IIFL Final

7/28/2019 IIFL Final

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TABLE OF CONTENTS

S.No CHAPTERS PAGE. NO.

CHAPTER – 1: INTRODUCTION

1.1 Introduction 7

1.2 Overview of Loan instruments in India 12

1.3 Gold Loan 15

1.4 Indian market at a Glance 19

CHAPTER – 2: LITERATURE REVIEW 27

CHAPTER – 3: COMPANY PROFILE

AND ITS COMPETITORS

3.1 Introduction to IIFL 31

3.2 IIFL Gold Loan 39

CHAPTER – 4: RESEARCH REPORT

4.1 Objectives 44

4.2 Hypothesis 45

4.3 Research Methodology 46

4.4 Analysis & Findings 49

4.5 Recommendation 63

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4.6 Conclusion 64

4.7 Bibliography 65

CHAPTER 1

INTRODUCTION

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EXECUTIVE SUMMARY

The title of the Project done at India Infoline Finance Limited is “Market Scoping-Gold Loan”

with special reference to IIFL Shahad branch

The main objective of the study is to find out the different services provided in gold loan market

by different organizations and to know the perception and awareness level of the people

regarding IIFL in the Gold Loan Market. Also this research project includes in finding out

policies and strategies of existing and upcoming competitors in this sector.

The type of research was Descriptive Research. The sampling used in this method is convenience

sampling method. The sources of the data for the study were primary and secondary data. The

questionnaire was prepared and administered to collect the relevant primary data. The data

collection method was based on questionnaire.

During this research, researcher visited local jewelries and banks\NBFC providing loan against

gold. It is found that all the NBFC companies have all most equal policies and procedures and

interest rate but local pawn brokers and jewelries have different rate of interest and different

policies. It is very difficult to get information from local pawn brokers and jewelries, because

they don’t have proper record like banks and NBFCs. Local pawn brokers have higher interest

rate as compared to banks and NBFCs also provides less amount of loan per gram gold. But on

the other hand in NBFCs the interest rate is less and provides good amount of loan up to 60

percent of the value of gold. In Banks interest rate is less and loan amount is less per gram.

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THE FUNDAMENTAL OF LOAN

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

In a loan, the borrower initially receives or borrows an amount of money, called the principal,

from the lender, and is obligated to pay back or repay an equal amount of money to the lender at

a later time. Typically, the money is paid back in regular installments, or partial repayments; in

an annuity, each installment is the same amount.

TYPES OF LOANS

SECURED

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property)

as collateral.

A mortgage loan is a very common type of debt instrument, used by many individuals to

purchase housing. In this arrangement, the money is used to purchase the property. The

financial institution, however, is given security — a lien on the title to the house — until

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the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have

the legal right to repossess the house and sell it, to recover sums owing to it.

UNSECURED

Unsecured loans are monetary loans that are not secured against the borrower's assets.

These may be available from financial institutions under many different guises or

marketing packages:

credit card debt

personal loans

bank overdrafts

credit facilities or lines of credit

corporate bonds (may be secured or unsecured)

Interest rates on unsecured loans are nearly always higher than for secured loans, because an

unsecured lender's options for recourse against the borrower in the event of default are

severely limited. An unsecured lender must sue the borrower, obtain a money judgment for

breach of contract, and then pursue execution of the judgment against the borrower's

unencumbered assets. In insolvency proceedings, secured lenders traditionally have priority

over unsecured lenders when a court divides up the borrower's assets. Thus, a higher interest

rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.

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OVERVIEW OF LOAN INSTRUMENTS IN INDIA

One of the reasons for boom in Indian economy is that now a days loans are easily available and

the rate of interests at which they are available are very reasonable. Banks are giving loan for and

loan against any and every thing. Government too is encouraging people to take loans for certain

purposes.

Some of the loan instruments available are:-

I] HOME LOANS

Real estate is currently one of the fastest growing sectors in India. Banking sector is also

registering profitable business since the last few decades, with the growth of real estate. Majority

of the banks are also offering easy home loans at attractive rates to their customers. Now that

getting a home loan is so easy, it seems everyone can fulfill his / her long cherished dreams of

purchasing lands, building their houses and expanding their homes. Different types of home

loans are tailored to suit the heterogeneous requirements of the customers.

• Home Purchase Loans: This is the basic home loan for the purchase of a new home.

•

Home Improvement Loans: These loans are given for implementing repair works andrenovations in a home that has already been purchased by you.

• Home Construction Loan: This loan is available for the construction of a new home.

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• Home Extension Loan: This is given for expanding or extending an existing home. For

instance, you may apply for a loan for the addition of an extra room in your home and for

similar cases etc.

II] PERSONAL LOANS

Personal loan is a lump sum amount that you take either from a bank or building society or

another lender. Such loans help you to take care of your immediate requirements without much

of a hassle. In fact, personal loan is one of the quickest ways of borrowing money. Also, no

questions regarding the end use of the loan are asked. You can use the loan amount for any

purpose such as home renovation, marriage expenses, medical expenses, holidays, consumer

durables, higher education etc. While applying for the loan, the lender usually conducts a credit

worthiness check, before giving the loan. Personal loans are repayable in equal monthly

installments (EMIs) and the loan tenure varies from 1 to 5 years.

The maximum amount of personal loan for which you are eligible depends upon your take-home

salary. The exact loan amount depends on your eligibility and takes into account many other

things as well, like your credit rating, job security, residential location and the ability to repay the

loan amount in time.

As personal loans are given without any security and involve a high risk, the interest charged is

usually more as compared to other loans, usually varying from 12 to 24%. Apart from this,

interest processing fee is also charged from the borrowers.

III] AUTO LOANS

With a plethora of auto loan opportunities available in India these days, it is now possible for one

to buy your dream car within a matter of days. No need to save up money for making completedown payment at the time of buying. Just gather enough amount for the initial payment and pay

the rest in easy installments, by taking up a loan. The best part about auto financing is that, apart

from the new cars, loans are available for old cars as well.

After undertaking a thorough research of each and every scheme , one will need to pick the one

that suits the most, in terms of interest rate, monthly installments, duration, and so on. The size

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of the loan will depend upon the cost of the vehicle and its type (standard or premium), along

with the percentage financing one want or are being offered.

In case of a new car, up to 90% of cost of the car is finance, while the percentage gets reduced to

80% in case of old car.

IV] LOAN AGAINST SHARES

The main purpose of taking loans against shares is to preserve investment, apart from taking care

of personal needs. People also resort to such a loan to meet their contingencies and get liquidity

without actually selling the shares. It is advisable to take loan against equity (shares &

debentures) only when expecting a certain sum of money a few months down the line and need

some funds in the interim. If one is reinvesting the loan amount, ensure that the benefits you

derive are more than the cost you have to incur (which includes interest and processing fee).

Carefully consider the risk involved in such a move.

Loan against shares is available in the form of an overdraft facility against the pledge of financial

securities like shares/units/bonds. After you submit the loan application with all the share

certificates and other relevant documents, a current account is opened in your name. You can

then withdraw up to the amount sanctioned and interest will be charged only for the number of

days you use the amount. The loan amount that can be sanctioned depends on two factors: the

extent of funding on a particular stock and the price (called the base price) considered by the

lender for calculating the value of the shares.

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HISTORY- 1991 India economic crisis

In 1985, India had started having balance of payments problems. By the end of 1990, it was in a

serious economic crisis. The government was close to default, its central bank had refused new

credit and foreign exchange reserves had reduced to such a point that India could barely finance

three weeks’ worth of imports. India had to airlift its gold reserves to pledge it with International

Monetary Fund (IMF) for a loan.

The crisis was caused by currency overvaluation; the current account deficit and investor

confidence played significant role in the sharp exchange rate depreciation.

The economic crisis was primarily due to the large and growing fiscal imbalances over the

1980s. During mid eighties, India started having balance of payments problems. Precipitated by

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the Gulf War, India’s oil import bill swelled, exports slumped, credit dried up and investors took

their money out. Large fiscal deficits, over time, had a spillover effect on the trade deficit

culminating in an external payments crisis. By the end of 1990, India was in serious economic

trouble.

The caretaker government in India headed by Prime Minister Chandra Sekhar's, immediate

response was to secure an emergency loan of $2.2 billion from the International Monetary

Fund by pledging 67 tons of India's gold reserves as collateral The Reserve Bank of India had to

airlift 47 tons of gold to the Bank of England and 20 tons of gold to the Union Bank of

Switzerland to raise $600 million. National sentiments were outraged and there was public

outcry when it was learned that the government had pledged the country's entire gold reserves

against the loan. The move helped tide over the balance of payment crisis, jolting the country out

of an economic slumber.

WHY INDIANS TAKE TO GOLD??

1) Gold is considered an equivalent for liquid

cash: Gold is highly liquid and portable as a

Security or Asset. It can be converted to cash

anytime when an emergency arises and is

considered a friend in need.

2) Gold is considered as Status Symbol: Especially in India gold symbolizes wealth. In Indian

weddings the gold the bride brings in show her family's status and wealth and forms part of the

dowry given to bride. It is believed that a bride wearing 24k gold on their wedding to bring luck

and happiness throughout the married life.

3) Gold is a very good investment: Gold is an asset which has consistently increased in value

and thereby considered as a safe and secure investment. Gold is considered an effective

diversifier which helps to reduce portfolio risk.

4) Gold is considered as a good gift item: It's precious and worthy across all cultures and times.

The gold jewelry is given as gifts during weddings, festivals and other special occasions.

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5) Gold has great religious significance: Gold is the symbol of the Hindu Goddess Lakshmi

and considered highly auspicious. Gold is brought or presented on festivals like Dhanteras and

Akshaya Tritiya. Toe rings are never made of gold as it represents the goddess of wealth and

should not be soiled by touching a human's feet.

6) Great Ornamental Value: Who can resist gold Ornaments? Women of every age and time

have always loved wearing gold ornaments. Moreover, Gold Ornaments are never out of fashion.

It also may be remembered that Wedding rings are also traditionally made of gold to mark a long

lasting relationship.

7) Great value as Heirloom: Gold jewelry is something which can be passed down from one

generation to the other as ancestral property.

Isn’t this why people say Gold is forever?

KEY FEATURES OF GOLD LOAN

Secure

d

Loan is borrowed against the gold deposited by the applicant.

Multi-purpose The loan can be used for any purpose, as long as it is not for any

illegal activity or speculation in the stock market. NBFCs place even

fewer restrictions on the use of loan.

Low disbursal

times

NBFCs and the unorganized sector disburse loans at a much faster

pace (as low as three minutes to a few hours) as compared with banks

which may take a few days.

High loan-to-value

(LTV) ratios

While banks would typically not give more than 75% of the gold

value as loan, NBFCs’ lending could go as high as 95% in case of

high-purity gold.

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Shorter loan

tenures

There is no minimum period for the loan and, if need be, one can

return the loan amount the very next day. The average tenure of the

loan is about 90 to 100 days.

Varied interest

rates

The interest rate depends on the tenure and amount of loan. It varies

from 12% to 18% in the case of banks, while for NBFCs, it could

reach 24%. The interest rates charged by the unorganized segment are

much higher and can range from 30% to 50%. Reasonable rates of

interest are especially applied if the loan to value (LTV) does not

exceed 50-60%.

Multiple repayment

options

Repayment can be structured as just interest amount with principal

being repaid at the end of the period in one lump sum. Repayment

through EMI, covering interest as well as principal, can also be an

option.

INDIAN MARKET AT A GLANCE

A LOOK AT THE NBFC SECTOR

The Indian NBFC sector can broadly be segregated into:-

1) Infrastructure NBFC segment,

2) The Housing Finance NBFC segment and

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3) The Retail or Consumer Finance NBFC segment.

The Indian Non Banking Finance Companies (NBFCs) accounts for a critical part of the

country’s overall financial system. It is estimated that the NBFCs as a whole account for 9.1% or

Rs. 4 trillion of assets of the entire financial system in India

RATIONALE BEHIND GOLD LOAN

As the name suggest its loan against Gold. It’s the most convenient way to receive cash in notime from any NBFC/Bank by pledging your

gold Coins/bars/Exchange traded funds ETFs/

SBI gold certificates etc., this is one loan

product which comes with minimal

documentation & no processing time

Product is designed in a way it ensures hassle

free process for the customer & loan availed can

be put to any use.

Loan amount eligibility is evaluated basis on the

Gold value banks usually fund 70-80% of the gold market value & on repayment of the loan gold

deposits are returned back to the customer.

This loan comes much cheaper than personal loan as it’s a secured product & rate of interest

ranges between 11.5-24% per annum.

Rate of interest is decided on two factors risk criteria-:

1. What % of market value of Gold you are availing loan. (If its 90% of the Gold market value

then interest charged will be higher & vice a versa for lower loan amount as compared to gold

value) &

2. Customer relationship with the bank.

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CHALLENGES FACED BY NBFC’s

The beginning of the last decade was very challenging for NBFC as they had to starve off

issues such as high cost of funds, low asset profile, intense competition, positioning

difficulties, slow economic and industrial growth and a high degree of NPAs.

The largely institutionally funded NBFC industry struggled in an era of where credit

confidence was ebbing away. Loss of employment, deterioration in asset quality and lack

of liquidity were some of the standout characteristics of NBFCs during that phase.

The RBI came to the rescue of the NBFCs by providing a range of measures such as

opening up a special repo window under the Liquidity Adjustment Facility, creation of an

SPV for liquidity support, deferring higher CAR norms for NBFCs and reducing risk

weights on bank’s exposure to NBFCs.

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SCOPE FOR NBFC’s

The Indian NBFC sector plays a very important role in financial intermediation in the

country, accounting for around 9-10% of the total financial assets in the system and their

fundamental importance to the country’s development is set to continue. However going

forward the situation is likely to be a lot more challenging as the NBFC sector seeks to

grapple with the twin issues of –

o Diminishing competitive advantages (weaker barriers to entry) and

o Greater regulatory pressures.

Going forward one is likely to see a greater influx of banking players within the NBFC

territories and unless the NBFC players can diversify their product offerings and tap

newer markets their competitive advantages will diminish.

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The RBI is looking to bridge the

regulatory gap between banks

and NBFCs and non deposit

taking NBFCs and deposit taking

NBFCs and this increasing cost

of regulation will affect

profitability and impose constraints on the business model of NBFCs.

GOLD LOAN SECTOR IN INDIA

THE REAL VALUE OF GOLD

The Indian gold market is a market that has grown at an impressive pace and is still currently

brimming with opportunities. While since FY02 till FY10 the gold stock in India is estimated to

have grown at a CAGR (Compounded Annual Growth Rate) of 35-40% (It is estimated that in

FY11 alone the country imported 900-1000 tonnes of gold) there is every reason to believe that

these rates can be sustained or even bettered going forward. The World Gold Council believes

that gold demand in the country will continue to grow at 30% in real terms driven by

urbanization, rapid GDP growth, burgeoning middle class incomes and a sustained and

potentially rising savings rate of 35-40%

Gold Loan Sector

16

Gold LoanSector

Organized

sector

Unorganized

sector



Gold Price in India – 40 Years History

Gold has always fascinated us Indians but do you know how prices of Gold have varied in India.

I happen to visit RBI website which publishes lots of reports including weekly Gold prices.

So here it is 40 Years price history of Gold.

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http://apnaplan.com/gold-price-in-india-40-years-history/

http://apnaplan.com/gold-price-in-india-40-years-history/



OPPORTUNITY FOR ORGANIZED SECTOR

India is estimated to possess 10% of the total gold stock in the world at 18000- 20000

tonnes.

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http://apnaplan.com/wp-content/uploads/2012/03/Gold-Price-in-India-40-Years-History.png



The opportunity for gold loan players lies in the fact that only 10% of this gold stock has

been pledged as gold and only 1-2% is captured by the organized segment. Greater

professionalism, standardization and the ensuing goodwill and trust can help channel the

gold stock to the broader gold loan segment with particular reference to the organized

segment.

While the potential size and the scope of the gold loan market are very admirable, that

alone is not enough. There has to be an undercurrent of strong demand to lend

credence to the scope and even on this count there is much to be optimistic. In fact

there has been a radical shift in the perception of gold loans by the average Indian.

Earlier while pledging gold for loans was frowned upon and was largely looked upon

as a last resort, these days gold loans are being taken even for the most elementary

reason (or as bridge loans), such that they have come to be known in common

parlance as “the loan of convenience”

Greater word-of-mouth, perception changes and the increasing share of the organized

segment in the total gold loan market can help bring the idle old gold stock to the gold

loan market.

Strong consumerism levels have only contributed to the boom of gold loans. In

addition to that while initially the gold loans were only taken by the rural class, these

days a broader class of people encompassing office goers in metros and semi urban

places, the elderly and the youth have all embraced this product.

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COMPETITIVE EDGE – NBFC’s

The gold loan players are broadly divided into the

o unorganized segment (pawn brokers, fund

brokers, money lenders),

o the organized gold NBFC players and

o organized banks.

It is estimated that 70% of the gold loan market is

unorganized with only 30% accounting for the

organized segment. The greater influx of the organized

sector is responsible for bringing a degree of standardization to the gold loan market and

this has helped stoke demand.

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The organized gold loan NBFC segment is better positioned than their organized banking

counterparts and the broader unorganized segment as they have a standardized gold loan

process, an abundance of gold appraisers, charge optimal rates that are lower than the

rates charged by the unorganized segment and possess a strong sense of expediency in the

disbursement of loans relative to the banks.

THE SPARK FOR INTEREST

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Contrary to the popular notion, gold loans are soaring not because of the ongoing rally in gold

prices, but because of relatively low competition from organized lenders like banks. And having

a tangible, super-secure commodity like gold for collateral can only add shine to the story.

CHAPTER 2

LITERATURE REVIEW

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GOLD MARKET AND THE BOOM OF GOLD LOAN SEGMENT

India is one of the largest markets for gold, accounting for approximately 10% of the total world

gold stock as of 2010. Rural India accounts for 65% of this gold stock. Though gold prices have

increased at more than 19% CAGR from 2002 to 2010, gold stock in India has grown at 22%

CAGR during the same period to 18,000 tons (Rs. 32,000 billion) as depicted in Figure 1. The

demand for gold has followed a regional trend with southern India accounting for 40% of annual

demand, followed by the west (25%), north (20-25%) and east (10-15%).

The organized gold loan market has grown at 40% CAGR from 2002 to 2010. NBFCs have been

a major driving force behind this growth given their extensive network, faster turnaround time,

higher loan-to-value ratios and the ability to serve non-bankable customers. Of late, banks have

improved their gold loan product features and services. Coupled with comparatively lower

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interest rates and charges, banks stand to gain market share at the expense of NBFCs in the near

future.

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Figure 4 depicts the gold loan portfolio size for key organized sector players, again highlightingthe rapidly growing dominance of NBFCs (e.g., Muthoot Finance, Manappuram and MuthootFincorp)

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CHAPTER 3

Company profile

26

http://www.iiflcap.com/Main/index.aspx



Introduction to IIFL

IIFL is the institutional equities division of India Infoline Ltd. (Bloomberg: IIFL IN), a listed

multi-services financial company with a market capitalization of US$400 million. With a team

of 25 research analysts, full-fledged sales and trading team, and an experienced investment banking team, IIFL is rapidly emerging as one of the premier institutional equities houses in

India. Headquartered in Mumbai, IIFL has overseas offices in Singapore and Dubai.

Amongst its other businesses, India Infoline is one of the leading players in the retail broking

and insurance distribution, and is currently in the process of scaling up its non-banking

financial services and wealth management franchises. The group has over 600 branches located

all over India.

India Infoline Group

We are a one-stop financial services shop, most respected for quality of its advice,

personalized service and cutting-edge technology.

Vision Statement :

Our vision is to be the most respected company in the financial services space.

India Infoline Group subsidiaries:

India Infoline Media and Research Services Limited

India Infoline Commodities Limited

India Infoline Marketing & Services

India Infoline Investment Services Limited

IIFL (Asia) Pte Limited

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History

The India Infoline Group was originally incorporated on October 18, 1995 as Probity

Research and Services Private Limited at Mumbai under the Companies Act, 1956 with

Registration No. 11 93797. The India Infoline Group commenced its operations as an

independent provider of information, analysis and research covering Indian businesses,

financial markets and economy, to institutional customers. We became a public limited

company on April 28, 2000 and the name of the Company was changed to Probity

Research and Services Limited. The name of the Company was changed to India

Infoline.com Limited on May 23, 2000 and later to India Infoline Limited on March 23,

2001.

In 1999, The IndiaInfoline Group identified the potential of the Internet to cater to a mass

retail segment and transformed our business model from providing information services to

institutional customers to retail customers. Hence we launched our Internet portal,

www.indiainfoline.com in May 1999 and started providing news and market information,

Independent research, interviews with business leaders and other specialized features.

In May 2000, the name of our Company was changed to India Infoline.com Limited to

reflect the transformation of our business. Over a period of time, we have emerged as one

of the leading business and financial information services provider in India.

The India Infoline Group’s broking services was launched under the brand name of

5paisa.com through its subsidiary, India Infoline Securities Private Limited

andwww.5paisa.com, the e-broking portal, was launched for online trading in July 2000. It

combined competitive brokerage rates and research, supported by Internet technology

Besides investment advice from an experienced team of research analysts, This group alsooffers real time stock quotes, market news and price charts with multiple tools for

technical analysis.

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29

Milestones

1995

Incorporated as an equity research and consulting firm with a client base that includedleading FIIs, banks, consulting firms and corporate.

1999

Restructured the business model to embrace the internet; launched

archives.indiainfoline.com mobilized capital from reputed private equity investors.

2000

Commenced the distribution of personal financial products; launched online equity trading;

entered life insurance distribution as a corporate agent.

2004

Acquired commodities broking license; launched Portfolio Management Service.

2005

Listed on the Indian stock markets.

2006

Acquired membership of DGCX; launched investment banking services.

2007

Launched a proprietary trading platform; inducted an institutional equities team; formed a

Singapore subsidiary; raised over USD 300 mn in the group; launched consumer finance

business under the ‘Money line’ brand.

2008

Launched wealth management services under the ‘IIFL Wealth’ brand; set up India Info line

Private Equity fund; received the Insurance broking license from IRDA; received the

venture capital license; received in principle approval to sponsor a mutual fund; received

‘Best broker- India’ award from Finance Asia; ‘Most Improved Brokerage- India’ award

from Asia money.

2009

Received registration for a housing finance company from the National Housing Bank;

received ‘Fastest growing Equity Broking House - Large firms’ in India by Dun &

Bradstreet.

http://archives.indiainfoline.com/




INDIA INFOLINE FINANCE LTD

India Infoline Finance Limited is a subsidiary of India Infoline Limited (IIFL). The Company

was originally incorporated on July 7, 2004 as a private limited company under the provisions of

the Companies Act, 1956 as India Infoline Investment Services Private Limited. The Company

was converted to a public limited company with effect from July 10, 2007.

The Company has obtained a certificate of registration dated May 12, 2005 bearing registrationno.- 147365 issued by the RBI to carry on the activities of a NBFC under section 45 IA of the

R BI Act, 1934.

The Company is engaged in the activity of mortgage financing, loan against securities, gold

loans, margin funding and other consumer financing products.

India Infoline Finance Ltd. is professionally managed and shares the professional values and

ethos of its parent company, IIFL and has acquired and maintained a reputation for reliability,transparency of operations and absolute integrity. A steady growth rate validates the trust that

industry has reposed in the Company.

30

ece ve n-pr nc p e approva or mem ers p o t e ngapore toc xc ange

Received membership of the Colombo Stock Exchange

2011

Launched IIFL Mutual Fund





Board of Directors

Mr. A. K. Purwar (Non Executive Chairman)

Mr. Purwar is currently the Chairman of India Venture Advisors Pvt. Ltd., investment manager

to India Venture Trust – Fund I, the healthcare and life sciences focused private equity fund

sponsored by the Piramal Group. He has also taken over as the Chairman of IL & FS Renewable

Energy Limited in March 2008 and India Infoline Finance Ltd in November 2009.

He is working as Independent Director in leading companies in Telecom, Steel, Textiles, Power,

Auto components, Renewable Energy, Engineering Consultancy, Financial Services and

Healthcare Services. He is an Advisor to Mizuho Securities in Japan and is also a member of

Advisory Board for Institute of Indian Economic Studies (IIES), Waseda University, and Tokyo,

Japan.

Awards received: "CEO of the year" Award from the Institute for Technology & Management

(2004); "Outstanding Achiever of the year" Award from Indian Banks' Association (2004);

"Finance Man of the Year" Award by the Bombay Management Association in 2006.

Mr. Nirmal Jain (Director)

Mr. Nirmal Jain is the founder and Chairman of India Infoline Ltd. He is a PGDM (PostGraduate Diploma in Management) from IIM (Indian Institute of Management) Ahmedabad, a

Chartered Accountant and a rank-holder Cost Accountant.

His professional track record is equally outstanding. He started his career in 1989 with Hindustan

Lever Limited, the Indian arm of Unilever. During his stint with Hindustan Lever, he handled a

variety of responsibilities, including export and trading in agro-commodities.

He founded Probity Research and Services Pvt. Ltd. (later re-christened India Infoline) in 1995;

perhaps the first independent equity research Company in India. His work set new standards for

equity research in India. Mr. Jain was one of the first entrepreneurs in India to seize the internetopportunity, with the launch of www.indiainfoline.com in 1999. Under his leadership, your

Company not only steered through the dotcom bust and one of the worst stock market

downtrends but also grew from strength to strength.

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Mr. R. Venkataraman (Director)

Mr. R Venkataraman, Co-Promoter and Executive Director of India Infoline Ltd., is a B.Tech

(electronics and electrical communications engineering, IIT Kharagpur) and an MBA (IIMBangalore). He joined the India Infoline Board in July 1999. He previously held senior

managerial positions in ICICI Limited, including ICICI Securities Limited, their investment

banking joint venture with J P Morgan of US, BZW and Taib Capital Corporation Limited. He

was also the Assistant Vice President with G E Capital Services India Limited in their private

equity division, possessing a varied experience of more than 20 years in the financial services

sector.

Mr. Nilesh Vikamsey (Independent Director)

Mr. Nilesh Vikamsey – Board Member since February 2005 - is a practicing Chartered

Accountant for 25 years and Senior Partner at M/s Khimji Kunverji & Co., Chartered

Accountants, a member firm of HLB International, a world-wide organization of professional

accounting firms and business advisers, ranked amongst the top 12 accounting groups in the

world.

He is elected member of the Central Council of Institute of Chartered Accountant of India

(ICAI), the Apex decision making body of the second largest accounting body in the world,

2010–2013. He is Chairman of its Research Committee, Vice Chairman of its Corporate Laws &Corporate Governance Committee and member of its various other committees.

He is member of Review, Reforms & Rationalization Committee (IMC), Member of Legal

Affairs Committee of Bombay Chamber of Commerce and Industry (BCCI), member of

Accounting and Auditing Committee of Bombay Chartered Accountant Society (BCAS) and also

on its Core Group, Corporate Members Committee of The Chamber of Tax Consultants (CTC) &

a Regular Contributor to WIRC Annual Referencer on "Bank Branch Audit".

Mr. Vikamsey is also a Director of India Infoline Finance Limited, Rodium Realty Limited,

ICAI Accounting Research Foundation & few Private Limited companies and Trustee in Sayagyi

U Ba Khin Memorial Trust (Vipassana International Academy) & a few Trusts focusing on

Education.

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Mr. M N Singh (Independent Director)

Mr. Singh Joined the 'Indian Police Service' in 1967. He has worked as the chiefs of the crime

branch of Mumbai Police, State CID and Anti-Corruption Bureau.

Ms. Pratima Ram (Wholetime Director & Chief Executive Officer)

Pratima Ram has held senior management positions in State Bank of India, where she had

extensive experience in Corporate and International Banking. Her last assignment with the Bank

was that of Country Head of SBI’s United States Operations based in New York. Prior to this,

she was CEO of South Africa Operations, based in Johannesburg. She also headed Mergers &Acquisitions at SBI Capital Markets.

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Subsidiaries

Company has following step-down subsidiaries:4. India Infoline Distribution Company Limited (distribution of retail loan products)

India Infoline Distribution Company Limited is in the business of distribution of financial products.

5. M oney line Cr edit Limited (consumer finance)

Money line Credit Limited is engaged in the business of loans. Money line CreditLimited's product bouquet includes unsecured and secured personal loan and loan against property.

6. India Infoline Housing Finance Limited (housing finance)

India Infoline Housing Finance Limited is the housing finance arm of the group. It isregistered with the National Housing Board (NHB). It is engaged in the business of housing and related loan activities.

Products

Mortgage Loans, which includes Housing Loans and Loans against Property.

Capital Market Finance , which includes Loans against Securities, Promoter Funding,

Margin Funding, IPO financing and other structured lending transactions.

Gold Loans, which includes finance against security of mainly used gold ornaments.

Healthcare Finance, which includes finance for medical equipments and project funding

in the healthcare sector.

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http://www.iiflfinance.com/GoldLoan.aspx

http://www.iiflfinance.com/HealthCareFinance.aspx


http://www.iiflfinance.com/MortgageLoan.aspx














IIFL Gold Loan

Gold loan or loan against gold is the easiest and quickest way for servicing your financial needs.To avail a gold loan, all you need to do is pledge your gold ornaments with us and they would

provide you with a loan amount as per the market value of your gold. Unlike other loans, gold

loan does not require you to provide any income or salary proof. Moreover, it has comparatively

lower interest rates; requires lesser documentation, and hence is processed in lesser time.

They at IIFL provide maximum loan against your gold at lowest interest rates. We have a strong

presence Pan-India and have serviced a large number of customers in a very short span. We offer

different types of schemes as per your requirement and convenience. Following are the main

features of our loans:-

• Loan amount ranges from min Rs 5,000 to max Rs 10,00,000

• Tenor for loans ranges from 3 months to 12 months

• Loan can be paid back on a monthly or quarterly basis

• Interest / Loan Amount due can be paid at any of our Gold Loan branches pan-India

• Minimal amount of paperwork and documentation is required

• Loan gets processed in as low as 5 minutes

• Variety of schemes are available to chose from

Your Gold is insured and secured safely with us in fire and burglary proof vaults

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Loan Disbursement Procedure

Customers

Customers are typically small businessmen, vendors, traders, farmers and salaried individuals,

who for reasons of convenience, accessibility or necessity, avail of our credit facilities by

pledging their gold jewellery with them rather than by taking loans from banks and other

financial institutions.

Players in the Gold Loan Industry

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The key players in the Indian gold loan market include the unorganized sector, banks –

public/private/cooperatives and NBFCs.

While the unorganized sector, comprising local pawnbrokers and moneylenders, has

traditionally dominated the gold loan market for many decades and still commands nearly

75% of the market, the organized sector, led by NBFCs, is catching up fast.

The organized sector has grown at a rapid pace of 40% CAGR from 2002 to 2010and is

expected to grow by 33% to 41% CAGR in 2011. And in doing so, these companies are

challenging the dominance of the large unorganized sector.

List of nominated banks

37

1. Allahabad Bank 2. Bank of Nova Scotia3. Bank of India4. Canara Bank 5. Corporation Bank 6. Dena Bank 7. HDFC Bank Ltd.8. ICICI Bank Ltd.9. Indian Overseas Bank 10. IndusInd Bank Ltd.11.Oriental Bank 12 Punjab National Bank 13 State Bank of India14 Union Bank of India



38



List of Major NBFCs

Muthoot Finance

Mannapuram Gold loan

Muthoot Fincorp

Reliance capital

Karvy Gold Loan

Unorganized Sector

Moneylenders

Marwadis (Jewelers)

Pawnbrokers

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CHAPTER 4

Research Report

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OBJECTIVE OF THE STUDY

To find out the competitors operating in the Gold Loan Market.

To find out the awareness level of IIFL providing loan against gold

To find out the occupation and the income group who prefers gold loan

To find out the perception of the people regarding loan against gold

To find out the preference of people for Gold banks or jwellers

To find the futuristic scope of gold loan market

To give recommendations to IIFL for better marketing activities and strategic planning.

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HYPOTHESIS

Hypothesis - 1

Ho: People are not aware about the Gold Loan.

Ha: People are aware about the Gold Loan

Hypothesis – 2

Ho : People prefer Gold banks or NBFC’s for Gold Loans.Ha : People prefer Jwellers for Gold Loans.

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RESEARCH METHODOLOGY

The methodology section is the blue print for researcher activity and specifies bow the

investigator intents to study the people or describe social settings. In other words the

methodology section make explicit the study desire and constitutes the “how to do it” phase.

Researcher has put his best possible effort to do this research and collect the necessary

information to learn about this topic thoroughly.

Research Design:

Descriptive Research: Descriptive research is also called Statistical Research. The main goal of

this type of research is to describe the data and characteristics about what is being studied. The

idea behind this type of research is to study frequencies, averages, and other statistical

calculations. Although this research is highly accurate, it does not gather the causes behind a

situation. Descriptive research is mainly done when a researcher wants to gain a better

understanding of a topic for example, a frozen ready meals company learns that there is a

growing demand for fresh ready meals but doesn’t know much about the area of fresh food and

so has to carry out research in order to gain a better understanding.

Sampling Design

1. Sample Size:

The sample size of my project is 100. Out of which only 70 people attempted all the

questions. Other 30 have not taken gold loan attempted only 5 questions.

2. Sample Unit:

Gold Jewelers, People who have taken loan against gold

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3. Sample Method:

The sample is selected in a non probability convenience sampling, irrespective of them

taken gold loan or not or availing the services or not. It was collected through mails and

personal visits to the known as well as unknown persons, by formal and informal talks

and through filling up the questionnaire prepared.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.Research has been done by primary data collection, and primary data has been collected by

interacting with various people. The secondary data has been collected through various journals,

websites and some special publications.

Data Collection Method:

Survey Method: The Survey method is the technique of gathering data by asking questions to

people who are thought to have desired information. A formal list of questionnaire is prepared.

Generally a non disguised approach is used. The respondents are asked questions on their

demographic interest opinion.

Data Collection Tool:

The questionnaire was prepared and administered to collect the relevant primary data. The data

collection method was based on Questionnaire.

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Analysis&Findings

45



1. Types of Loans availed by People

Findings:- Graph shows the general preference of loan taken by people. Personalloans scored high followed by gold loan with home loan trailing far behind.

46



2. Awareness Drivers

Findings:- TV advertisements have the largest impact in creating awareness amongst the massesfollowed by good publicity.

47



3. Major Factors that affects Loan

Findings:- Maximum loan amount is of paramount importance while choosing a loan instrumentfollowed by convenience & interest rates.

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4. Most likely Assets to be Pledge

Findings:- This shows that gold is the most convenient collateral that is pledged whereas home ishesitantly parted

49



5. Reasons for not taking Gold Loans

Findings:- This shows sentimental attachment of people for gold ornaments who do not wish to pledge gold.

50



6. Preffered Gold Pledging Outlet

Findings:- Jewelers were most preferred by people for taking gold loan followed by NBFC’s andlastly banks.

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7. Prefferd for Jwellers

Findings:- Trust and the ease of getting a loan coupled with a good value for gold were thereasons jewelers scored.

52



8. Preference for NBFC’s

Findings:- A combination of competitive interest rates, short disbursal times and a high LTVratio were the favorite factors.

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9. Growth Inhibiting factors for NBFC’s

Findings:- Lack of awareness was the major spoke in the wheel inhibiting business growth of NBFC’s.

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HYPOTHESIS TESTING

Hypothesis -1 Ho : People are not aware about the Gold Loan.Ha : People are aware about the Gold Loan.

From the analysis done above, it could be easily seen that majority of the responds are aware

about the Gold Loan.

This could be easily reflected from question 1,2 and 4.

From question 1 we came to know that around 45% of peoples are aware about the Gold Loan.

From question 2 we came to know that around 28% of peoples knows about Gold Loan by the

information spread through word of mouth.

From question 4 we came to know that around 64% people use their GOLD to avail the Loan

Conclusion:

Hence the researcher Rejects the Null hypothesis.Thus it is proved that people are aware about the Gold Loan.

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Hypothesis -2

Ho : People prefer Gold Bank or NDFC’s for Gold loanHa : People prefer Jwellers for Gold Loan.

From the analysis done above , it could be easily seen that People prefer Jwellers to avail theGold Loan.

From question 6 we came to know that around 64% people use Jwellers to avail the Gold Loan.

From question 7 we came to know that around 36% people use Jwellers for Gold Loan because

of their “CREDIBILITY”.

Conclusion:

Hence the researcher Rejects the Null hypothesis.

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NBFC’s growth rates in the last two years are

astronomically high with loan growth at more

than 110% and ROEs of 51% plus. These levels

are not sustainable. Besides the companies have been adding large number of branches every

year and unless they can sustain solid business, some of these branches could struggle

operationally.

FLUCTUATION IN PRICE AND DEMAND OF GOLD:- Much of the NBFC’s business

is dependent on the favorable perception of gold. Were gold prices to crash it could affect

demand for gold loans and jeopardize the margin ratios of the companies.

THREAT OF RBI REGULATIONS:- There is a lot of talk about the RBI potentially

taking a lot of measures to curb the rapid growth seen in gold loan companies. Regulatory

measures that have been mooted include higher margin ratios and a cap on branch expansion.

RISE OF COMPETITORS:- Recent influx of a large number of banks and NBFCs into the

gold loan market.

INTEGRITY OF EMPLOYEES:- NBFC’s place a great deal of importance on the

integrity of its employees who are in a position to take advantage of their position by

accepting fraudulent gold or stealing the gold. Besides unless security measures are up to the

mark, the NBFC branches run the risk of being burgled.

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CHANGING SCENARIO

• As we enter the 21st century, several opportunities and events have led to the sculpting of

the socio-economic landscape of India.

• India is endowed with a large percentage of youth population, which presents interesting

opportunities and edgy risks for today’s NBFC’s.

• Considerable shift from conservative to a more liberal lifestyle, job profiles and

opportunities have increased the spending power of youth multifold. This empowers them

to lavishly spend money whilst fulfilling their latent desires of a luxurious lifestyle.

• The generation is impatient, willing to spend at the drop of a hat to gain gratification

and flaunt audaciously. Such sentiments offer new insights and a chance for the NBFC’s

to multiply their business by slightly tweaking their strategies.

• Emphasis on education, pursuing higher degrees, elite medical facilities are the

aspirations of today’s modern Indians. However, these require generous monetary influx

at the right time. This need should be identified and dealt with by the NBFC’s.

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RECOMMENDATION&

CONCLUSION

59



Reccomendations

CREATE AWARENESS – USE MASS MEDIA

Bringing to the attention of people that private companies are also involved in gold loan

is of prime importance.

This awareness drive can be initiated by -:

Airing TV commercials explaining the product and concept,

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Distributing prints and pamphlets

Airing on radio stations

Installing hoardings.

STRONG BRANDING OF THE CHAIN- Brand ambassadors in the form of

famous celebrities can be employed to instill confidence in the brand.

CONCLUSION

For borrowers, gold loans have emerged as one of the best means of raising quick, short-termcapital. For lenders, gold loans are more advantageous compared with home and car loans

because of the shorter tenures, lower processing time and cost, and greater returns due to higher

interest rates. These factors, along with appreciation in value of gold, have led to an explosion in

the gold loan market.

From the research done above , it has been seen that Inspite of many Banks and NBFC’s people prefer Jwellers for Gold Loan. It has been seen that the main reason for this purpose is the“TRUST” and “CREDIILITY” they provide.

Hence to fetch this opportunity NBFC’s should start targeting the people who goes to Jwellersand should made them understand about the policies and benefits provided by Banks and NBFC’s

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Bibliography

Websites:

www.indiainfoline.com http://www.neytri.com/gold-loans-what-you-must-know/ http://www.muthootfinance.com/services/gold-loan.html http://thegoldwatcher.blogspot.com/2011/05/indian-gold-loan-market-

expanding.html

References:

Indian Gold Loan Market – Cognizant

The Economic Times

Mannapuram General Leasing Finance Limited 2011

http://www.indiainfoline.com/

http://www.neytri.com/gold-loans-what-you-must-know/

http://www.muthootfinance.com/services/gold-loan.html

http://thegoldwatcher.blogspot.com/2011/05/indian-gold-loan-market-expanding.html


http://www.indiainfoline.com/

http://www.neytri.com/gold-loans-what-you-must-know/

http://www.muthootfinance.com/services/gold-loan.html



IIFL Final

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