A REPORT ON

MUTUAL FUNDS AS AN EMERGING PHENOMENON IN INDIA

By Vaibhav Maheshwari 08BS0003706 IBS, Chandigarh

A REPORT ON
MUTUAL FUNDS AS AN EMERGING PHENOMENON IN INDIA

A report submitted in partial fulfillment of the requirements of MBA Program

Faculty Guide: Company Guide: Prof. G.S.Bedi Rohit Vajpaye Mr.

(Faculty IBS Chandigarh) (Vice President, SPA)

Acknowledgement
The completion of any task depends upon the co-operation, coordination and consolidated efforts of several resources of knowledge, energy, time and above all the proper guidance of the experienced. Therefore we approached this matter of acknowledgement through these lines trying my best to give full credit where it deserves. I wish to express my gratitude to those who generously help me to compile this project with their knowledge and expertise. Firstly I owe a great debt to Mr. Nitin Somani, Company Secretary (SPA Capital and Services Ltd) for obliging the project thus giving me chance to broaden my horizon about Finance department. I also thank Mr. Rohit Vajpaye (Vice President, SPA Capital and Services Ltd) my company guide and Prof. G.S.Bedi (Faculty, IBS Chandigarh), my faculty guide for giving me the opportunity to choose this topic and the necessary guidelines regarding the project, for helping me to track first hand information and supporting me in the completion of the project successfully, as well as insulating a belief in me which was essential for the completion of this project. The learning during the project was of immense importance & invaluable. Our work basically included the study of Performance of various Mutual Fund Schemes before and after Sub Prime Crisis and classifying the Funds of Kotak Mahindra into BCG matrix. The present report is an amalgamation of our thoughts with our efforts to study the features of different Mutual Fund Schemes by carrying out technical and fundamental analysis. We hope that the report will help to assimilate and learn from best practices shared by others in the industry.

TABLE OF CONTENTS
S No.
1 2 3 4 5 6 7 8 9 10 11

PARTICULAR
EXECUTIVE SUMMARY ABSTRACT OBJECTIVE OF THE PROJECT RESEARCH METHODOLOGY LIMITATION OF THE PROJECT CHAPTER 1: Introduction CHAPTER 2: About The Company CHAPTER 3: Comparing Different Mutual Funds CHAPTER 4: Applying BCG Matrix on Kotaks Mutual Funds CHAPTER 5: How to analyze a Fund CHAPTER 6: Conclusion

PAGE No

5 6 7 7 8 9-24 10-32 33-63 64-83 84-94 97-98

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12 13

CHAPTER 7: Recommendations REFERENCES

99-101 102

Executive Summary
I, Vaibhav Maheshwari (08BS0003706), a student of IBS Chandigarh did my Summer Internship Project with SPA Capital and Services Ltd from 25th Feb to 23th May, 2009. SPA Capital and Services Ltd. is one of Indias largest Company with a huge customer base. It is doing its business by continuously delivering differentiated products and services that provide high business value in return. The core objective of my SIP was to study the performance of the mutual funds industry over the period & classifying the Kotak Mutual Fund Schemes in BCG Matrix It included:
To gain the in depth knowledge of various mutual funds, its types and

different schemes.
To analyze the various mutual funds viability on the basis of their

technical and fundamental analysis. I have done this internship in the SPA Capital and Services Ltd.s Finance department. The company gave me the designation of summer trainee . During the summer internship, I have understood the framework of Indian Financial Markets in general and mutual fund industry in particular. I was made to study various kind of mutual fund scheme and options available to an investor to meet his investment objective. SPA undertake various research activities on the mutual funds schemes available under particular category (e.g. Equity funds, Debt Funds, MIPs, etc.) based on past performance of the scheme, investment portfolio of the scheme, economic outlook, etc. on the basis of analysis of SPA and investment goal of the investor, the company advises them to invest into a particular mutual fund scheme. The Company Secretary, Mr. Nitin Somany and my company guide Mr. Rohit Vajpaye appreciated my efforts during the tenure at SPA Capital and Services Ltd.

To sum it up this entire project was an enriching experience for me both as a summer trainee of Kotak Mahindra Asset Management Company and an IBS student.

Abstract
Performance of the Mutual Funds Industry and analyzing the different offers of Kotak Mutual Funds using BCG matrix. Performance of the Mutual fund industry have been analyzed using secondary sources such as books, journals, news articles and internet, a thorough survey on both the present situation of the mutual funds and the previous 3 years of 4 companies have been done by me. Till date this has been completed as the out comings of this primary research will give us clear picture of to what extent the changes have to be made. In this period, the collection of data about the present situation of 4 companies Kotak Mutual Funds, DSP Meryl Lynch, HDFC and ICICI Mutual Funds has been compared and trend analysis of last 3 years of these companies have been done. Then their performance have been analysed on the basis of their fundamental strength In the initial part of the project , I was given the facts sheets of various mutual funds to study. On the basis of my study I was told the basic parameters to judge the viability of the different mutual funds. Viability of mutual funds is checked on the basis of their fundamental and technical view. In the end part of my project I took a number of mutual funds of KOTAK MUTUAL FUNDS and on the basis of their features and growth perspective I tried to put them into BCG Matrix.

Objective Of the Project:

(a) To understand the framework of Indian Financial Markets in general and mutual fund industry in particular (b)To study the performance of the mutual funds industry over the period
(c) To apply BCG matrix to different mutual fund schemes of Kotak

Mahindra Asset Management Company.

(d) To examine the customer awareness, perception with respect to

different mutual fund schemes offered by Kotak.

Research Methodology:
Four Mutual Fund companies have been selected. Various parameters taken for comparison of mutual funds of different companies are: Sector wise investment
8

Net Asset Value ( NAV) Return on Investment Secondary data: We will be collecting secondary data for our project through published and non published articles in newspapers, magazines, internet etc. Categorizing different mutual fund schemes of Kotak Mahindra Asset Management Company using BCG matrix.

Limitations of the Study:

(a) NAV of the mutual funds keeps on changing on the daily basis, hence a

lot of hassles were faced to analyze and compare the funds. (b) Less focus was given DEBT FUNDS as the study was more centered to equity funds only. (c) People are apprehensive and uncooperative in giving information at times.
(d) No access to secret and confidential reports and data of the company.

(e) Only the finance Department was consulted for getting the facts and figures. (f) In the limited time of 14 weeks it is difficult to gather knowledge about all aspects of the project.

Chapter I

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Introduction
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. The Indian mutual funds industry is witnessing a rapid growth as a result of infrastructural development, increase in personal financial assets, and rise in foreign participation. With the growing risk appetite, rising income, and increasing awareness, mutual funds in India are becoming a preferred investment option compared to other investment vehicles like Fixed Deposits (FDs) and postal savings that are considered safe but give comparatively low returns, according to Indian Mutual Fund Industry. The net asset value, or NAV, is the current market value of a fund's holdings, less the fund's liabilities, usually expressed as a per-share amount. For most
11

funds, the NAV is determined daily, after the close of trading on some specified financial exchange, but some funds update their NAV multiple times during the trading day. The public offering price, or POP, is the NAV plus a sales charge. Open-end funds sell shares at the POP and redeem shares at the NAV, and so process orders only after the NAV are determined. Closed-end funds (the shares of which are traded by investors) may trade at a higher or lower price than their NAV; this is known as a premium or discount, respectively. If a fund is divided into multiple classes of shares, each class will typically have its own NAV, reflecting differences in fees and expenses paid by the different classes.

Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains Thomas Jefferson
1.1) Mutual Funds Global Overview
The size of the world mutual fund industry is over US$22 trillion. Globally, the mutual fund industry grew by 22.47% in 2006. USA holds the biggest mutual fund market in the world and accounts for over 50% of the world market. Major players in Europe are France and Luxembourg based funds, with US$1.8 trillion and US$2.2 trillion respectively ( till 2006 ). In the developed market, mutual funds are freely traded on stock exchanges. In some countries, the number of listed mutual funds exceeds the number of listed shares. Compared to this, the Indian Mutual Fund Industry has grown

12

by41%

in

2006-07

and

by

77%

in

the

last

two

years

Source: Investment Company Institute

13

Working of a Mutual Fund

There have been three great inventions since the beginning of time: fire, the wheel, and Mutual Funds will Rogers
14

Source: Investment Company Institute

1.2) Indian Mutual Fund Industry

The concept of mutual fund was introduced in India for the first time in 1963, when the Unit Trust of India was formed at the initiative of the Government of India and the Reserve Bank of India. From 1963 to 2009, the mutual fund industry has covered a long way. The development of the industry can be divided in four phases.

15

1.3.1)

Phase I (1964 87)

In 1963, Government of India and Reserve Bank of India set up a Unit Trust of India by an Act of Parliament. In 1964, Unit Trust of India launched its first scheme Unit 64. Initially, it was under the administrative control of and was also regulated by RBI. In 1978, the Industrial and Development Bank of India has taken charge of UTI as the administrative and development authority. The assets under the management of UTI at the end of 1988, was RS 6700 crores.

1.3.2)

Phase II (1987 93)

The monopoly of the UTI came to an end in 1987 when public sector banks, Life Insurance Corporation and General Insurance Corporation of India were allowed to enter the mutual fund industry. State Bank of India is the first among the public sector banks to open a mutual fund in June 1987, known as SBI Mutual Fund. This was followed by Canara Bankss mutual fund known as Can Bank Mutual Fund in December 1987, Punjab National Mutual Fund in August 1989, Indian Bank Mutual Fund in November 1989, Bank of India Mutual Fund in June 1990, and Bank of Baroda Mutual Fund in October 1992. The other non banking institutations LIC and GIC, set up their mutual fund in
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June 1989 and December 1990 resp. The asset under management of the mutual fund industry at the end of 1993 was 47,004 crores.

1.3.3)

Phase III (1993 2003)

This particular phase has again two sub phases. First, the entry of the private sector in the mutual fund industry was allowed in 1993. Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund in India. The first mutual fund regulations, SEBI (Mutual Fund) Regulation, were also introduced in 1993 and all mutual funds except UTI were registered governed under the regulation. In 1996, a more comprehensive and revised regulations SEBI (Mutual Fund) Regulation 1996, was introduced and replaced the old SEBI (Mutual Fund) Regulation 1993. Second, the Foreign Asset Management companies entered the Indian mutual fund industry in 2000. The entry of the private sector and foreign players has increased the number of mutual fund houses, as well as the choice of the investors. The asset under management of the 33 mutual Funds at the end of Jan 2003 was Rs 121,805 crores. The Unit Trust of India with Rs44,541 crores as asset under management was the numero uno in the mutual fund industry.

1.3.4)

Phase IV (2003 onwards)

In February 2003, Unit Trust of India was divided into two entities. The assets of US 64, assured return scheme and certain other schemes are covered under UTI I. The asset under management of this entity was around Rs 29,385 crores at the end of Jan 2003 and its functioning under an administrator and under the rules framed by Governor of India. This entity does not come under SEBI (Mutual Fund) Regulations. The Second one is known as UTI Mutual Fund Ltd. and is sponsored by the State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance
17

Corporation of India. This Mutual Fund is registered with SEBI and it comes under the purview of SEBI (Mutual Funds) Regulations. Mutual Fund Industry in India has come of age. From one mutual fund in 1964, we have 32 mutual funds now, offering 4,512 schemes and the total assets under management is Rs.556,729.71 crores as on 31st October, 2007.

1.3) Entry and Exit Load

The expenses incurred by the mutual funds are recovered from the investors by a percentage on their investments. Entry Load: When the expenses are charged to the investor at the time of entry into the fund, it is called entry load e.g. an investor Rs. 10,000 and the entry load is 2% then Rs.200 will be deducted from his investment and Rs.9800 will be invested in the fund. Exit Load: When expenses are deducted at the time of exit from the fund.

18

No Load: Here, there is no charges at the time of entry or exit. In dead, expenses can be recovered throughout the lifetime of the investment and an equal amount may be charged through the life of the investment.

1.4) Net Asset Value

Net Asset Value is a term used to describe the value of an entity's assets less the value of its liabilities. The term is commonly used in relation to collective investment schemes. It may also be used as a synonym for the book value of a firm. For collective investment schemes (such as US mutual funds and hedge funds), the NAV is the total value of the fund's portfolio less its liabilities. Its liabilities may be money owed to lending banks or fees owed to investment managers, for example. For companies, the NAV is the value of its assets less its liabilities. For the valuation of assets and liabilities, different methods are used depending upon the circumstances, the purposes of the valuation or the regulations that may apply. For funds, the most common method of valuation is to use the market value of the assets.

1.5) Systematic Investment Plan

An SIP is a vehicle offered by mutual funds to help you save regularly. It is just like a recurring deposit with the post office or bank where you put in a small amount every month. The difference here is that the amount is invested in a mutual fund. The minimum amount to be invested can be as small as Rs 500 and the frequency of investment is usually monthly or quarterly.

How an SIP scores

It makes you disciplined in your savings. Every month you are forced to keep aside a fixed amount. This could either be debited directly from your account or you could give the mutual fund post-dated cheques. As you see above, it helps you make money over the long term. Since you get more units when the NAV drops and fewer when it rises, the cost averages out over time. So you tide over all the ups and downs of the market without any drastic losses. Also, a number of mutual funds do not charge an entry load if you opt for an SIP. This fee is a percentage of the amount you are investing. And if you do not exit (sell your units) within a year of buying the units, you do not have to pay an exit load (same as an entry load, except this is charged when you sell your units). If, however, you do sell your units within a year, you would be
19

charged an exit load. So it pays to stay invested for the long-run. The best way to enter a mutual fund is via an SIP. But to get the benefit of an SIP, think of at least a three-year time frame when you won't touch your money.

1.6) Mutual Fund Schemes

The mutual funds offer different schemes. Schemes of mutual funds can be classified under heads from angles.

1.7.1)

By Structure
1.7.1.1) Open Ended Schemes: A mutual fund scheme which does not have a fixed maturity and which is available for subscription and redemption throughout the year is called an open ended scheme. Open ended scheme are traded at their net asset value related prices. The biggest advantages of these schemes are liquidity.

1.7.1.2) Closes Ended Schemes: A closes ended scheme is open for subscription at the time of initial public offer for a specified period. It has a maturity between 3 and 15 years. The units of the schemes are listed in a stock exchange. Once the issue is close for subscription, the investors can buy or sell the units in the stock exchange at the prevailing market price. In order to give an option to sell the units at net asses value related price, some funds repurchase the units at periodic intervals.

1.7.1.3) Interval Schemes: Interval schemes are the combination of open ended and close ended schemes. The units of an interval scheme may be at net asset value related prices during the predetermined intervals.

1.7.2)

By Investment Objective

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1.7.2.1) Growth Schemes: These schemes provide capital appreciation over a period of time. They do not provide regular income. Normally, major portion of the fund is invested in equity shares.

1.7.2.2) Income Schemes: These schemes provide regular income to investors. Major portion of the fund is invested in fixed income securities. Scope for growth in these schemes is very little.

1.7.2.3) Balance Schemes: These schemes are a combination of growth schemes and income schemes. They distribute periodic income and at the same time there is capital appreciation also. The funds are invested in equity shares as well as in fixed income securities.

1.7.2.4) Money Market Schemes: The funds of these schemes are invested in money market instrument like treasury bills, commercial schemes, certificates of deposit and call money market. Return of these schemes is normally lower than the others, but they are very liquid.

1.7.3)

By Nature
1.7.3.1) Equity Funds: As the name says, the fund is invested mostly in equity shares. Equity funds again can be classified under the following heads:I. Diversified Equity Funds II. Mid Cap Funds III. Sector Specific Funs IV. Tax Saving Funds
21

1.7.3.2) Debt Funds: The debt funds are invested in the debts like government securities, corporate debentures etc. Therefore, risk associated in these funds are very low and they provide a steady income. Debt funds can be classified as follows. I. II. III. IV. V. Gilt Funds Income Funds MIPs Short Term Plans Liquid Funds

1.7.3.3) Balanced Funds: These funds are invested partly in equity and partly in debt. Therefore, there is a possibility of both growth and regular income.

1.7) New Innovations in Mutual Fund Schemes

1.8.1) Money Market Mutual Funds
A money market mutual fund invests only in money market instruments and issues redeemable units to investors. Money market funds are very low risk but the returns are still not guaranteed. Their stability is based on the investments that make up their portfolios and any losses are rare. The funds are invested into some of the safest market instruments. These instruments provide a fixed return with short maturity. Money market funds carry a low risk while still offering high returns if debt securities issued by banks are purchased. This is in comparison to similar low-risk products. The initial investment is low as money market funds have lower requirements than other funds. These leave investment opportunities available to a wider range of investors. Money market funds offer investors a same day settlement similar to money market instruments.

22

1.8.2) Gilt Fund

A mutual fund that invests in several different types of medium and longterm government securities in addition to top quality corporate debt. Gilts originated in Britain. Gilt funds differ from bond funds because bond funds invest in corporate bonds, government securities, and money market instruments. Gilt funds stick to high quality-low risk debt, mainly government securities.

1.8.3) Arbitrage Fund

The Arbitrage Fund seeks to achieve capital growth by engaging primarily in merger and acquisition risk arbitrage. Merger arbitrage is a highly specialized investment approach designed to profit from the successful completion of corporate reorganizations. The most common arbitrage activity, and the approach the Fund will generally use, involves purchasing
23

the shares of an announced acquisition target company. The shares are purchased at a discount to their expected value upon completion of the acquisition. The Fund may also invest in corporate reorganizations involving publicly announced tender offers, leveraged buyouts, spin-offs, and liquidations.

1.8.4) Bear funds

Funds that utilize short-selling methods to quickly make profits during a bear or declining market. These funds are usually made up of hedge funds and mutual funds. They are actively managed, and short individual stocks or inverse-index funds that short entire indexes. Bear funds revolve around the idea of playing with both sides of the market so that gains in the bear fund offset losses elsewhere in an investor's portfolio. Bear funds are considered tactical investments, but usually end up being lousy long-term investments for investors.

1.8.5)

Tax Saving Schemes

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
1.8.6)

Index Schemes
24

Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.
1.8.7)

Sector Specific Schemes

These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. 1.8)

Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

25

1.9)

Pros & cons of investing in mutual funds

For investments in mutual fund, one must keep in mind about the Pros and cons of investments in mutual fund.

1.10.1) Advantages of Investing Mutual Funds

1. Professional Management - The basic advantage of funds is that, they are professional managed, by well qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments. 2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. 3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors. 4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want. 5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis.

1.10.2) Disadvantages of Investing Mutual Funds

1. Professional Management- Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over
26

whether or not the so-called professionals are any better than mutual fund or investor himself, for picking up stocks. 2. Costs The biggest source of AMC income, is generally from the entry & exit load which they charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. 3. Dilution - Because funds have small holdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. 4. Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

Chapter II
27

COMPANY PROFILE
SPA Group was promoted by a team of finance professionals in 1995 with an objective to provide value added financial services. Initially, the Group focused as a niche financial solutions provider in corporate finance and wealth management to Indian companies and high net worth individuals. In January 2000, the Group expanded its operations and the range of services. Today, SPA provides services for securities broking, merchant banking,
28

wealth management, financial advisory, corporate finance, risk management and insurance broking. SPA is being managed by its promoters along with a young and dynamic team of over 1000+ professionals with rich experience, in their respective fields. The Group has established itself as one of Indias leading financial advisory house, offering various financial solutions to its Institutional, corporate and individual clients. Customer centric approach of SPAs dedicated professional team has helped carve a niche for itself in financial services arena and won confidence of its clients. Clients of SPA are from a wide spectrum and comprise of Banks and other financial institutions, Mutual funds, Insurance companies, foreign institutional investors, public sector undertakings and government departments, private corporates, trusts and individuals.

PROMOTERS
Mr. Kamal Somani, FCA, is a senior finance professional with over 30 years of experience in investment banking, securities broking and corporate finance. His vast experience and vision has enabled the Group to establish itself as a respected financial services provider in the country. He looks after the overall group strategies and leads securities broking, investment advisory and investment banking activities of the Group. Mr. Sandeep Parwal, B.Com (Hons), FCA, has over 20 years of experience in various aspects of financial services. He handles investment advisory, insurance broking and merchant banking activities of the Group. His expertise in providing customized innovative solutions with unmatched speed provides a distinctive edge to the Group's capability.

MANAGEMENT TEAM
The Core management team of SPA consists of persons having a rich experience in Corporate Finance and Advisory, Investment Banking, Risk Management, Securities Banking and Wealth Management.
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Mr. Sanjay Joon, President MBA, having more than 21 years of experience in marketing of financial products and has a vast experience in information technology and administration. His forte lies in his abilities of accurately assessing his customers need, meeting them and leading an ever enthusiastic team. He heads Mutual Fund Division of the Group since its inception. Mr. Sanjay Gupta, Associate Director (Investment Banking) ACA, B.Com(H), having 10 years of experience in merchant banking and investments. Based at Delhi, he skillfully delivers customized for debt structuring and placement need of PSUs and SLUs. Mr. V K Khattar, Principal Officer He has to his credit 42 years of rich experience of working with Oriental Insurance Company Limited and retired as the Regional Manager. He is associated with our Group as the Principal Officer of the Insurance arm. Mr. Vivek Gautam, Associate Director He is having 30 years of experience in the field of Banking & Merchant Banking including 16 years of exclusive experience in Investment Banking. He has worked for 14 years in PNB till mid 1991 in Managerial positions. Thereafter he was deputed to PNB Capital Services Limited as Senior Vice President and worked as Head Merchant Banking during 1991 - 1996 and was associated in lead managing more than 60 public and rights issues for well known Corporates and Financial Institutions. He was also Head Investment Department dealing in securities for one year. Thereafter he worked as Director - Bajaj Capital Limited and President Merchant Banking for 7 years and also as Head Merchant Banking and Executive Director with Allianz Securities Limited for 1 year. He has wide experience in issue management, private placement of equity and debt, corporate advisory & finance, mergers & takeovers & distribution of financial products. He is with SPA Group since October 2006 and looking after Merchant Banking.

GROUP COMPANIES
SPA Capital Services Limited is the flagship Company of the Group and
is engaged in providing Wealth Management and Financial Advisory services to institutions, corporates, and individuals since 1995. The Company is a
30

leading distributor of Mutual Funds in the country and presently has assets over 4500 crores under its management. The Company has successfully positioned itself as a strategic advisor to its customers for wealth management with its customer centric approach and innovative solutions. The Company is registered with Reserve Bank of India as a Non Banking Financial Company. Presently the shares of the Company are listed on the Delhi Stock Exchange.

SPA Merchant Bankers Limited is a SEBI Category I Merchant Banker.

The Company is engaged in Merchant Banking activities and has delivered meaningful success to the borrowing programs both in form of bonds and term loan of many prestigious organizations with focus on debt structuring and placement for various Public Sector Undertakings, State Level Undertakings, Designated Financial Institutions and various Private Corporates. The Company is also engaged in the business of Investment Banking, Project Financing and Corporate Re-structuring. The Company is also providing equity-oriented merchant banking services to its clients as merchant bankers for public issues, right issues, preferential BUSINESS AREAS allotments and private placement of equity.

SPA Securities Limited is a SEBI registered securities broking Company.

The Company is a member of Wholesale Debt Market, Capital Market and Futures and Options Segment of the National Stock Exchange of India Limited. The Company is also a registered member of the Over the Counter Exchange of India. The Company is focused primarily on providing securities broking services to institutional clients and is empanelled as a approved securities broker with all the major Nationalised, Private and Co-operative banks, Corporate houses, Insurance Companies, Financial Institutions, Asset Management Companies and Provident Fund Trusts. The Company had a turnover of Rs. 25000 crores at NSE-WDM for the financial year ended March 2005. Equity broking for institutions was commenced in 2004 end. In its first full year of the operations, the Company achieved a turnover of over Rs.1500 crores in calendar year 2005.
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SPA Insurance Broking Services Limited is the arm of the SPA Group
providing entire range of insurance service in insurance right from meeting insurance need of clients to cover its risk spectrum, advisory, claim settlement and also meet requirement of clients if they wish to outsource entire gamut of insurances related functions. The Company is registered with Insurance Regulatory Development Authority as approved Broker. The Company is empanelled with almost all the life and general insurance companies as a Direct Broker. The Company is functioning as life and general insurance direct broker and risk assessors.

BUSINESS AREAS
MERCHANT BANKING
SPA Merchant Bankers Limited is engaged in private placement of debt instruments, structuring of the various financial products as per the requirements of the borrowers along with various other pre-issue and post issue services. The Company has made notable and considerable progress in a short span in the debt-oriented merchant banking activities by successful placement of various debt primary issues. This is also reflected through the ranking by Prime Database, which has ranked the Group amongst the top 10 service providers in this segment. The Company was able to achieve above ranks on the basis of its performance in just two financial years since it commenced investment & merchant banking activities. Since the commencement of merchant banking services, the Company has syndicated funds for various Public Sector Undertakings (PSUs), Designated Financial Institutions(DFIs), Banks and several State Level Undertakings (SLUs). The Company for its Merchant & Investment Banking activities has found patronage as an Arranger with various central public sector undertakings like HUDCO, NTC, ITI, MECON, IISCO SAIL, REC, KRCL, public sector banks and financial institutions. Also the Company has had privilege to provide its services to various state level undertakings of Andhra Pradesh, Karnatka,
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Kerela, Tamil Nadu, West Bengal, Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir, Maharashtra, Gujarat and Rajasthan. In the private sector, the Company has provided its services to various domestic and MNC corporates.

SECURITIES BROKING
SPA Securities Ltd. is registered member of NSE-WDM segment, Capital Market segment and Futures and Options segment. The company is also a member of The Stock Exchange, Mumbai. SPA Comtrade Pvt. Ltd. is the commodities broking company of the group and is a member of NCDEX and MCX. The Company has dedicated teams operating from a state of the art dealing room in Mumbai for equity, debt and derivatives broking supported by a strong in-house research team. Debt Broking The division is engaged in providing debt advisory and broking services to institutional, semi-institutional and retail customers. The company caters to a wide range of investors across the country ranging from Provident Funds, Banks, Corporate Treasuries, Financial Institutions, Mutual Funds, Educational, Religious and Charitable Trusts, Insurance Companies, HNI's etc. The company deals in Government Securities, Treasury Bills, Commercial Papers, Certificate of Deposits, PSU, SLU and Corporate Bonds and other debt instruments. With its nationwide network providing institutional broking services the company has executed business of over Rs. 300 Billion in last 3 years. Equity Broking The Company is engaged in equity research and broking for its institutional clients. On strength of its research and impeccable servicing the Company in its first year of operation in equity broking is empanelled with all the major domestic institutional players and has achieved a turnover of over Rs. 1,600 crores. Commodities Broking SPA Comtrade Pvt. Ltd., the commodities broking arm of the group has recently commenced operations. The company is catering to existing customers of the group by providing research based commodity broking services.

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MUTUAL FUNDS
The SPA Group, on strength of its research based customer centric approach and impeccable servicing, is recognized as one of the leading financial advisory service providers in the country. SPA Capital Services Ltd., the flagship company of the group provides investment advisory services. The company is engaged in advisory and distribution services of mutual funds and is ranked amongst top 10 intermediaries in the country. The Company provides customized solutions to the requirements of High Net worth Individuals and Corporate clients. Our strength lies in our ability to advise on investment strategies and structures, develop innovative products and distribute amongst a wide network of investors across the country. We have constantly endeavored to develop new instruments, tailor made to the requirements of our clients, enabling them to earn efficient post tax returns in accordance with their specific risk, return and maturity profiles. The company also has a distribution network of 200 sub-brokers across India being serviced by its eight branches. The company has mobilized more than Rs.7 trillion for various Mutual Funds during the last 7 years and is currently having Asset Under Management of over Rs.50 billion with satisfied customers. Additionally, the company provides advisory services for alternate investment options like portfolio management services in equity, debt and commodities besides investment in venture capital funds.

INSURANCE
SPA Insurance Broking Services Ltd is the insurance broking company of the group providing life and general insurance advisory services. Life Insurance advisory services are process oriented, which include identification of the needs of the clients, offering the best product available, resolution of their queries and post sales service. The company has covered over 2000 lives in 18 months of business with sum assured of over Rs. 20 billion and premium collection of over Rs.3.5 billion. In General Insurance we believe in servicing clients after assessment of their need and the risk involved and cover required and offer the best
34

insurance cover available in the market supported by strong after sales services to the clients. The Company is empanelled with all the general insurance companies operating in the Country enabling it to provide best insurance solutions suitable for the clients. The company has provided insurance coverage across assets classes of over Rs. 200 billion with impeccable claims and other after sales services.

VISION AND VALUES

SPA believes in attaining customer satisfaction, on continuing basis, by providing highest standard of financial services in India. The philosophy at SPA is to provide services to clients after assessment of their profile, needs and risk-appetite. The basic work theme at SPA is: Dedicated, competent and honest team of professionals Customer centric work environment Insight of customers perspectives Strong research base Clear understanding of applicable laws Consistency and passion to excel Technology savvy

SWOT Analysis of SPA Capital and Services Ltd.

STRENGTHS
1 2 3 4 5 6 7 8 9 Nation Wide Recognition Need Base Analysis Same Global Standard Services in all Branches Fair Deal in all Transactions Customer Services at Door Step Ethical conduct Infrastructure Customer Relationship Highly Professional and trained Staff

WEAKNESS 1 Frequent Job Rotation 2 Very less employees in office 3 Too much burden on one employee
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4 5 6 7

Strict Rules and Regulation Focus on only Premium Customers Less number of PSU clients Less number of advertisements
A lot ofscope available as it is in the developing phase Lack of awareness and lots of wealth with the people

OPPORTUNITIES
1 2

THREATS 1 Large number of existing competitors 2 Large number of prospective competitors

Chapter III

36

3.1) Performance of the Mutual Fund Industry

Four Mutual Fund companies Kotak Mutual Funds, ICICI Mutual Funds, HDFC Mutual Funds and 1 foreign investor DSP Black Rock Mutual Funds have been taken and their trend analysis of last 3 years will be done that is their value of funds before Subprime crisis and after Subprime crisis. All these fund houses have various schemes in Debt, Equity, Gilt and others but the growth of the company is determined by its Equity funds so we will be taking 3
37

Equity funds of each fund house and will be doing comparative study of them.

3.2) Kotak Mutual Fund

No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund 67 183 24 128 8 3 0 7

No. of Equity Schemes 24 and we will be taking 3 equity schemes which are:1) Kotak 30 2) Kotak Tax Saver 3) Kotak Opportunity

3.2.1)

Kotak 30:-

38

Type of Scheme Nature Option Inception Date Face Value (Rs/Unit) Fund Size in Rs. Cr.
Kotak 30 - Dividend

Open Ended Equity Growth Dec 22, 1998 10 638.94 as on Mar 31, 2009
Mar 30, 2009 10.0000%

The above graph depicts the change in the level of investment by the Kotak 30 fund in a period from 28th Feb to 31st March. Kotak 30 is the most selling Kotak fund. Its returns over the last three years have been far better than rest of its funds.

39

Sche me Code

Scheme Name

Date

NAV (Rs.)

Performance % as on Mar 31, 2009 91 Days -2.58 ___ 182 Days -14.07 ___ 1 Year -30.16 ___

KM003

Kotak 30 - Growth

Mar 31, 2009 Mar 31, 2006

57.69 59.46

KM003 Kotak 30 - Growth

Kotak Tax Saver:-

Type of Scheme Nature Option Inception Date Face Value (Rs/Unit) Fund Size in Rs. Cr.
Dividend history of Kotak Tax Saver

Open Ended Equity Growth Oct 25, 2005 10 299.33 as on Mar 31, 2009
Feb 8, 2008 35.0000 %

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The above graph depicts the change in the level of investment by Kotak Tax Saver in the period of 28th Feb to31st March. From the above graph we can see that there was 12.9% investment in Finance sector in Feb while it was reduced to only 3.75% in just one month so this shows that the Kotak is not sure of its investment in Finance sector and that is the reason why Kotak Tax Saver is not selling much in the market.

41

3.2.3)

Kotak Opportunity:-

Type of Scheme Nature Option Inception Date Face Value (Rs/Unit) Fund Size in Rs. Cr.
Dividend of Kotak Opportunities Fund

Open Ended Equity Growth Sep 9, 2004 10 603.23 as on Mar 31, 2009
Mar 14, 2008 20.0000 %

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The above graph depicts the change in the level of investment by Kotak Opportunities in the period of 28th Feb to 31st March. Kotak Opportunities investment in baking sector in the month of March has increased from 13.95% to 14.63% this is the due to the fact that Banking sector is doing good in this period.

Schem e Code

Scheme Name

Date

NAV (Rs.)

Performance % as on Mar 31, 2009 91 Days 182 Days 1 Year -36.03

Sector Name
KM076 Kotak Opportunities A Banks Fund

31st March 09 28th Feb 09 10.43 10.38 8.94 5.08 7.43 6.61 6.22 5.52 3.97

Pharmaceuticals

Mar 31,14.63 26.56 21.62 13.11 13.95 2009

KM076

C Auto & Auto ancilliaries Kotak Opportunities Mar 31,9.8025.89 Fund & Gas, Petroleum & 2006 9.36 D Oil Refinery E F G H I J Computers - Software & Education Food & Dairy Products Electricals & Electrical Equipments Entertainment Consumer Durables Finance 7.03 7.38 6.78 6.24 3.97 3.91

10.37 ---------

-----

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3.3) HDFC Mutual Funds

No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund 77 308 29 255 14 6 0 4

No. of Equity Schemes 29 and we will be taking 3 equity schemes which are:1) HDFC Equity Fund
2) HDFC Tax Saver Fund

3) HDFC Growth Fund

3.3.1)

HDFC Equity Fund:-

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Type of Scheme Nature Option Inception Date Face Value (Rs/Unit) Fund Size in Rs. Cr.
Dividend of HDFC Equity Fund

Open Ended Equity Growth Dec 24, 1994 10 2331.76 as on Feb 28, 2009
Mar 19, 2009 30.0000 %

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Sector Name A B C D E F G H I J Banks Pharmaceuticals Auto & Auto ancilliaries Oil & Gas, Petroleum & Refinery Computers - Software & Education Food & Dairy Products Electricals & Electrical Equipments Entertainment Consumer Durables Finance

31st March 09 28th Feb 09 15.43 10.43 9.80 8.63 8.02 7.38 6.78 6.24 3.97 3.91 20.42 10.38 10.37 8.72 8.07 7.43 6.61 6.22 5.52 3.97

The above graph depicts the change in the level of investment by HDFC Equity Fund in the period of 28th Feb to 31st March. There is large decrease in the percentage of investment i.e. 4.99% in the banking sector within a period of one month this has resulted in more volatile nature of this fund.

Sche me Code

Scheme Name

Date

NAV (Rs.)

Performance % as on Mar 31, 2009 91 182 1 Year 46

Days ZI006 HDFC Equity Fund Growth HDFC Equity Fund Growth Mar 31, 2009 Mar 31, 2006 114.8 6 127.1 5 -2.51

Days -15.10 -29.36

ZI006

___

___

___

3.3.2)

HDFC Tax Saver Fund:-

Type of Scheme Nature Option Inception Date Face Value (Rs/Unit) Fund Size in Rs. Cr.
Dividend of HDFC Taxsaver

Open Ended Equity Growth Mar 31, 1996 10 1022.22 as on Mar 31, 2009 5.0000% as on Mar 31, 2009

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The above graph depicts the change in the level of investment by HDFC Tax Saver Fund in the period of 28 th Feb to 31st March. There is investment in Personal Care, Entertainment & food & dairy products which is not evident in other Funds. This fund is also not doing well like other Tax Saver Funds
Performance % as on Mar 31, 2009 91 Days 4.68 182 Days -12.38 1 Year

Schem e Code

Scheme Name

Date

NAV (Rs.)

ZI005

HDFC Taxsaver Growth HDFC Taxsaver Growth

Mar 31, 2009 Mar 31, 2006

103.26

-31.00

ZI005

131.22

___

___

___

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3.3.3)

HDFC Growth Fund:Open Ended Equity Growth Aug 10, 2000 10 744.45 as on Feb 28, 2009
Feb 27, 2009 22.5000 %

Type of Scheme Nature Option Inception Date Face Value (Rs/Unit) Fund Size in Rs. Cr.
Dividend of HDFC Growth Fund

Sector Name Sector Name A Oil & Gas, Petroleum & A Pharmaceuticals Refinery B B Banks Banks

31st March 09 28th Feb 09 31st March 09 28th Feb 09 15.00 12.88 12.96 13.12 9.65 12.51 10.71 13.68 10.43 8.75 6.32 Performance % as on 4.38 Mar 31, 2009 5.03 3.75
91 3.27 182 3.96 Days Days 1 Year

Scheme Code

C C Oil & Gas, Petroleum & Pharmaceuticals 9.48 9.29 Refinery DScheme Name Computers - Software & Date 5.82 NAV D Telecom Education 3.86 E EDiversified Entertainment F FFood & Dairy Products Tobacco & Pan Masala 4.97 3.85 3.74 3.60

(Rs.)

G G Computers - Software & Auto & Auto ancilliaries 3.59 3.57 1.19 3.25 49 Education The DSP BlackRockgraph line Equity DS133 abovePower Generation, depicts the 8.14 Mar 31, 3.42 change in -6.63 level of 7.08 -26.39 H 1.61 the investment by ICICI Prudential FMCG Fund in the period Transmission & ancilliaries 3.28 2.84 Fund H Auto & AutoEquip 2009

of 28th Feb to 31st & Electrical There is large 5.61 change in the I ITelecom Electricals March. 2.68 3.28 1.31 DS133 DSP BlackRock Equity June 30, 10.41 ___ ___ ___ investment in Tobacco 40% & Personal Care 33.86%. Equipments J Steel 1.62 Fundpoor economic conditions this fund has not 2007 2.67 Due Kotak Funds Dairy Products in BCG matrix 2.91 4.9) to J Food & Classified 3.22