APROJECT REPORT
ON
“A COMPARATIVE STUDY OF NSE &BSE”
FOR THE PARTIAL FULFILLMENT OF DEGREE OF BECHELOR OF
BUSINESS ADMINISTRATION
SUBMITTED TO: SUBMITTED BY:
MS. SAFIA KHAN SHELENDRA BHATT
LECTURER MGMT. DEPT MBA 3RD
AMRAPALI INSTITUTE OF MANAGEMENT AND COMPUTER
APPLICATION
Shiksha Nagar, Lamachaur, Haldwani(Affiliated to Uttarakhand Technical University) Dehradun
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ACKNOWLEDGMENT
I would like to express my sincere gratitude and thanks to all whom in some
way or the other helped and guided me in the due course of the completion
of this project work. It was indeed impossible for me to accomplish to this
task without the timely accelerating encouragement and exuberant support .it
will be unfair to mention the name of those who directly or indirectly helped
me to make it a success.
It goes beyond words to express my special thanks to Ms. Safia Khan, who
despite of her busy schedule for providing information which I required for
my project.
SHELENDRA BHATT
MBA 3rd
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TABLE OF CONTENTS
NATIONAL STOCK EXCHANGE
ABOUT NSE
CORPORATE STRUCTURE
EQUITIES
LISTING
LISTING PROCEDURE ON NSE
ELIGIBILITY CRITERIA FOR LISTING ON NSE
BOMBAY STOCK EXCHANGE
ABOUT BSE
LISTINGS OF SECURITIES ON BSE
BIBLOGRAPHY
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DECLARATION
I, Shelendra Bhatt, Student of MBA, Amrapali Institute declare that the
project on “A Comaparative Study Of NSE & BSE” is the result of my own
efforts and it is based on data collected and guidance given to me.
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NATIONAL STOCK EXCHANGE
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.
NSE has played a catalytic role in reforming the Indian securities market in
terms of microstructure, market practices and trading volumes. The market
today uses state-of-art information technology to provide an efficient and
transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demutualisation of stock
exchange governance, screen based trading, compression of settlement
cycles, dematerialisation and electronic transfer of securities, securities
lending and borrowing, professionalisation of trading members, fine-tuned
risk management systems, emergence of clearing corporations to assume
counterparty risks, market of debt and derivative instruments and intensive
use of information technology.
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THE ORGANISATION
The National Stock Exchange of India Limited has genesis in the report of
the High Powered Study Group on Establishment of New Stock Exchanges,
which recommended promotion of a National Stock Exchange by financial
institutions (FIs) to provide access to investors from all across the country
on an equal footing. Based on the recommendations, NSE was promoted by
leading Financial Institutions at the behest of the Government of India and
was incorporated in November 1992 as a tax-paying company unlike other
stock exchanges in the country.
On its recognition as a stock exchange under the Securities Contracts
(Regulation) Act, 1956 in April 1993, NSE commenced operations in the
Wholesale Debt Market (WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November 1994 and
operations in Derivatives segment commenced in June 2000.
Mission
NSE's mission is setting the agenda for change in the securities markets in
India. The NSE was set-up with the main objectives of:
establishing a nation-wide trading facility for equities, debt
instruments and hybrids,
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ensuring equal access to investors all over the country through an
appropriate communication network,
providing a fair, efficient and transparent securities market to
investors using electronic trading systems,
enabling shorter settlement cycles and book entry settlements systems,
and
meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology have
become industry benchmarks and are being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force which
is guiding the industry towards new horizons and greater opportunities.
Logo
The logo of the NSE symbolises a single nationwide securities trading
facility ensuring equal and fair access to investors, trading members and
issuers all over the country. The initials of the Exchange viz., N, S and E
have been etched on the logo and are distinctly visible. The logo symbolises
use of state of the art information technology and satellite connectivity to
bring about the change within the securities industry. The logo symbolises
vibrancy and unleashing of creative energy to constantly bring about change
through innovation
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PROMOTERS
NSE has been promoted by leading financial institutions, banks, insurance
companies and other financial intermediaries:
1. Industrial Development Bank of India Limited
2. Industrial Finance Corporation of India Limited
3. Life Insurance Corporation of India
4. State Bank of India
5. ICICI Bank Limited
6. IL & FS Trust Company Limited
7. Stock Holding Corporation of India Limited
8. SBI Capital Markets Limited
9. The Administrator of the Specified Undertaking of Unit Trust of India
10. Bank of Baroda
11. Canara Bank
12. General Insurance Corporation of India
13. National Insurance Company Limited
14. The New India Assurance Company Limited
15. The Oriental Insurance Company Limited
16. United India Insurance Company Limited
17. Punjab National Bank
18. Oriental Bank of Commerce
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19. Corporation Bank
20. Indian Bank
21. Union Bank of India
CORPORATE STRUCTURE
NSE is one of the first de-mutualised stock exchanges in the country, where
the ownership and management of the Exchange is completely divorced
from the right to trade on it. Though the impetus for its establishment came
from policy makers in the country, it has been set up as a public limited
company, owned by the leading institutional investors in the country.
From day one, NSE has adopted the form of a demutualised exchange - the
ownership, management and trading is in the hands of three different sets of
people. NSE is owned by a set of leading financial institutions, banks,
insurance companies and other financial intermediaries and is managed by
professionals, who do not directly or indirectly trade on the Exchange. This
has completely eliminated any conflict of interest and helped NSE in
aggressively pursuing policies and practices within a public interest
framework.
The NSE model however, does not preclude, but in fact accommodates
involvement, support and contribution of trading members in a variety of
ways. Its Board comprises of senior executives from promoter institutions,
eminent professionals in the fields of law, economics, accountancy, finance,
taxation, etc, public representatives, nominees of SEBI and one full time
executive of the Exchange.While the Board deals with broad policy issues,
decisions relating to market operations are delegated by the Board to various
committees constituted by it. Such committees include representatives from
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trading members, professionals, the public and the management. The day-to-
day management of the Exchange is delegated to the Managing Director
who is supported by a team of professional staff.
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COMMITTEES
The Exchange has constituted various committees to advise it on areas such
as good market practices, settlement procedures, risk containment systems
etc. These committees are manned by industry professionals, trading
members, Exchange staff as also representatives from the market regulator.
Executive Committee
Committee On Trade Related Issues (COTI)
Advisory Committee - Listing of Securities
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EQUITIES
NSE started trading in the equities segment (Capital Market segment) on
November 3, 1994 and within a short span of 1 year became the largest
exchange in India in terms of volumes transacted.
Trading volumes in the equity segment have grown rapidly with average
daily turnover increasing from Rs.17 crores during 1994-95 to Rs.4,328
crores during 2003-04. During the year 2003-04, NSE reported a turnover of
Rs.1,099,535 crores in the equities segment accounting for 68.60% of the
total Indian securities market.
The Equities section provides you with an insight into the equities segment
of NSE and also provides real-time quotes and statistics of the equities
market. In-depth information regarding listing of securities, trading systems
& processes, clearing and settlement, risk management, trading statistics etc
are available here.
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LISTING
Listing means admission of securities of an issuer to trading privileges on a
stock exchange through a formal agreement. The prime objective of
admission to dealings on the Exchange is to provide liquidity and
marketability to securities, as also to provide a mechanism for effective
management of trading.
Listing on NSE provides qualifying companies with the broadest access to
investors, the greatest market depth and liquidity, cost-effective access to
capital, the highest visibility, the fairest pricing, and investor benefits. NSE
trading terminals are now situated in various cities and towns across the
length and breath of India.
Securities listed on the Exchange are required to fulfill the eligibility criteria
for listing. Various types of securities of a company are traded under a
unique symbol and different series.
NSE plays an important role in helping an Indian companies access equity
capital, by providing a liquid and well-regulated market. NSE has about 800
companies listed representing the length, breadth and diversity of the Indian
economy which includes from hi-tech to heavy industry, software, refinery,
public sector units, infrastructure, and financial services. Listing on NSE
raises a company’s profile among investors in India and abroad. Trade data
is distributed worldwide through various news-vending agencies.
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More importantly, each and every NSE listed company is required to satisfy
stringent financial, public distribution and management requirements. High
listing standards foster investor confidence and also bring credibility into the
markets.
NSE lists securities in its Capital Market (Equities) segment and its
Wholesale Debt Market segment
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LISTING PROCEDURE
An Issuer has to take various steps prior to making an application for
listing its securities on the NSE. These steps are essential to ensure the
compliance of certain requirements by the Issuer before listing its
securities on the NSE. The various steps to be taken include:
1. Initial Discussions
2. Approval of Memorandum and Articles of Association
3. Approval of draft prospectus
4. Submission of Application
5. Listing conditions and requirements
Initial Discussions
Authorised persons of the concerned Issuer should hold discussions with
NSE personnel regarding various requirements to be fulfilled by the Issuer
for listing its securities. The discussions should particularly cover the
qualifications of the Issuer which are required for an Issuer to be admitted
for listing on the NSE and to understand all the conditions that are precedent
to listing on the NSE. The proposed Memorandum & Articles of Association
and the draft prospectus may be presented to the NSE for examination
before finalizing.
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Approval of Memorandum and Articles of Association
Rule 19(2) (a) of the Securities Contracts (Regulation) Rules, 1957 requires
that the Articles of Association of the Issuer wanting to list its securities
must contain provisions as given hereunder.
The Articles of Association of an Issuer shall contain the following
provisions namely:
a. that there shall be no forfeiture of unclaimed dividends before the
claim becomes barred by law;
b. that a common form of transfer shall be used;
c. that fully paid shares shall be free from all lien and that in the case of
partly paid shares the Issuer's lien shall be restricted to moneys called
or payable at a fixed time in respect of such shares;
d. that registration of transfer shall not be refused on the ground of the
transferor being either alone or jointly with any other person or
persons indebted to the Issuer on any account whatsoever;
e. that any amount paid up in advance of calls on any share may carry
interest but shall not in respect thereof confer a right to dividend or to
participate in profits;
f. that option or right to call of shares shall not be given to any person
except with the sanction of the Issuer in general meetings.
g. permission for Sub-Division/Consolidation of Share Certificate.
Note: The Relevant Authority may take exception to any provision
contained in the Articles of Association of an Issuer which may be deemed
undesirable or unreasonable in the case of a public company and may
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require inclusion of specific provisions deemed to be desirable and
necessary.
If the Issuer's Articles of Association is not in conformity with the
provisions as stated above, the Issuer has to make amendments to the
Articles of Association. However, the securities of an Issuer may be
admitted for listing on the NSE on an undertaking by the Issuer that the
amendments necessary in the Articles of Association to bring Articles of
Association in conformity with Rule 19(2)(a) of the Securities Contract
(Regulation) Rules, 1957 shall be made in the next annual general meeting
and in the meantime the Issuer shall act strictly in accordance with prevalent
provisions of Securities Contract (Regulation) Act, 1957 and other statutes.
It is to be noted that any provision in the Articles of Association, which is
not in tune with sound corporate practice, has to be removed by amending
the Articles of Association.
Approval of draft prospectus
The Issuer shall file the draft prospectus and application forms with NSE. In
case NSE is not the Regional Stock Exchange then the draft prospectus and
application forms have to be filed simultaneously with the NSE when the
same is filed with the Regional Stock Exchange pertaining to the issue, for
the perusal of NSE. The draft prospectus should have been prepared in
accordance with the statutes, notifications, circulars, guidelines, etc.
governing preparation and issue of prospectus prevailing at the relevant
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time. The Issuers may particularly bear in mind the provisions of Companies
Act, Securities Contracts (Regulation) Act, the SEBI Act and the relevant
subordinate legislations thereto. NSE will peruse the draft prospectus only
from the point of view of checking whether the draft prospectus is in
accordance with the listing requirements, and therefore any approval given
by NSE in respect of the draft prospectus should not be construed as
approval under any laws, rules, notifications, circulars, guidelines etc. The
Issuers shall file a copy of the draft prospectus given by the respective
Regional Stock Exchange with NSE. The Issuer should also submit the SEBI
acknowledgment card or letter indicating observations on draft prospectus or
letter of offer by SEBI
Submission of Application
For Issuers listing on NSE for the first time
Listing of further Issues by Issuers already listed on NSE
Listing Fees
Security deposit (for new & fresh issues and when NSE is the
Regional Stock Exchange)
Supporting documents
Submission of Application (For Issuers listing on NSE for the first
time)
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Issuers desiring to list existing/new securities on the NSE shall make
application for admission of their securities to dealings on the NSE in the
forms prescribed in this regard as per details given hereunder or in such
other form or forms as the Relevant Authority may from time to time
prescribe in addition thereto or in modification or substitution thereof.
Appendix 'A' - Clauses of Articles of Association.
Appendix 'B'- Application Letter for Listing.
Appendix 'C-1' - Listing Application providing pre-issue details of
securities.
Appendix 'C-2' - Listing Application providing post-issue details of
securities.
Appendix 'D'- Checklist for supporting documents ( as applicable to the
issuer)
Appendix 'E' - Schedule of Distribution
Appendix 'F'- Listing Agreement
Submission of Application (Listing of further Issues by Issuers already
listed on NSE)
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Listing Fees
The listing fees depend on the paid up share capital of your Company:
Particulars Amount (Rs.)
Initial Listing Fees 7,500
Annual Listing Fees
Companies with paid up share and/or debenture capital:
Of Rs.1 crore 4,200
Above Rs.1 crore and up to Rs.5 crores 8,400
Above Rs.5 crores and up to Rs.10 crores 14,000
Above Rs.10 crores and up to Rs.20 crores 28,000
Above Rs.20 crores and up to Rs.50 crores 42,000
Above Rs.50 crores 70,000
Companies which have a paid up capital of more than Rs. 50 crores will pay
additional listing fees of Rs. 1400 for every increase of Rs. 5 crores or part
thereof in the paid up share/debenture capital.
Kindly draw your Cheques/Demand Drafts favouring National Stock
Exchange of India Limited, payable in Mumbai.
Submission of Application (Security Deposit)
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(Payable only for new and fresh issues and only when NSE is the Regional
Stock Exchange)
The Relevant Authority shall not grant admission to dealings of securities of
an Issuer which is not listed or of any new (original or further) issue of
securities of an Issuer excepting Mutual Funds, which is listed on the NSE
unless the Issuer deposits and keeps deposited with the NSE (in cases where
the securities are offered for subscription, whether through the issue of a
prospectus, letter of offer or otherwise, and NSE is the Regional Stock
Exchange for the Issuer) an amount calculated at 1% of the amount of
securities offered for subscription to the public and or to the holders of
existing securities of the Issuer, as the case may be for ensuring compliance
by the Issuer within the prescribed or stipulated period of all requirements
and conditions hereinafter mentioned and shall be refundable or forfeitable
in the manner hereinafter stated:
1. The Issuer shall comply with all prevailing requirements of law
including all requirements of and under any notifications, directives
and guidelines issued by the Central Government, SEBI or any
statutory body or local authority or any body or authority acting under
the authority or direction of the Central Government and all prevailing
listing requirements and conditions of the NSE and of each recognized
Stock Exchange where the Issuer has applied for permission for
admission to dealings of the securities, within the prescribed or
stipulated period;
2. If the Issuer has complied with all the aforesaid requirements and
conditions including, wherever applicable, its obligation under
Section 73 (or any statutory modification or re-enactment thereof) of
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the Companies Act, 1956 and obligations arising therefrom, within the
prescribed or stipulated period, and on obtaining a No Objection
Certificate from SEBI and submitting it to NSE , NSE shall refund to
the Issuer the said deposit without interest within fifteen days from the
expiry of the prescribed or stipulated period;
3. If on expiry of the prescribed or stipulated period or the extended
period referred to hereafter, the Issuer has not complied with all the
aforesaid requirements and conditions, the said deposit shall be
forfeited by the NSE, at its discretion, and thereupon the same shall
vest in the NSE. Provided the forfeiture shall not release the Issuer of
its obligation to comply with the aforesaid requirements and
conditions;
4. If the Issuer is unable to complete compliance of the aforesaid
requirements and conditions within the prescribed or stipulated
period, the NSE, at its discretion and if the Issuer has shown sufficient
cause, but without prejudice to the obligations of the Issuer under the
laws in force to comply with any such requirements and conditions
within the prescribed or stipulated period, may not forfeit the said
deposit but may allow such further time to the Issuer as the NSE may
deem fit; provided that
1. the Issuer has at least ten days prior to expiry of the prescribed
or stipulated period applied in writing for extension of time to
the NSE stating the reasons for non-compliance, and
2. the Issuer, having been allowed further time by the NSE, has
before expiry of the prescribed or stipulated period, published
in a manner required by the NSE, the fact of such extension
having been allowed; provided further that where the NSE has
not allowed extension in writing before expiry of the prescribed
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or stipulated period, the request for extension shall be deemed
to have been refused; provided also that any such extension
shall not release the Issuer of its obligations to comply with the
aforesaid requirements and conditions.
5. 50% of the above mentioned security deposit should be paid to the
NSE in cash. The balance amount can be provided by way of a bank
guarantee, in the format prescribed by or acceptable to NSE.
Submission of Application (Supporting Documents)
Issuers applying for admission of their securities to dealings on the NSE
shall submit to the NSE the following:
Documents and Information
The documents and information prescribed in Appendix D or Appendix I
(as the case may be) to this Regulation or such other documents and
information as the Relevant Authority may from time to time prescribe,
in addition thereto or in modification or substitution thereof together with
any other documents and information which the Relevant Authority may
require in any particular case;
Distribution Schedules
Distribution Schedules duly completed in respect of each class and kind
of security in the form prescribed in Appendix E (Table I, II & III) to this
Regulation or in such other form or forms as the Relevant Authority may
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from time to time prescribe in addition thereto or in modification or
substitution thereof.
Listing conditions and requirements
All Issuers whose securities are listed on the NSE shall comply with the
listing conditions and requirements contained in the Listing Agreement
Form appearing in Appendix F to this Regulation or such other conditions
and requirements as the Relevant Authority may from time to time prescribe
in addition thereto or in modification or substitution thereof.
After fulfilling these criteria, a company has to send the following
information for further processing:
1. A brief note on the promoters and management.
2. Company profile.
3. Copies of the Annual Report for last 3 years.
4. Copies of the Draft Offer Document.
5. Memorandum & Articles of Association.
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ELIGIBILITY CRITERIA FOR LISTING
An applicant who desires listing of its securities with NSE must fulfill the
following pre-requisites:
A. For Initial Public Offerings (IPOs)
B. For Securities of Existing Companies
NSE staff welcome the opportunity to discuss a company’s eligibility to list
before a formal application is made. On fulfillment of the eligibility criteria,
the company is required to fill in the listing application form.
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IPOs by Companies
Qualifications for listing Initial Public Offerings (IPO) are as below:
1. Paid up Capital
The paid up equity capital of the applicant shall not be less than Rs. 10
crores * and the capitalisation of the applicant’s equity shall not be less
than Rs. 25 crores**
In respect of the requirement of paid-up capital and market capitalisation,
the issuers shall be required to include, in the disclaimer clause forming a
part of the offer document that in the event of the market capitalisation
(Product of issue price and the post issue number of shares) requirement
of the Exchange not being met, the securities of the issuer would not be
listed on the Exchange.
* For this purpose, the post issue paid up equity capital for which listing
is sought shall be taken into account.
**For this purpose, capitalisation will be the product of the issue price
and the post issue number of equity shares.
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2. Conditions Precedent to Listing:
The Issuer shall have adhered to conditions precedent to listing as
emerging from inter-alia from Securities Contracts (Regulations) Act
1956, Companies Act 1956, Securities and Exchange Board of India Act
1992, any rules and/or regulations framed under foregoing statutes, as
also any circular, clarifications, guidelines issued by the appropriate
authority under foregoing statutes.
3. At least three years track record of either:
a. The applicant seeking listing; or
b. The promoters*/promoting company, incorporated in or outside India
For this purpose, the applicant or the promoting company shall submit
annual reports of three preceding financial years to NSE and also provide
a certificate to the Exchange in respect of the following:
• The Company has not been referred to the Board for Industrial and
Financial Reconstruction (BIFR).
• The networth of the company has not been wiped out by the
accumulated losses resulting in a negative networth.
• The company has not received any winding up petition accepted by a
court.
* Promoters’ mean one or more persons with minimum 3 years of
experience of each of them in the same line of business and shall be
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holding at least 20% of the post issue equity share capital individually or
severally
4. The Project/ Activity plan of the applicant must have been appraised
by a financial institution u/s 4 A of the Companies Act, 1956 or a state
finance corporation or a scheduled commercial bank with a paid up
capital exceeding Rs.50 crores or a category I Merchant Banker with a
net worth of atleast Rs.10 crores or a venture capital fund with a net
worth of atleast Rs. 50 crores.
or
The applicant should have working capital arrangements with a bank
having a Networth of not less than Rs.50 crores.
“Provided that this Clause 4 shall not be applicable for listing of:
a) Equity shares and securities convertible into equity issued by
1. a banking company including a local area bank (i.e. Private
Sector Banks) set up under sub-clause (c) of Section 5 of the
Banking Regulation Act, 1949 and which has received license
from the Reserve Bank of India or
2. a corresponding new bank set up under the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970, Banking
Companies (Acquisition and Transfer of Undertakings) Act,
1980, State Bank of India Act, 1955 and the State Bank of India
(Subsidiary Banks) Act, 1959 (i.e. Public Sector Banks) or
3. an infrastructure company – (a) whose project has been
appraised by a Public Financial Institution or Infrastructure
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Development Finance Corporation (IDFC) or Infrastructure
Leasing and Financial Services Limited (IL&FS) and (b) not
less than 5% of the project cost is financed by any of the
institutions referred to in clause (a) above, jointly or severally,
irrespective of whether they appraise the project or not, by way
of loan or subscription to equity or a combination of both.
b) Securities other than equity shares or securities convertible into equity
shares at a later date issued by Government Companies, Public Sector
Undertakings, Financial Institutions, Nationalised Banks, Statutory
Corporations, Banking Companies and subsidiaries of Scheduled
Commercial Banks.”
5) The applicant desirous of listing its securities should satisfy the
exchange on the following:
No disciplinary action by other stock exchanges and
regulatory authorities in past three years
The applicant, promoters’/promoting company(ies), group
companies, companies promoted by the promoters/promoting
company(ies) have not been in default in payment of listing
fees to any stock exchange in the last three years or has not
been delisted or suspended in the past, and has not been
proceeded against by SEBI or other regulatory authorities in
connection with investor related issues or otherwise.
Redressal mechanism of Investor grievance
The points of consideration are:
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The applicant, promoters’/promoting company(ies), group
companies, companies promoted by the promoters’/promoting
11company(ies) track record in redressal of investor
grievances
The applicant’s arrangements envisaged are in place for
servicing its investor.
The applicant, promoters’/promoting company(ies), group
companies, companies promoted by the promoters/promoting
company(ies) general approach and philosophy to the issue of
investor service and protection
defaults in respect of payment of interest and/or principal to
the debenture/bond/fixed deposit holders by the applicant,
promoters’/promoting company(ies), group companies,
companies promoted by the promoters’/promoting
company(ies) shall also be considered while evaluating a
company’s application for listing. The auditor’s certificate
shall also be obtained in this regard. In case of defaults in
such payments the securities of the applicant company may
not be listed till such time it has cleared all pending
obligations relating to the payment of interest and/or
principal.
Distribution of shareholding
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The applicant’s/promoting company(ies) shareholding pattern
on March 31 of last three calendar years separately showing
promoters and other groups’ shareholding pattern should be as
per the regulatory requirements.
Details of Litigation
The applicant, promoters’/promoting company(ies), group
companies, companies promoted by the promoters/promoting
company(ies) litigation record, the nature of litigation, status
of litigation during the preceding three years period need to be
clarified to the exchange.
Track Record of Director(s) of the Company
In respect of the track record of the directors, relevant
disclosures may be insisted upon in the offer document
regarding the status of criminal cases filed or nature of the
investigation being undertaken with regard to alleged
commission of any offence by any of its directors and its
effect on the business of the company, where all or any of the
directors of issuer have or has been charge-sheeted with
serious crimes.
Note:
In case a company approaches the Exchange for listing within six
months of an IPO, the securities may be considered as eligible for
listing if they were otherwise eligible for listing at the time of the
IPO. If the company approaches the Exchange for listing after six
months of an IPO, the norms for existing listed companies may be
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applied and market capitalisation be computed based on the period
from the IPO to the time of listing.
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BOMBAY STOCK EXCH ANGE
Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a
rich heritage. Popularly known as "BSE", 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.The Exchange's
pivotal and pre-eminent role in the development of the Indian capital market
is widely recognized and its index, SENSEX, is tracked worldwide. Earlier
an Association of Persons (AOP), the Exchange is now a demutualised and
corporatised entity incorporated under the provisions of the Companies Act,
1956, pursuant to the BSE(Corporatisation and Demutualisation) Scheme,
2005 notified by the Securities and Exchange Board of India (SEBI).
With demutualisation, the trading rights and ownership rights have been de-
linked effectively addressing concerns regarding perceived and real conflicts
of interest. The Exchange is professionally managed under the overall
direction of the Board of Directors.The Board comprises eminent
professionals, representatives of Trading Members and the Managing
Director of the Exchange. The Board is inclusive and is designed to benefit
from theparticipation of market intermediaries.
In terms of organisation structure, the Board formulates larger policy issues
and exercises over-all control. The committees constituted by the Board are
broad-based.The day-to-dayoperations of the Exchange are managed by the
Managing Director and a management team of professionals.
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The Exchange has a nation-wide reach with a presence in 417 cities and
towns of India. The systems and processes of the Exchange are designed to
safeguard market integrity and enhance transparency in operations. During
the year 2004-2005, the trading volumes on the Exchange showed robust
growth.
The Exchange provides an efficient and transparent market for trading in
equity, debt instruments and derivatives. The BSE's On Line Trading System
(BOLT) is a proprietory system of the Exchange and is BS 7799-2-2002
certified. The surveillance and clearing & settlement functions of the
Exchange are ISO 9001:2000 certified.
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HERITAGE
The oldest exchange in Asia and the first exchange in the country to be
granted permanent recognition under the Securities Contract Regulation Act,
1956, Bombay Stock Exchange Limited (BSE) has had an interesting rise to
prominence over the past 130 years.
While the BSE is now synonymous with Dalal Street, it wasn’t always so. In
fact the first venues of the earliest stock broker meetings in the 1850s were
amidst rather natural environs - under banyan trees - in front of the Town
Hall, where Horniman Circle is now situated. A decade later, the brokers
moved their venue to another set of foliage, this time under banyan trees at
the junction of Meadows Street and Mahatma Gandhi Road. As the number
of brokers increased, they had to shift from place to place, and wherever
they went, through sheer habit, they overflowed in to the streets. At last, in
1874, found a permanent place, and one that they could, quite literally, call
their own. The new place was, aptly, called Dalal Street.
The journey of BSE is as eventful and interesting as the history of India’s
securitiesmarkets. India’s biggest bourse, in terms of listed companies and
market capitalisation, BSE has played a pioneering role in the Indian
Securities Market - one of the oldest in the world. Much before actual
legislations were enacted, BSE had formulated comprehensive set of Rules
and Regulations for the Indian Capital Markets. It also laid down best
practices adopted by the Indian Capital Markets after India gained its
Independence.
35
Perhaps, there would not be any leading corporate in India, which has not
sourced BSE’s services in resource mobilization.
BSE as a brand is synonymous with capital markets in India. The BSE
SENSEX is the benchmark equity index that reflects the robustness of the
economy and finance. At par with international standards, BSE has been a
pioneer in several areas. It has several firsts to its credit even in an intensely
competitive environment.
First in India to introduce Equity Derivatives
First in India to launch a Free Float Index
First in India to launch US$ version of BSE Sensex
First in India to launch Exchange Enabled Internet Trading Platform
First in India to obtain ISO certification for Surveillance, Clearing &
Settlement
'BSE On-Line Trading System’ (BOLT) has been awarded the
globally
recognised the Information Security Management System standard
BS7799-2: 2002.
First to have an exclusive facility for financial training
Moved from Open Outcry to Electronic Trading within just 50 days
An equally important accomplishment of BSE is the launch of a nationwide
investor awareness campaign - Safe Investing in the Stock Market - under
which nationwide awareness campaigns and dissemination of information
through print and electronic medium was undertaken. BSE also actively
36
promoted the securities market awareness campaign of the Securities and
Exchange Board of India.
In 2002, the name The Stock Exchange, Mumbai, was changed to BSE.
BSE, which had introduced securities trading in India, replaced its open
outcry system of trading in 1995, when the totally automated trading through
the BSE Online trading (BOLT) system was put into practice. The BOLT
network was expanded, nationwide, in 1997. It was at the BSE's
International Convention Hall that India’s 1st Bell ringing ceremony in the
history Capital Markets was held on February 18th, 2002. It was the listing
ceremony of Bharti Tele ventures Ltd.
BSE with its long history of capital market development is fully geared to
continue its contributions to further the growth of the securities markets of
the country, thus helping India increase its sphere of influence in
international financial markets.
For the premier Stock Exchange that pioneered the stock broking activity in
India, 125 years of experience seem to be a proud milestone. A lot has
changed since 1875 when 318 persons became members of what today is
called "Bombay Stock Exchange Limited" by paying a princely amount of
Re1.
Since then, the stock market in the country has passed through both good
and bad periods. The journey in the 20th century has not been an easy one.
Till the decade of eighties, there was no measure or scale that could
precisely measure the various ups and downs in the Indian stock market.
Bombay Stock Exchange Limited (BSE) in 1986 came out with a Stock
Index that subsequently became the barometer of the Indian Stock Market.
37
BSE-SENSEX, first compiled in 1986 is a "Market Capitalization-Weighted"
index of 30 component stocks representing a sample of large, well-
established and financially sound companies. The base year of BSE-
SENSEX is 1978-79. The index is widely reported in both domestic and
international markets through print as well as electronic media. BSE-
SENSEX is not only scientifically designed but also based on globally
accepted construction and review methodology. The "Market Capitalization-
Weighted" methodology is a widely followed index construction
methodology on which majority of global equity benchmarks are based.
The growth of equity markets in India has been phenomenal in the decade
gone by. Right from early nineties the stock market witnessed heightened
activity in terms of various bull and bear runs. More recently, the bourses in
India witnessed a similar frenzy in the 'TMT' sectors. The BSE-SENSEX
captured all these happenings in the most judicial manner. One can identify
the booms and bust of the Indian equity market through BSE-SENSEX.
The launch of BSE-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 in India at Mumbai,
Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was
renamed as BSE-100 Index from October 14, 1996 and since then it is
calculated taking into consideration only the prices of stocks listed at BSE.
With a view to provide a better representation of the increased number of
companies listed, increased market capitalisation and the new industry
groups, the Exchange constructed and launched on 27th May, 1994, two new
index series viz., the 'BSE-200' and the 'DOLLEX-200' indices. Since then,
BSE has come a long way in attuning itself to the varied needs of investors
38
and market participants. In order to fulfill the need of the market participants
for still broader, segment-specific and sector-specific indices, the Exchange
has continuously been increasing the range of its indices. The launch of
BSE-200 Index in 1994 was followed by the launch of BSE-500 Index and 5
sectoral indices in 1999. In 2001, BSE launched the BSE-PSU Index,
DOLLEX-30 and the country's first free-float based index - the BSE TECk
Index taking the family of BSE Indices to 13.
The Exchange also disseminates the Price-Earnings Ratio, the Price to Book
Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its
major indices.
The values of all BSE indices (except the Dollar version of 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. The committee frames the broad policy guidelines for the
development and maintenance of all BSE indices. The Index Cell of the
Exchange carries out the day to day maintenance of all indices and conducts
research on development of new indices.
39
LISTING OF SECURITIES
Listing means admission of the securities to dealings on a recognised stock
exchange. The securities may be of any public limited company, Central or
State Government, quasi-governmental and other financial
institutions/corporations, municipalities, etc.
The objectives of listing are mainly to :
provide liquidity to securities;
mobilize savings for economic development;
protect interest of investors by ensuring full disclosures.
The Exchange has a separate Listing Department to grant approval for listing
of securities of companies in accordance with the provisions of the
Securities Contracts (Regulation) Act, 1956, Securities Contracts
(Regulation) Rules, 1957, Companies Act, 1956, Guidelines issued by SEBI
and Rules, Bye-laws and Regulations of the Exchange.
A company intending to have its securities listed on the Exchange has to
comply with the listing requirements prescribed by the Exchange. Some of
the requirements are as under: -
40
1. Minimum Listing Requirements for new companies
2. Minimum Requirements for companies delisted by this Exchange
seeking relisting of this Exchange
3. Minimum Requirements for companies delisted by this Exchange
seeking relisting of this Exchange
4. Permission to use the name of the Exchange in an Issuer
Company's prospectus
5. Submission of Letter of Application
6. Allotment of Securities
7. Trading Permission
8. Requirement of 1% Security
9. Payment of Listing Fees
10.Compliance with Listing Agreement
11."Z" Group
12.Cash Management Services (CMS) - Collection of Listing
Fees
41
42
[I] MINIMUM LISTING REQUIREMENTS FOR NEW COMPANIES
(A) Minimum Capital:
1. New companies can be listed on the Exchange, if their issued &
subscribed equity capital after the public issue is Rs.10 crores. In
addition to this the issuer company should have a post issue networth
(equity capital + free reserves excluding revaluation reserve) of Rs.20
crores.
2. For new companies in high technology ( i.e. information technology,
internet, e-commerce, telecommunication, media including
advertisement, entertainment etc.) the following criteria will be
applicable regarding threshold limit:
i. The total income/sales from the main activity, which should be
in the field of information technology, internet, e-commerce,
telecommunication, media including advertisement,
entertainment etc. should not be less than 75% of the total
income during the two immediately preceding years as certified
by the Auditors of the company.
ii. The minimum post-issue paid-up equity capital should be Rs.5
Crores.
43
iii. The minimum market capitalisation should be Rs.50 Crores.
(The capitalisation will be calculated by multiplying the post
issue subscribed number of equity shares with the Issue price).
iv. Post issue networth ( equity capital + free reserves excluding
revaluation reserve) of Rs.20 Crores.
(B) MINIMUM PUBLIC OFFER:
As per Rule 19(2) (b) of the Securities Contracts (Regulation) Rules, 1957,
securities of a company can be listed on a Stock Exchange only when at
least 25% of each class or kind of securities is offered to the public for
subscription.
In case of IPOs by unlisted companies in the IT & entertainment sector, at
least 10% of the securities issued by the company may be offered to the
public subject to the following:
Minimum 20 lac securities are offered to the public (excluding
reservation, firm allotment and promoters contribution)
The size of the offer to the public is minimum 50 crores.
44
For this purpose, the term "offered to the public" means only the portion
offered to the public and does not include reservations of securities on firm
or competitive basis.
SEBI may, however, relax this condition on the basis of recommendations of
stock exchange(s), only in respect of a Government company defined under
Section 617 of the Companies Act, 1956.
[II] MINIMUM LISTING REQUIREMENTS FOR COMPANIES
LISTED ON OTHER STOCK EXCHANGES
The Governing Board of the Exchange at its meeting held on 6th August,
2002 amended the direct listing norms for companies listed on other Stock
Exchange(s) and seeking listing at BSE. These norms are applicable with
immediate effect.
1. The company should have minimum issued and paid up equity capital
of Rs. 3 crores.
2. The Company should have profit making track record for last three
years. The revenues/profits arising out of extra ordinary items or
income from any source of non-recurring nature should be excluded
while calculating distributable profits.
3. Minimum networth of Rs. 20 crores (networth includes Equity capital
and free reserves excluding revaluation reserves).
4. Minimum market capitalisation of the listed capital should be at least
two times of the paid up capital.
45
5. The company should have a dividend paying track record for the last 3
consecutive years and the minimum dividend should be at least 10%.
6. Minimum 25% of the company's issued capital should be with Non-
Promoters shareholders as per Clause 35 of the Listing Agreement.
Out of above Non Promoter holding no single shareholder should hold
more than 0.5% of the paid-up capital of the company individually or
jointly with others except in case of Banks/Financial
Institutions/Foreign Institutional Investors/Overseas Corporate Bodies
and Non-Resident Indians.
7. The company should have at least two years listing record with any of
the Regional Stock Exchange.
8. The company should sign an agreement with CDSL & NSDL for
demat trading.
[III] Minimum Requirements for companies delisted by this Exchange
seeking relisting of this Exchange
The companies delisted by this Exchange and seeking relisting are required
to make a fresh public offer and comply with the prevailing SEBI's and
BSE's guidelines regarding initial public offerings.
[IV] Permission to use the name of the Exchange in an Issuer Company's
prospectus
46
The Exchange follows a procedure in terms of which companies desiring to
list their securities offered through public issues are required to obtain its
prior permission to use the name of the Exchange in their prospectus or offer
for sale documents before filing the same with the concerned office of the
Registrar of Companies. The Exchange has since last three years formed a
"Listing Committee" to analyse draft prospectus/offer documents of the
companies in respect of their forthcoming public issues of securities and
decide upon the matter of granting them permission to use the name of
"Bombay Stock Exchange Limited" in their prospectus/offer documents. The
committee evaluates the promoters, company, project and several other
factors before taking decision in this regard.
[V] SUBMISSION OF LETTER OF APPLICATION
As per Section 73 of the Companies Act, 1956, a company seeking listing of its securities
on the Exchange is required to submit a Letter of Application to all the Stock Exchanges
where it proposes to have its securities listed before filing the prospectus with the
Registrar of Companies.
[VI] ALLOTMENT OF SECURITIES
As per Listing Agreement, a company is required to complete allotment of
securities offered to the public within 30 days of the date of closure of the
subscription list and approach the Regional Stock Exchange, i.e. Stock
Exchange nearest to its Registered Office for approval of the basis of
allotment.
47
In case of Book Building issue, Allotment shall be made not later than 15
days from the closure of the issue failing which interest at the rate of 15%
shall be paid to the investors.
[VII] TRADING PERMISSION
As per Securities and Exchange Board of India Guidelines, the issuer
company should complete the formalities for trading at all the Stock
Exchanges where the securities are to be listed within 7 working days of
finalisation of Basis of Allotment.
A company should scrupulously adhere to the time limit for allotment of all
securities and dispatch of Allotment Letters/Share Certificates and Refund
Orders and for obtaining the listing permissions of all the Exchanges whose
names are stated in its prospectus or offer documents. In the event of listing
permission to a company being denied by any Stock Exchange where it had
applied for listing of its securities, it cannot proceed with the allotment of
shares. However, the company may file an appeal before the Securities and
Exchange Board of India under Section 22 of the Securities Contracts
(Regulation) Act, 1956.
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[VIII] REQUIREMENT OF 1% SECURITY
The companies making public/rights issues are required to deposit 1% of
issue amount with the Regional Stock Exchange before the issue opens. This
amount is liable to be forfeited in the event of the company not resolving the
complaints of investors regarding delay in sending refund orders/share
certificates, non-payment of commission to underwriters, brokers, etc.
[IX] PAYMENT OF LISTING FEES
All companies listed on the Exchange have to pay Annual Listing Fees by
the 30th April of every financial year to the Exchange as per the Schedule of
Listing Fees prescribed from time to time.
The schedule of listing fees for the year 2004-2005, prescribed by the
Governing Board of the Exchange and approved by the Securities and
Exchange Board of India is given hereunder:
49
SCHEDULE OF LISTING FEES FOR THE YEAR 2005-2006
Sr.
No.Particulars
Amount
(Rs.)
1 Initial Listing Fees 20,000
2Annual Listing Fees
(i) Companies with paid-up capital* upto Rs. 5 crores
(ii) Above Rs. 5 crores and upto Rs. 10 crores
(iii) Above Rs. 10 crores and upto Rs. 20 crores
10,000
15,000
30,000
3 Companies which have a paid-up capital* of more than Rs.
20 crores will pay additional fee of Rs. 750/- for every
increase of Rs. 1 crores or part thereof.
4 In case of debenture capital (not convertible into equity
shares) of companies, the fees will be charged @ 25% of the
fees payable as per the above mentioned scales.
*Includes equity shares, preference shares, fully convertible debentures, partly
convertible debenture capital and any other security which will be converted into equity
shares.
50
[X] COMPLIANCE WITH LISTING AGREEMENT
The companies desirous of getting their securities listed are required to enter
into an agreement with the Exchange called the Listing Agreement and they
are required to make certain disclosures and perform certain acts. As such,
the agreement is of great importance and is executed under the common seal
of a company. Under the Listing Agreement, a company undertakes,
amongst other things, to provide facilities for prompt transfer, registration,
sub-division and consolidation of securities; to give proper notice of closure
of transfer books and record dates, to forward copies of unabridged Annual
Reports and Balance Sheets to the shareholders, to file Distribution Schedule
with the Exchange annually; to furnish financial results on a quarterly basis;
intimate promptly to the Exchange the happenings which are likely to
materially affect the financial performance of the Company and its stock
prices, to comply with the conditions of Corporate Governance, etc.
The Listing Department of the Exchange monitors the compliance of the
companies with the provisions of the Listing Agreement, especially with
regard to timely payment of annual listing fees, submission of quarterly
results, requirement of minimum number of shareholders, etc. and takes
penal action against the defaulting companies.
[XI] "Z" Group
The Exchange has introduced a new category called "Z Group" from July
1999 for companies who have not complied with and are in breach of
51
provisions of the Listing Agreement. The number of companies placed under
this group as at the end of May, 2001 was 1,475.
The number of companies listed at the Exchange as at the end of May 2001
was 5,874. This is the highest number among the Stock Exchanges in the
country and in the world.
New Direct Listing norms
The Governing Board of the Exchange at its meeting held on 6th August,
2002 amended the direct listing norms for companies listed on other Stock
Exchange(s) and seeking listing at BSE. These norms are applicable with
immediate effect.
1. The company should have minimum issued and paid up equity capital
of Rs. 3 crores.
2. The Company should have profit making track record for last three
years. The revenues/profits arising out of extra ordinary items or
income from any source of non-recurring nature should be excluded
while calculating distributable profits.
3. Minimum networth of Rs. 20 crores (networth includes Equity capital
and free reserves excluding revaluation reserves).
4. Minimum market capitalisation of the listed capital should be at least
two times of the paid up capital.
5. The company should have a dividend paying track record for the last 3
consecutive years and the minimum dividend should be at least 10%.
6. Minimum 25% of the company's issued capital should be with Non-
Promoters shareholders as per Clause 35 of the Listing Agreement.
52
Out of above Non Promoter holding no single shareholder should hold
more than 0.5% of the paid-up capital of the company individually or
jointly with others except in case of Banks/Financial
Institutions/Foreign Institutional Investors/Overseas Corporate Bodies
and Non-Resident Indians.
7. The company should have at least two years listing record with any of
the Regional Stock Exchange.
8. The company should sign an agreement with CDSL & NSDL for
demat trading.
[XII] CASH MANAGEMENT SERVICES (CMS) - COLLECTION OF
LISTING FEES
As a further step towards simplifying the system of payment of listing fees,
the Exchange has entered into an arrangement with HDFC Bank for
collection of listing fees, from 141 locations, situated all over India. Details
of the HDFC Bank branches, are available on our website site
www.bseindia.com as well as on the HDFC Bank website
www.hdfcbank.com The above facility is being provided free of cost to the
Companies.
Companies intending to utilise the above facility for payment of listing fee
would be required to furnish the information, (mentioned below) in the Cash
Management Cash Deposit Slip. These slips would be available at all the
HDFC Bank centres.
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COMPARISON OF LISTING FEES
BSE NSE
Initial Listing Fees
Rs.20, 000 Rs.7, 500
Annual Listing Fees
Companies with paid up share and/or debenture capital:
Up to Rs. 5 crores10,000
Of Rs.1 crore 4,200
Above Rs.1 crore and
up to Rs.5 crores8,400
Above Rs. 5 crores
and up to Rs. 10
crores
15,000Above Rs.5 crores and
up to Rs.10 crores14,000
Above Rs. 10
crores and up to
Rs. 20 crores
30,000Above Rs.10 crores
and up to Rs.20 crores28,000
Above 20 crores
Additional fee of Rs.
750/- for every increase
of Rs. 1 crores or part
thereof.
Above Rs.20 crores
and up to Rs.50 crores42,000
Above Rs.50 crores 70,000
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The comparison of INITIAL LISTING FEES is shown in the chart:-1
Initial Listing Fees (In Rs.)
NSE BSE
7,500 20,000
With the help of these charts we can simplify the comparison of listing fees.
These charts depict that listing fees on NSE is much lower than on BSE.
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BIBLIOGRAPHY
WEBSITES
www.managementguru.com
www.nseindia.com
www.bse.com
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