
Writer of an option – the one who by receiving premium, is obliged to
sell/buy the asset if the buyer exercises on him
Call Option – gives the buyer the right but not the obligation to buy an asset by
a certain date for a certain price
Put Option – gives the buyer the right but not the obligation to sell an asset by
a certain date for a certain price
Spot Price – the price at which an asset trades in the spot market.
Strike Price – the target price or the expected price.
Contract Cycle – the period over which the contract trades. There are three
month contracts just like the futures.
Expiry Date – the date specified in the option contract. It is the last Thursday
of the month, just as in futures.
64
Contract Size – the amount of asset that has to be delivered under one
contract.
In-The-Money Option (ITM) – an option that would lead to a positive
cash-flow to the holder if it were exercised immediately.
A call option - on the index is said to be ITM if the current index stands higher
than the strike price (Spot Price > Strike Price).
A put option - is ITM if the index is below the Strike price (Spot Price < Strike
Price)
At-The-Money (ATM) – an option that would lead to zero cash flows to the
holder if it were exercised immediately.
Out-Of-The-Money Option (OTM) – an option that would lead to a
negative cash-flow to the holder if it were exercised immediately.
A call option - on the index is said to be OTM if the current index stands at a
level which is less than the strike price (Spot Price < Strike Price).
65
THE COMPETITORS
Major Competitors of Indiabulls Securities Ltd
Indiabulls Securities faces significant competition from companies seeking to attract
client financial assets, including traditional and online brokerage firms, mutual fund
companies and institutional players having wide presence and a strong brand name. They
are;
ICICI Securities Ltd.
Kotak Securities Ltd.
India Infoline
66
SSKI Ltd
Motilal Oswal Securities
Karvy
Geojit Securities
HDFC Securities
India Infoline Ltd:-
India Infoline Ltd is listed on both the leading stock exchanges in India, viz. the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). The India Infoline
group, comprising the holding company, India Infoline Ltd and its subsidiaries, straddles
the entire financial services space with offerings ranging from Equity research, Equities
and derivatives trading, Commodities trading, Portfolio Management Services, Mutual
Funds, Life Insurance, Fixed deposits and other small savings instruments to loan
products and Investment banking. India Infoline also owns and manages the websites,
www.indiainfoline.com and www.5paisa.com .
India Infoline Securities Pvt Ltd
India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is
engaged in the businesses of Equities broking and Portfolio Management Services. It
offers broking services in the Cash and Derivatives segments of the NSE as well as the
Cash segment of the BSE.
67
A choice of technologically advanced trading that is with the help of 5paisa.com. 5 paisa
also represents the availability of world class service to investors at the lowest possible
rate - 5 paisa for every trade of Rs100, i.e., a brokerage rate of 0.05%.
Features of 5 paisa.com
Paisa sense –
They offer a good value for money proposition. Their brokerage rates are very
competitive, charging only 5 paise for Rs100 of trade done, which is 0.05% brokerage.
They offer the most reasonable rates, independent of your net worth or volumes. In case
of trades that result in delivery, they charge an additional 0.20% for back office and
securities handling.
Personalized service –
68
At 5paisa.com, they are committed to provide you with unparalleled service, using e-mail,
call centers and support staff. They have also invested in physical infrastructure.
Protection – All transactions of 5paisa.com are secure and confidential. The orders are
electronically routed via sophisticated trading systems for execution. They follow a world
class security system that enables them to protect from any fraud or hacking.
Pedigree - 5paisa.com is a brand renowned for quality of information and services, they
are professionally managed, with a skill set which is of high standard. Their top
management has years of experience in financial services with leading banks and
institutions.
Sharekhan Securities
Sharekhan was created when SSKI Investor Services Pvt. Ltd., a company in the
securities and equities segment decided to harness the power of the Internet and offer
services to its customers through an online stock trading portal. Sharekhan brings and
provides a user-friendly online trading facility. They also have an extensive all-India
ground network of franchisees across the country.
Motilal Oswal:-
Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just
two people running the show. Motilal Oswal Securities Limited has established itself as
69
the Best Local Brokerage House in India (Asia Money Brokers’ Poll 2005). Their
Institutional Equities Division combines the efforts of the Research and Sales & Trading
departments to best serve clients' needs. Consistent delivery of high quality advice on
individual stocks, sector trends and investment strategy has established them as a reliable
research unit amongst leading Indian as well as international investors.
Their sales & trading team, comprising top equity professionals, translates the research
findings into actionable advice for clients, based on their specific needs. Sophisticated
computerized tools are used to understand client investment profile and objectives, which
ensures proactive and timely service.
FEATURE
Integrity: A company honoring commitment with highest ethical and business
practices.
Team Work: Attaining goals collectively and collaboratively.
Meritocracy: Performance gets differentiated, recognized and rewarded in an
apolitical environment.
Passion & Attitude: High energy and self motivated with a “Do It” attitude.
70
Excellence in Execution: Time bound results within the framework of the
company’s value system.
Karvy
The birth of Karvy was on a modest scale in the year 1982. It began with the vision and
enterprise of a small group of practicing Chartered Accountants based in Hyderabad, who
founded Karvy. They started with consulting and financial accounting automation, and
then carved inroads into the field of Registry and Share Transfers. Karvy has built a
reputation as an integrated financial services provider, offering a wide spectrum of
services for over 20 years.
71
In 1982, a group of Hyderabad-based practicing Chartered Accountants started Karvy
Consultants Limited with a capital of Rs.150, 000 offering auditing and taxation services
initially. Later, it forayed into the Registrar and Share Transfer activities and
subsequently into financial services.
Karvy made inroads into a host of capital-market services, - corporate and retail - which
proved to be a sound business synergy. In January 1998, Karvy became the first
Depository Participant in Andhra Pradesh.
Karvy Securities Limited
Deals in distribution of various investment products, viz., equities, mutual funds, bonds
and debentures, fixed deposits, insurance policies for the investor.
Kotak Securities
Kotak Securities Limited,
A subsidiary of Kotak Mahindra Bank, is the stock broking and distribution arm of the
Kotak Mahindra Group. Kotak Mahindra is one of India's leading financial institutions,
offering complete financial solutions that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life insurance, to investment
banking, the group caters to the financial needs of individuals and corporate.
72
Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both The
Bombay Stock Exchange and the National Stock Exchange of India Limited.
Its operations include stock broking and distribution of various financial products -
including private and secondary placement of debt and equity and mutual funds.
Currently, Kotak Securities is one of the largest broking houses in India with wide
geographical reach. The company has four main areas of business:
Institutional Equities,
Retail (equities and other financial products),
Portfolio Management and
Depository Services.
Kotak Securities Ltd is also a depository participant with National Securities Depository
Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual
benefit services wherein the investors can use the brokerage services of the company for
executing the transactions and the depository services for settling them.
Kotak Securities has 195 branches servicing more than 2, 20,000 customers and coverage
of 231 Cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers
Internet Broking services and also online IPO and Mutual Fund Investments.
Features of Kotak Securities:-
73
AKSESS Kotak securities Electronic Search Service: AKSESS
offers you an easy way to get to Kotak Securities' institutional research. On
this online archive you will be able to access estimates, company reports,
sector reports, strategy reports and a bunch of other products including the
daily India Market Flash produced by Kotak Securities.
High Quality of software (KEAT ): K.E.A.T is special software that
Koataksecurities.com provides its customers using which they can view live
market rates of scrip’s on both the NSE and BSE.
Research Reports : Kotak Securities provide Different reports to investors
which include
Intraday calls
Daily Technical View
Daily Morning Brief
Weekly Technical Report
Sectoral Reports
Stock Ideas
Derivative Reports
SMS Alerts: Kotak Securities also provides SMS alerts to customers
providing useful tips about stocks & shares.
74
ANALYSIS & INTERPRETATION
Indian Retail Brokerage Market
75
The Indian retail brokerage industry consists of companies that primarily act as agents for
the buying and selling of securities (e.g. stocks, shares, and similar financial instruments)
on a commission or transaction fee basis. It has two main interdependent segments:
Primary market and the Secondary market.
Interdependent Segments of Brokerage Market
Objective: The main objective is to
76
Indian Retail Brokerage Market
Interdependent
Segments
Primary Market Secondary Market
Analyze retail brokerage industry taking into account the health of the capital
markets, Derivative Market and the intensity of competition among the brokerage
companies.
Doing Competitive Analysis for Indiabulls
Major growth drivers for brokerage revenue and trading volume
are:
• Continuous fall in brokerage fees
• Adoption of technology — screen-based trading, electronic matching, and
paperless securities.
• Centralized operations, effective risk management, and control on large
interconnected operations spanning multiple locations, which is enabled by telecom
connectivity and low costs
• Increasing access to capital and the ability to provide margin finance
Parameter Assessment for Doing Competitive analysis:-
77
Product Price Service Value Proposition
A differentiating aspect is a comparative assessment of the top retail brokerages on
various value indicators, comprising of
Product
Pricing
Service
Unique Value proposition.
78
Customers need to analyze the Brokerage Firms Based on these 5
Parameters.
Brokerage & Miscellaneous charges
Quote Software
Execution Platform
Demat Account, and finally
Back office Support.
Brokerage & Miscellaneous charges: This accounts for all the charges that you
incur for your trading/investing. A few examples would be: Demat Account maintenance,
Brokerage, Annual account Fee, Telephone based trading charges, trading software usage
charges, etc.
Quote Software: This is used mainly for technical study and for live quotes. Many
people don’t evaluate quote software. Some Investors don’t pay attention to the quality of
data (how accurate it is). Or how fast and often it refreshes. Does it allow us to back test
our strategy? Does it allow customizing technical signals/parameters?? Does it allow us to
79
see historic data? For, what period is intra day data available? They might need all this
information. They should be clear on what they need and ensure quote software provides
it all.
Execution Platform: It’s nothing but a platform that allows us to execute our trade fast. It
should automate trade management and execution, and should automatically give
protection against human errors.
Demat Account: Demat account should only be opened with a well known and
established brokerage firm in the market.
Back office Support: People while trading face lots of problem because of lack of
good back office support. Relationship Managers trading without their client’s
knowledge, funds not being transferred, trades not being executed, slow execution etc are
a few examples.
Brokerage Charges
Intraday Brokerage charges of the Competitors of Indiabulls Securities Ltd
80
Intraday Brokerage Charges
0.1
0.05
0.1
0.25
0.05
0.1 0.1
0
0.05
0.1
0.15
0.2
0.25
0.3
Indiabulls KotakSecurities
India-infoline ICICI direct Karvy Motilaloswal
Sharekhan
Financial Brokerage Firms
Cha
rges
Indiabulls Kotak Securities India-infoline ICICI direct Karvy Motilal oswal Sharekhan
81
Delievery Brokerage Charges
0.50.45
0.5
0.75
0.5 0.5 0.5
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Indiabulls KotakSecurities
India-infoline
ICICI Direct Karvy Motilal oswal Sharekhan
Financial Brokerage Firms
Char
ges
Indiabulls Kotak Securities India-infoline ICICI Direct Karvy Motilal oswal Sharekhan
Intraday Brokerage Charges
Delivery Brokerage charges of the Competitors of
Indiabulls Securities Ltd
82
Delivery Brokerage Charges
Analyzing the Blogs from Web Site Traderji.com (online community
for Indian Investors & Traders)
We were interpreting the blogs written by customers, their experiences and their review
on brokerage firms.
In this web site they have conducted opinion poll on broker preferences of customers &
reasons for choosing the particular brokerage firm. In this poll opinion, customers have
shared their viewpoint about pros & cons of different brokerage firms.
Experiences of Customers
Poll Options
Which online broker u prefer and why - chose one
5paise
ShareKhan
Motilal Oswal
ICICI Direct
HDFC
India Bulls
Kotak
Any other (mention name)
83
Which Online Broker You Prefer? Poll Results of Blog(Voters 457)
Any other Mention, (58), 13%
Kotak, (34), 7%
Indiabulls, (75), 16%
HDFC, (14), 3%
ICICI direct, (109), 24%
Motilal Oswal, (16), 4%
Sharekhan, (83), 18%
India-Infoline(5paisa), (68), 15%
India-Infoline(5paisa) Sharekhan Motilal Oswal ICICI direct
HDFC Indiabulls Kotak Any other Mention
View Poll Results Vote Now
Poll Results of Blogs: Total Number of Voters =457
84
Pie chart showing Poll results
Competitive Strength of Indiabulls Securities
Indiabulls securities Ltd have a distinct set of competitive advantages that make it
uniquely capable of winning in the marketplace against its competitors
Diverse Branch Network
Bouquet of financial products and services
Advanced technology team that delivers market leading product innovation
Strong sales and marketing teams with continuous reinvestment and training
Strong cross-selling opportunities.
Strong and experienced promoters
Leading product innovation and marketing strategies
Well capitalized player, with strong banking relationships and credit ratings
Ability to combine people and technology in unique ways
85
Strong market presence and increased market share leading to a virtuous cycle of
growth and Profitability.
Core pillars of Business strategy
Increase the number of Client Relationships.
Offer Diversified Financial Products & Services.
Multiple Channels – Enhance Customer Experience and Opportunities.
Low cost and highly scalable business.
Merits of Indiabulls Securities
Low brokerage charges (Competitive) with 0.10 for Intra-day and 0.50 % for
delivery.
Indiabulls securities provide 8 times margin for Intra-day and 4 times margin for
delivery.
Indiabulls is suitable for both Day trading & Long term investment
86
IndiaBulls has software called Power IndiaBulls. It is a Java based application,
with real-time streaming quotes. It is fast in terms of speed and execution
Research reports are free of cost to trading members.
They Provide 3 in 1 interface, i.e. Demat Account, Trading account & bank
account all are linked in one interface.
De-Merits of Indiabulls Securities
You have to open a bank account with the banks mentioned in Indiabulls site
for Credit/ Debit Facility as they don’t have their own bank. And In ICICI
direct , you have a direct debit/credit facility with the bank
Most customers feel that it is difficult to understand the ledger reports of
Indiabulls securities, so proper customer guidance should be given.
Lack of Banking arm
Rural market is yet to be tapped.
More importance should be given to promotions & advertisements.
87
Value Proposition of Indiabulls Securities
ISL provide a very good Trading tools like Power Indiabulls & Indiabulls market
trader.
Power Indiabulls: A desktop Trading application offering clients sophisticated
trading tools accessible at lightning fast speed.
Indiabulls Market Trader: Browser based trading application built for retail
investor.
Indiabulls Equity Analysis: Premium research on 400 plus companies.
Indiabulls Professional Network: Offers real-time prices, detailed data and news,
intelligent analytics and electronic trading capabilities.
Relationship manager: Indiabulls securities robust technology is integrated with
knowledgeable and customer-focused relationship managers who are available
24X7 to assist the clients.
In Depth Market Analysis and Research
Their special research cell bring you intensive research reports on how the stock
market is faring, when is the right time to invest.
88
Branches of Competitors of Indiabulls as per the Year 2005-06
306
667750
257250
500400
0
100
200
300
400
500
600
700
800
Kotak Indiabulls ICICI Sharekhan India-Infoline
Motilal-oswal
Karvy
Competitors
Num
ber o
f Bra
nche
s
Kotak Indiabulls ICICI Sharekhan India-Infoline Motilal-oswal Karvy
Number of Branches of Competitors compared with
Indiabulls securities
89
Number of Customers Using Online Trading Terminal as per Year 2005
675,000
140,000
60,00075,000 90,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Brokerage Firms
Num
ber o
f Cus
tom
ers
usin
g O
nlin
e Tr
adin
g Te
rmin
al
Number of Customers of competitors compared with
Indiabulls
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Merits & De-merits of Competitors
ICICI securities: It provides products & services in fixed income, equity & corporate
finance.
ShareKhan
Merits of ShareKhan Securities
Low brokerage charges, intraday 0.1% and 0.5% for delivery.
Live streaming quotes
Customer support is good
No monthly charges
Can trade in both BSE and NSE
De-Merits of ShareKhan Securities :-
No BTST (buy today sell tomorrow), in ShareKhan you can’t sell a share today which
you bought yesterday.
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You have to open a bank account with the banks mentioned in ShareKhan site.
Streaming quotes requires JVM (Java Virtual Machine); this may be big headache
for customers.
Annual charges are Rs330.
Their trading terminals are certainly not for "investors", only for active traders.
That is because, you have to trade a certain volume every month, otherwise you
end up paying a fine
Can apply IPO online Can apply IPO online
Not necessary while opening a Demat
account you
Need to maintain a minimum
of Rs 5000
Can trade in BSE & NSE Can Trade in BSE & NSE
No Monthly Charges No Monthly Charges
Cannot apply can apply mutual funds
online
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India Infoline
Merits of India Infoline (5 Paisa.com) Securities
Low brokerage charges, intraday 0.10% and 0.50% for delivery and it is
negotiable.
Minimum brokerage per share will be 1 paisa for trading transactions and 5 paisa
for delivery based transactions.
5 paisa provides 6 times margin for Intraday & 8 time’s margin for Delivery.
All customers will get Digital Contract Notes. Physical contract notes could be
provided on request which would entail a nominal charge.
De- Merits of India Infoline (5 Paisa.com) Securities
Registration Fees (one time) Rs.500/ and is non-refundable.
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Software License Fee Rs.799/- per month or 7999/- per annum and is non-
refundable.
There is lot of Hidden costs.
Annual Service Charges Rs.250.
Customers who just want to have a depository relationship will be required to pay
Rs.1000/-, for each Demat account, which will be adjusted against service
charges.
The information in their web based terminal is too much compressed in one
screen.
Trader terminal is good, but the interface is too complicated
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Kotak Securities
Merits
They provide streaming quote software free.
Low Brokerage charges with 0.05% for Intra-day & 0.45% for delivery.
Kotak Securities will offer small-time retail investors with invest able
surpluses as low as Rs.5, 000 a chance to invest in capital markets.
Transactions are transparent with effective back office support.
They provide Simple Ledger reports, which customers feel easy to understand
than any other brokerage firms.
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Mutual fund & IPO facility is available online.
Flexibility of products - Once you invest with Kotak Securities, you can enjoy
access to a wide range of products and services to help you make the most of
your investments.
De-Merits
Unethical act: Geojit Securities Ltd has accused kotak securities stock broking
firm of hacking into its account to steal critical business information and
blocking information access. (Report: dated 2002, Ref: www.domain-b.com).
Some investors have bad experience with accounts opening & they complain
that it takes a long time for opening accounts.
Some customers are not happy with customer care of Kotak securities.
Value Proposition of Kotak Securities
Kotak Securities have a definite policy on brokerage, and they have different
slabs for different clients based on their turnover. You can always choose your
brokerage based on your style and quantum of trading.
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High Quality of software (KEAT)
K.E.A.T is a special software that Koataksecurities.com provides its
customers using which they can view live market rates of scrip’s on both the
NSE and BSE, create a watch list and simultaneously place orders, view order
reports, research companies etc. It is a complete online trading terminal.
Mobile trading
The facility is exclusively designed to give you instant access to the stock
market through mobile phone.
Phone Trading – Call and Trade
Call & Trade is a service offered by Kotak Securities for its customers, which
provides customers with a facility to trade over the phone. Kotak Securities
provides you a toll free number that you can call from anywhere in India.
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CONCLUSION
On the whole, my project at INDIABULLS was worthwhile as I got the opportunity to
learn a lot about the capital market. It was a wonderful experience interacting with
employees of the organization and simultaneously enhancing my knowledge and skills
about stock market operations. I got to know about the process of dematerialization,
account opening and how the trades department settles the various transactions etc.
Working at INDIABULLS and preparing this project report was a learning experience
and I shall make immense use of it in my career.
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RESULT,FINDINGS & SUGGESTIONS
Aggressive Promotions: Indiabulls Securities compared to its competitors
concentrates less on advertising and promotions, especially through electronic media. Its
competitors like Sharekhan, ICICI and Kotak are advertising aggressively through media.
Indiabulls should concentrate more on advertising through print and electronic media.
Tapping Rural Market: The Indian rural investors market are relatively untapped,
with only small and private firms meeting the current demand. Indiabulls Securities can
gain the “First Mover Advantage” over its competitors, especially in areas were
commercial crops are grown and the standard of living is high. These people do not have
much option to invest other than banks and post offices.
Reduce the initial account opening charges: The charge for opening a trading
and demat account in Indiabulls securities is high compared to its competitors. This
influences the potential investors to open their account with another company which
provides the same at lower prices. Thus it acts as a mental barrier for potential customers,
who tend to overlook all other benefits offered by Indiabulls. Hence Indiabulls should
consider reducing their account opening charges.
Bring in more product differentiation: Product differentiation here means that Indiabulls
securities should bring in more customized services and more value proposition for large
investors. It can reduce the brokerage charges for large investors which will encourage
them to invest more in the company.
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Invest more on R&D: Indiabulls should concentrate on its research and development
since most of its competitors are investing on R&D. This will help the company to read
the market better and will also be in a better position to understand the needs of the
customers. This can be extremely beneficial for Indiabulls in the long run.
ANNEXURE
Profit & loss Summary
100
Mar 2007
Mar
2008 Mar 2009
Rs. Crore (Non-
Annualized) 12 months 12 months 12 months
-
Income 69.48 114.59 317.97
Leasing & hire services 0 0 0
Security transactions 0.18 0 0
Dividend income 0 0.29 0
Interest income 15.36 1.93 21.16
Others 53.94 112.37 296.81
Other income 0 0 0
Non-recurring income 0.03 0.27 0.13
-
Expenditure
101
Loss on security
transactions 0 0.28 0.04
Other operating
expenses 3.58 7.92 13.84
Personnel cost 10.72 20.88 50.24
Other expenses 11.33 13.71 21.24
Finance charges 13.97 21.48 46.7
Lease rent 2.19 3.89 3.08
Less: expenses
capitalized 0 0 0
Non-recurring expenses 0 0 0
-
Profits / losses
PBDT 29.91 51.28 186.85
Depreciation 1.11 2.16 6.57
PBT 28.8 49.12 180.28
Tax provision 10.79 17.89 61.06
PAT 18.01 31.23 119.22
-
Appropriation of profit
102
Dividends 0.7 6.14 0.62
Retained earnings 17.31 25.09 118.6
Format of Questionnaire For Doing Promotions
103
The format of Questionnaire given to people is as follows:
Name of Person:
Contact Number:
E-mail Id
Are you interested in Share Market? Yes No Do you invest in Share market? Yes No
Are you aware of Indiabulls? Yes No
Do you have a Demat Account? Yes No
Presently in which security are you trading?
Signature
Brokerage & Tax break up format of Indiabulls
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(For Security reasons all data are not revealed)
Intraday (%) Delivery (%)
Futures (%)
Buy Sell Buy Sell
Buy Sell
Brokerage Charges 0.1 0.1 0.5 0.5
0.1 0.1
Security Transaction 0 0.025 0.125 0.125 0
0.017
Tax (STT)
Service Tax (12.24% on brokerage)
Turn over Tax (TOT)
Stamp duty
Total
105
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Bibliography:-
“Bombay Stock Exchange" Bseindia. 20 Mar. 2007 <http://www.bseindia.com>.
" Indiabulls Securities” Indiabulls.Com. 15 Mar. 2007 <http://www.Indiabulls.com>.
"National Stock Exchange” nseindia. 25 Mar. 2007 <http://www.nseindia.com>.
"Share khan Securities” Sharekhan.Com. 25 Mar. 2007 <http://www.sharekhan.com>.
“India Infoline Securities” India-Infoline.Com. 26 Mar. 2007 <http://trade.indiainfoline.com>.
" India Infoline Securities” 5paisa.Com. 26 Mar. 2007 <http://www.5paisa.com>.
" Kotak Securities” kotak securities.Com. 26 Mar. 2007 <http://www.kotaksecurities.com>.
"ICICI Securities” ICICI securities.Com..25 Mar. 2007 <http://www.ICICIsecurities.com>.
" Karvy” Karvy.Com. 25 Mar. 2007 <http://www.karvy.com>.
“Online Investors & Traders” 2 Apr. 2007 <http://www.traderji.com>.
" Motilal Oswal Securities” . 25 Mar. 2007 <http://www.motilaloswal.com>.
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