Indiabulls Securities Ltd.

An Internship Report

Preetham Joyappa SSN:888-94-0921

In Partial Fulfillment of the Masters Program in Business Administration, Ohio University, Athens, USA.

OHIO UNIVERSITY CHRIST COLLEGE ACADEMY FOR MANAGEMENT EDUCATION Christ College Campus, Hosur Road, Bangalore 29

April - 2007 ACKNOWLEDGMENT

This project report reflects the help and advice of many people. I express my profound thanks to Mr.K.M.Bopanna (Regional Manager) Indiabulls Securities Ltd. for giving me an opportunity to do this project in the company.

I am grateful to Mr.Tamal Som, (Relationship Manager), Mr. Gururaj, (Relationship Manager) and all other employees of Indiabulls Securities for guiding me throughout the project. I also like to thank my Professors Mr. Amalendu Jyotishi and Mr. Girish for their support and guidance.

Once again I like to convey my acknowledgment to all people directly and indirectly associated with this project work. I thank one and all.

DATE: 3/04/07 PLACE: Bangalore

Preetham Joyappa

EXECUTIVE SUMMARY
India is a large and growing economy with rapidly expanding financial services sector. The sector has witnessed a transformation over the last decade as a result of the economic liberalization which started in 1991.The Indian capital markets have undergone a substantial change over the last decade. India is now placed among the mature markets of the world. With over 20 million shareholders, India has the third largest investor base in the world after USA and Japan. 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. Our summer internship was at Indiabulls Securities Ltd, Jayanagar branch, Bangalore for a period of five weeks. We had a chance to take part in the day to day functioning of the organization where in we had to make telephonic calls to our to potential clients and convince them to by our product. We also had to meet them personally when required. We were involved in online trading as well. We were given a group project titled An Overview of the Indian Stock Market, where in we had to analyze the Indian Stock market and its characteristics. We were also asked to analyze the Retail Security Market and the major players in this field. We had to do a competitive analysis for Indiabulls Securities Ltd to know where it currently stands in the Indian Retail

Securities Market. We did a thorough analysis on Indiabulls competitors to know its competitive advantage. We have done a SWOT analysis for Indiabulls and have come up with few suggestion and recommendations for the company.

Table of Contents
Particulars No. Page

Introduction to Indiabulls........................................5 Organizational Structure.........................................8 Products and Services.............................................11 Financial Analysis...................................................13 Product Description................................................19 Competitors of Indiabulls.........................................28 Competitive Analysis for Indiabulls..........................35 SWOT analysis of Indiabulls.....................................52 Suggestions and Recommendations ........................57 Conclusion..............................................................58 Works Citied...........................................................59

Introduction to Indiabulls
Indiabulls is Indias leading Financial and Real Estate Company with a wide presence throughout India. They ensure convenience and reliability in all their products and services. Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than 4,50,000 which covers from a wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. The company employs around 4000 Relationship managers who help the clients to satisfy their customized financial goals. Indiabulls entered the Real Estate business in the year 2005 with its group of companies. Large scale projects worth several hundred million dollars are evaluated by them. Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 2500 million (29th December 2006). Consolidated net worth of the group is around USD 700 million. 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. Indiabulls became the first company in India to bring Foreign Direct Investment in Indian Real Estate through a JV with Farallon Capital Management LLC, a respected US based investment firm. It has good

experience in the Indian Real Estate and has won many competitive bids for landmark properties in Mumbai and Delhi. Indiabulls announced de-merger of its real estate division to a separate entity in April 2006.

Growth of Indiabulls Year 2000-01:

One of Indias first trading platforms was set up by Indiabulls Financial Services Ltd. with the development of an in-house team.

Year 2001-03:
The service offered by Indiabulls was increased to include Equity, F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research.

Year 2003-04:
In this particular year Indiabulls ventured into Distribution and Commodities Trading business.

Year 2004-05:
This was one of the most important years in the history of Indiabulls. In this year: Indiabulls came out with its initial public offer (IPO) in September 2004. Indiabulls started its Consumer Finance business. Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in Indian Real Estate.

Indiabulls won bids for landmark properties in Mumbai.

Year 2005-06:
In this year the company acquired over 115 acres of land in Sonepat for residential home site development. The world renowned investment banks like Merrill Lynch and Goldman Sachs increased their shareholding in Indiabulls. It also became a market leader in securities brokerage industry, with around 31% share in Online Trading. The worlds largest hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. In the same year, the Steel Tycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd.

Year 2006-07:
In this year, Indiabulls Financial Services Ltd. was included in the prestigious Morgan Stanley Capital International Index (MSCI). Indiabulls Financial Services Ltd. was benefited with the Farallon Capital agreeing to invest Rs. 6,440 million in it. The company also received an in principle approval from Government of India for development of multi product SEZ in the state of Maharashtra. Indiabulls Financial Services Ltd acquired 100% of the equity share capital of Noble Realtors Pvt Ltd. Noble Realtors is a Company engaged in the business of construction and development of real estate projects. Indiabulls Real Estate Business was demerged to become a separate entity called Indiabulls Real Estate Ltd. The Board of Indiabulls Financial Services Ltd. Resolved to Amalgamate Indiabulls Credit Services Ltd and demerge Indiabulls Securities Limited.

Indiabulls Financial Services Ltd. The Board of Directors

Sameer Gehlaut Gagan Banga Rajiv Rattan Shamsher Singh Aishwarya Katoch Karan Singh Prem Prakash Mirdha Saurabh K Mittal Amit Jain

CH and CFO Exec. Director CEO Director Director Director Director Director Co. Secretary

Organization Structure- Board of Directors:

Senior Vice President

Regional Manager

Branch Manager Senior Sales Manager

Support System

Sales Function

Back Office Executive

Local Compliance Officer

RM/SRM

ARM

Dealer

Organization Structure:

Director-Online

Director-Offline

Administration

Operations & Service

Technolog y

Finance

Corporate Affairs

Human Resources

Corporate Communi cation

Legal

Customer Service

Recruitment

Marketing

Training

Sr. Vice President

Regional Manager

Branch Manager

Relationship Manager 10

Indiabulls Financial Services Ltd.

Indiabulls Financial Services Ltd. was incorporated in the year 2005.The Auditors of Indiabulls Financial Services Ltd. are Deloitte, Haskins & Sells. The main activity of this company is in relation to securities and stock brokerage. It was also responsible for setting up one of Indias first trading platforms. The subsidiaries of Indiabulls Financial Services Ltd. include: Indiabulls Capital Services Ltd. Indiabulls Commodities Pvt. Ltd. Indiabulls Credit Services Ltd. Indiabulls Finance Co. Pvt. Ltd Indiabulls Housing Finance Ltd. Indiabulls Insurance Advisors Pvt. Ltd. Indiabulls Resources Ltd. Indiabulls Securities Ltd.

The Bankers of Indiabulls Financial Services Ltd. are as follows: ABN-Amro Bank Andra Bank Bank of Maharashtra Bank of Rajasthan Ltd. Canara Bank Centurion Bank of Punjab Ltd. Citibank Punjab National Bank Dena Bank LKB Ltd State Bank Of India UTI Bank Ltd. HDFC Bank Ltd HSBC Ltd. Corporation Bank ICICI Bank Ltd. IDBI Ltd Industrial Bank Ltd. ING Vysya Bank Ltd Standard Chartered Bank Karnataka Bank Syndicate Bank Union Bank Of India Yes Bank Ltd.

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Products and Services of Indiabulls

Indiabulls Real Estate:
Indiabulls through its group companies entered Indian Real Estate business in the year 2005. Looking at opportunity for growth and profit in the Real Estate business, Indiabulls entered the Indian Real Estate market and become the first company to bring FDI in Indian Real Estate through a JV with Farallon Capital Management LLC, a respected US based investment firm. In the year 2006 the Government of India provided fresh momentum to the construction and development sector by allowing 100% foreign direct investment (FDI) under the automatic route in order to encourage investment in the vital infrastructure sector. This has contributed largely to the real estate boom in India. Farallon Capital, which is Indiabulls foreign partner made the first real estate related FDI investment in Indiabulls to buy Jupiter Mills immediately after the new FDI guidelines were introduced by the Government of India for real estate development in the year 2005. Many large projects are currently being evaluated by Indiabulls which are worth several hundred million dollars. The Indiabulls Real Estate business is able to compete for large- scale projects and win most of them as they have good access to large pools of capital. Some of the Projects undertaken by Indiabulls Real Estate Pvt. Ltd : Jupiter and Elphistone Mills Mumbai Sonepat Housing Development Sonepat Delhi Residential Development- Delhi

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Commercial Vehicle Loans:

In April 2006 Indiabulls started Commercial Vehicle Finance under the flagship of Indiabulls Credit Services Ltd. in order to provide refinance to its commercial vehicle clients. Their fundamentals, competent management and expertise in financing the transporters is pretty sound. The companys unique market position enables it to excel in client contentment, quick service and growthled profitability. The commercial vehicle finance provided by them helps small and medium operators to purchase vehicle through minimum hassle and documentation.

Mortgage Loans:
Indiabulls Housing Finance Ltd. which is a flagship of Indiabulls has started lending of Mortgage Loans to prospective customers. This company enables the home-seekers to access finance to buy their homes. They provide different types of loans like plot loans, Loan against Residential, Commercial and Rental Property, thereby enabling the borrower to leverage the property owned to fund any genuine needs be it Business Expansion, Child's Education, Child's Marriage or for Holiday Abroad.

Consumer Finance:
Indiabulls is a retail focused organization that fulfills the credit needs of a large percentage of population in India. The key aspect of Indiabulls business model is to provide an extremely unique customer experience. The power of internet along with personalized services allows Indiabulls to expand its geographical coverage and capture a good market share in the highly competitive retail market. They provide consumer loans, home loans, personal loans, securities brokerage, and other financial products and

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services to retail customers from across 640 Indiabulls offices in 127 leading cities of the country.

Financial Analysis of Indiabulls Securities Ltd Profitability ratios: Indiabulls Securities Ltd.
Per cent (Non-Annualised) Margins ratios (%) As % of operating income PBDT PBT PAT PBDT (NNRT) PBT (NNRT) PAT (NNRT) Corporate tax as per cent of PBT Returns ratios (%) As % of total assets PBDT PBT PAT PAT (NNRT) Operating cash flow As % of net worth PBDT PBT PAT PAT (NNRT) Operating cash flow As % of capital employed PBDT

Mar 2004
12 mths

Mar 2005
12 mths

Mar 2006
12 mths

43.05 41.45 25.92 43.01 41.41 25.88 35.83

44.75 42.87 27.25 44.52 42.63 27.02 33.69

58.76 56.7 37.49 58.72 56.66 37.45 32.47

18.95 18.15 11.54 11.44 77.78 53.48 51.23 32.57 32.29 219.53 47.39

31.35 30.25 20 19.98 65.19 128.77 124.25 82.16 82.07 267.75 58.11

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PBT PAT PAT (NNRT) Operating cash flow Appropriation of profits (as % of PAT) Dividends Equity dividends Preference dividends Retained profits Dividends / net worth Equity dividends / equity capital Equity dividends / equity cap. & sh. prem.

45.39 28.86 28.61 194.53

56.06 37.07 37.03 120.82

3.89 0.44 3.44 96.11

19.66 2.27 17.39 80.34 6.4 3.98 3.98

0.52 0.07 0.45 99.48 0.43 0.45 0.45

Liquidity ratios: Indiabulls Securities Ltd.

Times (Non-Annualised) Short term liquidity Cash / current liabilities & provisions Quick ratio Medium to long term liquidity Current ratio Solvency ratio Debt equity ratio Interest incidence (%) Interest cover PBIT / interest PBIT (NNRT) / interest Operating cash flow / interest (Rs. Crore) Current assets

Mar 2004
12 mths

Mar 2005
12 mths

Mar 2006
12 mths

0.67 1.6

0.86 0.86

1.7 1.89

1.776 1.567 1.237 11.42

1.141 1.561 0.848 19.13

2.137 1.269 2.056 11.67

3.63 3.63 -2.99 231.47

4.01 4 11.97 261.19

5.2 5.2 8.91 914.49

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Current liabilities Working capital Net worth Reserves & surplus

130.34 101.13 83.34 20.24

228.86 32.33 108.43 45.33

427.87 486.62 181.77 163.94

Asset utilization ratios Indiabulls Securities Ltd.

Mar 2004 12 mths Mar 2005 12 mths Mar 2006 12 mths

Times (Non-Annualised) Efficiency ratios Operating cash flow / total assets 0 Operating cash flow / gross fixed 0 assets Operating cash flow / capital 0 employed Operating income / total assets Operating income / GFA / leased assets Operating income / capital employed PBDT (NNRT) / total assets PBDT (NNRT) / gross fixed assets PBDT (NNRT) / capital employed PBT / total assets PBT / gross fixed assets PBT / capital employed PAT / total assets PAT / gross fixed assets PAT / capital employed

0.78 17.46 1.95 0.42 9.51 1.06 0.19 4.23 0.47 0.18 4.05 0.45 0.11 2.57 0.29

0.65 14.15 1.21 0.53 11.58 0.99 0.31 6.8 0.58 0.3 6.56 0.56 0.2 4.34 0.37

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Interpretation:
Current Ratio: 2.137
The current ratio being 2.137 implies that for every one rupee of current liabilities, current assets of 2.137 are available to meet them.

Quick ratio: 1.89

The quick ratio is a measure of the firms ability to service the short-term liabilities. A large part of the firms current assets are tied up in slow paying debts.

Debt equity Ratio: 2.056

Debt equity ratio is the related contribution of creditors and owners of the business in its financing. This ratio thus signifies that a portion of 2.056 of equity and debt of the company is being used to finance its assets. <http://www.indiabulls.com>

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Income for three years through different segments of Indiabulls Securities

Segmentwise Sales of Indiabulls Securities for March 2004( in Crore)

6.38, 9% 15.36, 22%

Segmentwise sales of Indiabulls Securities For March 2006(in Crore)

21.16, 7%

0.26, 0% 3% 9.08,

0, 0%

23.06, 7%

47.2, 69%

Brokerage Income Income From Depository Service Income From other Financial Activ ity Interest Transaction Charges
261.11, 82%

3.57, 1%

Brokerage Income of Indibulls Securities of 3 Years( in Crore)

300
Brokerage Income Income From other Financial Activity 250 Transaction Charges
Brokerage Income

261.11 Income From Depository Service

Interest

200 150 100 50

99.65 47.2

0 2004
Years Mar-04 Mar-05 Mar-06

2005

2006 18

Project Description
We in Indiabulls were given a group project to work on along with the day to day regular work along with the staff of the company. The title of the project was An Overview of the Indian Stock Market. This project involves analyzing the Indian stock market and providing an analysis on it. We also will try to find out the growth pattern of Indiabulls securities and where it currently stands in the Indian securities market.

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States to Europe was stopped; thus, the 'Share Mania' in India began. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association, which is alternatively known as The Stock Exchange". In 1895, the Stock Exchange acquired a premise in the same

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street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

National Stock Exchange

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualization of stock exchange governance, screen based trading, compression of settlement cycles, dematerialization and electronic transfer of securities, securities lending and borrowing, professionalization of trading members, fine-tuned risk management systems, emergence of clearing corporations to assume counterparty risks, market of debt and derivative instruments and intensive use of information technology.

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Trading at NSE can be classified under two broad categories: Wholesale debt market Capital market

Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial instruments such as government securities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. There are two kinds of players in NSE: Trading members Participants

Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities.

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Delays in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.

Unless stock markets provide professionalized service, small investors and foreign investors will not be interested in capital market operations. And capital market being one of the major sources of long-term finance for industrial projects, India cannot afford to damage the capital market path. In this regard NSE gains vital importance in the Indian capital market system. <http://www.nseindia.com>

Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956. The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE (Corporatisation and Demutualization) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualization, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors. The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from the participation of market intermediaries.

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<http://www.bseindia.com>

SENSEX
For the premier Stock Exchange that pioneered the stock broking activity in India, 128 years of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons became members of what today is called "The Stock Exchange, Mumbai by paying a princely amount of Re 1. Since then, the country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Freefloat methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time. Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.

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The growth of equity markets in India has been phenomenal in the decade gone by. Right from early nineties the stock market witnessed heightened activity in terms of various bull and bear runs. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX. The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100 stocks listed at five major stock exchanges in India at Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was renamed as BSE100 Index from October 14, 1996 and since then it is calculated taking into consideration only the prices of stocks listed at BSE. The Exchange launched dollar-linked version of BSE-100 index i.e. Dollex-100 on May 22, 2006. With a view to provide a better representation of the increased number of companies listed, increased market capitalization and the new industry groups, the Exchange constructed and launched on 27th May, 1994, two new index series viz., the 'BSE-200' and the 'DOLLEX-200' indices. Since then, BSE has come a long way in attuning itself to the varied needs of investors and market participants. In order to fulfill the need of the market participants for still broader, segment-specific and sector-specific indices, the Exchange has continuously been increasing the range of its indices. The launch of BSE-200 Index in 1994 was followed by the launch of BSE-500 Index and 5 sectoral indices in 1999. In 2001, BSE launched the BSE-PSU Index, DOLLEX-30 and the country's first free-float based index - the BSE TECk Index. The Exchange shifted all its indices to a free-float methodology (except BSE PSU index) in a phased manner. The Exchange also disseminates the Price-Earnings Ratio, the Price to Book Value Ratio and the Dividend Yield Percentage on day-to-day basis of all its major indices. The values of all BSE indices are updated every 15 seconds during the market hours and displayed through the BOLT system, BSE website and news wire agencies.

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All BSE-Indices are reviewed periodically by the "Index Committee" of the Exchange. The Committee frames the broad policy guidelines for the development and maintenance of all BSE indices. Department of BSE Indices of the Exchange carries out the day to day maintenance of all indices and conducts research on development of new indices.

Security & Exchange Board of India (SEBI)

Introduction
SEBI was established in 1988 and became a fully autonomous body in the year 1992 with defined responsibilities to cover both development and regulation of Stock Market.

Functions of SEBI
1. Regulation of Stock exchanges and Subsidiaries: One of the key functions of the Board is to supervise and monitor the activities of the exchanges, clearing houses and the settlement system, strengthen market infrastructure and ensure that appropriate risk management systems are in place. Main functions include Inspection of Stock Exchanges: Inspection of Subsidiaries of Stock Exchanges Restructuring of Management of Subsidiaries Takes Strict actions against Illegal Trading in Securities

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2. Registration and Regulation of the working of Intermediaries: In order to interpose between issuers and investors, regulators recognize various classes of intermediaries in the capital market. SEBI, over the period, recognized many types of capital market intermediaries in India and operations during the year is reviewed in the following sections.

Primary

Market:

Intermediaries

such

as

merchant

bankers,

underwriters, debenture trustees, bankers to an issue, registrars to an issue and share transfer agents and portfolio manager are the intermediaries that function in the primary markets.

Secondary Market: Brokers & sub-brokers will function in the secondary market. Sub-brokers are intermediaries between the broker and the investor.

Registration of FIIs Registration of Custodian of Securities

3. Registration and Regulation of Collective Investment schemes including mutual Funds. Registration of Collective Investment Schemes (CIS). Mutual Funds Registered with SEBI. Venture Capital Funds: includes domestic & foreign venture capital funds. 4. Promotion and Regulation of Self Regulatory organizations 5. Fraudulent and Unfair Trade practices: investigations in 122 cases in 2002-03 bringing the total cases taken up for investigation till the end of this financial year to 654 cases. Of these 122 cases investigation into 102 cases have been completed during 2002-2003. 6. Investor Education and the Training of Intermediaries SEBI ensures that no

fraudulent or unfair practices occur in the stock market. SEBI took up

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CASH MARKET
The Spot Market or Cash Market is a commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective. Spot markets can operate wherever the infrastructure exists to conduct the transaction. The Spot market for most securities exists primarily on the internet. The trading in this cash market can be further divided into Intraday and Delivery. Delivery refers to buying stocks today with a plan of selling it in future. In India there is a concept of T+2 settlements. Which means a stock bought on trade day is credited to your Demat account (or delivered) into your Demat account after 2 days. Intraday refers to buying or selling stocks today with an obligation to sell or buy the stock on the same day. It means completing the trading cycle in the same day. Here the stocks do not come to the Demat account.

DERIVATIVES
By far the most significant event in finance during the past decade has been the extraordinary development and expansion of financial derivatives. These instruments enhance the ability to differentiate risk and allocate it to those investors most able and willing to take it

Definition:
Derivatives are instruments whose value is derived, in whole or in part, from the value of one or more underlying assets.

Futures and Forwards

As the name suggests, futures are derivative contracts that give the holder the opportunity to buy or sell the underlying at a pre-specified price some time in the future.

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They come in standardized form with fixed expiry time, contract size and price. Forwards are similar contracts but customizable in terms of contract size, expiry date and price, as per the needs of the user.

Options
Option contracts give the holder the option to buy or sell the underlying at a pre-specified price some time in the future.

An option to buy the underlying is known as a Call Option. An option to sell the underlying at a specified price in the future is known as Put Option.

In the case of an option contract, the buyer of the contract is not obligated to exercise the option contract. Options can be traded on the stock exchange or on the OTC market.

THE COMPETITORS
INDIA INFOLINE LTD
Vision: Our vision is to be the most respected company in the financial services space

INTRODUCTION:
India Infoline Ltd is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). The India Infoline group, comprising the holding company, India Infoline Ltd and its subsidiaries, straddles the entire financial services space with offerings ranging from Equity research, Equities and derivatives

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trading, Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits and other small savings instruments to loan products and Investment banking. India Infoline also owns and manages the websites, www.indiainfoline.com and www.5paisa.com . India Infoline Ltd, being a listed entity, is regulated by SEBI (Securities and Exchange Board of India). It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web' and 'a must read for investors in Asia'. India Infoline's research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where it is amongst the most read Indian brokers.

India Infoline Securities Pvt Ltd

India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is engaged in the businesses of Equities broking and Portfolio Management Services. It 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. As 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. India Infoline.com is making a great move towards giving the investor in Indian equities market a choice. A choice of technologically advanced trading that is with the help of 5paisa.com. 5 paisa also represents the availability of world class service to investors at the lowest possible rate - 5 paisa for every trade of Rs100, i.e., a brokerage rate of 0.05%.

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SHAREKHAN
Sharekhan was created when SSKI Investor Services Pvt. Ltd., a company in the securities and equities segment decided to harness the power of the Internet and offer services to its customers through an online stock trading portal. Sharekhan, one of India's leading brokerage houses, is the retail arm of SSKI. With over 510 share shops in 170 cities, and India's premier online trading firm. Sharekhan is an equities focused organization tracing its lineage to SSKI, a veteran equities solutions company with over five decades of experience in Indian stock markets. Sharekhan brings and provides a user-friendly online trading facility, coupled with a wealth of content that will help you stalk the right shares. They also have an extensive all-India ground network of franchisees across the country. The company offers its services through a combination of online and offline channels. The online model comprises a portal, chat facilities, and 'speed trade' terminals. And the offline model uses a combination of an IVR infrastructure and a team of customer agents to receive orders over the telephone. The company claims to have around 150,000 current registered users nationwide. The 'speed trade' channel offers the benefit of a terminal at the user end, which is connected to the company's systems through a TCP/IP link. Unlike a Web trade request, which travels with the help of HTTP or HTTPS a speed trade transaction is a direct transfer of information with the trading system, is live, and on real-time. Sharekhan Depository Services offers dematerialization services to individual and corporate investors. They have a team of professionals and the latest technological expertise dedicated exclusively to the demat department, apart from a national network of franchisee, making the services quick, convenient and efficient.

30

<http://www.sharekhan.com>

MOTILAL OSWAL
Vision:To be a well respected and preferred global financial services organization enabling wealth creation for all our customers

Introduction:
Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude, ethical and transparent business practices, respect for professionalism, research-based value investing and implementation of cutting-edge technology have enabled them to blossom into an almost two thousandmember team. Motilal Oswal Securities Limited (MOSt) has established itself as the Best Local Brokerage House in India (Asia Money Brokers Poll 2005). Their Institutional Equities Division combines the efforts of the Research and Sales & Trading departments to best serve clients' needs. It believes that it is their unflinching commitment to providing superior client service that makes them stand out. They have a dedicated research team, which is engaged in analyzing the Indian economy and corporate sectors to identify equity investment ideas. They staunchly practice the value-investing philosophy and advise investors to take a long-term view of equity investments. Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy has established them as a reliable research unit amongst leading Indian as well as international investors. Most is known for its equity research ideas. Asia Money Broker's Polls have consistently rated their research as one of the best in the industry. Their sales & trading team, comprising top equity professionals, translates the research findings into actionable advice for clients, based on their specific

31

needs. Each of the sales personnel has at least five years experience in equity research. Sophisticated computerized tools are used to understand client investment profile and objectives, which ensures proactive and timely service. <http://www.motilaloswal.com>

KARVY
The birth of Karvy was on a modest scale in the year 1982. It began with the vision and enterprise of a small group of practicing Chartered Accountants based in Hyderabad, who founded Karvy. They started with consulting and financial accounting automation, and then carved inroads into the field of Registry and Share Transfers. Karvy has built a reputation as an integrated financial services provider, offering a wide spectrum of services for over 20 years. In 1982, a group of Hyderabad-based practicing Chartered Accountants started Karvy Consultants Limited with a capital of Rs.150, 000 offering auditing and taxation services initially. Later, it forayed into the Registrar and Share Transfer activities and subsequently into financial services.

A decade of commitment, professional integrity and vision helped Karvy achieve a leadership position in its field when it handled the largest number of issues ever handled in the history of the Indian stock market in a year. Thereafter, Karvy made inroads into a host of capital-market services, - corporate and retail - which proved to be a sound business synergy.

Today, Karvy has access to millions of Indian shareholders, besides companies, banks, financial institutions and regulatory agencies. Over the past one and half decades, Karvy has evolved as a veritable link between industry, finance and people. In January 1998, Karvy became the first Depository Participant in Andhra Pradesh. An ISO 9002 company, Karvy's commitment to quality and retail reach has made it an integrated financial services company. 32

Associate Companies of Karvy Karvy Securities Limited

Deals in distribution of various investment products, viz., equities, mutual funds, bonds and debentures, fixed deposits, insurance policies for the investor.

Karvy Investor Services Limited

Deals in Issue management, Investment Banking and Merchant Banking.

Karvy Stock broking Limited

Deals in buying and selling equity shares and debentures on the National Stock Exchange (NSE), the Hyderabad Stock Exchange (HSE) and the OverThe-Counter Exchange of India (OTCEI). <http://www.karvy.com>

KOTAK SECURITIES
Introduction
Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and distribution arm of the Kotak Mahindra Group. Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both The Bombay Stock Exchange and the National Stock Exchange of India Limited. Its operations include stock broking and distribution of various financial products - including private and secondary placement of debt and equity and mutual funds. Currently, Kotak Securities is one of the largest broking houses

33

in India with wide geographical reach. The company has four main areas of business: Institutional Equities, Retail (equities and other financial products), Portfolio Management and Depository Services.

Kotak Securities Ltd is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can use the brokerage services of the company for executing the transactions and the depository services for settling them. Kotak Securities has 195 branches servicing more than 2, 20,000 customers and coverage of 231 Cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments. <http://www.kotaksecurities.com>

ICICI SECURITIES
Introduction
ICICI Securities, A subsidiary of ICICI Bank, was set up in February 1993 to provide investment-banking services to investors in India. As on date ICICI Bank holds 99.9% of the share capital of ICICI Securities. ICICI Securities Limited is Indias leading full service investment bank with a dominant position in all segments of its operations Corporate Finance Fixed Income and Equities.

34

In order to assist/provide corporate clients and institutional investors with investment banking services in the United States of America, ICICI Securities has set up two subsidiaries namely, ICICI Securities Holdings Inc and ICICI Securities Inc, ICICI Securities Inc, has become the registered broker dealer with the National Association of Securities Dealers Inc, empowering it to engage in a variety of securities transactions in the U.S. market. ICICI Securities Inc. is also registered with the Financial Services Authority, UK (FSA) and the Monetary Authority of Singapore (MAS) to carry out Corporate Advisory Services. <http://www.ICICIsecurities.com>

Indian Retail Brokerage Market: Competitive Analysis for Indiabulls

The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar financial i n s t r u m e n t s ) o n a c o m m i s s i o n o r t r a n s a c t i o n f e e

35

basis. It has two main interdependent segments: Primary market and the Secondary market Objective: The main objective is to Analyze retail brokerage industry taking into account the health of the capital markets, Derivative Market and the intensity of competition among the brokerage companies.

Doing Competitive Analysis for Indiabulls.

The major growth drivers for brokerage revenue and trading volume are: Continuous fall in brokerage fees Adoption of technology screen-based trading, electronic matching, and paperless securities Centralized operations, effective risk management, and control on large interconnected operations spanning multiple locations, which is enabled by telecom connectivity and low costs Increasing access to capital and the ability to provide margin finance Parameter Assessment for Doing Competitive analysis A differentiating aspect is a comparative assessment of the top retail brokerages on various value indicators, comprising of Product Pricing Service delivery model Unique selling proposition.

Customers need to analyze the Brokerage Firms Based on these 5 Parameters.

Brokerage & Miscellaneous charges Quote Software Execution Platform Demat Account, and finally

36

Back office Support.

We will explain each in brief.

Brokerage & Miscellaneous charges: This accounts for all the charges
that you incur for your trading/investing. A few examples would be: Demat Account maintenance, Brokerage, Annual account Fee, Telephone based trading charges, trading software usage charges, etc. We should understand what all charges we are bound to incur from our broker.

Quote Software: This is used mainly for technical study and for live
quotes. Many people dont evaluate quote software. We typically use software that have stumbled upon and stick with it just because we have eventually grown comfortable using it. We dont pay attention to the quality of data (how accurate it is). Or how fast and often it refreshes. Does it allow us to back test our strategy? Does it allow customizing technical signals/parameters? Does it allow adding new indicators? Does it allow us to see historic data? For, what period is intra day data available? We might need all this information. We should be clear on what we need and ensure our quote software provides it all.

Execution Platform: Its nothing but a platform that allows us to execute

our trade fast. It should automate trade management and execution, and should automatically give protection against human errors.

Demat Account: Demat account should only be opened with a well known
and established brokerage firm in the market.

Back office Support: People while trading face lots of problem because of
lack of good back office support. Relationship Managers trading without their clients knowledge, funds not being transferred, trades not being executed, slow execution etc are a few examples.

37

Major Competitors of Indiabulls Securities Ltd.

Indiabulls faces significant competition from companies seeking to attract client financial assets, including traditional and online brokerage firms, mutual fund companies and institutional players having wide presence and a strong brand name. We have recognized our competitors on the basis of their client base, market share and trade volume. They are; ICICI Securities Ltd. Kotak Securities Ltd. India Infoline IL&FS Limited SSKI Ltd. Motilal Oswal Securities Karvy Geojit Securities HDFC Securities Indiabulls Securities Trading Products They provide three products for trading. They are Cash account Intraday account Margin trading (Mantra)

Cash account provides the client to buy 4 times of cash balance in his trading account. Intraday product provides the client to buy 8 times of his cash balance in the trading account. Mantra account called as margin trading, is a special account to buy on leverage for a longer duration

38

Brokerage charges of the Competitors of Indiabulls for Intraday.

39

In tra d a y B ro ke rag e C h a rg e s
0.3 0.25 0.2 0.25

Charges

0.15 0.1 0.05 0 Indiabulls K otak India -infoline IC I direc t IC S ec urities K arvy M otilal os w al S harek han 0.1 0.05 0.1 0.05 0.1 0.1

F in a n c ia l B r o k e r a g e F ir m s

Indiabulls K otak S ec uritiesIndia-infoline IC IC I direc t K arvy M otilal os w alS harek han

Brokerage charges of the Competitors of Indiabulls for Delivery

40

Delievery Brokerage Charges

0.8 0.7 0.6 Charges 0.5 0.4 0.3 0.2 0.1 0 Indiabulls Kotak Securities Indiainfoline ICICI Direct Karvy Motilal oswal Sharekhan 0.5 0.5 0.5 0.5 0.5 0.75

0.45

Financial Broke rage Firms

Indiabulls Kotak Securities India-infoline ICICI Direct Karvy Motilal oswal Sharekhan

Going through the Web Site Traderji.com online community for Indian Investors & Traders
We were interpreting the blogs written by customers, their experiences and their review on brokerage firms. In this web site they have conducted opinion poll on broker preferences of customers & reasons for choosing the particular brokerage firm. In this poll opinion, customers have shared their viewpoint about pros & cons of different brokerage firms.

Experiences of Customers

41

Poll Options Which online broker u prefer and why - chose one
5paise ShareKhan Motilal Oswal ICICI Direct HDFC India Bulls Kotak Any other (mention name) View Poll Results
Vote Now

Poll Results of Blogs: Total Number of Voters =457

Which Online Broker You Prefer? Poll Results of Blog(Voters 457)

Any other Mention, (58), 13%

India-Infoline(5paisa), (68), 15%

Kotak, (34), 7%

Sharekhan, (83), 18%

Indiabulls, (75), 16% ICICI direct, (109), 24% HDFC, (14), 3%

Motilal Oswal, (16), 4%

India-Infoline(5paisa) HDFC

Sharekhan Indiabulls

Motilal Oswal Kotak

ICICI direct Any other Mention

Indiabulls Securities 42

Competitive Strength of Indiabulls Securities

Indiabulls securities Ltd have a distinct set of competitive advantages that make it uniquely capable of winning in the marketplace against its competitors Diverse Branch Network Bouquet of financial products and services Advanced technology team that delivers market leading product innovation Strong sales and marketing teams with continuous reinvestment and training Strong cross-selling opportunities. Strong and experienced promoters Leading product innovation and marketing strategies Well capitalized player, with strong banking relationships and credit ratings Ability to combine people and technology in unique ways Strong market presence and increased market share leading to a virtuous cycle of growth and Profitability.

Core pillars of Business strategy

Increase the number of Client Relationships. Offer Diversified Financial Products & Services. Multiple Channels Enhance Customer Experience and Opportunities. Low cost and highly scalable business.

Merits of Indiabulls Securities

Low brokerage charges (Competitive) with 0.10 for Intra-day and Indiabulls securities provide 8 times margin for Intra-day and 4 Indiabulls is suitable for both Day trading & Long term investment 0.50 % for delivery. times margin for delivery.

43

IndiaBulls has software called Power IndiaBulls. It is a Java based

application, with real-time streaming quotes. It is fast in terms of speed and execution Research reports are free of cost to trading members. They Provide 3 in 1 interface, i.e. Demat Account, Trading account

& bank account all are linked in one interface.

De-Merits of Indiabulls Securities

You have to open a bank account with the banks mentioned in Indiabulls site for Credit/ Debit Facility as they dont have their own bank. And In ICICI direct , you have a direct debit/credit facility with the bank given. Most customers feel that it is difficult to understand the ledger reports of Indiabulls securities, so proper customer guidance should be

Value Proposition of Indiabulls Securities

ISL provide a very good Trading tools like Power Indiabulls & Indiabulls market trader. Power Indiabulls: A desktop Trading application offering clients sophisticated trading tools accessible at lightning fast speed. Indiabulls Market Trader: Browser based trading application built for retail investor. Indiabulls companies. Indiabulls Professional Network: Offers real-time prices, detailed data and news, intelligent analytics and electronic trading capabilities. Relationship manager: Indiabulls securities robust technology is integrated with knowledgeable and customer-focused relationship managers who are available 24X7 to assist the clients. Equity Analysis: Premium research on 400 plus

In

Depth

Market

Analysis

and

Research

Their special research cell bring you intensive research reports on how

44

the stock market is faring, when is the right time to invest, when to execute your order and more. Depending on what kind of investor you are, they bring you fundamental or basic research and technical research.

Number of Branches of Competitors compared with Indiabulls securities

Bra nches of Compe titors of Indiabulls as pe r the Ye ar 2005-06

800 700 750

667 500 400 306 250 257

Number of Branches

600 500 400 300 200 100 0 Kotak Indiabulls ICICI Sharekhan IndiaInfoline Motilalos wal

Karvy

Compe titors

Kotak

Indiabulls

ICICI

Sharekhan

India-Infoline

Motilal-oswal

Karvy

45

Number Indiabulls

of

Customers

of

competitors

compared

with

Number of Customers Using Online Trading Terminal as per Year 2005 800,000 Number of Customers using Online Trading Terminal 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
Se cu di ri t ab ie s ul ls Se cu rit ie IC s IC Is ec Sh ur ar i ti ek es ha n Se cu ri t ie s In di aIn fo lin e In

675,000

140,000 75,000 60,000 90,000

Ko t

ak

Broke rage Firms

46

Merits & De-merits of Competitors ICICI securities

ICICI securities: It provides products & services in fixed income, equity & corporate finance. Merits of ICICI Securities ICICI Direct is considered best for long term investment.( Indiabulls is suitable for both Day trading & Long term investment) A direct debit/credit facility with the bank. All facilities available under one umbrella. BTST (Buy today & sell tomorrow) is available; this facility is available only in ICICI Direct. Can apply for IPO online (we cant do this in Indiabulls). Can apply for mutual funds online and can also sell them online. Internet banking demo which gives customers an opportunity to learn.

De-Merits of ICICI Securities

Brokerage charges are high - intraday 0.25% and 0.75% delivery compared to other brokerage firms (is considered as highest in the market).

Day trading is a night mare in ICICI because of Web based terminal, which is very slow. Orders placed at or around 10.00 hrs may be queued of a for hassle for a Cash while. trading So though. intra-day Margin trading could be annoying now & then. It's not much

47

(Indiabulls offers you a trading terminal 'powerIndiabulls', which is java based software. It is fast in terms of speed and execution). ICICI Direct brokerages are not negotiable ( Where as Indiabulls Brokerage Charges are negotiable)

While opening Demat account, three accounts are opened ,the saving bank account, trading account and Demat account and you have to maintain minimum of Rs. 5000 in case if it is not a salaried account. (That Rs. 5000 sleeps without earning any money)

Other banks account cannot be linked with the ICICI trading account. They charge an annual maintenance charges are Rs. 540.

Value Proposition of ICICI Securities

E-Instructions: You can transfer securities 24 hours a day, 7 days a week through Internet & Interactive Voice Response (IVR) at a lower cost. Now with "Speak to transfer", you can also transfer or pledge instructions through our customer care officer.

Mobile Request: Access your Demat account by sending SMS to enquire about Holdings, Transactions, Bill & ISIN details.

The equities research team tracks over 15 key sectors of the Indian economy and publishes in-depth research reports every year.

The equities team at ICICI Securities comprises of research desk, sales desk and the trading desks. <http://www.5paisa.com>

ShareKhan Merits of ShareKhan Securities

Low brokerage charges, intraday 0.1% and 0.5% for delivery. Live streaming quotes

48

Customer support is good No monthly charges Can trade in both BSE and NSE

De-Merits of ShareKhan Securities No BTST (buy today sell tomorrow), in ShareKhan you cant sell a You have to open a bank account with the banks mentioned in Streaming quotes requires JVM (Java Virtual Machine); this may Annual charges are Rs330. Their trading terminals are certainly not for "investors", only for

share today which you bought yesterday. ShareKhan site. be big headache for customers.

active traders. That is because, you have to trade a certain volume every month, otherwise you end up paying a fine

Comparing ShareKhan & ICICI Direct

Sharekhan Live Streaming quotes but streaming quotes require JVM No BTST facility (Buy today sell tomorrow) Annual Maintenance charge Rs 330 You have to open a bank account With the banks mentioned in ShareKhan site Can apply IPO online Not necessary

ICICI Securities No live streaming quotes BTST facility is available Annual Maintenance charge Rs 540 other banks account cannot be linked with ICICI trading account Can apply IPO online while opening a Demat account you Need to maintain a minimum of Rs 5000

49

Can trade in BSE & NSE No Monthly Charges

Can Trade in BSE & NSE No Monthly Charges

India Infoline Merits of India Infoline (5 Paisa.com) Securities

Low brokerage charges, intraday 0.10% and 0.50% for delivery Minimum brokerage per share will be 1 paisa for trading 5 paisa provides 6 times margin for Intraday & 8 times margin All customers will get Digital Contract Notes. Physical contract and it is negotiable. transactions and 5 paisa for delivery based transactions. for Delivery. notes could be provided on request which would entail a nominal charge.

De- Merits of India Infoline (5 Paisa.com) Securities

Software License Fee Rs.799/- per month or 7999/- per annum There is lot of Hidden costs. Annual Service Charges Rs.250. Customers who just want to have a depository relationship will

and is non-refundable.

be required to pay Rs.1000/-, for each Demat account, which will be adjusted against service charges. The information in their web based terminal is too much Trader terminal is good, but the interface is too complicated compressed in one screen.

50

Kotak Securities Merits

They provide streaming quote software free. Low Brokerage charges with 0.05% for Intra-day & 0.45% for delivery. Kotak Securities will offer small-time retail investors with invest able surpluses as low as Rs.5, 000 a chance to invest in capital markets. Transactions are transparent with effective back office support. They provide Simple Ledger reports, which customers feel easy to understand than any other brokerage firms.

Mutual fund & IPO facility is available online.

Flexibility of products - Once you invest with Kotak Securities, you can enjoy access to a wide range of products and services to help you make the most of your investments.

De-Merits
Unethical act: Geojit Securities Ltd has accused kotak securities stock broking firm of hacking into its account to steal critical business information and blocking information access. (Report: dated 2002, Ref: www.domain-b.com). Some investors have bad experience with accounts opening & they complain that it takes a long time for opening accounts. Some customers are not happy with customer care of Kotak securities.

Value Proposition of Kotak Securities

Kotak Securities have a definite policy on brokerage, and they have different slabs for different clients based on their turnover. You can always choose your brokerage based on your style and quantum of trading.

51

High Quality of software (KEAT) K.E.A.T is a special software that Koataksecurities.com provides its customers using which they can view live market rates of scrips on both the NSE and BSE, create a watch list and simultaneously place orders, view order reports, research companies etc. It is a complete online trading terminal. Mobile trading The facility is exclusively designed to give you instant access to the stock market through mobile phone.

Phone

Trading

Call

and

Trad e

Call & Trade is a service offered by Kotak Securities for its customers, which provides customers with a facility to trade over the phone. Kotak Securities provides you a toll free number that you can call from anywhere in India.

Kotak Securities offers Variety of account types for different investors

Kotak Auto Invest Kotak flat Kotak Gateway Kotak privilege circle Kotak High Trader Kotak free way

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SWOT ANALYSIS OF INDIABULLS

STRENGTHS
Integrated technology platform: - Since the launch of their website, www.indiabulls.com their online trading platform, they have invested in building a technology platform. They have also developed software called power Indiabulls. Their trader terminal is an application which allows customers to trade on both the BSE and the NSE, has features like live intra-day tick by tick charts, historical charts, price alerts and other features. The features allow them to seamlessly integrate across delivery channels, online or offline through branches or telephone.

Pan India distribution network: - They have 640 branches across India. These branches help in customer acquisition as well as customer service. Their distribution network is well spread to capture the target audience and cater to the needs of their potential customers.

53

Relationship manager facility: - This is one of the unique services that Indiabulls offers its customers. Every customer is provided with a relationship manager, where in the customers can contact these managers at anytime of the day to get information on the market or get their queries clarified.

Growth rate: - The Company is growing at a very rapid rate, from 25 branches in the year 2003 it has grown to 650 branches in the beginning of 2007. Not only has it seen a fast growth rate in the number of branches but also it has grown in the number of clients and the employee strength. They have a customer base of more than 450,000 and over 4500 relationship managers. Indiabulls has been rated as the Fastest Growing Large Cap Company in India in a report by Business Today magazine in April, 2006.

Power Indiabulls has developed into brands: - Indiabulls.com and power Indiabulls which is their software are well known brands amongst retail investors across India. In all the cities that they have expanded into, they have been able to leverage upon brand awareness and have established a customer base.

Strong sales and marketing teams that deliver market leading product innovation: - their relationship manager channel offers a single point contact to all their retail customers. These managers offer personalized services to their customers and help to build strong and continuing relationships with them. The marketing associates help the company in client acquisition at minimal cost and they also help the company and its subsidiaries in increasing their penetration into smaller towns and cities.

Strong banking relations and credit ratings: - Indiabulls has banking relation with some of the major banking institutions in the country such as HDFC Bank, ICICI Bank, Standard Chartered Bank, etc, for easy mobilization of funds of the customers.

Strong market presence and increased market share: - Their growing client base and market share have increased their market presence and brand recognition has enhanced their profitability. Their

54

brand and profitability allows them to recruit good and efficient employees, compensate them attractively and provides the flexibility for them to invest in the business and technology systems these attributes in turn has a positive effect on the growth of the company.

Diversified business model: -Our Company and our subsidiaries offer various financial services and products ranging from equity, F & O and wholesale debt, insurance and IPO distribution, depository services to cater to the specific needs of the retail and institutional investors thus providing all these services in a single platform. Thus Indiabulls is not dependent on any single of its subsidiary for survival and failure of any one subsidiary will not have an adverse effect on the company as a whole.

WEAKNESSES

Lack of a banking arm: - Indiabulls does not have a banking arm of its own which otherwise would have helped the company to a large extent. Whereas a few of its competitors like HDFC securities, ICICI securities, Kotak securities, etc have their own banking arms which make the transactions easier and simpler.

Loss of relationship managers leads to loss of clients: - Their business is dependent on the team of relationship managers who directly manage client relationships. Any events that harm these relationships including the loss of their relationship managers may lead to the loss of client.

OPPORTUNITIES

Changing demographics with higher disposable income: - India is one of the fastest growing economies in the world. It has a large and

55

rapidly growing middle class of 300 million people with increasing levels of discretionary income available for consumption and investment purposes. The options they have for investments are fixed deposits, post office deposits etc,. This gives them a limited interest rate on their investment; where as the stock market provides a good scope for making good returns. The evolution in Indias demographic setup with a median age of 24 years and higher consumption expenditure is expected to have a virtuous cycle effect by improving the economic growth and per capita income which would result in higher savings and investments.

Rapid penetration of internet and computers: -Technology is vastly used in stock market trading. Now, with the use of the computers and internet the stock market trading has become fast. The traders can place orders through the internet and execute them. This saves the time of the investors, who earlier had to make calls to their brokers in order to trade. These people are willing to use advanced communication tools, such as computers and telephones, and want to take charge of their personal investment decisions. The use of technology is influencing more people to invest in the stock market.

Market size and Characteristics: -India is a large and growing economy with rapidly expanding financial services sector. The sector has witnessed a transformation over the last decade as a result of the economic liberalization which started in 1991. India is the worlds 12th largest economy in dollar terms and the 4th largest in PPP terms. The projected growth rate of real GDP is greater than 9% per annum with higher growth in many sectors such as financial services. Indian financial sector presents a huge retail finance opportunity. As a result of falling interest rates, bank deposits, other traditional investment opportunities are losing their attraction. Thus, Indian investors are getting attracted towards alternate investments such as the equity markets and are looking for newer financial products.

56

THREATS

Economic slowdown: - Terrorist attacks and other acts of violence or war, including those involving India or other countries could adversely affect national economy or world economy as a whole. Such act may also result in a loss of business confidence. Travel restrictions as a result of such incidents may have adverse affect on the ability to operate effectively. This will result in an economic slowdown (example: the 9/11 attack on the World Trade Centre, New York).

Political instability in the country: - The government of India has pursued the policy of economic liberalization, including relaxing restriction on the private sector. With the change in government, there is no assurance that these liberalization polices will continue in the future. Any political instability could delay the economic reforms and could have adverse effect on the market.

Volatile movement in market indices: - The Indian stock market is very volatile in nature and is capable of shedding or gaining several points in a single day. Unless and until the market stabilizes the investors will be very hesitant to invest in the market. Stock market falls will have a cascading effect on the investors and economy of the country.

Competition:

Indiabulls

faces

significant

competition

from

companies seeking to attract clients financial assets, including traditional and online brokerage firms, mutual fund companies, etc, which are having a wide presence and strong brand name. As the company enters new markets their bound to face additional competition from those who have longer operating history have grater retail and brand presence than Indiabulls. If the company is unable to manage its business it might impede their competitive position and their profitability.

57

Substitutes: - Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. The stock market is very unpredictable with fluctuations; this may prompt many people to invest in fixed deposits, posy office deposits, etc in order to avoid risk.

Low product differentiation: - The retail broking services provided by the various companies are homogeneous with very low product differentiation. This does not allow the company to freely fix their prices due to the threat of competition, which in turn reduces their profit.

Suggestions and Recommendations

58

Aggressive Promotions: Indiabulls Securities compared to its competitors concentrates less on advertising and promotions, especially through electronic media. Its competitors like Sharekhan, ICICI and Kotak are advertising aggressively through media. Hence Indiabulls should concentrate more on advertising through print and electronic media. Tapping Rural Market: The Indian rural investors market are relatively untapped, with only small and private firms meeting the current demand. Indiabulls Securities can gain the First Mover Advantage over its competitors, especially in areas were commercial crops are grown and the standard of living is high. These people do not have much option to invest other than banks and post offices. Reduce the initial account opening charges: The charge for opening a trading and demat account in Indiabulls securities is high compared to its competitors. This influences the potential investors to open their account with another company which provides the same at lower prices. Thus it acts as a mental barrier for potential customers, who tend to overlook all other benefits offered by Indiabulls. Hence Indiabulls should consider reducing their account opening charges. Bring in more product differentiation: Product differentiation here means that Indiabulls securities should bring in more customized services and more value proposition for large investors. It can reduce the brokerage charges for large investors which will encourage them to invest more in the company. Invest more on R&D: Indiabulls should concentrate on its research and development since most of its competitors are investing on R&D. This will help the company to read the market better and will also be in a better position to understand the needs of the customers. This can be extremely beneficial for Indiabulls in the long run.

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CONCLUSION
Indiabulls faces significant competition from companies seeking to attract clients financial assets including traditional and online brokerage firms, mutual fund companies and institutional players, having wide presence and a strong brand name. As Indiabulls enter newer markets, they are likely to face additional competition from those who may be better capitalized, have longer operating history, have greater retail and brand presence, and better management than Indiabulls. As new players like Reliance Money enters the market the competition will only get more intense. If they are unable to manage their business it might impede their competitive position and profitability. Hence they should continue to compete vigorously to capture more market share and should add more management personnel to manage their growth in an optimal way. Post economic liberalization in 1991 the Indian financial services industry has experienced significant growth. Exposure to global practices has made the Indian customer more demanding. As a result of falling interest rates, bank deposits, other traditional investment opportunities are losing their attraction. Thus, Indian investors are getting attracted towards alternate investments such as the Retail Security Market and are looking for newer financial products. As the Indian Retail Security Market is still in a nascent stage and as a lot of potential for growth, its a very good opportunity for companies like Indiabulls to increase their market presence. They will have to concentrate more on the Research and Development and come up with strategies which are beneficial for the company. Thus for the purpose of Applied Research Projects in the company, they can do more research on the market and identify the major factors which will drive the market in the future.

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WORKS CITED
Bombay Stock Exchange Bseindia. 20 Mar. 2007 <http://www.bseindia.com>. "Indiabulls Securities Indiabulls.Com. 15 Mar. 2007 <http://www.Indiabulls.com>. "National Stock Exchange nseindia. 25 Mar. 2007 <http://www.nseindia.com>. "Share khan Securities Sharekhan.Com. 25 Mar. 2007 <http://www.sharekhan.com>. India Infoline Securities India-Infoline.Com. 26 Mar.

2007

<http://trade.indiainfoline.com>. " India Infoline Securities 5paisa.Com. 26 Mar. 2007

<http://www.5paisa.com>. " Kotak Securities kotak securities.Com. 26 Mar.

2007

<http://www.kotaksecurities.com>. "ICICI Securities ICICI securities.Com..25 Mar. 2007 <http://www.ICICIsecurities.com>. "Karvy Karvy.Com. 25 Mar. 2007 <http://www.karvy.com>. Online Investors & Traders 2 Apr. 2007 <http://www.traderji.com>. "Motilal Oswal Securities 25 Mar. 2007 <http://www.motilaloswal.com>.

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