Ali Project Report

1

PROJECT REPORT AT

(HSBC GROUP) A Project Report submitted in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION (Industry Integrated) TO

MADURAI KAMARAJ UNIVERSITY, MADURAI

BY ALI AYAN Reg No.A7752101

Under the guidance of Mr. VARUN SRIVASTAVA Area Sales Manager IL&FS INVESTSMART SECURITIES LTD HARIKISHAN INSTITUTE OF MANAGEMENT STUDIES, NEW DELHI

2

JUNE 2009

Certificate This is to certify that the Project Report at

II&FS INVESTSMART SECURITIES LTD , NEW DELHI Submitted in partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION (Industry Integrated) TO

MADURAI KAMARAJ UNIVERSITY, MADURAI Is a record of bonafide Training carried out by KUNAL KUMAR SINGH Under my supervision and guidance and that no part of this report has been submitted for the award of any other degree / diploma / fellowship or similar titles or prizes.

FACULTY GUIDE Signature: Name: Qualifications: MBA, M. Phil, PhD

Signature & seal of the Learning Center

3

STUDENT’S DECLARATION I hereby declare that the Project Report conducted at

IL&FS INVESTSMART SECURITIES LTD , NEW DELHI Under the guidance of

Mr. VARUN SRIVASTAVA Submitted in Partial fulfillment of the requirements for the Degree of

MASTER OF BUSINESS ADMINISTRATION (Industry Integrated) TO MADURAI KAMRAJ UNIVERSITY, MADURAI

Is my original work and the same has not been submitted for the award of any other Degree/diploma /fellowship or other similar titles or prizes.

Place:

---------------------

Date:

Reg.No

4

ACKNOWLEDGEMENT

An endeavor over a period can be successful only with the advice and support of well-wishers. I take this opportunity to express my gratitude and appreciation to all those who encouraged me to complete this project. I am deeply indepted to prof: ……………. Dean Harikishan Institute of Management Studies, New Delhi for my successful completion of the project. I express my profound and sincere thanks to ……….. Dean who acted as a mariner’s compass and steered me through out my project voyage through his exellent guidance and constant inspiration. I shall be failing in my duty if I don’t acknowledge my debt to Mr VARUN SRIVASTAVA Area Sales Manager IL&FS INVESTSMART,NEW DELHI for his valuable guidance and support,which helped me in giving a shape to my study. I extend my hearty thanks to Mr. Sandeep Sahgal Manager of IL&FS INVESTSMART,NEW DELHI for giving me an opportunity to take up the project work and providing all the facilities for the same. I also extend thanks to all other faculty members of Hrikishan Institute Of Management Studies ,New Delhi for their external support and guidance. I acknowledge with profound gratitude and reverence the help and guidance of one and all in my endeavor for gainful project work I undertook at IL&FS INVESTSMART,New Delhi.

PLAC: New Delhi

ALI AYAN MOB-09716636943

5

CONTENTS CHAPTER 1.1 1.2 1.3

General Introduction Objectives of the study Industry Profile.

CHAPTER 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8

1 INTRODUCTION

2 PROFILE OF THE ORGANIZATION

Origin of the Organization. Growth and development of the Organization. Present status of the Organization. Future plans of the Organization. Functional Departments of the Organization. Organization structure and Organization chart. Product and Service profile of the Organization. Market profile of the Organization.

CHAPTER

3 DISCUSSIONS ON TRAINING.

3.1 Student’s work profile (Role and responsibilities). 3.2 Description of live experience. 3.3 Student’s contribution to Organization.

CHAPTER 4.1 4.2 4.3 4.4 4.5

4 STUDY OF SELECTED RESEARCH PROBLEM

Statement of research problem. Statement of research objectives. Research design and methodology. Analysis of data. Summary of Findings.

CHAPTER

5

SUMMARY AND CONCLUSIONS

5.1 Summary of Learning Experience. 5.2 Conclusions and Recommendations. APPENDIX Annexure like copy of questionnaires, interview schedule, leaflets, brochures, Photographs to be enclosed. Bibliography.

6

CHAPTER

1

INTRODUCTION

1.1 General Introduction about the sector

Financial sector The financial sector is in a process of rapid transformation. Reforms are continuing as part of the overall structural reforms aimed at improving the productivity and efficiency of the economy. The role of an integrated financial infrastructure is to stimulate and sustain economic growth. The US$ 28 billion Indian financial sector has grown at around 15 per cent and has displayed stability for the last several years, even when other markets in the Asian region were facing a crisis. This stability was ensured through the resilience that has been built into the system over time. The financial sector has kept pace with the growing needs of corporate and other borrowers. Banks, capital market participants and insurers have developed a wide range of products and services to suit varied customer requirements. The Reserve Bank of India (RBI) has successfully introduced a regime where interest rates are more in line with market forces. Financial institutions have combated the reduction in interest rates and pressure on their margins by constantly innovating and targeting attractive consumer segments. Banks and trade financiers have also played an important role in promoting foreign trade of the country.

7

Banks The Indian banking system has a large geographic and functional coverage. Presently the total asset size of the Indian banking sector is US$ 270 billion while the total deposits amount to US$ 220 billion with a branch network exceeding 66,000 branches across the country. Revenues of the banking sector have grown at 6 per cent CAGR over the past few years to reach a size of US$ 15 billion. While commercial banks cater to short and medium term financing requirements, national level and state level financial institutions meet longer-term requirements. This distinction is getting blurred

with commercial

banks extending

project finance.

The total

disbursements of the financial institutions in 2001 were US$ 14 billion. Banking today has transformed into a technology intensive and customer friendly model with a focus on convenience. The sector is set to witness the emergence of financial supermarkets in the form of universal banks providing a suite of services from retail to corporate banking and industrial lending to investment banking. While corporate banking is clearly the largest segment, personal financial services is the highest growth segment. The recent favourable government policies for enhancing limits of foreign investments to 49 per cent among other key initiatives have encouraged such activity. Larger banks will be able to mobilise sufficient capital to finance asset expansion and fund investments in technology.

8

Capital Market The Indian capital markets have witnessed a transformation over the last decade. India is now placed among the mature markets of the world. Key progressive initiatives in recent years include: • The depository and share dematerialisation systems that have enhanced the efficiency of the transaction cycle • Replacing the flexible, but often exploited, forward trading mechanism with rolling settlement, to bring about transparency • The infotech-driven National Stock Exchange (NSE) with a national presence (for the benefit of investors across locations) and other initiatives to enhance the quality of financial disclosures. • Corporatisation of stock exchanges. • The Securities and Exchange Board of India (SEBI) has effectively been functioning as an independent regulator with statutory powers. • Indian capital markets have rewarded Foreign Institutional Investors (FIIs) with attractive valuations and increasing returns. • The Mumbai Stock Exchange continues to be the premier exchange in the country with an increase in market capitalisation from US$ 40 billion in 1990-1991 to US$ 203 billion in 1999-2000. The stock exchange has about 6,000 listed companies and an average daily volume of about a billion dollars

9 • Many new instruments have been introduced in the markets, including index futures, index options, derivatives and options and futures in select stocks.

Insurance With the opening of the market, foreign and private Indian players are keen to convert untapped market potential into opportunities by providing tailormade products: • The presence of a host of new players in the sector has resulted in a shift in approach and the launch of innovative products, services and value-added benefits. Foreign majors have entered the country and announced joint ventures in both life and non-life areas. Major foreign players include New York Life, Aviva, Tokio Marine, Allianz, Standard Life, Lombard General, AIG, AMP and Sun Life among others. • With competition, the erstwhile state sector companies have become aggressive in terms of product offerings, marketing and distribution. • The Insurance Regulatory and Development Authority (IRDA) has played a proactive role as a regulator and a facilitator in the sector’s development. • The size of the market presents immense opportunities to new players with only 20 per cent of the country’s insurable population currently insured. • The state sector Life Insurance Corporation (LIC), the largest life insurer in 2000, sold close to 20 million new policies with a turnover of US$ 5 billion.

10 • The gross premia for the insurance sector was US$ 13 billion for 2001-02. • There are four public sector and nine private sector insurance companies operating in general/non-life insurance business with a premium income of over US$ 2.58 billion. • The market’s potential has been estimated to have a premium income of US$ 80 billion with a potential size of over 300 million people. The General Insurance Corporation (GIC) (which covers the non-life sector) had a total premium income of US$ 2 billion in 2001-02. This has the potential to reach US$ 9 billion in the next five years.

Venture Capital Technology and knowledge have been and continue to drive the global economy. Given the inherent strength by way of its human capital, technical skills, cost competitive workforce, research and entrepreneurship, India is positioned for rapid economic growth in a sustainable manner. To realise the potential, there is a need for risk finance and venture capital (VC) funding to leverage innovation, promote technology and harness knowledge based ideas. • The Indian venture capital sector has been active despite facing a challenging external environment in 2001 and a competitive market scenario.

11 • There were 34 VCFs and 2 Foreign VCFs registered with SEBI in March 2002. • According to a survey conducted by Thomson Financial and Prime Database, India ranked as the third most active venture capital market in Asia Pacific (excluding Japan). It recorded 115 deals in 2001 with average investment per deal amounting to US$ 7.9 million. 57 VCFs invested US$ 908 million in 101 Indian companies during 2001. • Disbursements for 2002 are expected to be US$ 2 billion and are estimated to reach US$ 10 billion by 2007. • There is an increased interest in India: 70 VC funds operate in India with the total assets under management worth about US$ 6 billion. • The amount has grown nearly twenty fold in the past five years. Most VCs believe that 2002-03 will be driven by a relatively stable economy and new initiatives that will boost the e-commerce sector, particularly on-line trading and e-banking sectors.

12 1.2

INDUSTRY PROFILE

A.

Origin and Development of the industry

The Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbai’s Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official

organization

known

as

‘The

Native

Share

&

Stock

Brokers

Association’. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSE’s trading platform.

Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition.

13 Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the integration of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India.

Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poor’s.

In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by

14 gaining many awards such as ‘Best IT Usage Award’ by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999).

The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. Since the early 1950s till the early 1990s, Indian policy makers had been nourishing the goal of Socialist pattern of society. They had been following the development planning strategy of the former Soviet Russia in a mixed economic framework. From July 1991, in the face of an unprecedented foreign exchange crisis, Indian economy started experiencing an IMF-World Bank dictated regime of liberalisation. One aspect of this is financial liberalisation. There is a move towards privatisation of nationalised banks – these banks are selling their shares in the stock market. Transnational banks are encouraged to operate in the Indian banking sector. Attempts are made to attract foreign direct investment in different sectors. There is an increasing entry of foreign

15 portfolio capital due to stock market liberalisation. People are encouraged to invest in stocks through income tax benefits and abolition of capital gains tax. There is a move to develop a national pension fund which will be invested in different stocks to get returns out of which pension will be provided to retired people. It is expected that boosting up of stock market will accelerate the process of capital accumulation and growth. Stock market development has been an important part of financial liberalisation in the less developed countries (LDCs). In the pro-liberalisation circle, stock market is assigned to play an important role in the capitalist development of LDCs. There are many studies supporting the positive link between stock market development and growth. Let us mention some of the recent studies. One important study was undertaken by Levine and Zervos (1998). Their crosscountry study found that the Development of banks and stock markets has a positive effect on growth. In another study Levine (2003) argued that although theory provides ambiguous relationship between stock market liquidity and economic growth, the cross-country data for 49 countries over the period 1976-93 suggest a strong and positive relationship (see also Levine, 2001). Henry (2000) studied a sample of 11 LDCs and observed that stock market liberalisations lead to private investment boom. Recently, Bekaert et al (2005) analysed data of a large number of countries and

16 observed that the stock market liberalisation ‘leads to an approximate 1 % increase in annual real per capita GDP growth’. There are some economists who are sceptical. Long time back Keynes (1936) compared the stock market with casino and commented: ‘when the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done’. Referring to the study of World Bank (1993) Singh (1997) pointed out that stock markets have played little role in the post-war industrialisation of Japan, Korea and Taiwan. He argued that the recent move towards stock market liberalisation is ‘unlikely to help in achieving quicker industrialisation and faster long-term economic growth’ in most of the LDCs. In this perspective this study examines the nature of relationship between stock market and growth through capital accumulation in India. Figure 1: India’s Real Share Prices (log-values), 1950-2004

17 Figure 2: India’s Annual Growth Rate of Real Industrial Output, 1961-2003

Figure3 : India’s Annual Growth Rate of Real GDP, 1951-2003

18 B.

Growth and present status of the industry

The ever-growing and fast-maturing 'India Market' is a lucrative business destination for developed countries. With 7-8% of GDP growth, huge analytical, young and English speaking work force the 'pull' for opportunities are luring. The bandwidth of 'India Market' is enviably wide and very deep.

'Markets in India' are well protected by legal guidelines and efficient administrators. With a liberal and proactive government at the center the road ahead for 'Markets of India' is very rosy. 'Market India' has witnessed exponential growth over past one and half decade. Liberal and transparent financial policies has effected free-in-flow of FII and as a result of which 'India Market' has grown to a colossal monster in the international market. Foreseeing sure and substantial returns on investments (ROI) companies are pro- actively listing on the stock market indexes. Government agencies once much hated for red tape and bribes has shed its image. Professionalism is their new mantra. Public Enterprises like IOC, ONGC, BHEL, NTPC, SAIL, MTNL, BPCL, HPCL and GAIL, SBI, LIC, Hindustan Antibiotics Limited, Air India etc. to name a few, are giving Private Indian companies a good run for their money. Private giants like Reliance Industries Limited, Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, ICICI are breaking their own records every financial years.

19

'Markets in India' has witnessed meteorite rise of the Indian Software, Telecommunication and Banking Industry. This has propelled growth of Urban Indian class which, in turn has increased consumerism. Today, each and

every

type

of

industry

of

'Market

India'

like

Infrastructure,

Pharmaceutical & Biotechnology, Banking & Insurance, Electronics, FMCG etc. has tremendous growth potential. Retail Industry along with Agriculture & Food industry are yet to contribute their share to the growth story of 'Market India'.

Indian Equity Market at present is a lucrative field for the investors and investing in Indian stocks are profitable for not only the long and mediumterm investors, but also the position traders, short-term swing traders and also very short term intra-day traders. In terms of market capitalization, there are over 2500 companies in the BSE chart list with the Reliance Industries Limited at the top. The SENSEX today has rose from 1000 levels to 8000 levels providing a profitable business to all those who had been investing in the Indian Equity Market. There are about 22 stock exchanges in India which regulates the market trends of different stocks. Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or the Over the Counter Exchange of India, which lists the medium and small sized companies. There is the SEBI or the Securities and Exchange

20 Board of India which supervises the functioning of the stock markets in India. Thus, the growing financial capital markets of India being encouraged by domestic and foreign investments is becoming a profitable business more with each day. If all the economic parameters are unchanged Indian Equity Market will be conducive for the growth of private equities and this will lead to an overall improvement in the Indian economy. Indian Stock Market including both NSE-National Stock Exchange and the BSE-Bombay Stock Exchange have certainly taken a tremendous beating in the past few weeks. We are sure most of us here knew that the correction in the trading curve was round the corner which would be healthy, and the markets would bounce back from 18k levels with the help of mutual fund investments & buying of Indian stocks again. However the anticipation went wrong, and the US recession story along with global and Indian commodity prices have added fuel to the global equity market turmoil on a whole.

21

C.

Future of the industry

The stock market is booming in spite of the low agriculture output. The monsoon is good in an overall sense but still the question remains who takes the credit? The answer is the karma of the people. I appreciate the Indian politicians and the industrialists who being pawns of destiny are doing things positive and productive. India, as a country is running a very good period and the position of planets in the transit are giving wonderful results. Less than one percent of population own stocks and less than 1000 individuals control the market, the majority being the FIIS, the promoters of the company. The credit should go to media for making stock market headlines. The question many people in the market ask: Will the bull run continue? What heights we can reach? First of all, mark my words Indian bourses in the future will be one of the best investments in the world. There will be a time when it can even reach 3000 points in the nifty. India will begin one of the best dasas of the Sun, which will work in its favour. So before 2009 Indian bourses should see an all time high. Now this bull run will continue. • level.

There can be some correction in the BSE sensex in the 7500 points

22 •

The market will hover between the 6000- 7000 till mid august.

•

There will be huge fluctuations.

Investors and new entrants to the market to cool down a bit and come well below 7000. In any case if you are long terms players then step-in and buy now and forget for another 10 years. You will make a killing in the Indian markets. Most of the tech companies and the main index will do well but slightly in the lower side of expectations.

23 CHAPTER 2 2.1

PROFILE OF THE ORGANISATION ORIGIN OF THE ORGANISATION

IL&FS Investsmart Ltd is one of the leading financial services organizations in India. The company is providing customized financial management solutions to individuals and corporate. Their principal activities are to provide brokerage related, investing and financial services. They also provide loan and credit activities, insurance products and security dealing services. IL&FS Investsmart Ltd was incorporated as Investsmart India Ltd on September 1, 1997, as a wholly owned subsidiary of Infrastructure Leasing & Financial Services Ltd. The company commenced equity broking on NSE and BSE in February 1998 and August 1999 respectively. In June 2000, the company commenced derivative broking on NSE and in January 2001, they launched investment advisory products. In January 2002, with the view of consolidate the IL&FS's interests in the capital markets, IL&FS Merchant Banking Services Ltd and DebtonNet India Ltd were merged with the company. The company also forayed into insurance distribution by setting up wholly owned subsidiaries namely Investsmart Insurance Agency Pvt Ltd and Investsmart Insurance Distribution Pvt Ltd. In March 2003, the name of the company was changed from Investsmart India Ltd to IL&FS Investsmart Ltd. During the year 2003-04, the company acquired 4 branches of Tata TD Waterhouse Securities Pvt Ltd. They incorporated a wholly owned subsidiary, IL&FS

24 Investsmart Commodity Brokers Ltd and also acquired IL&FS Academy for Insurance and Finance Ltd during the year. During the year 2004-05, the company has Inducted two strategic partners namely, Softbank Asia Infrastructure Fund L P (SBAIF) and E*Trade Financial Corporation. SBAIF is a large private equity fund with funds under management exceeding USD 6 billion and E*Trade is one of the largest retail broking and banking equity based in US with the presence in all major world markets. During the year, the company commenced derivative broking on BSE and also commenced commodity broking business through their wholly owned subsidiary, IL&FS Investsmart Commodity Brokers Ltd. During the year 2005-06, the company incorporated a wholly owned subsidiary namely IL & FS Investsmart Asia Pacific Pvt Ltd in Singapore to undertake securities services related business. During the year 2009-07, the company incorporated IL&FS Investsmart Securities Ltd as a wholly owned subsidiary and transferred their Portfolio Management Services to the subsidiary company. Also, they acquired 100% stake in Tajir Investment & Properties Ltd, a Non-Banking Finance Company on a going concern basis. During the year 2007-08, the company transferred Merchant Banking and Underwriting Business to IL&FS Investsmart Securities Ltd. The company received the 'Best Performing National Financial Advisor Award' from CNBC for the two years.

The Company was set up as Investsmart India Limited, a wholly owned

25 subsidiary of Infrastructure Leasing & Financial Services Limited for carrying on capital market activities such as share and stock broking,underwriting, placement of securities etc. The Company was incorporated on September 01, 1997 and received the Certificate of Commencement of Business on October 07, 1997. Change In the Registered office of the Company IL&FS has set up a financial centre in Bandra Kurla Complex in Mumbai with a view to house all its subsidiaries, ventures etc. at the sameplace for administrative convenience and to pursue group synergy. Pursuant to this, on June 14, 2000 the registered office of the Company was changed from Mahindra Towers, 4th Floor, 'B1 Wing, Dr. G. M. Bhosale Marg, Worli, Mumbai 400 018 to The IL&FS Financial Centre, Plot

C-22, G Block, Bandra-Kurla

Complex, Bandra (E), Mumbai 400 051. Subscription by ORIX Corporation, Japan in 2000 ORIX subscribed to 80,00,000 equity shares in March 2000 representing 27.59% of the paid up capital at that point of time. ORIX is an integrated financial services group based in Tokyo, Japan, providing innovative value-added products and services to both corporate and retail customers. With operations in 24 countries worldwide, ORIX's include

leasing,

corporate

finance,

real

estate-related

activities

finance

and

development, life insurance, and investment and retail banking. ORIX is made up of 202 consolidated subsidiaries and 74 affiliates. ORIX has 974 offices in Japan, with 234 locations throughout the United States, Asia,

26 Oceania, Europe, the Middle East and Northern Africa .Amalgamation of IL&FS Merchant Banking Services Limited (IMBSL) and.DebtonNet India Limited (OIL) with IL&FS In vests mart Ltd (erstwhile In vests mart India Limited) IL&FS, in addition to its core activity of infrastructure financing, was also registered with SEBI as a Category merchant banker since the inception of the SEBI (Merchant Banking Regulations) 1992. Consequent to changes in SEBI regulations on segregating merchant banking from fund based activities, IL&FS set up IL&FS Merchant Banking Services Limited (IMBSL) as a wholly owned subsidiary.

IMBSL was set-up to provide full-fledged

merchant banking services and was registered as a Category I merchant banker with SEBI. IL&FS also had a 50% stake in another company called DebtonNet India Limited (OIL), which was set up along with. National Stock Exchange Of India Limited. DIL was set up to provide an automated and transparent platform, using the Internet, for book built debt issuances. Over a period of time DIL had enhanced the scope of the platform to provide a wide range of information, news and analytics relevant to the debt market. With a view to consolidate IL&FS's interests in the capital markets IMBSL and DIL were merged into the Investsmart India Limited. Prior to this, IL&FS had taken over the 50% stake of National Stock Exchange of India Limited in DIL. The scheme of amalgamation was approved by the High Court on August 01, 2002 and was effective from January 01,2002.

27 2.2

Growth and Development of the Organization

UK banking giant HSBC will acquire 73.21% of IL&FS Investsmart for Rs 1002.55 crore (around $241.6 million), paving its entry into the retail brokerage arena. This would also give the group an entry into the nonbanking finance market, which it has been looking at entering for the past couple of years. It is also keeping the options of delisting the broking company open. Under the terms of the agreements, HSBC proposes to acquire a 43.85% stake from E*TRADE Mauritius and an additional 29.36% from IL&FS for Rs 200 per share. HSBC will also pay IL&FS Rs 82 crore as part of a three-year non-compete agreement. It will also make an open offer to acquire up to another 20% of Investsmart. The open offer will be announced on May 20. HSBC tookeover IL&FS Investsmart. E*TRADE and Softbank Asia Infrastructure Fund L P had in 2004 collectively acquired 34% equity in IL&FS Investsmart at Rs 54 per share. In late 2006, E*Trade had made an open offer for Rs 210 per share. On Friday, the scrip closed on BSE at Rs 198.80. HSBC Securities and Capital Markets (India) Private Ltd, the Group's securities arm in India, will pick up IL&FS stake while HSBC Mauritius will pick up the stake of E*TRADE Mauritius. Investsmart provides equity and commodity broking, investment banking, insurance broking and distribution, mutual funds distribution and related

28 financing services. It has 88 branches and 190 franchisee outlets. However, the RBI is not in favour of allowing foreign entities to get into the commodity broking space. HSBC may have to offload the commodity broking piece. "We have not taken a decision on the commodity broking," says Ms Kidwai. HSBC will also use the investment banking capabilities of Investsmart for its maid-market clients. According to Tarun Kataria, MD and head of corporate, investment banking and markets, HSBC India, Investmart has a strong management team and they are very much part of our future growth plans. This acquisition will allow us to scale our institutional brokerage business. Investmart also allows us a platform to do mid cap research and mid size ECM transactions. The group could look at delisting the company depending on the response to the open offer. 2.3

Present Status of the Organisation

IL&FS INVESTSMART LIMITED, a financial services company, provides customized

financial

management

solutions

for

retail

customers,

institutional investors, and corporate clients in India. Its retail offerings include mutual fund advisory, portfolio management, IPO advisory and distribution, and insurance advisory services, as well as equities and derivatives, and commodity trading services. The company’s institutional offerings comprise financial advisory and capital-raising services, as well as investing and trading strategies. In addition, it also provides online

29 trading services. HSBC Holdings has offered to delist IL&FS Investmart from the BSE and NSE. IL&FS Investmart was started in 1999 as a broking arm of IL&FS. The company had issued a GDR and E*Trade and SAIF Partners subscribed to the issue triggering an open offer. HSBC holding bought about 73% from E*Trade, SAIF Partners, and IL&FS for Rs 1,311 crore. It later acquired another 20% stake, increasing its stake to 93.8%. However, HSBC has now offered to delist the company from the BSE as well as the NSE. HSBC currently holds 93.8% stake in IL&FS Investmart. As far as HSBC stake goes, in 2008 they bought 73.2% stake from E*trade, SAIF Partners and IL&FS and then made an open offer for 20%. The open offer was for Rs 200 per share and currently it’s sitting on Rs 144-145.

In last evening’s announcement to the exchanges, the HSBC board took a final approval and they are looking at delisting by offering to buyback the remaining 6.2% shares and delist the company from the Indian stock exchanges. Valuation of IL&FS Investsmart Valuation wise this is will not be as far as what Motilal or Edelweiss is because the market share in the Indian retail market is just constituted by several large players which constitute 60% of the market share and

30 the rest of the market share is split across the board, across small brokerages and regional players. IL&FS doesn’t have a market share of more than 1% but what is interesting is that it has a good branch network and this is what HSBC wanted. Even when they bought that 70% stake, the whole idea was to get into the branch network. SERVICES PROVIDING BY THE IL&FS INVESTSMART LTD •

Retail offering

•

Institutional Offering

•

Advisory report

•

Online Trading

•

Advisory Services

2.4

Functional Department of the Organisation •

EQUITY

•

DERIVATIVES

•

IPO

•

PMS

•

ONLINE TRADING

•

COMMODITIES

•

INSURANCE

31

2.5

ORGANISATION STRUCTURE AND ORGANISATION CHART

•

HOME

•

RETAIL OFFERING

•

INSTITUTIONAL OFFERING

•

MARKETS

•

ADVISORY REPORT

•

ONLINE REPORT

•

ADVISORY SERVICE

Product and Services of the organization

2.6

competitors A. 1.

Online product offering SMARTSTART features •

Trade on NSE & BSE

•

Simple order entry for Equity & Derivatives

32 •

Fully Customizable display

•

User friendly Get Quote screen

•

Integrated Accounts (Bank. Demat & Trading)

•

Live order status

•

Track your orders real-time

•

Dynamic buying power

•

Works behind a Proxy

•

Back office access

2. SMARTINVEST Features 

Instant Loading



Works behind a Proxy



Live Streaming quotes



Multiple Watch lists



NSE& BSE Access



Single order form for Cash and FnO



Point and Click order entry



Hot Key Functions



Market Depth Window



Back Office access

3.

SmartTRADE

33 Features •

Fully Customizable display

•

Dynamic Charts with Indicators

•

EOD Charts

•

Real-Time market data

•

Advanced Alert capabilities

•

Live order status

•

Track your orders real time

•

Real time position updates

•

Dynamic buying power

•

Derivative chain

•

Lock terminal option

•

Message window docking

ADVISORY SERVICES 1. Why invest? Saving v/s Investing is not a new debate. While savings pertains to money put away for short time periods, Investing on the other hand is a decision catering to a longer time duration. Saving V/s investing •

Savings is normally the money that is put away for short term periods

and is associated with low risk and low return.

34 •

The after tax returns generated from savings rarely outpace inflation.

•

Investing on the other hand is a conscious decision.

•

Monies are invested for a longer duration of time, over 3-5 years.

•

The returns generated are generally higher when compared to the

returns from savings.

2.7

MARKET PROFILE OF THE ORGANISTION

IL & FS Investsmart Limited (Bombay Stock Exchange) Sector: Financials • industry: Investment Services • As of 26 Jun 2009 198.75INR Price Change +9.45 Percent Change +4.99%

Analyst Recommendations OVERVIEW IL & F S Investsmart Limited provides financial management solutions. The Company’s business comprises of loan financing and credit facilities. It provides individuals and corporates with customised financial management

35 solutions. It provides personalised investment management services including planning, advisory, execution and monitoring of the of investment services. The Company offers financial advisory and capital-raising services to corporates. As of March 31, 2008, the Company had 143 institutional clients.

QUICK FINANCIAL SYNOPSIS BRIEF: For the fiscal year ended 31 March 2009, IL & FS Investmart Ltd.'s revenues decreased 44% to RS2.19B. Net loss totaled RS1.09B, vs. a profit of Rs549.6M. Revenue reflects a decrease income from operations and lower other operating income. Net loss reflects an increase in rent, higher depreciation, the presence of provision for contingencies, an increase in other expenditure and the presence of exceptional items.

COMPANY ADDRESS IL & FS Invest smart Limited The IL&FS Financial Centre, Plot C - 22, G-Block Bandra-Kurla Cmplex, Bandra(E) Mumbai

400 051

P: +9122.26533333 F: +9122.26533075

36

TOTAL EMPLOYEES 1997 COMPANY WEB LINKS -

Home Page

-

News Releases

-

Investor Relations

-

Corporate History/Profile

-

Executives

-

Products/Services

-

Employment Opportunities

37

CHAPTER

3

DISCUSSION ON TRAINING

3.1 Student’s work profile(role and responsibilities) I worked there with IL&FS INVESTSMART with a profile of sales trainee. This profile offers me to understand the need of customer and provide them the best deal possible with maximization of the profit, both for the company as well as for the customer. The most important aspect for the role of trainee is trust. So far fulfillment of the targets one needs to: •

Capitalize on the old and loyal clientage which can be building slowly by advising people in the best possible way.

•

Generating new leads through various activities.

Generation of leads Since I was new in the field so I had to start from scratch and generate new leads to sustain in the market. Cold calling is one of the trusted ways of getting to the customers without meeting them. Although the rate of conversion remained very less.for cold calling the quality and accent remains a very important criterion . this

38 activity give me mixed result. I often got success and generated many leads through it but it also landed me in awkward position where the customer were in different mood and made us hear words

for which a marketer

should be always prepared to hear.corporate calls always remained more difficult to crack with respect to retail sector. The corporate were the most difficult and most temping to get the business from. It took me one one day to crack Hi-tech Gears. At IL&FS INVESTSMART after getting the product knowledge in the first week at the branch I was also allotted distributor to work with. In the initial phase I was accompanied by more experienced staff. After I became known to the market and procedure I started attending calls alone only. After the third week my performance also improved and I was able to get close to the targets, though it looked difficult to achieve in the beginning. To get awareness of the every product I attended diversified calls. This helped me to implement cross selling to get better results. LIMITATIONS: 1. Cold Calling •

Voice and accent plays a major role.

•

The right time to call a customer cannot be decided, as the customer

may in a different mood at the time of calling. •

Time consuming

•

Less success rate

39 2. Corporate •

Time consuming

•

Contacts with higher authorities play a major role

3.1

Description of live experience

I was supposed to use the database provided by the company to make cold calls or by directly meeting people to get new leads. While making cold calls, we need to have: •

Good Communication Skills (Voice quality is clear and articulate)

•

Persistent and able to bounce back from rejection

•

Good organizational skills.

•

Ability to project a telephone personality (Enthusiasm, friendliness)

•

Flexibility: can adapt to different types of clients and new situations.

Using a good database is very essential.

40 “Eighty percent of our business comes from 20 percent of our customers" is a frequent statement at any sales convention. There's hardly a sales executive who is not aware of the 80/20 rule”.

While talking to customers, I analyze their needs. Whether they want to go for investment purpose or insurance or both. Suggest them the plan that best suits them. If they agree to it then either we send across the agents to close the deal or close it themselves.

Problems faced while selling products: •

Customer dissatisfied with the services.

•

People fear that Reliance Money Being a Private company and a new

entrant may be able to sustain or not. •

Insurance means LIC for people.

•

Past experience, word of mouth.

41 •

Misguidance by agents.

•

People do not want insurance products.

•

Lack of knowledge and awareness about general and life insurance.

•

People risk appetite is very low, so they are afraid of mutual fund as

well. •

People relate the problems of mobile phones of Reliance

Communication with IL&FS INVESTSMART.

SWOT ANALYSIS

Weakness • • • •

Inexperienced Staff Low awareness due to lack of advertisement. Lack of loyal clientage Developing product.

Opportunity • • • •

Untapped Market Increased spending power Changing Mindset of Customers Unpredictable Sensex

Strength •

• • •

Co-operative and Experienced Branch Managers Good Database Reliance Brand Low pricing

Threat • •

•

Reach Stiff competition from existing players in the market Better products

42

CHAPTER

4

STUDY OF SELECTED RESEARCH PROBLEM

Statement of Research objectives

4.2

4.3

•

To find the market potential and market penetration of IL&FS Investsmart product offerings in New delhi.

•

To collect the real time information about preference level of customers using Demat account and their inclination towards various other brokerage firms e.g. Indiabulls, Sharekhan, Indiainfoline, Religare, Alankit , Unicon.

•

To expand the market penetration of IL&FS Investsmart.

•

To provide pricing strategy of competitors to fight cut throat competition.To increase the product awareness of IL&FS Investsmart as single window shop for investment solutions

Research design and methodology It was important to collect detailed information on various aspects for

effective analysis. As “Marketing today is becoming more of a battle based on information based society companies with superior information enjoys a competitive advantage.

43 Methodology Adopted The information was collected through person interview and interview was conducted through the mode of questionnaire.

4.4

Analysis of Data Data collection The data collection was collected through primary as well as secondary source.

PRIMARY DATA : Primary data was collected from 155 respondents using a schedule of question and a survey was conducted. The tabular and graphical data was Microsoft exel.

SECONDARY DATA : Secondary data was collected mainly from internet ,printed journals on the capital markets of India ,newspaper articles and books written on the Indian stock markets.

SAMPLING:

44 Judgment, non-random sampling was used. Respondents were request to help with the schedule at their offices , homes or at the IL&FS office.

4.5 SUMMARY OF FINDING

1. Preference of Investment

Fig4.5.1 Result of Preference of Investment

Interpretation: This shows that although the mutual funds market is on the rise yet, the most favored investment continues to be in the Share Market. So, with a more transparent system, investment in the Stock Market can definitely be increased.

2. Awareness on Online Share Trading

45

Fig4.5.2 Result of Awareness of Online Share Trading

Interpretation: With the increase in cyber education, the awareness towards online share trading has increased by leaps and bounds. This awareness is expected to increase further with the increase in Internet education. 3.

Awareness of IL&FS Invest smart as a Brand

Fig4.5.3 Result of Awareness of Reliance money as a Brand

Interpretation: This pie-chart shows that reliance money has a reasonable amount of Brand awareness in terms of a premier Retail stock broking

46 company. This brand image should be further leveraged by the company to increase its market share over its competitors.

4. Awareness of Reliance Money Facilities

Fig4.5.4 Result of Awareness of Reliance money Facilities

Interpretation: Although there is sufficiently high brand equity among the target audience yet, it is to be noted that the customers are not aware of the facilities provided by the company meaning thereby, that, the company should concentrate more towards promotional tools and increase its focus on product awareness rather than brand awareness.

5. Satisfaction Level among Customers with current broker

47

Fig4.5.5 Result of satisfaction level among customers with current broker

Interpretation: This pie-chart corroborate the fact that Strategic marketing, today, has gone beyond only meeting Sales targets and generating profit volumes. It shows that all the competitors are striving hard not only to woo the customers but also to make them Brand loyal by generating customer satisfaction.

6. Frequency of Trading

Fig4.5.6 Result of Frequency of Trading

Interpretation: Inspite of the huge returns that the share market promises, we see that there is still a dearth of active traders and investors. This is because of the non – transparent structure of the Indian share market and the skepticism of the target audience that is generated by the

48 volatility of the stock market. It requires efficient bureaucratic intervention on the part of the Government.

7. Percentage of earnings invested in Share Trading

Fig4.5.7 Result of percentage of earning invested in share trading

Interpretation: This shows that people invest only upto 10% of their earnings in the stock market, again reiterating the volatile and nontransparent structure of the Indian stock market. Hence, effective and efficient steps should be undertaken to woo the customers to invest more in the lucrative stock market.

49

CHAPTER

5

SUMMARY AND CONCLUSIONS

5.1

SUMMARY OF LEARNINGS EXPERIENCE

•

To get initial success in this field is very difficult. Although the business

generation becomes easier with time as we serve more people who then get added up in the loyal clientage. Thus time and service are two most factors to get in this field. •

Also the corporate remains a very important segment which gets

business in bulk but retail cannot be ignored which makes your business ticking. •

Customer remains in the pivotal position.

5.2

CONCLUSION AND RECOMMENDATIONS

Based on the findings of our project we would like to suggest the following:•

After sales services and follow up calls are important for getting new

references so trained telesales should be appointed for this purpose whose sole work should be to make feedback calls.

50 •

Investsmrt is having too many financial products right from Demat

account to General Insurance and not all the salespeople are familiar with each and every product so the work force should be segregated each group dealing in a specific product and the sales target should be given likewise. •

While interacting with the investors I found that most of the customers

are unaware about the Mutual fund. Some of the people look upon mutual funds and equity trading as gambling. Thus a mutual fund awareness program can help to increase the penetration of mutual funds in the market. •

INVESTSMART should declare in black ink that they will charge just 1

paisa per transaction. People tend to think that there must be some hidden charges. •

Rs950 account opening charges are too high when targeting a

corporate so the company should be flexible on this amount. •

INVESTSMART should provide periodic training for updating the

product knowledge of various financial advisors. •

Company should have a scheme of rewards and recognition to

employees and the field persons to boost their motivation.

KEY ISSUES AND CONCLUSIONS Based on the above SWOT analysis and study of the available data I have come to the following conclusions: HUGE POTENTIAL:

51 •

All though relatively new entrants in the market, INVESTSMART is

slowly but surely gaining a strong hold because it is finally able to grasp the investment climate in Delhi. Secondly the branch managers at all the branches are very knowledgeable with a lot of experience in the financial markets so under their leadership can definitely expand its base •

The entire workforce consists of mostly youngsters, which means they

can be encouraged and motivated to do good work because they have a long way to go and most of them are eager to climb the ladder. •

Right now Reliance is at its nascent stage and will surely grab the

major market under its belt very soon like in other fields.

Huge investments taking place: •

The Stock Market has been very buoyant until now especially in the

past 3 years. This particular trend is very favorable because a soaring SENSEX means higher returns, which encourages the investors to invest their money in the market. Although in the past 3 months the market has shown very unpredictable trend and has already lost over 1000 points. •

So in order to make the best the only thing required is to recruit more

field staff who should be trained in a proper way to get better results. •

In case of insurance, it requires push selling because people always

associate it with emergencies and unpleasant situations like death and they

52 don’t want to think about such situation let alone prepare for them, which means it requires a lot of conviction on part of the executives.

Large untapped market: •

People have just opened up to the idea of ULIPs because till now they

knew only two kinds of insurance plans, endowment and term plans so the concept of high returns with protection is very new to them and slowly and slowly these are becoming popular so there is a huge market waiting to be tapped. •

In the past few years there has been a tremendous inflow of funds in

the Indian market which has lead to the sky rocketing SENSEX. In fact there has been a tremendous response from the investors not only in shares but mutual funds as well. The Rs5700Cr infused in the market through the HSBC INVESTSMART Equity mutual Funds is an example of the growing trust of investors who earlier shied from such investments due to stock market fiascos like the Harshad Mehta scam or the US64 disaster in which investors lost huge amounts of money as well as their trust in financial instruments.

53 •

With the FDI limits being relaxed, a lot of avenues will open up in the

insurance sector and insurance companies are expected to come up with new plans with a great deal of customization and flexibility.

APPENDIX

QUESTIONNAIRE Q1. In which of these Financial Instruments do you invest into? Shares

Mutual Funds

Bonds

Derivatives

Q2. Are you aware of online Share trading? Yes

No

Q3. Heard about IL&FS INVESTSMART? Yes

No

Q4. Do you know about the facilities provided by IL&FS INVESTSMART? Yes

No

Q4. Do you know about the facilities provided by IL&FS INVESRTSMART?

54

Yes

No

Q5. With which company do you have your DEMAT account? Reliance money

ICICI Direct

IL&FS INVESTSMART

India Bulls

Others (please specify) Q6. What differentiates your Share trading company from others? (in regards of brokerage, satisfaction, services, products )

Q7. Are you currently satisfied with your Share trading company? Yes

No

Q8. How often do you trade? Daily

Weekly

Monthly

Yearly

Q9. What percentage of your earnings do you invest in share trading? Up to 10%

Up to 25%

Up to 50%

Q13. How do you rate these share trading companies? 1. 4.

2. 5.

3.

Above 50% a. Reliance money b. ICICI Direct c. India Bulls d. IL&FS INVESTSMART e. Others (Please specify)

Q14. What more facilities do you think you require with your DEMAT account?

55

Personal Information

Name

:

Age Sex Phone No

: :

Male

Female

:

Occupation:

References and Bibliography

Articles •

Capital Market Review 2003-04,Published by SHCIL

Books •

Financial Management Prashanna Chandra,6th edition

•

Financial Management Khan & Jain ,3th edition

•

Securities Analysis and Portfolio Management ,Fischer & Jordon

•

Research Methodology ,David .R. Cooper and Schindler

Websites

56 •

www.shcil.com

•

www.icicidirect.com

•

www.investsmart.com

•

www.nseindia.com

•

www.economicstimes.com