Topic Study of Depository and Their Financial Analysis Name Sapana Oswal Course - PGDM

EXECUTIVE SUMMARY
This project is an attempt to understand the basics of stock market. A project which will make me well versed with the depository system, market happenings ups & downs in the stock market, daily analysis- fundamental & a little bit of technical. The chapter On Job Training explains the steps that I took in understanding the equity market. It mentions a step by step detail of how I went by in order to answer my own doubts & the techniques that I used to go ahead. It also gives a detailed report of my summer internship done at the company. It gives the jobs assigned to me at work, followed by the methods which I undertook in going about my internship. The next chapter gives a brief description about the company where I did my internship from, which is 5paisa.com which is a trading arm of India Info line Securities Pvt Ltd. The next chapter is on Depository explains in detail the entire working of the Depository, its role, importance, services provided, depository participant. The next chapter gives brief analysis of Broking and Investment Management Industry, it describes economy overview, industry overview. It also gives Analysis of India Info line Securities Pvt Ltd & India Bulls Securities Pvt Ltd. The nest chapter gives Financial Analysis of Inter firms, Intra firm & Industry analysis. The conclusion gives the details about the learning that I have gained in the company and the findings I did while doing the analysis and suggestions recommended

INTRODUCTION OF STUDY
INTRODUCTION The following project is a study of the Indian Stock Market & Depository & their Financial Analysis.. The capital market (securities markets) is the market for securities, where companies and the government can raise long-term funds. The capital market includes the stock market and the bond market. A stock market is a market for the trading of company stock and derivatives. The objectives of my internship are as follows: Understanding the various activities in an E- Broking firm. To get acquainted with all the workings of online trading. To gain practical knowledge in share trading To analyze the financial market & the share movements in order to study the

prospects of investing in a particular stock or sector. The aim of the project is to understand the overall equity market, to get to know the trading, clearing & settlement aspect of the equity market. As far as this project is concerned, it will help us to understand the overall working of the equity market & its importance to the economy of the India. A huge amount of money flows & millions of shares exchange hands in a single market day. This exchange of shares enables the flow of money in & out of a firm. The company whose shares are listed & the government who plays a pivotal role through the policies formed in the market, helps them to raise long term funds which can be used for the benefit & the growth of the companies & also gives back some part of their profit to the investor in the form of dividends. Also through this project what I am trying to derive is the Detail Study of Depository and their financial analysis concluding with the opportunities of investing in the sector. The reason why I have selected Broking and Investment Management sector is because of the growth in the earning power of the individual , each one aims a 3

creating wealth by some of the other way. This is one of the most booming on huge amount of are flowed in this sector and with that there is growth of the economy in general and also there is huge investment opportunities in the sector & also to understand this sector for my future growth as a equity advisor for the sector.

SCOPE:
The scope of this project is limited to only one sector i.e. Broking & Investment Management sector. This project is concerned with only one sector in the stock market. The project does not extend its scope to any other sector of companies.

Source of information for this project is

Primary source: India Info Line had provided with Annual Report Secondary source: The information about the Depository, Economy, Industry, India Bulls is all from websites, annual report, data bank of the firms.

COMPANY PROFILE INDIA INFOLINE SECURITIES PRIVATE LIMITED INTRODUCTION

India Infoline Ltd (IIL) started in 1995 with providing Online Media and Content services. Mr. Nirmal Jain and Mr. Venkataram, the founder members of the company sensed the growing opportunities in the market and increased the horizon for IIL from time to time. IIL with an aim to become 'One stop for all financial needs' started with equity and commodity broking, distribution of financial products and now with investment banking. IIL has a huge branch network across 95 cities, which it leverages for customer acquisitions, relationship building, retail advisory and distribution services. IIL is in the expansion mode and plans to set up 350 branches by FY08E. It also plans to set up branches in cities like Dubai, Singapore and London to serve the NRI's for PMS service. It has recently opened up a branch in Kuwait and expects this branch to contribute to the equity broking business. IIL has just received Investment banking license: with this they expect to enter the market with an intention to target the SME sector. It also plans to launch a Venture capital fund.

MANAGEMENT
NIRMAL JAIN Nirmal Jain is the founder and Chairman of India Infoline Ltd. He holds an MBA degree from IIM Ahmedabad, and is a Chartered Accountant (All India Rank 2) and a Cost Accountant.

R VENKATARAMAN R Venkataraman is the co-promoter and Executive Director of India Infoline Ltd. He holds a B. Tech degree in Electronics and Electrical Communications Engineering from IIT Kharagpur and an MBA degree from IIM Bangalore.

BOARD OF DIRECTORS Mr Sat Pal Khattar (Non Executive Director) Mr Sanjiv Ahuja (Independent Director). Mr Nilesh Vikamsey (Independent Director) Mr Kranti Sinha (Independent Director)

VISION
Our Vision Is To Be The Most Respected Company In The Financial Services Space.

VISION ELABORATES

CUSTOMER STRATEGY

BUSINESS STRATEGY

BUSINESS MODEL

SUBSIDIARIES OF INDIA INFOLINE LIMITED

1. 2. 3. 4. 5. 6. 7. India Infoline Securities Pvt Ltd India Infoline Commodities Pvt Ltd India Infoline.com Distribution Co Ltd Mortgages & Loans India Infoline Investment Service Ltd India Infoline Insurance Service Ltd India Infoline Insurance Broking Ltd

GEOGRAPHICAL PRESENCE
IIL has pan-India presence across 94 cities. It started off with major branches n metros and now it is focusing on Tier II and III cities. In Q1-FY07 the company opened 56 branches, taking the total number of branches to 233 as on June 2006 Almost 50% of the revenue comes from centers in Maharashtra and Delhi, allowed by other regions.

ON-JOB TRAINING INTRODUCTION

I have done my summer internship in India Infoline Securities Private Limited to perform various activities undertaken by an E broking firm (Depository Participant).

OBJECTIVE
India Infoline Securities Pvt. Ltd. (5paisa.com) performs as intermediary between stock exchange and clients. Various task related to E-broking had been assigned to me. The main objectives are as follows To understand various activities in E-Broking firm. (D P). To get familiar with the working of online trading. To gain practical knowledge in share trading. To get an exposure Operating TT Advance Software Teaching clients to operate TT Advance for trading. Translating physical form of shares into electronic form. Solving Trading and Terminal related client problems. Studying upcoming IPOs to make clients aware of it. Detail study of Equity Market, Derivatives. Analyzing the Security Market. Suggesting the client according the market conditions Developing a client database

TASK ASSIGNED
Market observation Customer acquisition. Technical Issues Administrative tasks Customer follow-up

MARKET OBSERVATION
It was the basic task assign during the SIP. While working with an E-broking firm it very essential to be aware about the current market issues like current market news, Current market position, stock watch, global market condition, past trend of the market etc. It was also imperative to target particular stocks & track their daily movements. By targeting & tracking individual stocks & scripts, it helped me understand the various factors that lead to stocks price movements. Also taking with clients during market hours helped me to understand the investment psychology of the client.

CUSTOMER ACQUISITION
To acquire new customers for the company it was the task given to me. 15 new Demat accounts have been opened in this duration.

STRATEGY IN ACQUIRING NEW CUSTOMERS

Reference by existing customers. Lead by company guide Tele calling (by lead data) Cold callings

TECHNICAL TASKS
Various technical tasks has been performed like, software down loading, to give software demonstration to the clients, solving various problems of the clients regarding software handling etc.

ADMINISTRATIVE TASK
These were the secondary task given bellow, which has been performed during the training period. Completion of account opening form Collection of requires documents form existing clients. Margin funding form, To transfer shares

CUSTOMER FOLLOW-UP
Follow-up has been given to newly acquire as well as existing clients for various issues. Trading for offline clients under the relationship managers guidance. To give markets updates to newly acquire as well as existing clients in market duration, etc.

ACHIEVEMENTS
Stock Market observation has been done during internship period. 15 new clients have been acquired Companies trading software has been downloaded Software demonstration has been given to newly acquire as well as existing clients. Various administrative activities have been performed. Follow-up to the customer has been given, Company generated brokerage from the newly acquired customer by me during the internship period. Offline customers orders have been taken in regular market schedule.

LIMITATIONS
It was hard to acquire knowledge about this field in such short span of time 10

Share market is very vast & fast sector, it was very difficult to cope-up with the environment in such short span of time. This field is requiring with very deep fundamental & technical knowledge. Acquiring new clients it was the tough task to perform High risk involve while trading on behalf of the clients under the guidance of RM.

CONCLUSION
LEARNING EXPERIENCE In my summer training, I knew about the stock market and its nitty-gritty. And now I am confident about equity knowledge. Although nobody can claim complete expertise but there is a sea change at least in my point of view. I have learnt what are the various indices and their significance in market. I have learnt about various fundamentals and technical aspects, which affect the stock prices in short run and long run. SELLING EXPERIENCE Apart from this I also sold the Demat accounts. During this venture I came across many people who came from different walks of life. I learnt how to deal with them, how to persuade them and guide them in trading. Selling an online trading account requires special focus on targeting the customers. Each and every person does not trade / invest in the stock market. Actually what I had to identify the prospect and then convince them. As I met more and more people, I came to know more about how to talk to them, how much time be given to each person I met. Even, by solving the customer queries, my own understanding was enhanced. While selling our product in the market, I also came to know more about the competitors product like, icicidirect, India bulls and their strategy of marketing and the consumers preference towards the competitors product. After forms were filled by the clients, and after the procedures were complete, the clients were given client Id. After that, I was required to show the customer how to make a transaction and how to get access to the terminal. Also, other queries, which the customer faced, had to be solved by me. So, it was all a very good learning experience for me. There were senior trainees always to solve the difficulties I faced in approaching a customer, filling up the form, demonstrating the site, or solving their queries. I faced some bad and resentful experiences like being sent out of offices and waiting for hours for a customer and went to the customer again in case if a signature is left in the form or in occurrence of any proof problems. This was again a learning to increase my tolerance and be more careful while filling up the form.

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INDIAN FINANCIAL SYSTEM INTRODUCTION

The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations. There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities. FINANCIAL SYSTEM

The word "system", in the term "financial system", implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three terms are intimately related yet are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation. These are briefly discussed below; FINANCIAL MARKETS - A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend. MONEY MARKET- The money market if is a wholesale debt market for low-risk, highly-liquid, short-term instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions.

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CAPITAL MARKET -The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year. Capital market consists of securities or stock market. Securities market consists of primary market and secondary market. Primary market consists of channel for sale of new securities, while secondary market deals in the securities already issued. Primary markets involve the following methods of issue. IPO Further issue of capital Rights issue Offers to public Bonus issue Secondary market enables those who already hold securities to adjust their investment in response to change in their assessment of risk and return, the statement implies that those who already holds the securities may want to sell them in case if those securities are not paying off, or if he needs to adjust his liquidity or for any other reason. Secondary market refers to the stock exchanges, a stock exchange provides mechanism to buy and sell the securities already issues in primary market. There are at present 23 stock exchanges in India. FOREX MARKET - The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe. CREDIT MARKET- Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals.

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CONSTITUENTS OF A FINANCIAL SYSTEM

FINANCIAL INTERMEDIATION
Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor in order to garner the requisite amount. When the borrower of funds approaches the financial market to raise funds, mere issue of securities will not suffice. Adequate information of the issue, issuer and the security should be passed on to take place. There should be a proper channel within the financial system to ensure such transfer. To serve this purpose, Financial intermediaries came into existence. Financial intermediation in the organized sector is conducted by a wide range of institutions functioning under the overall surveillance of the Reserve Bank of India. In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower. This service was offered by banks, FIs, brokers, and dealers. However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened. Some of the important intermediaries operating ink the financial markets include; investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers financial consultants, primary dealers, satellite dealers, self regulatory organizations, etc. Though the markets are different, there may be a few intermediaries offering their services in more than one market e.g. underwriter. However, the services offered by them vary from one market to another. Intermediary Stock Exchange Investment Bankers Underwriters Role Secondary Market to Capital Market securities Corporate advisory services, Capital Market, Credit Market Issue of securities Capital Market, Money Subscribe to unsubscribed 14 Market

Market Registrars, Depositories, Custodians Primary Dealers Satellite Dealers Forex Dealers Capital Market

Money Market Forex Market

portion of securities Issue securities to the investors on behalf of the company and handle share transfer activity Market making in government securities Ensure exchange ink currencies

STOCK MARKET
The term the stock market is a concept for the mechanism that enables the trading of company stocks (collective shares) and other securities. The size of the 'stock market' is estimated at about $51 trillion. The stocks are listed and traded on stock exchanges which are entities specialized in the business of bringing buyers and sellers of stocks and securities together. TRADING Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry (e.g.: -New York stock exchange). This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders at computer terminals (e.g. -Nasdaq). Actual trades are based on an auction market paradigm where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any bid price or ask price for the stock.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price. The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a market place (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery. MARKET PARTICIPANTS Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, with long family histories (and emotional ties) to particular corporations. Over time, markets have become more "institutionalized"; buyers and 15

sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, hedge funds, investor groups, and banks). The rise of the institutional investor has brought with it some improvements in market operations. THE FIRST STOCK MARKET The Dutch started joint stock companies, which let shareholders invest in business ventures and get a share of their profits - or losses. In 1602,The Dutch East India Company issued the first shares on the Amsterdam Stock Exchange It was the first company to issue stocks and bonds. Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock exchange to introduce continuous trade. The Dutch "pioneered short selling, option trading, debt-equity, merchant banking, unit trusts and other speculative instruments ". There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, Canada, China (Hongkong), India, UK, Germany, France and Japan

Function and purpose The stock market is one of the most important sources for companies to raise money. This allows businesses to go public, or raise additional capital for expansion. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central bank tends to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the important outlook of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. The smooth functioning of all these activities facilitates economic growth in that lower cost and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity. Relation of the stock market to the modern financial system The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via banks' traditional lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. Statistics show that in recent decades shares have made up an increasingly large proportion of households' financial assets in many countries. The major part of this adjustment in financial portfolios has gone directly to shares.

IMPORTANCE OF STOCK MARKET

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IMPACT OF STOCK EXCHANGES IN INDIA:

Following are the changes due to the existence of Stock Exchange 1. Mobilization of savings The savings of the individuals are easily mobilized in various types of industries. Therefore the amount of investments in the stock exchange increases. 2. Increase in rate of return on investment The investors get more rate of return i.e. the market rate and not the normal bank rate, which is much lower. 3. Availability of funds for growth of industries. The amount of funds required for the growth of the industries is easily available whereas there was always shortage of capital. 4. Diversification of industries Due to the availability of funds the industry becomes financially strong and have scope or diversification due to which they can become more strongly in the market. 5. Increase in employment Growth and diversification of industries leads to increase in the amount of work and thus increase job opportunities for the unemployed. 6. Increase in standard of living The increased job opportunities and the availability of goods of higher quality have increased the standard of living of people. 7. Increase in GDP Increase in business in overall all industries has automatically leaded to the rise in GDP of the country and thus its prosperity. 8. Decrease in Trade Deficit. Due to growth in industries the country is becoming self-sufficient leading to decrease in trade deficit.

TRADING IN INDIA
The trading on stock exchange in India used to take place through open outcry without use of information technology for immediate matching or recording of trades. This was time consuming and inefficient. This imposed limits on trading volumes and efficiency. In order to provide efficiency, liquidity and transparency, NSE introduced a nationwide online fully automated screen based trading system (SBTS) where a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds matching sale or buy order from a counter party. SBTS electronically matches order on strict time/price priority and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the information efficiency of markets. It enables market participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth of liquidity market. It also provides a perfect audit trail, which helps to resolve disputes by logging in the trade execution process in entirety. Today India can boast that almost 100% trading

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take place through electronic order matching. Technology was used to carry the trading platform from the trading hall of stock exchanges to the premises of brokers. NSE carried the further platform further the PCs at the residence of Clients through the Internet for Users in geographically vast country like India.

CONCEPTUAL FRAMEWORK
TRADING NETWORK

The trading network is depicted in the above figure shows NSE has main computer, which is connected through very small Aperture Terminal installed at the office. The main computer runs on falls tolerant STRATUS mainframe computer at the exchange. Brokers have terminals installed at their premises, which are connected through VASTs/ leased lines/ modems. Investors inform broker to place an order on behalf of them. The broker enters the order through his PC, which runs under Windows NT and sends signal to the satellite via VAST/ leased line/ modem. The signal directed to mainframe computer at NSE The system also provides complete market information online. The market screens at any point of time provide information on total order depth in a security, the five best buys and sells available in the market, the quantity traded in the day security, the high and the low, the last traded price, etc. investors can also know the fate of the orders almost as soon as they placed with the trading members. The trading system is normally made available for trading on all days except Saturdays, Sundays and other holidays.

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STUDY OF DEPOSITORY SYSTEM INTRODUCTION

With the liberalization of Indian economy and several pragmatic measures taken by the Government, the capital market has undergone a radical change. There has been a significant increase in the number of investors. Of course, comparing with the growth of population of our country, increase in number of investors is meager. Market capitalization on the stock exchanges has also increased manifold. In recent times, an unfortunate trend of frequent fraudulent interception of share certificates/dividend warrants in postal transit and forgery of share certificates/signatures on transfer deeds by unscrupulous persons emerged and caused avoidable problems for bonafide investors and the concerned companies. In view of the factors, investor protection/ investor service has assumed a new dimension. In this context many top- level companies, multinational companies, etc. strengthened their share operations and share departments putting in manpower, hardware, software, new techniques and skills and other requisite resources.

SCRIP BASED SYSTEM

It is a traditional and long prevalent system in our country that involves an enormous paper work involving share certificates in paper form and transfer deeds (physical form). The process beginning from buying shares through stock exchanges till getting the certificates duly endorsed in the buyers name in indeed quite complex and time consuming and is riddled with as variety of problems like bad deliveries, for several reasons, e.g., signature differences of transferors, mistake in completing the details in transfer deeds, litigation/disputes in respect of shares purchased, fake certificates, tearing/mutilation of certificates, loss/fraudulent interception of certificates in transit, delays in postal transit to and from the company, processing time taken by companies in effecting the transfers, cost towards stamp duty @ 0.5 per cent of the market value of shares, and postal/courier charges etc. The system is not an investor friendly and therefore, a revised system is to be implemented.

NEED FOR DEPOSITORY SYSTEM

The trading in physical segment is full of inefficiencies due to handling of large volumes of certificates and also involves various other problems like delays in transfer, delay in settlement, loss in transit, forgerly certificates, stolen certificates, mutilation of certificates, postal losses, court cases, litigation etc. To overcome these deficiencies, a new system of trading, viz. Depository system was introduced, which facilitates investor to hold securities in electronic form and to trade in these securities. The first depository set up in India is National Securities Depository Limited (NSDL) and is promoted by IDBI, UTI and NSE.

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CONCEPT OF A DEPOSITORY SYSTEM

Depository system essentially aims at eliminating voluminous and cumbersome paper work involved in the script-based system and offers scope for paperless trading through state of-the-art technology. Depository system enables conversion of physical securities in the electronic form through a process of dematerialization (also known as demat) of share certificates and facilitates share transactions and transfers electronically without involving any share certificate or transfer deed. Depository system offers option for converting the shares from electronic form to physical or paper from through a process of dematerialization (also known as remat).

DEPOSITORY
A depository is an organization where securities of shareholders are held in electronic format at the request, through the medium of a depository participant (DP). The depository system can be compared with a banking system. A depository is like a bank wherein the deposits are securities (viz., shares, debentures, bonds, government securities, units etc.) in electronic form. The investor wants to avail the services offered by a depository; the investor has to open an account with any branch of a bank in order to avail its services. Besides holding securities, a depository also provides services related to transactions in securities. This facilitates faster, risk free and low cost settlement. Depository is much like a bank and performs many activities that are similar to a bank. Following table compares the two. BANK Holds funds in accounts Transfers funds between accounts Transfers without handling money Safekeeping of money DEPOSITORY Holds securities in account Transfers securities between accounts Transfers without handling securities Safekeeping of securities

ROLE OF DEPOSITORY
Depository is an organization where the securities of an investor are held in electronic form through the medium of Depository Participants (DPs). It enables surrender and withdrawal of securities to and from the depository through the process of demats and remats. Maintains investors holdings in electronic form. Effect settlement of securities traded in depository made on the stock exchanges. Carries out settlement of traders not done on the stock exchanges (off-market trades)

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DEPOSITORIES IN INDIA
1. National Securities Depository Limited (NSDL) It is an organization promoted by lOBI, UTI and National Stock Exchange of India Ltd. The aim is to provide facilities for holding and handling securities in electronic form. Subsequently; SBI (acquired a 4.76 per cent in NSDL). HDFC. bank, Deusche bank, Dena Bank, Canara Bank, Global Trust Bank, Standard Chartered bank, Citibank NA and HSBC have acquired stake in NSDL. It commenced its operations in November 1996. Its headquarter is situated at Mumbai. It is holding and handling securities in electronic form. It facilitates faster settlement cycles. It provides services related to transactions in securities. It interfaces with the investors through its agents called depository participant (DPs). As a depository, NSDL (i) acts as a custodian as well as legally transfer beneficial ownership, (ii) reduces settlement risk by minimizing the paper work involved in trading, and settling and transferring securities. NSDL offers the following benefits: (a) dematerialization, (b) rematerialization, (c) electronic settlement trades in stock exchanges connected to NSDL, (d) pledging/ hypothecation of dematerialized securities against bank loan, (e) electronic credit of securities, (f) receipt of non-cash corporate benefits such as bonus in electronic form, (g) other services viz., holding debt instruments in the same account, availing stock lending/ borrowing facility etc. 2. CENTRAL DEPOSITORY SERVICES (INDIA) LTD. (CDSL) Bombay Stock Exchange Limited (BSE) promoted CDSL jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank, and Union Bank of India and Centurion Bank CDSL was set up with the objective of providing convenient, dependable and secure depository services at affordable cost to all market participants. CDSL received the certificate of commencement of business from SEBI in February 1999. All leading stock exchanges like the National Stock Exchange, Calcutta Stock Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have established connectivity with CDSL.

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As at the end of Dec 2005, over 5000 issuers have admitted their securities (equities, bonds, debentures, and commercial papers), units of mutual funds, certificate of deposits etc. into the CDSL system. CDSL has over 296 DPs spread around 119 cities/towns across the country, offering convenience for an investor to select a DP based on his location.

DEPOSITORY PARTICIPANT
Depository provides its services to investors through its agents called as depository participant (DPs). These agents are appointed by the Depository with the approval amongst others, three categories of entities i.e.; Banks, Financial Institutions and Members of stock exchanges registered with SEBI can become DPs. NSDL carries out its activities through various functionaries called business partners who include Depository Participants (DPs), Issuing corporate and their Registrars and Transfer Agents, Clearing corporations/ Clearing Houses etc. NSDL is electronically linked to each of these business partners via a satellite link through Very Small Aperture Terminals (VSATs). The entire integrated system (including the VSAT linkups and the software at NSDL and each business partner's end) has been named as the "NEST" [National Electronic Settlement & Transfer] system. The investor interacts with the depository through a depository participant of NSDL. A DP can be a bank, financial institution, a custodian or a broker Just as one opens a bank account in order to avail of the services of a bank, an investor opens a depository account with a depository participant in order to avail of depository facilities. Depository Participant likes IndiaBulls.com 5paisa.com KotakStreet.com ICICIDirect.com

Motilal Oswal securities Anand Rathi

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 Karvy Il&Fs
India Infoline Securities

ROLE OF DEPOSITORY PARTICIPANTS

A depository participant is a representative in the depository system of an investor. As per the SEBI guidelines, financial institutions/banks/custodians/stock brokers etc. can become depository participants provided they meet the necessary requirements prescribed by SEBI. A depository participant is a first point of contact with the investor. The depository participant serves a link between the investor and the company through the depository in dematerialization of shares and other electronic transactions.

BENEFITS OF PARTICIPATION IN DEPOSITORY

1. Immediate transfer of securities 2. No stamp duty on transfer of securities 3. Elimination of risk associated with physical certificate such as bad delivery, fake securities, etc 4. Reduction in paper work involve in transfer of securities 5. Reduction in transactions cost 6. Nomination facility 7. Change in address recorded with DP get registered electronically with all companies in which investors hold securities eliminating the need to correspond with each of them separately 8. Transmission of securities is done by DP eliminating correspond companies 9. Convenient method of consolidation of accounts 10. Holding investment in equities, debt instrument and government securities in single account

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11. Automatic

credit

into

demats

account

of

shares,

arising

out

of

split/consolidation/merger etc.

SERVICES OFFERED BY THE DEPOSITORY

1 2 3 Conversion of physical certificates to electronic form, i.e., dematerialization. Dematerialization facility. Transfer of securities.

4 Settlement of trades executed in connected stock exchanges with respect to dematerialized securities.
5 6 Pledging/hypothecation of dematerialized securities. Electronic credit in public offerings of companies.

7 Receipt of non-cash corporate benefits such as bonus, rights in electronic for. ACTIVITIES OF DEPOSITORY SERVICES OFFERED
1 SERVICES OFFERED BY NSDL The following services are offered by NSDL to the investors, through its agents viz. Depository Participants. Holding the investors securities in electronic form. Dematerialization and rematerialization of securities. Settlement of trades in electronic form. Electronic credit of public offerings and non-cash corporate actions such as rights, bonus etc. 2 ACCOUNT OPENING Opening a depository account is as simple as opening a bank account. You can open a depository account with any DP convenient to you. There is no restriction on the number of depository accounts a person can open. However, if your existing physical shares are in joint names, you have to open the account in the same order of names before you submit your share certificates for demat.

DEMATERIALIZATION Dematerialisation and trading in the demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer demat services and the securities are held in the electronic form for the investor directly by the Depository. 24

REMATERIALIZATION Remat means converting electronic form into physical form. During a rematerialization process, the request goes from the DP to the r&t agent via NSDL. the r&t agent, after processing the request, will print and dispatch the share certificate directly to you. No transfer duty will be charged to you when you rematerialize your shares. You have the option of rematerializing your total holdings or part of it. In addition to this, you have the option to get the certificates in market lot or jumbo lot.

TRADING / SETTLEMENTS At present, the facility of trading and settlement in dematerialised shares is available in The Stock Exchange, Mumbai (BSE), National Stock Exchange (NSE), Bangalore Stock Exchange (BgSE), The Calcutta Stock Exchange Ltd (CSE), The Delhi Stock Exchange Association Ltd (DSE), Ludhiana Stock Exchange (LSE) and the Over The Counter Exchange of India (OTCEI). These Stock Exchanges have distinct trading segments viz. the unified (physical) and depository (dematerialised). In the unified segment, investor has the option of delivering physical or dematerialised shares. However, with effect from 4th January, 1999 shares included in the list of select list of companies (including of RELIANCE ENERGY) can be delivered only in the dematerialised form in all stock exchanges linked to NSDL. The other stock exchanges, at present, have only the physical segment. However, in times to come, other stock exchanges too may be providing depository segments. The settlement of trades done in the exclusive dematerialised segments at BSE, DSE, NSE, BSE, CSE, DSE and OTCEI follow the rolling settlement concept, where trade done on each day is settled after a fixed number of days. Right now, the dematerialized segments follow T+5 rolling settlement, which means that trades are settled on the fifth working day from the date of the trade. CORPORATE ACTIONS When any corporate event such as rights or bonus or dividend is announced for a particular security, NSDL will give the details of all the clients having electronic holdings in that security as of the record date to the registrar or share transfer agent. The registrar will then calculate the corporate benefits due to all the shareholders. The disbursement of cash benefits such as dividend/interest will be done by the registrar whereas NSDL will do the distribution of securities entitlements (Rights or Bonus) based on the information provided by the registrar to all those clients who have opted for electronic allotment. NOMINATION The investors have an option of nominating persons who would be entitled to receive shares outstanding in their names in the event of their death. While opening

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the account with the DP, the investor is required to fill up an application form for operating the Account , wherein the investor has an option to fill in the names of their nominees. Shareholders have an option to hold securities in joint names with or without nomination or in single name with nomination which is optional. Such a facility has been recently introduced under the Companies (Amendment) Ordinance, 1998 for shares held in physical form. As far as concerned the nominee entered by the investor while opening the demat account will be the beneficiary and shall be deemed to be the member of the Company. 8 ACCOUNT TRANSFER INSTRUCTIONS An account holder can transfer his account from one DP to another DP account in the prescribed format given by the SEBI. INTERDEPOSITORY INSTRUCTIONS There are two depository i.e., NSDL and CSDL. For e.g. if my depository account is with NSDL, can I receive my securities from an account holder having account with some other depository in India.

10 FREEZING / DEFREEZING A depository account holder (beneficiary account) may freeze securities lying in the account for as long as the account holder wants it. By freezing the account holder can prevent unexpected debits or credits or both, creeping into its account. The following types of freeze facility available in the NSDL the system may BE availed of by submitting freeze instructions to the DP in a prescribed form. Defreezing is vice versa to freeze. 11 ACCOUNT CLOSING An account holder can close his account by just filling the closing form, which is available with the entire depository participant

12 TRANSMISSION
Transmission of securities due to death, lunacy, bankruptcy, and insolvency or by any other lawful means other than transfer is also possible in the depository system. In the case of transmission, the claimant will have to fill in a transmission request form, (which is available with the DP) supported by valid documents. The DP, after ensuring that the application is genuine, will transfer securities to the account of the claimant. For this, the claimant must have a depository account. The major advantage in transmission of dematerialized holdings is that the transmission formalities for all securities held with a DP can be completed in one go, unlike in the case of share certificates, where the claimant will have to interact with each issuing company or its R&T Agent. In case where the deceased was one of the joint

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holders in the Client account, the surviving client(s) shall be the person(s) recognized by depository as having title to the securities held in that joint Client account.

13 IPO Credits for public offers can be directly received into demat account. In the public issue application form of depository eligible companies, there will be a provision to indicate the manner in which securities should be allotted to the applicant. All you have to do is to mention your client account number and the name and identification number of your DP.

14 RECEIPT OF CASH / NON CASH BENEFITS When any corporate event such as rights or bonus or dividend is announced for a particular security, depository will give the details of all the clients having electronic holdings in that security as of the record date to the registrar. The registrar will then calculate the corporate benefits due to all the shareholders. The disbursement of cash benefits such as dividend/ interest will be done directly by the registrar. In case of non-cash benefits, depository will directly credit the securities entitlements in the depository accounts of all those clients who have opted for electronic allotment based on the information provided by the registrar.

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16 PLEDGING

Procedure: 1. Pledgor gives a pledge creation request to DP who enters it in the system. 2. The request reaches the pledgees DP through the NSDL system. Pledgee is intimated by his DP. 3. Pledgee gibes a pledge creation confirmation to his DP who enters it in the system. 4..Securities are transferred from free balances head to pledged balances head. 5. Loan is given by pledgee to pledgor outside the NSDL system

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17

CLOSURE

Procedure 1. Pledgor repays the loan to pledgee. 2. Pledgor gives a pledge closure request to his DP. DP forwards the request to pledgees DP through NSDL. 3. Pledgee gives a pledge closure confirmation form to DP. DP confirms the closure on the system. 4. The pledge is closed and the securities are moved from pledged balances to free balances in the pledgors account.

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18 INVOCATION

Procedure: 1. On repayment default, pledgee sends an invocation notice to pledgor. 2. Pledgee submits a pledge invocation request to DP. DP forwards the request to the pledgors DP through the NSDL system. 3. Securities move automatically from pledgors account to pledgees account through the NSDL system. 3. Pledgor is informed of the movement of securities by his DP.

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19 STOCK LENDING:

Procedure: 1. Lender forwards request to his DP. 2. Lenders DP electronically communicates request to NSDL. 3. The securities are blocked in lenders account in favour of the intermediary. 4. NSDL electronically informs intermediarys DP. 5. Intermediary forwards acceptance request to his DP. 6. Intermediarys DP electronically communicates acceptances to NSDL. Securities are moved from lenders account to intermediarys account.

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20 STOCK BORROWING

Procedure 1. Borrower forwards request to his DP. 2. Borrowers DP electronically communicates request to NSDL. 3. NSDL electronically informs intermediarys DP. 4. Intermediary forwards acceptance request to his DP. 5. Intermediarys DP electronically communicates acceptance to NSDL. 6. Securities are moved from intermediarys account to borrowers account.

21 CHARGES
NSDL charges the DPs and not the investors. NSDL's charges to its DPs are fixed. However, the DPs are free to charge its client for the services offered. You can get the details of the charges from the DP with whom you want to open an account.

22 SAFETY FEATURES
At least once every fortnight, your DP will give you a statement of holdings and a transaction statement which will detail your current balances and the various transactions you have done through the depository. If you so desire, you can enter into an agreement with your DP to provide the statement of holdings and transactions statement at shorter intervals. Some of the safety and security measures built in the system are : Agreement between the Client and DP indemnifying the client against misuse of his holdings. Transactions only on investors' authorization. Maintenance of records of all clients both by the DP and NSDL and daily reconciliation of balances.

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System of daily back up of data onsite and offsite by DP and NSDL and disaster back-up at Pune. Compulsory issue of periodic statement of holdings. Comprehensive insurance policy for all depository account holders protecting against negligence, misuse, etc.

23 ELECTRONIC TRANSACTIONS
Once shareholder opens an account with the depository participant, he can buy or sell shares in electronic form without any paper work. The shareholder need not pay any stamp duty of 0.5% as applicable to scrip based transactions. The depository participants charge the s h a r e h o l d e r s / i n v e s t o r s acquaintance, a list of service charges appended. A shareholder can open accounts with any number of DPs of his choice just as opening bank account with a number of banks. Shareholder can trade in depository mode through any broker registered with National Stock Exchange.

SELECTION OF DEPOSITORY
To select a depository participant, one can consider the following factors. 1. Reputation of the institution. 2. Track Record. 3. Strength-as measured by net worth and capital adequacy.. 4. Dedicated manpower. 5. Infrastructure 6. Safety 7. Convenience and networking 8. Hidden costs like opening a Savings Bank account with minimum balance. 9. Comfort to use the services

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ANALYSIS OF BROKING & INVESTMENT MANAGEMENT INDUSTRY ECONOMIC OVERVIEW

INTRODUCTION Since the early 1950s till the early 1990s, Indian policy makers had been nourishing the goal of Socialist pattern of society. They had been following the development planning strategy of the former Soviet Russia in a mixed economic framework. From July 1991, in the face of an unprecedented foreign exchange crisis, Indian economy started experiencing an IMF-World Bank dictated regime of liberalization. One aspect of this is financial and stock market liberalization. There is an increasing entry of foreign portfolio capital due to stock market liberalization. People are encouraged to invest in stocks through income tax benefits and abolition of capital gains tax. It is expected that boosting up of stock market will accelerate the process of capital accumulation and growth. The Indian economy is in an upbeat mood. Marked by impressive growth, it is showing a clear sign of vibrancy with stability. At the end of second sector of the year 2007, India has recorded a real GDP growth at 9.2%. it is not only the 10th largest, but also the 2nd fastest growing economy of the world. The upswing in the Indian economy has brought about a change in the consumption and investment pattern of the Indian middle class, in tandem with their growing disposal incomes. The in the Indian market is reflected with the growing trend of using to credit fund purchase, in contrast to the earlier first save, then spend pattern. Enchasing on this paradigm shift, the company has made available a variety of consumer credit products to fulfill the needs of Indians, who are willing to acquire assets through borrowing. Easier availability of finance as compared to the earlier years, with interest rates compared to the international standards, has changed the buying pattern of consumer. It has also enabled them to buy costlier and higher quality products. The consumer finance market includes loans for multiple applications such as personal; use, housing finance and businesses. The lifestyle of fulfillment has replaced the functional life. Growing consumerism within the rural segment too has become enormous business opportunity. The major growth drivers for brokerage revenue and trading volume are Adoption of technology - screen-based trading, electronic matching, and paperless securities Centralized operations, effective risk management, and control on large interconnected operations spanning multiple locations, which is enabled by telecom connectivity and low costs. Increasing access to capital and the ability to provide margin finance Continuous fall in brokerage fees

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MACRO ENVIRONMENT India among fastest growing free market democracies, expected to grow at 9% FII inflow crosses USD 7 Bn in Nov 2006 and MF assets are at USD 73 Bn Strong economic growth, increase in affluence and rising risk awareness leading to rising investor confidence

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FAVORABLE DEMOGRAPHICS By 2009-10, over 500 Mn Indians are expected to have household income of over$10,000 pa, compared to 350 Mm at present Demographic profile favours higher retail off take 54% of population is in 1535 years of age Ranked 2nd by AT Kearney in a Global Retail Development Index of 30 developing countries, India is seen as a potential gold mine.

CHALLENGING LANDSCAPE Industry rapidly consolidating Share of Top 10 brokers grown by 58.4% since 2003-04 Customer demands changing from plain vanilla execution to advice & service Multiple relationships across asset classes consolidating into a single relationship

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INDUSTRY OVERVIEW
INTRODUCTION Over the past decade, the consumer credit market in India , has witnessed rapid expansion and growth and still an under pressure market. Consumer credit has become cheaper, more rapidly available and increasing accepted to consumer. The catalyst factor that have brought change in the market are Increased focus by Bank and Financial institution on consumer credit, resulting in market shift towards regulated players from unregulated money lenders / financiers. Increasing desire by the customers to acquire assets such as car, goods and house on credit. Growing number of household in the companys target segment. Improve terms of credit as interest rate in India have begun to fall into line with the global interest rates and sophisticated products have reduced the interest rate further. Legislation changes that offer great protection against lenders fraud and potential default increasing the incentives to lend. Growth in the assignment and securitisation agreement for consumer loans have enable non deposit bases entities to access wholesale funding and compete in the market base on ability to originate, underwrite and service consumer loans.

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ONLINE EQUITY TRADING IN INDIA

MAJOR SECTOR PLAYERS 1. Ashim Investment Company Limited 2. Geojit Financial Services Limited 3. IL&FS Investment Limited 4. India Infoline Limited 5. Indiabulls Financial Services Limited 6. Motilal Oswal Financial Services Limited 7. Mount Everest trading & Investment Limited

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INDIA INFOLINE SECURITIES PVT LTD INTRODUCTION

India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is engaged in the businesses of equities broking and portfolio management services (PMS). It holds memberships of both the leading stock exchanges of India viz. the stock exchange, Mumbai (BSE) and the national stock exchange (NSE). It offers broking services in the cash and derivatives segments of the NSE as well as the cash segment of the BSE. It offer online trading facilities under the 5paisa brand name. 5paisa is the trade name of India Infoline Securities Private Limited (5paisa), member of National Stock Exchange and The Stock Exchange, Mumbai. 5paisa is a wholly owned subsidiary of India Infoline Ltd, Indias leading and most popular finance and investment portal. 5paisa has emerged as one of leading players in E-broking space in India. India Infoline also owns and manages the websites www.indiainfoline.com www.5paisa.com . It is also a SEBI authorized Portfolio Manager, it offers Portfolio Management Services to clients. These services are offered to clients as different schemes, which are based on differing investment strategies made to reflect the varied risk-return preferences of clients.

SERVICES PROVIDED
India Infoline Securities Pvt. Ltd. act as Full Service Investment Solutions Provider, providing you wide range of services like Equity & Derivatives Trading on NSE and BSE Online Trading Portfolio Management Services Depository Services IPO Services Uniform Service Standards.

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STRATEGY FOR RETAIL PRODUCTS

Aggressive expansion (locations, products/ offerings & customer base) Scalable systems and processes Leveraging technology for cost-efficient high-quality service Effective Human Resource Development

WHOLESALE PRODUCTS

IIL straddles the entire value-chain in Investment Banking Strong focus on the SME segment Innovation in instrument structuring Ability to offer post-execution service of market making because of access to a huge investor base

Well-acknowledged research acumen Capital, which was hitherto a problem is now not a constraint People with relationships needed to propel business to the next orbit

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INVESTMENT HIGHLIGHTS
Strong growth in Industry volumes and rising retail participation Average daily volumes in the equity markets (cash and derivative combined) have increased by 72% to Rs.167bn in FY 05 to Rs. 288bn in FY 06. With the economy growing at 7-8% a mounting per capita income and growing BPO culture, there is a new class of young investors, which are moving towards the equity market.

Expansion of Branches IIL is majorly present in the retail segment. With the rising income levels, risk taking ability of people and the confidence in the India Inc, participation from the retail crowd is increasing y-o-y. IIL is aggressively increasing its presence by opening branches in Tier I and II cities. In FY QI-07, they roll out 56 new branches and acquired 25000 new customers. We expect them to have 350 and 430 branches by FY 07E and FY 08E respectively.

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Increasing internet penetration With increasing PC and Internet penetration in tier II and tier III cities, there is huge potential for Internet trading. Internet trading, began in 2000 is still at a nascent stage, however, there has been a steady growth in Internet trading volumes. This can be attributed to growth in sophistication of retail investors, increasing P.C penetration, higher telecom density, lowest brokerage and user-friendly software. IIL's 87% of the clientele is online. It has user-friendly software and is focused towards building online clientele. Increasing online penetration suggests huge potential for IIL.

Well positioned to exploit the opportunity in Insurance segment IIL is leveraging its established branch network to distribute Life insurance products of ICICI Pru to its retail clients. It has applied to IRDA for insurance broker status, which will enable them to enter general insurance segment and sell products across companies.

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Insurance penetration in India is just 3.25% (general insurance 0.75% of GDP) of GDP, which reflects huge potential in the country. IIL compared to other players in the industry (like: Indiabulls Financial service and IL&FS Investsmart) is an established player in this segment and has trained employees for insurance distribution. Indiabulls in spite of having vast branch network has an insignificant presence in insurance distribution at present. Entry of other players will definitely increase the competition but IIL would be in a better position because of the relations it has built with clients and because of the professional work force it has. IIL focusing on building its online client base Acting as insurance broker will significantly increase revenues from this segment.

Strong growth in commodity broking Commodity market is at a very nascent stage in India. With significant volumes witnessed in the market and rising awareness among people, commodity segment is expected to sustain its phenomenal growth. IIL's average daily volume is around Rs.1bn. It provides this facility through 100 branches and is concentrating in selected areas for this segment. It has identified Rajasthan and Gujarat as potential areas where there is significant presence of HNI's and self employed people. Sensing the opportunity at Gujarat, it plans to open new 30 branches in Ahmedabad in addition to the existing 20 branches. Income from commodity broking is expected to grow robustly from Rs.41.3 mn in FY06 to Rs.129mn and Rs.194 by FY 07E and FY 08E.

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Foray into Investment Banking IIL has received an investment-banking license and plans to target small and medium sized companies for this service. With consolidation happening across the sectors, there's significant momentum expected in this segment. Foreseeing the potential, IIL has acquired London based Marchmont Capital Advisors, Marchmont has more than 20 years of experience in this field. IIL plans to set up offices in three major cities in the country and five overseas centers within six months. We don't expect the company to show any results in the coming two quarters but it would make contribution to the earnings by FY08.

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INVESTMENT CONCERN
High reliance on equity segment In FY06, 67% of IILs earnings are derived from the equity broking business. Any volatility in the market has direct impact on the earnings of the company. Sensing this possibility IIL's diversified into other business segments like distribution of financial products, commodity broking and recent entry into investment banking. These segments will take time to drive the earnings of the company. We expect earnings from equity broking to be 62% and 54% of the earnings by FY07E and FY08E respectively.

Investment for future keep near term returns low India Infoline is ramping up its distribution network. It currently has 233 branches and plans to set up 350 by end of FY07E. While this investment is imperative from a longer-term view, near term it will impede earnings progression. Though EBIDTA has grown in absolute terms, EBIDTA margin is expected to move down to 36% in FY07E and again increase to 38% by FY08E.

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Competition from banks Distribution business is purely a "reach" game. With banks making foray into the distribution of financial products it would be challenging for IIL to capture the market. Banks are well networked across the country covering almost all cities, towns and villages. They have a huge customer base to exploit. Above all banks are looked upon as trust worthy compared to a standalone financial product distributing company. Valuations At CMP, the stock is trading at 11.5x FY07E and 8.5x FY08E earnings of Rs 15.6 and Rs 21.1 respectively. We expect a 19% CAGR in revenues triggered by sound equity market volumes and rising contribution from insurance distribution segment. We have compared IIL to domestic as well as International brokers. The international brokers are trading at an average multiple of 16.6x FY08E. Considering the low penetration of financial services in the country, India depicts higher growth potential and therefore larger scope of expansion for IIL.

IIL is not directly comparable to Indiabulls, as the later valuations reflect its real estate business as well; therefore IL&FS Investsmart would be the only comparable peer in domestic market. We believe valuations look attractive, given its growth prospects and rate he tock as an 'Outperformer' with a price target of Rs.220.

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BUSINESS ANALYSIS
Equity Broking India Infoline significant presence in retails segment. It offers both online and offline broking facilities. It has utilized technology to bring the convenience of trading to the investor's preferred location through computerized access. In the last two years it has built up a client base of 100,000 by June'06, about 87% online. It provides broking service in cash as well as in the derivatives segment. Average daily volumes witnessed in FY06 were Rs 4,560mn signifying lmost 1.2% of the market. Broking income also includes the brokerage they earn on PMS activity, where the average ticket size is Rs.5 lakhs. With rising volumes in the market, IIL also witnessed buoyant increase in the average daily turnover, increasing their broking income to Rs 1,427 mn in FY06. Addition of 160 branches, last year increased customer base by around 1363%, howing an upward trend in customer per branch. This signifies that both new and existing branches are adding to the expansion of client base.

Turnover per client has been moving southwards; signifies that large portion of the customers acquired is not active or are low-ticket size clients. Low turnover per client also decreased income per client. Insurance Distribution Business Since 2000, India Infoline has been a corporate agent for ICICI Pru Life. It contributes about 5% to total ICICI Pru's premium collection. With its vast ranch network, 2,000 trained employees and a good client base, it becomes easy to cross-sell products. IL has seen showing impressive growth in premium collection of over 266%yoy. Similarly it witnessed 261% yoy growth in revenue from the insurance distribution in FY06. India Infoline enjoys a 44% EBIDTA margin in the insurance segment

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Foray into general insurance distribution IIL has applied to IRDA for a license as an insurance broker, by this it intends to distribute both life and general insurance products across the companies. We expect IIL to start acting as an insurance agent from FY08 onwards, thus higher contribution from insurance distribution is expected. Distribution of Mutual fund and other loan products IIL is leveraging its branch network to distribute mutual fund, fixed income products, RBI Bonds, mortgage and personal loans Mutual funds distribution forms 90% in this mobilization business. IIL mobilized Rs.31, 000 mn in FY06, a yoy growth of 72%.

With interest rates falling to their lowest in the last decade, rising income levels and higher returns from the equity market, mutual funds have come to the fore. The sector has grown at a fairly strong 30% yoy With no drastic volatility expected in the market we expect mutual fund business will also move in tandem with market. IIL has

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recently entered into distribution of home loans with acquisition of 75% stake in Money tree consulting. IIL now distributes personal and home loans for Kotak Mahindra Bank, IDBI, Citibank and ICICI. Commodity Broking IIL started with commodity broking in 2004. Since then, commodity revenues have increased by 754% yoy to Rs.41mn. IIL foresee lot of opportunity in this sector. The sector itself is at a nascent stage, where it takes efforts to make people understand the dynamics of commodity business. IIL is member of MCX and NCDEX and is awaiting Dubai Gold Exchange Membership. Currently contribution of commodity segment to the top line is insignificant, but we expect the contribution to increase to 4% by FY08. IIL caters to 600 clients in this segment, mainly in Gujarat and Rajasthan with 500 employees. IIL is planning to set up more 30 branches in Gujarat in addition to 20 branches. Turnover has quickly picked up with average monthly turnover hovering to Rs 1bn. IIL also offers commodity research, and maintains its site www.5paisa.commodities.com, keeping its investors updated on latest happenings.

PROFITABILITY
Network expansion contributes to improved revenues EBITDA margins improve in Q4 of 2006-07 Strong platform established for continued growth

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REVENUE SPLIT SEQUENTIAL TRENDS

Share of equities and financing declines from 63% to 51% Increased diversity in revenue streams.

Strengths

Large retail customer base Value-for-money proposition for customers Strong research which picks winners Bouquet of asset & liability products Wide branch network across India It is Specialized & Customized research Products addressing the investment philosophy of verities of Investors and Traders in the secondary stock market.

Opportunities

Booming financial services sector Institutional broking Wealth management Leverage network for more products

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INDIA BULLS FINANCIAL SECURITIES PVT LTD INTRODUCTION

Indiabulls is Indias leading Financial Services and Real Estate Company having over 640 branches all over India. Indiabulls serves the financial needs of more than 4,50,000 customers with its wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. With around 4000 Relationship Managers, Indiabulls helps its clients to satisfy their customized financial goals. Indiabulls through its group companies has entered Indian Real Estate business in 2005. It is currently evaluating several large-scale projects worth several hundred million dollars. Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 2,350 million (25th April 2007). Consolidated net worth of the group is around USD 510 million (31st March 2007). Indiabulls and its group companies have attracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital. It is one of the first movers in adopting the online trading model, started by players in the US like Charles Schwab and E-Trade. This delivery channel accounts for 34.85% of the overall brokerage revenues. This model is highly cost effective and scalable. IFSL has a market share of more than 20% in the online transaction business. Business of the company has grown in leaps and bounds since its inception. Revenue of the company grew at a CAGR of 159% from FY03 to FY07. During the same period, profits of the company grew at a CAGR of 184%. Indiabulls became the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital Management LLC, a respected US based investment firm. Indiabulls has demonstrated deep understanding and commitment to Indian Real Estate market by winning competitive bids for landmark properties in Mumbai and Delhi. Indiabulls has emerged as one of the leading and fastest growing financial company in less than two year, since its initial public offering in September 2004. It has a market capitalization of around 2,350 million (25th April 2007) and consolidated net worth of the group is around USD 510 million.

GROWTH STRUCTURE

2000-01

Indiabulls Financial Services Ltd. established Indias one of the first trading platforms with the development of an in house team. Indiabulls expands its service offerings to include Equity, F&O, and Wholesale Debt, Mutual fund, IPO distribution and Equity Research.

2001-03

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2003-04

Indiabulls ventured into Insurance distribution and commodities trading. Company focused on brand building and franchise model. Indiabulls came out with its initial public offer (IPO) in September 2004. Indiabulls started its consumer finance business. Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in Indian Real Estate. Indiabulls won bids for landmark properties in Mumbai. Indiabulls has acquired over 115 acres of land in Sonepat for residential home site development. Merrill Lynch and Goldman sac, one of the renowned investment banks in the world have increased their shareholding in Indiabulls. Indiabulls is a market leader in securities brokerage industry, With around 31% share in online trading, Farallon Capital and its affiliates, the worlds largest hedge fund committed Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. Steel Tycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd. Indiabulls entered in a 50/50 joint venture with DLF, Kenneth Builders & Developers (KBD). KBD has acquired 35.8 acres of land from Delhi Development Authority through a competitive bidding process for Rs 450 crore to develop residential apartments. Indiabulls Financial Services Ltd. is included in the prestigious Morgan Stanley Capital International Index (MSCI). Farallon Capital has agreed to invest Rs. 6,440 million in Indiabulls Financial Services Ltd. Indiabulls ventured into commodity brokerage business. Indiabulls has received an in principle approval from Government of India for development of multi product SEZ in the state of Maharashtra. Dev Property Development plc. Has subscribed to new shares and has also acquired a minority shareholding from the Company. Indiabulls Financial Services Ltd. Board resolves to Amalgamate Indiabulls Credit Services Limited and demerges Indiabulls Securities Limited.

2004-05

2005-06

2006-07

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MANAGEMENT

Sameer Gehlaut Chairman and Whole time Director Sameer Gehlaut Chairman and CEO Rajiv Rattan Whole Time Director Prem Prakash Mirdha Independent Director Saurabh K Mittal Promoter Non-Exe.Director Shamsher Singh Director Gagan Banga Whole Time Director Karan Singh Director Rajiv Rattan Whole Time Director Shamsher Singh Non.Exe.Independent Director Aishwarya Katoch Director Aishwarya Katoch Non.Exe.Independent Director Karan Singh Non.Exe.Independent Director Saurabh K Mittal Director Gagan Banga Director Prem Prakash Mirdha Non.Exe.Independent Director

SUBSIDIARIES
Indiabulls Financial Services (IFSL) was established in 2000 by three IIT engineering graduates with a funding of Rs.70 crore from venture capitalist funds, proprietary equity funds and institutional investments. The company is headquartered in Delhi and Mumbai, with the sales and marketing efforts coordinated at Mumbai and the back office and support work conducted in Delhi. IFSLs business is done through its three subsidiaries. The business and shareholding pattern of the subsidiaries are elucidated below.

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PRODUCT AND SERVICES

STRONG DISTRIBUTION NETWORK

IFSL has a strong distribution network which has been the main reason for its strong growth. The company wants to set up 75 more branches by Dec-06.It also wants reach of to the NRI population abroad and has planned to increase its branch network to U.K and Dubai.

DELIVERY CHANNELS
The company has two major delivery channels offline and online. Apart from reaching out to clients via branches, IFSL has a marketing network that consists of 476 relationship managers, as mainly to tap the high net worth segment. This provides personalized services to the customer. Apart from this, the employees are highly incentives, which keep in line their goals with the companys objective of increasing its turnover. The offline model is an adoption of the model started by US players like Charles Schwab and E-Trade. The contribution of the online model has been growing and is 34.85% of the overall revenues. As most of the costs in this model are fixed in nature, profits will grow at a faster rate than incremental revenue.

LARGE CLIENT BASE

ISL clients include institutions and retail customers, with a greater focus on the latter. The emphasis on the retail crowd stems from the fact that retail traders constitute 65% of the overall daily volumes (FIs & FIIs-15%, brokers and related parties 20 %)

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and are still under serviced. India has the third largest investor base after US and Japan and is expected to grow at a CAGR of 25% in the next 10 years.

HUMAN RESOURCES
The company considers its Human Resources as one of its key valuable assets. The development of IBFSLs business and expansion of its customer base is dependant on its ability to recruit, train and retain members for its sales force. The management personal includes Chartered Accountants, company Secretaries, Engineers, management Graduates and Legal Professionals. The PRD measures in place, include, scientific appraisal of employees performance, proper placements, promising career plans and training. The Companys culture promotes high performance and high professional standards.

CRISIL BROKER GRADING, RATINGS AND OPINIONS

CRISIL has assigned the highest broker grading CRISIL BQ 1 to Indiabulls Securities Ltd., a 100% subsidiary of Indiabulls Financial Services Ltd. (IBFSL) As has already been intimated earlier, CRISIL has assigned the highest rating of P1 + (pronounced as P one Plus) for unsecured short term borrowing programme of Rs. 7.50 billion of IBFSL .CRISIL has also assigned its highest rating AAA (SO) for Pass through Certificates, in relation to loan receivables of Indiabulls Credit Services Ltd.

INVESTMENT HIGHLIGHT
IFSL is among the top 5 brokers Stock broking companies in India have diversified into allied products and services to support their principal revenue source; brokerage. Larger players are slowly consolidating their position in the industry while smaller players are unable to survive and are slowly exiting or selling out. Increased capital requirements to comply with regulatory procedures like margin requirements, investment in upgrading technology, increased back office operations in lieu of shorter settlement cycles and pressure from competition have led to structural changes in the industry. Any move towards the T+1 settlement cycle will further weed out smaller players. The share of the top 5 brokers was 6% in 1997 and it has reached 13% at the end of December 2004. The Top 5 brokers captured more than 90% on the online sales

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(this can be explained by their ability to incur large technology costs). However, there is still a long way to go as the Top 5 players in the US account for nearly 50% of the market share.

BUSINESS OVERVIEW
Indiabulls Financial Services Limited (IBFSL) is a recognized and leading NBFC in India. Together with its subsidiaries and associate companies, IBFSL participates in the following key business segments: 1. consumer financing offering a varied product suite to retail customers including financing activities in the areas of consumer finance, vehicle loans, small business enterprise loans, loan against properties, loan against shares and providing financing for retail customers engaged in subscribing for securities of companies conducting initial public offerings and 2. Securities and commodities broking activities. While IBFSLs consumer finance business is rapidly growing. It is already established as the leading retail brokerage company in the country. In 2006, pursuant to a restructuring and reorganization of its business, the company demerge it real estate business into a separate listed entity, Indiabulls Real Estate Limited (IBREL). IBFSLs total market capitalization as on 31st March, 2007, post the Real Estate demerges, was Rs 7, 65,358 lacs. IBFSL is primarily engaged in the business of providing finance to its clients, against listed securities. The Company has for the year ended 31 March, 2007, disbursed Rs 220,229 lacs by way of loans as compared to Rs 11,355 lacs for the year ended 31 March, 2006 as part of its consumer finance business. The Companys other operations are conducted through IBFSLs subsidiaries and associated companies, IBFSL also has a client base for securities business totaling over 4,58,114 clients as on 31 March, 2007, compared to 2,36,287 as on 31 March, 2006. The Company current operates through its head office in New Delhi and over 680 offices over 201 cities throughout India For the fiscal year ended, 31 March 2007, The Companys total revenue were Rs 124,441 lacs, compared to Rs 61,361 for the same period in 2006, representing a growth of 102.9%. Net profit after tax amounted to Rs443391 lacs for the fiscal year ended, 31 March, 2007, compared to Rs 25337 for the same period in 2006 representing a growth of 75.0%.

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DATA PRESENTATION, ANALYSIS & INTREPRETATION FINANCIAL ANALYSIS INDIA INFOLINE SECURITIES PVT LTD 1 LIQUIDITY RATIOS
CURRENT RATIO
YEAR (1) 2007 (2) 2006 (3) 2005 India Infoline 0.15 0.64 0.42

India Infoline PERCENTAGE 0.8 0.6 0.4 0.2 0 1 2 YEAR 3 India Infoline

Current ratio indicates the relationship between current asset and current liabilities. Current asset includes cash and those assets that can be converted into cash within a year. It measures firms short term solvency. Higher the ratio, the greater the margin of safety, the larger the amount of current assets in relation to liabilities, the more the firms ability to meet its current obligation. The ideal ratio should be 2:1. The company had high ratio in 2006 as compared to 2005 & 2007. But in 2007 the ratio is almost three times less as compared to 2006. This indicates the failure of the company to meet its obligations due to lack of sufficient liquidity, will result in a poor credit worthiness, loss of creditors confidence.

2 LEVERAGE RATIOS
DEBT EQUITY RATIO
YEAR (1) 2007 (2) 2006 (3) 2005 India Infoline 0.28 0.48 0.03 57

India Infoline PERCENTAGE 0.6 0.4 India Infoline 0.2 0 1 2 YEAR 3

Debt to equity ratio indicates the relationship between the lenders contribution for each rupee of owners contribution in financing assets of the company. It indicates extent to which the company relies on debt. In the above given graph, it is clear that over a period of time the company have started relying on DEBT more. The companys ratio has increased in 2006 as compared to 2005 & 2007.. The high ratio means that claims of creditors are greater than those of owners. A high level introduces inflexibility in the firms operations due to the increase interference and pressure from creditors. The company is able to borrow funds on very restrictive terms and conditions. But in 2007 it has decreased to 0.28 that means the company has lessen its debts.

3 PROFITABILITY RATIOS
NET PROFIT MARGIN
YEAR (1) 2007 (2) 2006 (3) 2005 India Infoline 0.19 0.59 0.82

India Infoline 1 0.8 0.6 0.4 0.2 0 1 2 YEAR 3 PERCENTAGE

India Infoline

Net Profit Margin ratio establishes a relationship between net profit & sales and indicates management efficiency in manufacturing, administratering & selling the

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products. This ratio is the overall measure of the firms ability to turn each rupee sales to net profit. The companys ratio in 2005 is 0.82 which has decreased to 0.19 in 2007which is almost 4 times less. This indicates that the sales of the company are increasing but the PAT is decreasing due to which the companys ratio is decreasing. The company will fail to achieve satisfactory return on shareholders funds.

RONW (RETURN ON NET WORTH/ EQUITY) YEAR India Infoline (1) 2007 1.03 (2) 2006 0.58 (3) 2005 0.55
India Infoline PERCENTAGE 1.5 1 India Infoline 0.5 0 1 2 YEAR 3

Return on Net Worth indicates how well the firm has used the resources of owners. This ratio is one of the most important relationships in financial analysis. Common or ordinary shareholders are entitled to the residual profit. The rate of dividend is not fixed; the earnings may be distributed to shareholders or retained in the business. The companys return on equity has increased tremendously from 2005 to 2007. The ratio in 2006 is 0.58 which has increased to 1.03 in 2007 which is almost 2 times more. This is indeed good for the shareholders as they are getting high returns. The return on owners equity reveals the relative performance and strength of the company in attracting future investment.

DPS (DIVIDEND PER SHARE)(RS)

YEAR (1) 2007 (2) 2006 (3) 2005 India Infoline 2.98 2.96 0

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India Infoline 4 3 Rs 2 1 0 1 2 YEAR 3 India Infoline

Dividend per Share indicates the relationship between the earning distributed to ordinary shareholders divided by the number of ordinary shares outstanding. As the graph indicates, it is clear that over the year the company DPS ratio has increase tremendously. In 2006 it was 2.96 and in 2007 it has increased to 2.98. It is good for the shareholders as they have started getting more returns.

EPS (EARNING PER SHARE) (RS)

YEAR 2007 2006 2005 India Infoline 10.39 5.87 5.53
India Infoline 15 Rs 10 India Infoline 5 0 1 2 YEAR 3

The ratio indicates the returns on the amount invested by the shareholders. Its calculations made over years indicates whether or not the firms has changed over the period. It measures profitability of the shareholders investment. The companys ratio is Rs5.53 in 2005 & Rs5.87 in 2006, where as in 2007 it has paid shareholders return of Rs 10.39 which is almost double. It shows that company is making efforts to high pay returns to the shareholders.

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INDIA BULLS FINANCIAL SECURITIES PVT LTD 1 LIQUIDITY RATIOS

CURRENT RATIO

YEAR (1) 2007 (2) 2006 (3) 2005

Indiabulls

0.16 0.39 0.54

Indiabulls 0.6 0.5 0.4 0.3 0.2 0.1 0 1 2 YEAR 3

Ratio

Indiabulls

Current ratio indicates the relationship between current asset and current liabilities. Current asset includes cash and those assets that can be converted into cash within a year. It measures firms short term solvency. Higher the ratio, the greater the margin of safety, the larger the amount of current assets in relation to liabilities, the more the firms ability to meet its current obligation. The ideal ratio should be 2:1. The company had high ratio in 2005 as compared to 2006 & 2007. But in 2007 the ratio is almost three times less as compared to 2005. This indicates the failure of the company to meet its obligations due to lack of sufficient liquidity, will result in a poor credit worthiness, loss of creditors confidence.

2 LEVERAGE RATIOS
DEBT EQUITY RATIO

Year (1) 2007 (2) 2006 3) 2005

Indiabulls

1.02 1.33 0.21

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Indiabulls PERCENTAGE 1.5 1 Indiabulls 0.5 0 1 2 YEAR 3

Debt to equity ratio indicates the relationship between the lenders contribution for each rupee of owners contribution in financing assets of the company. It indicates extent to which the company relies on debt. In the above given graph, it is clear that over a period of time the company have started relying on DEBT more. The companys ratio has increased in 2007 by almost 4 times as compared to 2005. The high ratio means that claims of creditors are greater than those of owners. A high level introduces inflexibility in the firms operations due to the increase interference and pressure from creditors. The company is able to borrow funds on very restrictive terms and conditions.

3 PROFITABILITY RATIO
NET PROFIT MARGIN
Year Indiabulls (1) 2007 0.38 (2) 2006 0.47 (3) 2005 1.74
Indiabulls PERCENTAGE 2 1.5 1 0.5 0 1 2 YEAR 3 Indiabulls

Net Profit Margin ratio establishes a relationship between net profit & sales and indicates management efficiency in manufacturing, administratering & selling the

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products. This ratio is the overall measure of the firms ability to turn each rupee sales to net profit. The companys ratio in 2005 is 1.74 which has decreased to 0.38 in 2007which is almost 4 times less. This indicates that the sales of the company are increasing but the PAT is decreasing due to which the companys ratio is decreasing. The company has failed to achieve satisfactory return on shareholders funds.

RONW (RETURN ON NET WORTH/ EQUITY)

Year Indiabulls (1) 2007 2.31 (2) 2006 0.88 (3) 2005 0.03
Indiabulls 2.5 2 1.5 1 0.5 0 1 2 YEAR 3 PERCENTAGE

Indiabulls

Return on Net Worth indicates how well the firm has used the resources of owners. This ratio is one of the most important relationships in financial analysis. Common or ordinary shareholders are entitled to the residual profit. The rate of dividend is not fixed; the earnings may be distributed to shareholders or retained in the business. The companys return on equity has increased tremendously from 2005 to 2007. The ratio in 2006 is 0.88 which has increased to 2.31 in 2007 which is almost 3 times more. This is indeed good for the shareholders as they are getting high returns. The return on owners equity reveals the relative performance and strength of the company in attracting future investment.

DPS (DIVIDEND PER SHARE) (RS)

Year Indiabulls (1) 2007 4.63 (2) 2006 1.77 (3) 2005 0.06

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Indiabulls 5 4 3 2 1 0 1 2 YEAR 3 PERCENTAGE

Indiabulls

Dividend per Share indicates the relationship between the earning distributed to ordinary shareholders divided by the number of ordinary shares outstanding. As the graph indicates, it is clear that over the year the company DPS ratio has increase tremendously. In 2006 it was 1.77 and in 2007 it has increased to 4.63 which is almost 3 times more. It is good for the shareholders as they have started getting more returns.

EPS (EARNING PER SHARE) (RS)

Year Indiabulls (1) 2007 1.81 (2) 2006 0 (3) 2005 0
Indiabulls PERCENTAGE 2 1.5 1 0.5 0 1 2 YEAR 3 Indiabulls

The ratio indicates the returns on the amount invested by the shareholders. Its calculations made over years indicates whether or not the firms has changed over the period. It measures profitability of the shareholders investment.. The companys ratio is zero in 2005 & 2006, where as in 2007 it has paid shareholders return of Rs 1.81. It shows that company is making efforts to pay high returns to the shareholders.

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COMPARISON IDIA INFO LINE & INDIA BULLS 1 LIQUIDITY RATIOS

CURRENT RATIO
Year (1) 2007 (2) 2006 (3) 2005 India Infoline 0.15 0.64 0.42 Indiabulls 0.16 0.39 0.54

Current Ratio
0.8 Ratio 0.6 0.4 0.2 0 1 2 Years 3 India Infoline Indiabulls

Current ratio indicates the relationship between current asset and current liabilities. Current asset includes cash and those assets that can be converted into cash within a year. It measures firms short term solvency. Higher the ratio, the greater the margin of safety, the larger the amount of current assets in relation to liabilities, the more the firms ability to meet its current obligation. The ideal ratio should be 2:1. AS it is clear from the graph that the both the company doesnt have good current ratio but if we compare these 2 companies, the current ratio of India Infoline is better as compared to India bulls over last 3 years. India Infoline is trying to maintain a high liquidity position to meet its current obligations

2 LEVERAGE RATIOS
DEBT- EQUITY RATIO
India Infoline 0.28 0.48 0.03

Year (1) 2007 (2) 2006 (3) 2005

Indiabulls 1.02 1.33 0.21

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Debt- Equity Ratio

1.5 Ratio 1 0.5 0 1 2 YEAR 3 India Infoline Indiabulls

Debt to equity ratio indicates the relationship between the lenders contribution for each rupee of owners contribution in financing assets of the company. It indicates extent to which the company relies on debt. In the above given graph, it is clear that over a period of time the companys have started relying on DEBT more. Indiabulls has huge debt as compared to India Infoline. This means that Indiabulls claims of creditors are greater than those of owners. A high level introduces inflexibility in the firms operations due to the increase interference and pressure from creditors. The company is able to borrow funds on very restrictive terms and conditions.

3 PROFITABILITY RATIOS
NET PROFIT MARGIN
India Infoline 0.19 0.59 0.82

Year (1) 2007 (2) 2006 (3) 2005

Indiabulls 0.38 0.47 1.74

Net Profit Margin

PERCENTAGE 2 1.5 1 0.5 0 1 2 YEAR 3 India Infoline Indiabulls

Net Profit Margin ratio establishes a relationship between net profit & sales and indicates management efficiency in manufacturing, administratering & selling the

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products. This ratio is the overall measure of the firms ability to turn each rupee sales to net profit. As we can see from the graph Indiabulls had good profit in 2005 as compared to India Infoline, But the ratio of both the companies is falling down. This indicates that the sales of the companys are increasing but the PAT is decreasing due to which the companys ratio is decreasing. The companys has failed to achieve satisfactory return on shareholders funds.

RONW (RETURN ON EQUITY/ NET WORTH)

India Infoline 1.03 0.58 0.55 RONW
2.5 2 1.5 1 0.5 0 1 2 YEAR 3 PERCENTAGE

Year (1) 2007 (2) 2006 (3) 2005

Indiabulls 2.31 0.88 0.03

India Infoline Indiabulls

Return on Net Worth indicates how well the firm has used the resources of owners. This ratio is one of the most important relationships in financial analysis. Common or ordinary shareholders are entitled to the residual profit. The rate of dividend is not fixed; the earnings may be distributed to shareholders or retained in the business. The companys return on equity has increased tremendously from 2005 to 2007. Indiabulls is doing well as compared to India Infoline.This is indeed good for the shareholders as they are getting high returns. The return on owners equity reveals the relative performance and strength of the company in attracting future investment.

DPS (DIVIDEND PER SHARE) (RS)

YEAR (1) 2007 (2) 2006 (3) 2005 India Infoline Indiabulls 2.98 4.63 2.96 1.77 0 0.06

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DPS
5 4 3 2 1 0 1 2 Years 3

Rs

India Infoline Indiabulls

Dividend per Share indicates the relationship between the earning distributed to ordinary shareholders divided by the number of ordinary shares outstanding. As the graph indicates, it is clear that over the year the companys DPS ratio has increase tremendously. Indiabulls is paying high dividend as compared to India Infoline.

EPS (EARNING PER SHARE) (RS)

India Infoline 10.39 5.87 5.53 EPS
15 RS 10 5 0 1 2 Years 3 India Infoline Indiabulls

YEAR (1) 2007 (2) 2006 (3) 2005

Indiabulls 1.81 0 0

The ratio indicates the returns on the amount invested by the shareholders. India Infoline is paying high return to shareholders as compared to Indiabulls. Infact, Indiabulls didnt paid EPS for last 2005 & 2006. But started paying in 2007 so this shows that companies are making efforts to pay high returns to the shareholders. India Infoline is paying high return to shareholders as compared to Indiabulls. Infact, Indiabulls didnt paid EPS for last 2005 & 2006. But started paying in 2007 so this shows that companies are making efforts to pay high returns to the shareholders.

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BROKING SECTOR & COMPANIES COMPARISON 1 LEVERAGE RATIOS

DEBT - EQUITY RATIO
India Industry Infoline Indiabulls 0.18 0.28 1.02 0.6 0.48 1.33 0.95 0.03 0.21 D/E Ratio
1.5 Percentage 1 0.5 0 1 2 Year 3 Industry India Infoline Indiabulls

Year (1) 2007 (2) 2006 (3) 2005

Debt to equity ratio indicates the relationship between the lenders contributions for each rupee of owners contribution in financing assets of the company. It indicates extent to which the company relies on debt. In the above given graph, it is clear that over a period of time the company have started relying on DEBT more. Indiabulls is relying more on debt as compared to India Infoline and the Industry Aggregate. To rely more on debt means that claims of creditors are greater than those of owners. A high level introduces inflexibility in the firms operations due to the increase interference and pressure from creditors. The company is able to borrow funds on very restrictive terms and conditions. It is not good for Indiabulls as it has high debt as compared to Industry Aggregate.

PROFITABILITY RATIOS
NET PROFIT MARGIN
India Industry Infoline Indiabulls 0.19 0.19 0.38 0.37 0.59 0.47 0.35 0.82 1.74

Year (1) 2007 (2) 2006 (3) 2005

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Net Profit Margin

2 Parcentage 1.5 1 0.5 0 1 2 Year 3 Industry India Infoline Indiabulls

Net Profit Margin ratio establishes a relationship between net profit & sales and indicates management efficiency in manufacturing, administratering & selling the products. This ratio is the overall measure of the firms ability to turn each rupee sales to net profit. In the above given graph, it is clear that over a period of both the companies are making good profits as compared to the Industry Aggregate. Indiabulls had high profits in 2005 as compared to India Infoline and Industry Aggregate. Where as in 2006 India Infoline made more profits as compared to Indiabulls and Industry Aggregate. But again in 2007 Indiabulls Made more profit as compared to other two

RONW (RETURN ON NET WORTH / EQUITY)

Year (1) 2007 (2) 2006 (3) 2005 Industry India Infoline Indiabulls 11.9 1.03 2.31 9.22 0.58 0.88 16.10 0.55 0.03 RONW
20 Percentage 15 10 5 0 1 2 Year 3 Industry India Info line India bulls

Return on Net Worth indicates how well the firm has used the resources of owners. This ratio is one of the most important relationships in financial analysis. Common or ordinary shareholders are entitled to the residual profit. The rate of dividend is not fixed; the earnings may be distributed to shareholders or retained in the

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business. Return on net worth or equity is calculated to see the profitability of owners investment. Looking at the graph, which indicates how well the industry and both the companies (India Infoline & Indiabulls) are not able to use the resources of the owners, we can not say much about the ability of the firm in utilizing the resources of the shareholders funds because the graph does not indicate any trend to show the ability of the management In the above given graph, it is clear that over a period of time the industry has high return as compared to the companies. The companies has very low return. Indiabulls has high return as compared to India Infoline.

COMPARISION OF RETURN
Comparison of return of sensex with the return of India info line & India bulls of 3 months (may, June, July)
Name (1) Sensex (2) Indiainfoline (3) Indiabulls Return -0.009 0.31 0.26

Return 0.4 0.3 R etu rn s 0.2 0.1 0 -0.1 1 2 Names 3 Return

Looking at the given graph it is clear that the return of sensex is negative. But the broking sector has positive return. India Info line Securities Pvt Ltd has high returns as compared to India Bulls Financial Securities Pvt Ltd.

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Conclusion

To conclude if we take into consideration the fundaments due to the impressive growth of the capital market in the recent years the future prospect of growth of business of DP is very bright Further it can be concluded that for the investor India Info Line is a good investment avenue judging by its financial as compared to India bulls. One can take into consideration Returns, EPS & DPS, then India Info Line has given better returns. The overall performance of the India Infoline is good and there is a continuous flow of project business. The company is continuing its drive for volume with continued focus on profitability. Looking at the above-mentioned ratios, India Infoline looks profitable in the long run because there is no sign of downfall in the near future.

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FINDINGS

India is in a sweet spot. There are a lot of strongly positive changes that are happening in the economy. So, over a 3-5 year period, there is absolutely no doubt that equities will give you very strong returns, far more than what debt has to offer. In terms of revenue, the overall commission market is about $500-800 million. There are about 10-12 large international players and about 7-8 large domestic players who together form about 80% of the market. Currently, there are quite a few significant entry barriers and, therefore, not many new entrants. The biggest entry barrier is definitely in terms of a large research platform. It is not easy to build scale in this business. Second, is establishing a network. These two form the business core.

INDIA INFOLINE SECURITIES PVT LTD The Board of Directors of the Company have considered and approved the following
With a view to reconsolidate the insurance distribution business of the wholly owned subsidiaries namely India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited, the existing investments of the Company in the above two wholly owned insurance subsidiaries be transferred to India Infoline Marketing Services Limited (wholly owned subsidiary). The transfer will be as per the valuation of Chartered Accountants. As per the authorization of the shareholders for increase in the limits of investments by FIIs in the company's shares, the board approved increase in FII limits upto 100% of the equity of the company. With a view to meet the real estate requirements of the Company, primarily for its own office space and training centre requirements, the Board approved to make investments in a separate subsidiary to have better focus and monitoring of capital deployed. The Board has appointed a Committee of Directors to finalize the plan. This will be an good opportunity for the investors to invest in India Infoline.

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OPPORTUNITIES

Financial Service sector is Booming in India. There have been a couple of "sell" calls on the emerging markets and foreign institutions seem to be becoming risk-averse. This being the case, do you see the institutional flows into the Indian stock market continuing With heightened M&A activity and more multinational players entering this sector, the business will gain more credibility and more retail participation. The brokerage business has always been seen as a mom-and-pop business and there was not much strut in this business, but now the youths are also entering into this business. The competition will continue and intensify in the future. However, opportunity in India is fairly widespread. India has anywhere between 800-1,000 companies, out of the 4000-odd listed companies, which are of investment grade. On the other side, we have about 2,000-2,500 institutional investors. Institutional broking has increased. Wealth management is becoming popular Leverage network for more products.

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BIBLIOGRAPHY 1 BOOKS

Financial Management -By Prasanna Chandra Financial Managemnt -By I M Pandey

2 WEBSITES

www.indiainfoline.com www.indiabulls.com www.geojit.com www.icicidirect.com www.myiris.com www.moneycontrol.com www.nseindia.com www.bseindia.com www.ibef.org www.managementparadise.com www.moneypore.com www.buzzingstock.com www.wikipedia.com www.sebi.com www.google.com

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