SUMMER TRAINING PROJECT REPORT

INDIABULLS SECURITIES LTD.Study of Indiabulls securities ltd. and Equity market

Integrated academy of management and technology Ghaziabad, (U.P)

PGDM (Session: 2007-2009)Submitted To: Mr. U.C. Mathur

Submitted By: Mukesh Kumar Singh Batch: 2007-09 Roll No.: PG07106

ACKNOWLEDGEMENT

This work bears the inputs of many persons whose valuable assistance and insightful suggestion have made this summer project worthy. With sincere thoughts and a deep sense of gratitude firstly I would like to take the opportunity to express my sincere thanks to Mr. SOURABH AGRAWAL, Relationship Manager, Indiabulls securities ltd, okhla, New delhi whose able guidance helped me to give present shape of the project. I would also like to thank Mr. U.C. Mathur my faculty guide for guiding me through the project & all the people in Indiabulls securities Ltd, Okhala who helped me during the project. Last but not least, I would also like to thank my institute, Integrated Academy Of Management & Technology, Ghaziabad for the knowledge gained, that helped me to sharpen my skills.

Mukesh kumar singh

Project Report Details Particulars: 1. Indian Stock market 2. Overview of the Regulatory Framework of the Capital Market in India 3. Overview of Indiabulls

4. Overview of Indiabulls Securities 5. Financial Analysis of Indiabulls 6. Trading with Indiabulls 7. Understanding Capital market 8. Derivatives 9. Portfolio 10. Competitors 11. Competitive Analysis 12. SWOT Analysis 13. Findings & Suggestions 14. Bibliography & Webliography Appendix Questionnaire for walk-in Customers for referential Marketing Questionnaire for market survey for awareness among general public

EXECUTIVE SUMMARY Indian securities markets have undergone many changes during the last decade. Exponential growth in trading volumes is pushing existing trading systems and processes to capacity and increasing settlement risk. With Indian market moving to a T+2 rolling settlement cycles in line with global markets, SEBI is continuing its efforts to increase the efficiency and transparency in Indian markets. Indeed it has been SEBI endeavor to make the Indian markets, one of the most competitive and efficient markets of the world. This Project titled Study of Indiabulls securities ltd. and Equity market is an attempt to enable the reader to understand the position of the Indiabulls as a stock broking firm & also different approaches used to create awareness about the offerings of India bulls & its future prospect, this report also gives you the glance of the security

market & comparative analysis in the broad term of Indiabulls & other firms. Apart from that, SWOT analysis of the services & product offering of Indiabulls was also done to know the strengths and opportunity to the product on which it can leverage and the weakness and threats, which has to be taken care of for the success of Indiabulls and the continuous growth of it in the market. Along with that using the questionnaire approach, the required different approaches to target the different respondent

1. INDIAN STOCK MARKET 1.1 Introduction Indian Stock Markets is 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. 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 street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated. The Indian stock market has been assigned an important place in financing the Indian corporate sector. The principal functions of the stock markets are

enabling mobilizing resources for investment directly from the investors providing liquidity for the investors and monitoring Disciplining company management.

The two major stock exchanges in India are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). 1.2 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, market of debt and derivative instruments and intensive use of information technology. 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. Capital market: A market where debt or equity securities are traded.

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 intermarket operations are streamlined coupled with the countrywide access to the securities. 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.

NSE Nifty S&P CNX Nifty is a well-diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. NSE came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services. CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the USbased Standard & Poor's Financial Information Services. 1.3 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. SENSEX 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 Free-float 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. 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. The Exchange launched dollar-linked version of BSE-100 index i.e. Dollex-100 on May 22, 2006. 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 BSE500 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 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. 2. OVERVIEW OF THE REGULATORY FRAMEWORK OF THE CAPITAL MARKET IN INDIA

India has a financial system that is regulated by independent regulators in the sectors of banking, insurance, capital markets and various service sectors. The Indian Financial system is regulated by two governing agencies under the Ministry of Finance. They are: 1. Reserve Bank of India The RBI was set up in 1935 and is the central bank of India. It regulates the financial and banking system. It formulates monetary policies and prescribes exchange control norms.

2. The Securities Exchange Board of India The Government of India constituted SEBI on April 12, 1988, as a non-statutory body to promote orderly and healthy development of the securities market and to provide investor protection. The jurisdiction of the RBI and SEBI overlap in many fields Department Economic Affairs The capital markets division of the Department of Economic Affairs regulates capital markets and securities transactions. The capital markets division has been entrusted with the responsibility of assisting the Government in framing suitable policies for the orderly growth and development of the securities markets with the SEBI, RBI and other agencies. It is also responsible for the functioning of the Unit Trust of India (UTI) and Securities and Exchange Board of India (SEBI). The principal aspects that are dealt with the capital market division are:

Policy matters relating to the securities market Policy matters relating to the regulation and development and investor protection of the securities market and the debt market. Organizational and operational matters relating to SEBI

The Capital Market is governed by:

Securities Contract (Regulation) Act, 1956 Securities Contract (Regulation) Rules, 1957 SEBI Act, 1992 Companies Act 1956

SEBI (Stock Brokers and Sub Brokers) Rules, 1992 Exchange Bye-Laws Rules & Regulations

Self-regulating Role of the Exchange The exchange functions as a Self Regulatory Organization with the parameters laid down by the SCRA, SEBI Act, SEBI Guidelines and Rules, Bye-laws and Regulations of the Exchange. The Governing Board discharges these functions. The Executive Director has all the powers of the governing board except discharging a member indefinitely or declaring him a defaulter or expelling him. The Executive Director takes decisions in the areas like surveillance, inspection, investigation, etc. in an objective manner as per the parameters laid down by the governing board or the statutory committees like the Disciplinary Action Committee. High Level Co-ordination Committee on Finance and Capital Markets HLCCFM is the forum to deal with inter-regulatory issues arising in the financial and capital markets as India follows a multi-regulatory regime for the financial sector. The Capital Market Division functions as the Secretariat of this committee.

Financial Intelligence Unit FIU-IND was setup by the government of India on the 18th of November 2004 as the central national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions. It is also responsible for coordinating and strengthening efforts of the national and international intelligence, investigation and enforcement agencies in pursuing efforts against money laundering crimes. FIU-IND is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.

3. OVERVIEW OF INDIABULLS 3.1 Introduction Indiabulls is Indias leading Financial and Real Estate Company with a wide presence throughout India. Indiabulls Financial Services Limited was established in the year 2000 by three promoters all of whom are engineers from Indian Institute of Technology, New Delhi, and has attracted over Rs 700 million of investments from venture capital firms, private equity funds and institutional investors. History

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as Orbis Infotech Private Limited at New Delhi. The name of the Company was changed to Indiabulls Financial Services Private Limited on March 16, 2001 due to change in the main objects of our Company from Infotech business to Investment & Financial Services business. It became a Public Limited Company on February 27, 2004 and the name of the Company was changed to Indiabulls Financial Services Limited. 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. 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). 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.

3.2 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: : Indiabulls acquired over 115 acres of land in Sonepat for residential home site development. Merrill Lynch and Goldman Sachs, renowned investment banks in the world increased their shareholding in Indiabulls. Indiabulls becomes a market leader in securities brokerage industry, with around 31% share in Online Trading. Farallon Capital and its affiliates, the worlds largest hedge fund committed Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. Steel Tycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd. 2007.Year 2006-07: Indiabulls entered in a 50/50 joint venture with DLF, Kenneth Builders & Developers (KBD). KBD acquired 35.8 acres of land from Delhi Development Authority through a competitive bidding process for Rs.450 core to develop residential apartments. Indiabulls Financial Services Ltd. is included in the prestigious Morgan Stanley Capital International Index (MSCI). Farallon Capital has agreed to invest Rs. 6,440 million in Indiabulls Financial Services Ltd. Indiabulls

received an in principle approval from Government of India for development of multi product SEZ in the state of Maharashtra. Indiabulls Infrastructure Ltd and DLF won 35.8 acres of residential land in South Delhi in public - private partnership project for a consideration of Rs.450 cores. FIM Ltd. managed by Farallon Capital Management bought 36% equity in Indiabulls Buildcon Ltd. for a consideration of Rs. 150 million. 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 Consume finance Diversified Business Group of Indiabulls Fig 3.1: Diversified Business Groups of Indiabulls 3.3 India Bulls Subsidiaries Indiabulls securities limited: business comprises of Securities & Derivatives broking. Indiabulls Credit services limited: business comprises of personal loans, secured and unsecured loans, and housing and auto loans. Financial products distribution: distribution of mutual funds and insurance products. Indiabulls commodities Pvt ltd: deals with commodity brokerage business Indiabulls Realities limited: is into development of Real estate and mining. Indiabulls housing loans: is into mortgage of properties and housing loan business. 3.4 Organizational Structure of Indiabulls The organizational structure of Indiabulls is Functional, which consist of several departments. Functioning Online: serving clients primarily through an Internet based relationship targeted towards clients who value anytime, anywhere access and can be serviced at low incremental costs. Functioning Offline: serving clients primarily through an office based relationship targeted towards clients who value physical interaction. Online & offline business consist of following departments

Administration Operations & Service quality Technology Finance

Corporate affairs Human resources Marketing Corporate communications Legal

3.5 Products and Services of Indiabulls Indiabulls offer the following products and services in the financial markets:

Stocks Options and Futures Depository Services Commodities Insurance Products Mutual Funds Bonds and Debt Products

ConsumerFinance Indiabulls being a retail focused organization fulfills the credit need of a large percentage of population in India. The key aspect of Indiabulls business model is to provide an extremely unique customer experience. The blend of power of the Internet with personalized services allows Indiabulls to expand its geographical coverage and capture a greater share in the highly competitive retail market. We offer consumer loans, home loans, personal loans, securities brokerage, and other financial products and services to retail customers from across 640 Indiabulls offices in 127 leading cities of the country.

Indiabulls Home Loans

One can avail of the Home Loans purchasing a ready built house/flat, residential plot and even for re-financing existing loans you may have availed from other banks or housing finance companies. The benefits of taking a Home Loan.

The income tax authorities look with favour upon those servicing a housing loan from specified financial institutions. And, it is up to you to be wise enough to take advantage of this. Let's start with Section 24 of the Income Tax Act. Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. Rs 1,50,000 is the maximum amount eligible for deduction in the case of self-occupied property and for Rented out property there is no limit of amount of deduction. That brings us to Section 80C of the Income Tax Act. Get a maximum Rs.1,00,000 deductions from the Income, on repayment of principal during a financial year. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount.

Purpose: For purchase of house/plot from builder / resale. Loan Amount: Rs.5 lac onwards. Maximum Tenor: 20 years for salaried individuals and 16 years for self employed. Loan Against Property

One can use your self occupied residential and commercial property & use the true value of your property.

Wondering where the money would come from for

Higher education of your child Financing your business Medical expenses Daughter's wedding Consolidating obligations

INDIABULLS HOUSING FINANCE LIMITED is there to fulfill your dreams.

Get a loan upto Rs.50 lakhs. Payable in easy monthly installments over a period of 16 years or less. Available against Residential as well as Commercial Properties. Indiabulls Fast Loans

Personal Loan Features Flexible loan tenure of up to 4 years (i.e. 1 month to 48 months). Loans available from a minimum of Rs.10,000 up to a maximum of Rs.100,000. Easy monthly repayment through equated monthly installments (EMI). Easy documentation and quick disbursal.

Documentary Requirements: 1. Residence Proof Residence Proof If Self - Owned house: Ownership Proof - Utility Bill / Sale agreement / Ration card / Passport. If Parental: Utility Bill + Relationship Proof. If Rented Accommodation: Registered Rent Agreement. If Company Allotted: Company Allotment Letter. 2. Identity Proof Passport Voter Identity Card Driving License Photo credit Card Pan Card Employee ID card issued by Government / Reputed Public Ltd and Pvt Ltd Company Banker's 3. Income Proof Salary Slip (2 months) Salary Certificate from Government or Reputed Company. Form 16 Salary Credit to Bank account Verification

4. Bank Statement 3 months bank statement from the date of application

Commercial Vehicle Loans Indiabulls started Commercial Vehicle Finance under the flagship of Indiabulls Credit Services Ltd. in April 2006 to provide refinance to its commercial vehicle clients. We have sound fundamentals, competent management and expertise in financing the transporters. The company's reach gives it a unique market position enabling it to excel in customer satisfaction, quick service and growth-led profitability. The Commercial Vehicle Finance provided by us helps the small and medium operators to acquire vehicles with minimum hassle and documentation. We provide customized financing options to suit your needs. Our strength lies in the quick completion of transactions, long association with transporters and the intimate knowledge of the market and its nuances. Our finance schemes are easy to understand with no hidden costs. You will deal only with our employees, who are of high integrity and extremely customer friendly. You are assured of a quick, transparent and gimmick-free deal from us. 1. Product Offering 2. Proposed Finance 3. Features of Loan Offering 4. Unique Selling Proposition. 4. OVERVIEW OF INDIABULLS SECURITIES LTD 4.1 Introduction Indiabulls Securities Ltd is engaged in the business of Internet based trading and is registered with SEBI as a stockbroker, trading and clearing member of NSE, member of BSE and as a depositary participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). ISL is also a member of the National Securities Clearing Corporation Limited. History Indiabulls Securities Limited (ISL) was incorporated as GPF Securities Private Limited on June 9, 1995. The name of the company was changed to Orbis Securities Private Limited on December 15, 1995 to change the profile of the company and subsequently due to the conversion of

the company into a public limited company; the name was further changed to Orbis Securities Limited on January 5, 2004. The name of the company was again changed to Indiabulls Securities Limited on February 16, 2004 so as to capitalize on the brand image of the term Indiabulls in the company name. ISL is a corporate member of capital market & derivative segment of The National Stock Exchange of India Ltd. 4.2 Business Model & Operations of Indiabulls Securities Ltd The three distinct internal business segments are:

Online business Offline business Other Sales

Online business: serving clients primarily through an Internet based relationship targeted towards clients who value anytime, anywhere access and can be serviced at low incremental costs. The Online sales force sells all products and services and follows the relationship manager model. Offline business: serving clients primarily through an office based relationship targeted towards clients who value physical interaction and are typically larger accounts. The Offline Sales force sells all products and services and follows the relationship manager model. The Institutional business serving clients such as mutual funds and pension funds is considered part of the offline business due to largely similar client servicing and channel needs as required for high net worth clients. Indiabulls Securities Limited has established relationships with some large institutional players in India and is qualified broker for Equities, F&O and Debt markets for 145 such institutional clients.

Other Sales: includes insurance, research services and other offerings.

4.3 Basic Requirement for doing Trading Trading requires Opening a Demat account. Demat refers to a dematerialized account. You need to open a Demat account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. We need to approach the Depository Participants (DP, they are like bank branches), to open Demat account. A depository is a place where the stocks of investors are held in electronic form. The depository has agents who are called depository participants (DPs).

Think of it like a bank. The head office where all the technology rests and details of all accounts held is like the depository. And the DPs are the branches that cater to individuals. There are only two depositories in India

The National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd (CDSL).

4.4 Trading Products of Indiabulls Securities Fig showing 3.1 Trading Products of Indiabulls securities Indiabulls Securities 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.

5. FINANCIAL ANALYSIS OF INDIABULLS SECURITIES

5.1 Income: Indiabulls Securities Ltd income unit has the following components Income from Online business : The contribution of revenue from Online business have grown from Rs. 31.85 million in FY 2002 to Rs. 242.26 million in FY 2004 and from

24.05% of total business in FY 2002 to 34.85% of business in FY 2004. The rapid growth of the online business is driven by growth in total clients, increasing product flexibility and quality, enhanced online-only features such as portfolio analysis and updates, streaming tickers, enhanced product offering of Power Indiabulls.

Brokerage Equities F&O

Income from Offline Business: The offline business unit has one of the widest branch networks in India with a pan India presence with large market share. The revenues have grown from Rs. 96.02 million in FY 2002 to Rs. 447.25 million in FY 2004 and have changed from 72.52% of total business in FY 2001 to 64.34% of business in FY 2004. The rapid growth of the Offline business is driven by growth in total clients, increased geographical presence.o o o o

Brokerage Equities F&O Wholesale Debt Markets

Brokerage Income Brokerage Income comprises revenues earned from Equities, F&O and Wholesale debt markets on all stock exchanges.

The income from brokerage services is driven primarily by the number of active clients. The rapid growth in total clients is driven primarily by increased geographical presence. Equities constitute the largest portion of brokerage business. F&O brokerage is becoming an increasingly important component of its revenues as Futures & Options trading gains more acceptance. Wholesale Debt market is focused on institutional clients.

Income from transaction and service charges and interest income Related income comprises revenues earned from market related activities such as transaction charges, service charges and interest levied on customer transactions. These

charges are dependent on trading volume, number of transactions completed and any ledger debit amount in the client account. Income from other Sales including Insurance, Mutual Fund Sales and Other Products Other income comprises revenues earned from sale of third party products such as Insurance, Mutual Funds and new services such as Research Services. Revenues are a function of volume of mutual funds sold, the type of fund sold (active managed equity, passive fixed income etc.) and the commissions paid on the funds sold.

Segment wise Sales of Indiabulls securities for March 2008(in Crore) 5.2 Financial Ratio Analysis of Indiabulls Securities Ltd Profitability ratios: Indiabulls Securities Ltd. Mar 2006 Mar 2007 Mar 2008 Per cent (Non-Annualized) 12 months 12 months 12 months -

Margins ratios (%)

-

As % of operating income

PBDT 43.05 44.75 58.76 PBT 41.45 42.87 56.7 PAT 25.92

27.25 37.49 PBDT (NNRT) 43.01 44.52 58.72 PBT (NNRT) 41.41 42.63 56.66 PAT (NNRT) 25.88 27.02 37.45 -

Corporate tax as per cent of PBT 35.83 33.69 32.47 -

Returns ratios (%)

-

As % of total assets

PBDT 18.95 31.35 PBT 18.15 30.25 PAT 11.54 20 PAT (NNRT) 11.44 19.98 Operating cash flow 77.78 65.19 -

As % of net worth

PBDT 53.48 128.77 PBT 51.23 124.25 PAT

32.57 82.16 PAT (NNRT) 32.29 82.07 Operating cash flow 219.53 267.75 -

As % of capital employed

PBDT 47.39 58.11 PBT 45.39 56.06 PAT 28.86 37.07 PAT (NNRT) 28.61 37.03 Operating cash flow 194.53

120.82 -

Appropriation of profits (as % of PAT)

Dividends 3.89 19.66 0.52 Equity dividends 0.44 2.27 0.07 Preference dividends 3.44 17.39 0.45 Retained profits 96.11 80.34 99.48 -

Dividends / net worth 6.4 0.43 Equity dividends / equity capital 3.98 0.45

Equity dividends / equity cap. & sh. prem. 3.98 0.45

Liquidity ratios: Indiabulls Securities Ltd. Mar 2005 Mar 2006 Mar 2007 Times (Non-Annualized) 12 months 12 months 12 months -

Short term liquidity

-

Cash / current liabilities & provisions 0.67 0.86 1.7 Quick ratio 1.6 0.86

1.89 -

Medium to long term liquidity

-

Current ratio 1.776 1.141 2.137 Solvency ratio 1.567 1.561 1.269 Debt equity ratio 1.237 0.848 2.056 -

Interest incidence (%) 11.42 19.13 11.67 -

Interest cover

-

PBIT / interest 3.63 4.01 5.2 PBIT (NNRT) / interest 3.63 4 5.2 Operating cash flow / interest -2.99 11.97 8.91 -

(Rs. Crore)

Current assets 231.47 261.19 914.49 Current liabilities 130.34 228.86 427.87 Working capital 101.13

32.33 486.62 Net worth 83.34 108.43 181.77 Reserves & surplus 20.24 45.33 163.94

Asset utilization ratios Indiabulls Securities Ltd. Mar 2006 Mar 2007 Mar 2008 Times (Non-Annualized) 12 months 12 months 12 months -

Efficiency ratios

-

Operating cash flow / total assets 0 0.78 0.65

Operating cash flow / gross fixed assets 0 17.46 14.15 Operating cash flow / capital employed 0 1.95 1.21 -

Operating income / total assets 0.42 0.53 Operating income / GFA / leased assets 9.51 11.58 Operating income / capital employed 1.06 0.99 -

PBDT (NNRT) / total assets 0.19 0.31 PBDT (NNRT) / gross fixed assets 4.23 6.8 PBDT (NNRT) / capital employed

0.47 0.58 -

PBT / total assets 0.18 0.3 PBT / gross fixed assets 4.05 6.56 PBT / capital employed 0.45 0.56 -

PAT / total assets 0.11 0.2 PAT / gross fixed assets 2.57 4.34 PAT / capital employed 0.29 0.37

5.3 Interpretation:

Profitability Ratios: Profitability is the net result of a number of policies and decisions. The ratios examined thus far provide useful clues to the effectiveness of firms operations. Liquidity Ratios: liquidity ratios deal with firms ability to pay off its debts. It includes

Current ratio: The current ratio is calculated by dividing current assets by current liabilities. The current ratio of Indiabulls securities is 1.776, 1.441, & 2.137 for year 2005, 2006 & 2007 respectively. Current ratio = Current assets / Current Liabilities

Quick ratio (acid test ratio): The quick ratio is calculated by deducting inventories from current assets and then dividing the remainder by current liabilities. The quick ratio is a measure of the firms ability to pay-off the shortterm liabilities. A large part of the firms current assets are tied up in slow paying debts. The industry average for Acid test ratio is 2.1, but for Indiabulls securities quick ratio is 1.6, 0.86 & 1.89 for year 2005, 2006 & 2007 respectively, which is less than Industry average. The quick ratio should be high which indicates the companys ability to pay-off short term obligations. Debt equity Ratio: Debt equity ratio is the related contribution of creditors and owners of the businessin its financing.

Functional Area Information :- Marketing Associates 6. TRADING WITH INDIABULLS

This section will introduce us about the process and instruments used to help a customer or a client to trade with Indiabulls securities. This process is almost similar to any other trading firm but there will be some difference in the cost of brokerage commission. Trading: It is a process by which a customer is given facility to buy and sell share this buying and selling can only be done through some broker and this is where Indiabulls help its customer. A customer willing to trade with any brokerage house need to have a demat account, trading account and saving account with a brokerage firm. Any one having following document can open all the above mentioned account and can start trading. Document Required

3 photographs ( signed across) Photo Identification Proof - any of the following - Voter ID/Driving

License/Passport.

Address Proof any of the following - Voter ID/Driving License/ Passport/ Bank statement or pass book sealed and attestation by bank official/ BSNL landline bill. A crossed Cheque favoring India bulls Securities Ltd. of the required amount. The amount for Demat as well as trading will be Rs. 900/-(free Demat +900 Trading Account) the minimum amount being Rs. 900 a cheque can be given for a larger amount.

Copy of PAN Card is mandatory. Registration Kit CDSL Demat Kit Bank and address proof declaration. (Master undertaking) PAN name discrepancy form

These documents may not be consumer friendly but it is to avoid illegal transaction and to prevent black money this ensures that money invested is accounted. Techniques and Instruments for Trading The various techniques that are available in the hands of a client are:1. Delivery 2. Intraday 3. Future 4. Forwards 5. Options 6. swaps From 3 to 6 are called derivatives the detailed explanation for the same is given in the separate section of Derivatives and mutual fund as a hedging tools These are three ways by which a consumer can invest more money than what he is available to his account. 1. Cash account 2. Intraday account 3. Margin trading 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.

Brokerage and Tax Breakup Remarks Delivery Buy Brokerage 0.5 Sell 0.5 0.0612 0.125 Intraday Buy 0.1 0.01224 0 Sell 0.1 0.01224 0.025 Futures Buy 0.1 0.01224 0 sell 0.1 0.01224 0.017

Service 0.0612 tax(@12.24% on brokerage) Security 0.125 transaction tax (STT)

Turnover Tax (T 0.018 oT) Stamp duty Total 0.011224 0.715424

0.018 0.011224 0.715424

0.018 0.002245 0.132485

0.018 0.002245 0.157485

0.018 0.002245 0.132485

0.018 0.002245 0.149485

7. UNDERSTANDING CAPITAL MARKET

7.1 Framework The Indian capital markets have witnessed a transformation over the last decade. India now finds its place amongst some of the most sophisticated and largest markets of the world. With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential. Over the past few years, the capital markets have also witnessed substantial reforms in regulation and supervision. Reforms, particularly the establishment and empowerment of SEBI, market-determined prices and allocation of resources, screen-based nation-wide trading, dematerialization and electronic transfer of securities, rolling settlement and derivatives trading have greatly improved both the regulatory framework and efficiency of trading and settlement.

7.2 Indian Capital markets - Chronology

1994- Equity Trading commences on NSE 1995- All Trading goes Electronic 1996- Depository comes in to existence 1999- FIIs Participation- Globalization 2000- over 80% trades in Demat form 2001- Major Stocks move to Rolling Set 2003- T+2 settlements in all stocks 2003 - Demutualization of Exchanges

7.3 Capital Market Participants

Banks Exchanges Clearing Corporations Brokers Custodians Depositories

Investors Merchant Bankers

7.4 Types of Investors

Institutional Investors- MFs / FI / FIIs / Banks Retail Investors Arbitrageurs / Speculators Hedgers Day traders/Jobbers

7.5 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.

7.6 Key Terms

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. 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. Square off- making the position nil. Say selling off the stocks. (Or buying back in case of short selling). Short selling- selling without having the possession of the stocks (possible in intraday trade). Selling the stocks initially and buying them back later. It is a concept used in the falling markets. Demat Account- the account where in the shares are delivered. Every Demat account is linked to a trading account and a savings bank account. Demat account are provided by CDSL (central depository services limited) and NSDL(national

securities depository limited). Indiabulls is a depository participant which links the depository to the beneficial owner of the account (client).

Trading pool/margin account- the place where the stock is received after the trade, it is the brokers account called the broker pool account. T+2= Transaction + 2 days.

8. 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 8.1 Definition: Derivatives are instruments whose value is derived, in whole or in part, from the value of one or more underlying assets. History of Derivatives The history of derivatives is surprisingly longer than what most people think. Some texts even find the existence of the characteristics of derivative contracts in incidents of Mahabharata. Traces of derivative contracts can even be found in incidents that date back to the ages before Jesus Christ. However, the advent of modern day derivative contracts is attributed to the need for farmers to protect themselves from any decline in the price of their crops due to delayed monsoon, or overproduction. The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardized contracts, which made them much like today's futures. The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was established in 1848 where forward contracts on various commodities were standardized around 1865. From then on, futures contracts have remained more or less in the same form, as we know them today. Derivatives have had a long presence in India. The commodity derivative market has been functioning in India since the nineteenth century with organized trading in cotton through the establishment of Cotton Trade Association in 1875. Since then contracts on various other commodities have been introduced as well. Exchange traded financial derivatives were introduced in India in June 2000 at the two major stock exchanges, NSE and BSE. There are various contracts currently traded on these exchanges. National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in December 2003, to provide a platform for commodities trading.

The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the most highly traded contracts on NSE accounting for around 55% of the total turnover of derivatives at NSE, as on April 13, 2005.

8.2 Understanding Derivatives The primary objectives of any investor are to maximize returns and minimize risks. Derivatives are contracts that originated from the need to minimize risk. The word 'derivative' originates from mathematics and refers to a variable, which has been derived from another variable. Derivatives are so called because they have no value of their own. They derive their value from the value of some other asset, which is known as the underlying. Derivatives are specialized contracts which signify an agreement or an option to buy or sell the underlying asset of the derivate up to a certain time in the future at a prearranged price, the exercise price. The contract also has a fixed expiry period mostly in the range of 3 to 12 months from the date of commencement of the contract. The value of the contract depends on the expiry period and also on the price of the underlying asset. For example, a farmer fears that the price of soybean (underlying), when his crop is ready for delivery will be lower than his cost of production. Let's say the cost of production is Rs 8,000 per ton. In order to overcome this uncertainty in the selling price of his crop, he enters into a contract (derivative) with a merchant, who agrees to buy the crop at a certain price (exercise price), when the crop is ready in three months time (expiry period). In this case, say the merchant agrees to buy the crop at Rs 9,000 per ton. Now, the value of this derivative contract will increase as the price of soybean decreases and vice-aversa. If the selling price of soybean goes down to Rs 7,000 per ton, the derivative contract will be more valuable for the farmer, and if the price of soybean goes down to Rs 6,000, the contract becomes even more valuable. This is because the farmer can sell the soybean he has produced at Rs 9000 per ton even though the market price is much less. Thus, the value of the derivative is dependent on the value of the underlying. 8.3 Difference between Commodity Derivative & Financial Derivative If the underlying asset of the derivative contract is coffee, wheat, pepper, cotton, gold, silver, precious stone or for that matter even weather, then the derivative is known as a commodity derivative. If the underlying is a financial asset like debt instruments, currency, share price index, equity shares, etc, the derivative is known as a financial derivative.

Derivative contracts can be standardized and traded on the stock exchange. Such derivatives are called exchange-traded derivatives. Or they can be customized as per the needs of the user by negotiating with the other party involved. Such derivatives are called over-the-counter (OTC) derivatives. Continuing with the example of the farmer above, if he thinks that the total production from his land will be around 150 quintals, he can either go to a food merchant and enter into a derivatives contract to sell 150 quintals of soybean in three months time at Rs 9,000 per ton. Or the farmer can go to a commodities exchange, like the National Commodity and Derivatives Exchange Limited, and buy a standard contract on soybean. The standard contract on soybean has a size of 100 quintals. So the farmer will be left with 50 quintals of soybean uncovered for price fluctuations. However, exchange traded derivatives have some advantages like low transaction costs and no risk of default by the other party, which may exceed the cost associated with leaving a part of the production uncovered. In India we have several derivatives, two of the most famous derivatives traded on National stock exchange are

Futures Option Futures and options are traded on the NSE platform, with a normal IndiaBulls trading account the client get the access to trade in the F&O contracts.

8.4 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. 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. 8.5 Options Option contracts give the holder the option to buy or sell the underlying at a prespecified 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. 8.6 Futures Terminology

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Spot Price: the price at which an asset trades in the spot market. Futures Price: the price at which the futures contract trades in the futures market Contract Cycle: The period over which the contract trades. The index futures contracts on the NSE have a one-month, two-month and threemonth expiry cycles which expire on the last Thursday of the month. On the Friday following the last Thursday, a new contract having a threemonth expiry is introduced for trading. Expiry Date-the date specified in the futures contract. It is the last Thursday of the month Contract Size: the amount of asset that has to be delivered less than one contract. For instance, the contract size on NSE futures market is 100 Niftiest. It is prescribed by NSE for stocks. Each stock had a different lot size. Basis the futures price minus the spot price. There will be a different basis for each delivery month for each contract. In a normal market, basis will be positive. This reflects that futures prices normally exceed spot prices. Cost of Carry the storage cost plus the interest that is paid to finance the asset less the income earned on the asset. Initial Margin the amount that must be deposited in the margin account at the time the futures contract is first entered into. These margins are prescribed by the exchange. It varies from stock to stock. Marking to Market the adjustment made at the end of each trading day to the investors margin account to reflect the investors gain or loss depending upon the futures closing price. It is the difference between todays closing price and yesterdays closing. The MTM profit /loss are credited to the client account on day to day basis. Thus we call this a T+0 settlement. Maintenance Margin somewhat lower than the initial margin; the balance in the margin account must never become negative and in case it does, the investor receives a margin call that must top-up the account to the initial margin level before trade commences the following day.

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Difference between Long Position & Short Position A long position is an agreement to buy. You take a long position on a stock when you are bullish or have a feeling that the stock will move up. LONG => BUY A short position is an agreement to sell. You take a short position on a stock when you are bearish or have a feeling that the stock will move down. SHORT => SELL There are around 152 companies which are underlying for future and options in NSE. There are

index Futures (Nifty futures, Bank Nifty, CNX IT futures) Stock Futures (Infosys futures. ITC futures, etc linked to specific stocks) Index options (linked to indices) Stock option (linked to specific stocks).

8.7 Option Contracts: The owner of an option has the OPTION to buy or sell something at a predetermined price. Option provides the buyer of the contract the right but not the obligation to exercise. Right to BUY / OWN CALL OPTION Or Right to SELL / WRITE PUT OPTION

You buy a call option when you are bullish or have an upward target. You buy a put option when you are bearish or have a downward target. 8.8 Options Terminology

Stock options options on individual stocks. A contract gives the buyer the right to buy or sell shares at the specified price Buyer of an option the one who by paying price (premium) buys the right but not the obligation to exercise his/her option on the seller/writer Writer of an option the one who by receiving premium, is obliged to sell/buy the asset if the buyer exercises on him Call Option gives the buyer the right but not the obligation to buy an asset by a

certain date for a certain price

Put Option gives the buyer the right but not the obligation to sell an asset by a certain date for a certain price Spot Price the price at which an asset trades in the spot market. Strike Price the target price or the expected price. Contract Cycle the period over which the contract trades. There are three month contracts just like the futures. Expiry Date the date specified in the option contract. It is the last Thursday of the month, just as in futures. Contract Size the amount of asset that has to be delivered under one contract. In-The-Money Option (ITM) an option that would lead to a positive cashflow to the holder if it were exercised immediately. A call option on the index is said to be ITM if the current index stands higher than the strike price (Spot Price > Strike Price). A put option is ITM if the index is below the Strike price (Spot Price < Strike Price). At-The-Money (ATM) an option that would lead to zero cash flows to the holder if it were exercised immediately. Out-Of-The-Money Option (OTM) an option that would lead to a negative cash-flow to the holder if it were exercised immediately. A call option on the index is said to be OTM if the current index stands at a level which is less than the strike price (Spot Price < Strike Price).

8.9 Participants in Derivative Market Three broad categories of participants:

Hedgers Speculators Arbitrageurs

Hedgers: They face risk associated with the price of an asset. They use derivative markets to reduce or eliminate their risk. Speculators: They wish to bet on future movements in the price of an asset. Futures and options contracts can give them an extra leverage; that is, they can increase both the potential gains and potential losses in a speculative venture.

Arbitrageurs: Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets. If, for example, they see the futures price of an asset getting out of line with the cash price, they will take offsetting positions in the two markets to lock in profit. In our research we consider only two players in the derivative market. They are hedgers and speculators. The industry, which we have to consider our research, is derivative market or derivatives industry. Derivative is a product whose value is derived from the value of one or more underlying, called bases (underlying asset, index, or reference rate), in a contractual manner. The underlying can be commodities, precious metals, currency, bonds, stock, stock indices etc. The derivative market performs a number of economic functions:

Prices in an organized derivatives market reflect the perception of market participants about the future and lead the prices of underlying to the perceived future level. The derivatives market helps to transfer risks from those who have them but may not like them to those who have appetite for them. Derivatives, due to their inherent nature, are linked to the underlying cash markets. With the introduction of derivatives, the underlying market witness higher trading volumes because of participation by more players who would not otherwise participate for lack of an arrangement to transfer risk. Speculative trades shift to a more controlled environment of derivatives market. An important incidental benefit that flows from derivatives trading is that it acts as a catalyst for new entrepreneurial activity. The derivatives have a history of attracting many bright, creative, well-educated people with an entrepreneurial attitude. Derivatives market helps increase saving and investment in the long run.

PORTFOLIO A collection of investments held by an institution or a private individual. Holding a portfolio is often part of an investment and risk-limiting strategy called diversification. By owning several assets, certain types of risk (in particular specific risk) can be reduced. The following tables( Table 2.1,2.2,2.3) helps to understands how a portfolio can be a hedging tool, but before we study these tables and derive some interpretation is important to understand the assumption and jargons used. Understanding the portfolio formation Three portfolio have been taken for our understanding which are made from stocks only, in realty a portfolio can be made from any assets (example: gold, insurance, FD etc). All three portfolio are industry specific in practicality this limitation can also be broken. Standard deviation has been used to calculate the risk, we will find that overall risk of the stocks have been reduced till certain extent when their individual risk is pooled together in a portfolio. Jargons explained 1. Beta: This also measure the risk of individual stock but in relation to the market, if the beta of stock X is 1 it means its returns are equal to market return, if market falls by 10% stock X will also fall by 10%. 2. Weight: while calculating the standard deviation of portfolio we decide what weight should be given to individual assets taken in the portfolio, this weight is important because this will decided the standard deviation of portfolio. ( example is given for the better understanding of weight at the end of cement portfolio) 3. Standard deviation: This statistical tool explains that what percentage of returns is deviating from its mean. Higher the standard deviation higher the risk. 4. Correlation Co-variance: This shows the relation between returns of any two given stocks whose value varies between -1 and +1, negative value means when one stock is moving upward another is going downward. Having a negative Correlation Co-variance is considered as a hedging technique because one stock is giving negative return we can expect profit from other. While selecting the

assets to make a portfolio Correlation Co-variance of assets is very important.

DESIGNED PORTFOLIO The following portfolio have made by using the Standard Deviation as a tool the source of all the data have been mentioned in the index, this is just an prototype of a real portfolio. It is understood that lot of other analysis goes while making a real portfolio. (Source: For beta http://www.bseindia.com/) Information Technology Portfolio Company Beta Weight Standard Correlation deviation Co-variance Infosys TCS Wipro 0.92 70.34% 42.01% 0.97 17.76% 25.80% 1.16 11.88% 10.67% .87 .95 .94

Table 2.1

Standard deviation of the IT portfolio comes out to be 34.88% Risk involved with Infosys is reduced

Bank Portfolio Company HDFC ICICI State Bank India Beta 0.86 0.95 of 0.91 Weight 19.39% 61.61% 18.99% Standard deviation 6.45% 6.64% 15.04% Correlation Co-variance -0.88 -0.99 0.83

Standard deviation of the Banking portfolio comes out to be 4.31% The overall risk of individual assets is reduced

CEMENT PORTFOLIO Company ACC Gujrat Ambuja Grasim Ind

Beta 1.16 1.03 0.99

Weight 41.48% 25.89% 32.61%

Standard deviation 23.53% 5.76% 29.76%

Correlation Co-variance -0.66 -0.45 0.80

Standard deviation of cement sector comes out to be 30.48%

As it can be seen that risk of this portfolio is greater than individual assets, this risk can be changed or reduced by varying the weights of different assets. The example for the same has been shown below. By changing the weight of Gujrat Ambuja from 25.89% to 35.89% and weight Grasim Ind from 32.61% to 22.61% the new standard deviation comes out to be 29.80%

10. THE COMPETITORS

10.1 Major Competitors of Indiabulls Securities Ltd. Indiabulls Securities 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. They are;

ICICI Securities Ltd. Kotak Securities Ltd. India Infoline SSKI Ltd. Motilal Oswal Securities Karvy Geojit Securities HDFC Securities

10.2 India Infoline Ltd. 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 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 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 offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. 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%. Features of 5 paisa.com: Paisa sense - They offer a good value for money proposition. Their brokerage rates are

very competitive, charging only 5 paise for Rs100 of trade done, which is 0.05% brokerage. They offer the most reasonable rates, independent of your net worth or volumes. In case of trades that result in delivery, they charge an additional 0.20% for back office and securities handling. Personalized service - At 5paisa.com, they are committed to provide you with unparalleled service, using e-mail, call centers and support staff. They have also invested in physical infrastructure. Protection All transactions of 5paisa.com are secure and confidential. The orders are electronically routed via sophisticated trading systems for execution. They follow a world class security system that enables them to protect from any fraud or hacking. Pedigree - 5paisa.com is a brand renowned for quality of information and services, they are professionally managed, with a skill set which is of high standard. Their top management has years of experience in financial services with leading banks and institutions. 10.3 Sharekhan Securities 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 brings and provides a user-friendly online trading facility. 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. 10.4 Motilal Oswal Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit, with just two people running the show. Motilal Oswal Securities Limited 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. 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. Their sales & trading team, comprising top equity professionals, translates the research findings into actionable advice for clients, based on their specific needs. Sophisticated computerized tools are used to understand client investment profile and objectives, which ensures proactive and timely service.

FEATURES

Integrity: A company honoring commitment with highest ethical and business practices. Team Work: Attaining goals collectively and collaboratively. Meritocracy: Performance gets differentiated, recognized and rewarded in an apolitical environment. Passion & Attitude: High energy and self motivated with a Do It attitude. Excellence in Execution: Time bound results within the framework of the companys value system. 10.5 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. Karvy made inroads into a host of capital-market services, - corporate and retail - which proved to be a sound business synergy. In January 1998, Karvy became the first Depository Participant in Andhra Pradesh. Karvy Securities Limited Deals in distribution of various investment products, viz., equities, mutual funds, bonds and debentures, fixed deposits, insurance policies for the investor.

10.6 Kotak Securities 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 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.

Features of Kotak Securities

AKSESS Kotak securities Electronic Search Service: AKSESS offers you an easy way to get to Kotak Securities' institutional research. On this online archive you will be able to access estimates, company reports, sector reports, strategy reports and a bunch of other products including the daily India Market Flash produced by Kotak Securities. High Quality of software (KEAT): K.E.A.T is special software that Koataksecurities.com provides its customers using which they can view live market rates of scrips on both the NSE and BSE. Research Reports: Kotak Securities provide Different reports to investors which include Intraday calls Daily Technical View Daily Morning Brief Weekly Technical Report Sectoral Reports Stock Ideas Derivative Reports SMS Alerts: Kotak Securities also provides SMS alerts to customers providing useful tips about stocks & shares.

10.7 ICICI SECURITIES 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.

Features of ICICI securities ICICI provides multiple channels in banking like, which is unique feature.

Internet Banking

Mobile Banking ATM banking Phone Banking ICICI Securities is amongst the largest arranger of funds in Debt and Equity segments and also amongst the leading advisors in Mergers and Acquisitions. COMPETITIVE ANALYSIS FOR INDIABULLS SECURITIES

11.

11.1 Indian Retail Brokerage Market 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 instruments) on a commission or transaction fee 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

11.2 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. 11.3 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 Unique Value proposition.

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

Brokerage & Miscellaneous charges Quote Software Execution Platform Demat Account, and finally Back office Support.

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. Quote Software: This is used mainly for technical study and for live quotes. Many people dont evaluate quote software. Some Investors 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 us to see historic data? For, what period is intra day data available? They might need all this information. They should be clear on what they need and ensure 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. 11.7 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 0.50 % for delivery. Indiabulls securities provide 8 times margin for Intra-day and 4 times margin for delivery. Indiabulls is suitable for both Day trading & Long term investment 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 Most customers feel that it is difficult to understand the ledger reports of Indiabulls securities, so proper customer guidance should be given. Lack of Banking arm Rural market is yet to be tapped. More importance should be given to promotions & advertisements.

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 Equity Analysis: Premium research on 400 plus 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. In Depth Market Analysis and Research Their special research cell bring you intensive research reports on how 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.

11.8 Number of Branches of Competitors compared with Indiabulls securities: Approx. 5 Branches of Competitors has been taken for comparing. Number of Customers of competitors compared with Indiabulls. Approximately 100 Customers of competitors.

11.9 Merits & De-merits of Competitors 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 0.3% 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 for a while. So intra-day Margin trading could be annoying now & then. It's not much of a hassle for Cash trading though. (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 rs5000 in case if it is not a salaried account. (That Rs5000 sleeps without earning any money) Other banks account cannot be linked with the ICICI trading account. They charge an annual maintenance charges are Rs540.

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.

ShareKhan Merits of ShareKhan Securities

Low brokerage charges, intraday 0.1% and 0.5% for delivery. Live streaming quotes 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 share today which you bought yesterday.

You have to open a bank account with the banks mentioned in ShareKhan site. Streaming quotes requires JVM (Java Virtual Machine); this may be big headache for customers. Annual charges are Rs330. Their trading terminals are certainly not for "investors", only for 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 ICICI Securities Live Streaming quotes No live streaming quotes But streaming quotes require JVM No BTST facility BTST facility is available (Buy today sell tomorrow) Annual Maintenance charge Rs 330 Annual Maintenance charge Rs 540

You have to open a bank account other banks account cannot be With the banks mentioned in ShareKhan site linked with ICICI trading account Can apply IPO online Can apply IPO online Not necessary while opening a Demat account you Need to maintain a minimum of Rs 5000 Can trade in BSE & NSE Can Trade in BSE & NSE No Monthly Charges No Monthly Charges Cannot apply can apply mutual funds online

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

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

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

Registration Fees (one time) Rs.500/ and is non-refundable. Software License Fee Rs.799/- per month or 7999/- per annum and is nonrefundable. There is lot of Hidden costs. Annual Service Charges Rs.250. Customers who just want to have a depository relationship will 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 compressed in one screen. Trader terminal is good, but the interface is too complicated

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. 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 Trade 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.

12. SWOT ANALYSIS OF INDIABULLS SECURITIES Visioning is best aided by SWOT analysis. "SWOT" is a simple acronym for Strengths, Weaknesses, Opportunities and Threats. SWOT analysis consists of the following two activities:

An assessment of the organizations internal Strengths and Weaknesses and An assessment of the Opportunities and Threats posed by its external environment

SWOT analysis provides a framework for visioning by helping the planners to identify and priorities the organizations GOALS and to further identifies the strategies of achieving them. Assessing the Internal Environment Internal scan or assessment of the internal environment of the organization involves identification of its strengths and weaknesses i.e., those aspects that help or hinder accomplishment of the organizations mission and fulfillment of its mandate with respect to the following Four Ps: 1. People (Human Resources) 2. Properties (Buildings, Equipments and other facilities) 3. Processes (Such as student placement services, M.I.S etc.) 4. Products (Students, Publications etc.) Assessing the External Environment External scan refers to exploring the environment outside the organisation in order to identify the opportunities and threats it faces. This involves considering the following:

Events, trends and forces in the Social, Technological, Economical, Environmental and Political areas (STEEP). Identifying the shifts in the needs of customers and potential clients and Identification of competitors and collaborators.

SOME MORE INPUTS ON SWOT ANALYSIS . PURPOSES OF SWOT ANALYSIS

SWOT analysis is conducted in order to identify an organizations internal Strengths and Weaknesses and also the Opportunities and Threats posed by its external environment. It enables the planners to identify the following: (1) (2) (3) (4) Strengths Weaknesses Opportunities Threats : Internal things we have that are good OR do well : Internal things we do not have OR do not do well : External factors that may help in the achievement of our Mission. : External factors that may be barriers to achievement of our Mission

QUESTIONS TO BE ANSWERED STRENGTHS What makes us special? What resources (inputs) strategies (processes) and performances (outputs) do we handle well? (Focus on the Four Ps) What are our major internal strengths? WEAKNESSES What are our soft spots? What resources (inputs), strategies (processes) and performances (outputs) do we not handle well or at all? (Focus on the Four Ps) OPPORTUNITIES What are our major internal weaknesses? What trends and events can help us? What are the positive social, technological, economic, environmental and political forces influencing us? (Focus on the STEEP) What are our major external opportunities? THREATS What trends and events can hinder us? What are the negative social, technological, economic, environmental and political forces influencing us? (Focus on the STEEP) What are our major external threats?

12.1 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.

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 640 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 ret