Money Market Capital Market
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a) b)
Money market Capital market
Money market Money market is a market for dealing with financial assets and securities which have a maturity period of up to one year. In other words,it is a market for purely short term funds. The money market may be subdivided into four. They are: Call money market Commercial bills market Treasury bills market Short-term loan market
The call money market is a market for extremely short period loans say one day to fourteen days. So, it is highly liquid. The loans are repayable on demand at the option of either the lender or the borrower. In India, call money markets are associated with the presence of stock exchanges and hence, they are located in major industrial towns like Mumbai, Kolkata, Chennai, Delhi, Ahmadabad, etc. The special feature of this market is that the interest rate varies from dayto-day and even from hour-to-hour and center-tocenter. It is very sensitive to changes in demand and supply of call loans.
It is a market for bills of exchange arising out of genuine trade transactions. In the case of credit sale, the seller may draw a bill of exchange on the buyer. The buyer accepts such a bill promising to pay at a later date the amount specified in the bill.
In India the bill market is under-developed. The RBI has taken many steps to develop a sound bill market. The discount and finance house of India was set up in 1988 to promote secondary market in bills. In spite of all these, the growth of the bill market is slow in India. There are no specialized agencies for discounting bills. The commercial banks play a significant role in this market.
It is a market for treasury bills which have ‘short-term’ maturity. A treasury bill is a promissory note or a finance bill issued by the government . It is highly liquid because its repayment is guaranteed by the government. It is an important instrument for short term borrowing by the government. There are two types of treasury bills namely: (i) ordinary or regular and (ii) ad hoc treasury bills.
It is a market where short term loans are given to corporate customers for meeting their working capital requirements. Commercial banks play a significant role in this market. Commercial banks provide short term loans in the form of cash credit and overdraft. Overdraft facility is mainly given to business people whereas cash credit is given to industrialists.
capital market The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a maturity period of above one year. Capital market may be further divided into three namely: (i) Industrial securities market. (ii) Government securities market and (iii) Long term loans market.
(iii) (iv) (v)
Primary market is a market for new issues or new financial claims. Hence, it is also called new issue market. The primary market deals with those securities which are issued to the public for the first time. In the primary market, borrowers exchange new financial securities for long term funds. Thus, primary market facilitates capital formation. There are three ways by which a company may raise capital in a primary market. They are: Public issue Rights issue Private placement
Secondary market is a market for secondary sale of securities . In other words, securities which have already passed through the new issue market are traded in this market. Generally, such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. This market consists of all stock exchanges recognized by the government of India. The stock exchanges in India are regulated under the Securities Contracts (Regulations) Act, 1956. The Bombay stock exchange is the principal stock exchange in India which sets the tone of the other stock markets.
It is a market where government securities are traded. In India there are many kinds of government securities- short-term and long-term. Long term securities are traded in this market while short term securities are traded in the money market. Securities issued by the central government, state government, semigovernment authorities like city corporations, port trusts ,etc. improvement trusts, state electricity boards, all India and state level financial institutions and public sector enterprises are dealt in this market.
Development banks and commercial banks play a significant role in this market by supplying long term loans to corporate customers. Long-term loans market may further be classified into: (i) Term loans market (ii) Mortgages market (iii) Financial guarantees market
Money market 1. It is a market for short term loan able funds for a period of not exceeding one year. 2. This market supplies funds for financing current business operations, working capital requirements of industries of the government. 3. The instruments that are dealt in a money market are bills of exchange, treasury bills, commercial papers, certificate of deposit.
Capital market 1. It is a market for long term funds exceeding a period one year. 2. This market supplies funds for financing the fixed capital requirements of trade and commerce as well as the long term requirements of the government. 3. This market deals in instruments like shares, debentures, government bonds.
•
4. Each single money market instrument is of large amount. A TB is of minimum for one lakh. Each CD is for a minimum of Rs.25 lakhs. 5. The central bank and commercial banks are the major institutions in the money market. 6. Money market instruments generally do not have secondary markets. 7. Transactions mostly take place over the phone and there is no formal place. 8. Transactions have to be conducted without the help of brokers.
4. Each single capital market instrument is of small amount. Each share value is Rs.10. each debenture value is Rs.100 5. Development banks and insurance companies play a dominant role in the capital market. 6. Capital market instruments generally have secondary markets. 7. Transactions take place at a formal place viz., stock exchanges. 8. Transactions have to be conducted only through authorized
BUYING AND SELLING OF SHARES
IN OUR STOCK MARKET MORE THAN 13,766 STOCKS
BSE (BOMBAY STOCT EXCHANGE )
NSE (NATIONAL STOCK EXCHANGE)
• • • • • • •
Started in 1850 in front of Town-Hall in Bombay currently known as Horniman circle Formed in 1875 as Bombay Stock Exchange In 1986 launched its first stock index named ‘SENSEX’ with base year 1978-79 Non-profit association & evolved as the premier stock exchange Oldest stock exchange of Asia Accounts for 75% of listed capital & 75% of shares in terms of market capitalization Its turnover is 1/3rd of the total turnover in securities in India
Transactions are carried by TM on behalf of their clients • Financial soundness, track record, experience, infrastructure and manpower
TM must be registered and pay fee to BSE & Regulatory Authority TM’s play a role of brokers, sub-brokers, floor-brokers, agents, jobbers, dealers, Badla financiers, dealer in G-Sec and underwriters
•
BSE has – A Board of 9 directors – Executive Director – 3 Gov Nominees – A RBI Nominee – 5 Public representatives
•
Executive Director is responsible for day-2day functioning and administration of Stock Exchange
• •
Outcry System Interaction based trading & settlement – If paid-up value= INR 10 & or 100 Sh. Trading lot is 50 or 100 Sh. – Paid-up value > 100 INR, market lot of 10 Sh.
• •
•
Settlement period 14 days or more Permission from board or president in special cases Physical settlement by TM at the clearing house
•
•
•
•
NSE was started in April 1993 as a corporate body. In July 2005, became the largest exchange in India. Trades over 1500 equity, 800 debt instrument with a corporate membership of 980. Companies are selected on the basis of record, the profitability, paid-up capital, market capitalization and dividend payment.
1.
2. 3. 4. 5.
6. 7. 8. 9. 10.
1
(SENSEX 30 STOCKS)
2
(NIFIY 50 STOCKS)
1. 2. 3. 4. 5. 6. 7.
ACC 21. SBI GRASIM 22.INFOSYS HINDALCO 23.DR.REDYS HLL 24.SATYAM ITC 25.CIPLA L&T 26.AIRTEL RIL
11.BHEL 12.GUJ AMBUJA 13.ICICI BANK 14.RANBAXY 15.REL 16.R.COM 17.HDFC BANK
1.ACC 11.GUJ AMBUJA 21.JET AIRWAYS 2.BAJAJ AUTO 12.HCL 22.ITC 3.BHEL 13.HDFC 23.L&T 4.BPL 14.HDFC BANK 24.MTNL 5.BHARTI AIRTEL 15.HERO HONDA 25.M&M 6.CIPLA 16.HINDALCO 26.MARUTI 7.DABUR 17.HLL
31.NATIONAL ALUMINIUM MOTORS 32.RANBAXY POWER 33.R.COM 43.TATA STEEL 34.REL 44.WIPRO 35.RIL 36.SATYAM 46.VSNL
41.TATA 42.TATA
45.ZEE
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
BANKING SECTOR CAPITAL GOODS SECTOR CEMENT SECTOR REAL ESTATE SECTOR INFRASTRUCTURE SECTOR POWER SECTOR TELECOM SECTOR AUTOMOBILES SECTOR METAL SECTOR INFORMATION TECHNOLOGY SECTOR
1. (ASIXS BANK)
4.
(PNB)
2. (ICICI BANK)
3. (HDFC BANK)
5.
(SBI)
1.
4.
2.
3.
5.
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
1.
4.
2.
5.
3.
1.
4.
2.
5.
3.
1.
2.
3.
4.
5.
1
2.
3.
4.
5.
1.
2.
3.
4.
1.
2.
3.
4.
5.
3. 4. 5. 6. 7.
INFLATION MARKET TRENDS GLOBAL MARKETS GOVT. POLICIES FINANCIAL STATEMENT OF COMPANIES
INFLATION RATE CURRENT 0.57 MAIN FACTOR CRUDE earlier147$ BARRAL NOW CRUDE IS ON 49$ BARRAL
1.BULL MARKET
2. BEAR MARKET
PROFITS LOSSES GROWTH
FINANCIAL STATEMENT OF COMPANIES GROWTH OF CONPANIES ORDER BOOK MANAGEMENT LAND BANK POLICIES PLANS
1. 2. 3. 4. 5. 6. 7. 8.
GDP GROWTH RATE ORDER BOOK OF INDIAN COMPANIES Stock MARKET GROWTH INDIA GORWING FASTER FIIS INVESTING IN INDIA BIG FISHS GETTING BIGER NUCLEAR DEAL STRONG FUNDAMENTALS
ORDER BOOK Rs 85,000 CRORE INCOME GROWTH 26% NET PROFIT Rs 27,OOO CRORE
ORDER BOOK Rs 52,683 CRORE INCOME GROWTH 40% NET PROFIT Rs 29,883 CRORE
25000 20000 15000 SENSEX
10000 5000 0 1990
1994
1998
2002
2006
INFR AS TRUC TURE PROJECTS
POWER
3.
FOREGIN ECONOMY 2.INDIAN ECONOMY 2% GROWTH RATE DEVELOPED ECONOMY LESS EXPANSTION
8.5% GROWTH RATE DEVELOPING ECONPMY MORE EXPANSTION
75000 MW BY 2017
15000 MW BY 2015
POWER
FOR INDUSTRY GROWTH OF POWER SECTOR CHEAPER POWER OPPORTUNITY FOR COMPANIES
1. DIRECT
INVESTMENT
BY OPENING TRADING ACCOUNT BY OPENING DEMAT ACCOUNT
1.
2.
3.
4.
5.
3.
2.
2. MUTUAL FUNDS
FUND
MANAGERS SAFeTY OF YOUR MONEY
ESTABLISHMENT OF SEBI
The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. Basic functions of the Securities and Exchange Board of India “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to”
As an important entity in the market it works with following objectives: 1. It tries to develop the securities market. 2. Promotes Investors Interest. 3. Makes rules and regulations for the securities market.
1.1 Definition of Venture Capital Fund : The Venture Capital Fund is now defined as a fund established in the form of a Trust, a company including a body corporate and registered with SEBI which: ◦ has a dedicated pool of capital; ◦ raised in the manner specified under the Regulations; and ◦ to invest in Venture Capital Undertakings in accordance with the Regulations."
1.2 Definition of Venture Capital Undertaking: Venture Capital Undertaking means a domestic company :- ◦ Whose shares are not listed on a recognised stock exchange in India ◦ Which is engaged in business including providing services, production or manufacture of articles or things, or does not include such activities or sectors which are specified in the negative list by the Board with the approval of the Central Government by notification in the Official Gazette in this behalf.
1.3 Minimum contribution and fund size : the minimum investment in a Venture Capital Fund from any investor will not be less than Rs. 5 lacs and the minimum corpus of the fund before the fund can start activities shall be atleast Rs. 5 crores.
1.4 Investment Criteria : The earlier investment criteria has been substituted by a new investment criteria which has the following requirements : ◦ disclosure of investment strategy; ◦ maximum investment in single venture capital undertaking not to exceed 25% of the corpus of the fund; ◦ Investment in the associated companies not permitted; ◦ atleast 75% of the investible funds to be invested in unlisted equity shares or equity linked instruments. ◦ Not more than 25% of the investible funds may be invested by way of:
subscription to initial public offer of a venture capital undertaking whose shares are proposed to be listed subject to lock-in period of one year; debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity. It has also been provided that Venture Capital Fund seeking to avail benefit under the relevant provisions of the Income Tax Act will be required to divest from the investment within a period of one year from the listing of the Venture Capital Undertaking.
1.5 Disclosure and Information to Investors: In order to simplify and expedite the process of fund raising, the requirement of filing the Placement memorandum with SEBI is dispensed with and instead the fund will be required to submit a copy of Placement Memorandum/ copy of contribution agreement entered with the investors along with the details of the fund raised for information to SEBI.
2. QIB status for Venture Capital Funds : The venture capital funds will be eligible to participate in the IPO through book building route as Qualified Institutional Buyer subject to compliance with the SEBI (Venture Capital Fund) Regulations. 3. Relaxation in Takeover Code: The acquisition of shares by the company or any of the promoters from the Venture Capital Fund under the terms of agreement shall be treated on the same footing as that of acquisition of shares bypromoters/companies from the state level financial institutions and shall be exempt from making an open offer to other shareholders.
4. Investments by Mutual Funds in Venture Capital Funds: In order to increase the resources for domestic venture capital funds, mutual funds are permitted to invest upto 5% of its corpus in the case of open ended schemes and upto 10% of its corpus in the case of close ended schemes. Apart from raising the resources for Venture Capital Funds this would provide an opportunity to small investors to participate in Venture Capital activities through mutual funds.
5. Government of India Guidelines: The Government of India (MOF) Guidelines for Overseas Venture Capital Investment in India dated September 20, 1995 will be repealed by the MOF on notification of SEBI Venture Capital Fund Regulations. 6. The following will be the salient features of SEBI (Foreign Venture Capital Investors) Regulations, 2000 : 6.1 Definition of Foreign Venture Capital Investor : any entity incorporated and established outside India and proposes to make investment in Venture Capital Fund or Venture Capital Undertaking and registered with SEBI.
6.2 Eligibility Criteria : entity incorporated and established outside India in the form of investment company, trust, partnership, pension fund, mutual fund, university fund, endowment fund, asset management company, investment manager, investment management company or other investment vehicle incorporated outside India would be eligible for seeking registration from SEBI. SEBI for the purpose of registration shall consider whether the applicant is regulated by an appropriate foreign regulatory authority; or is an income tax payer.
6.3 Investment Criteria : ◦ disclosure of investment strategy; ◦ maximum investment in single venture capital undertaking not to exceed 25% of the funds committed for investment to India however it can invest its total fund committed in one venture capital fund; ◦ atleast 75% of the investible funds to be invested in unlisted equity shares or equity linked instruments. ◦ Not more than 25% of the investible funds may be invested by way of: subscription to initial public offer of a venture capital undertaking whose shares are proposed to be listed subject to lock-in period of one year; debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity.
7. Hassle Free Entry and Exit : The Foreign Venture Capital Investors proposing to make venture capital investment under the Regulations would be granted registration by SEBI. SEBI registered Foreign Venture Capital Investors shall be permitted to make investment on an automatic route within the overall sectoral ceiling of foreign investment under Annexure III of Statement of Industrial Policy without any approval from FIPB.
8. Trading in unlisted equity : The Board also approved the proposal to permit OTCEI to develop a trading window for unlisted securities where Qualified Institutional Buyers(QIB) would be permitted to participate.
Some of the members of the Board felt that the mandated post listing exit time frame of one year for availing tax pass through by a domestic Venture Capital Fund could be reconsidered by the Government in the light of international experience and the need to avoid operational restrictions and optimize inflow of venture capital in the country. The Board also desired that a small Group within SEBI could be set up to codify the experience of the existing players, international experience including tax treatment and potential areas for venture capital funding
PRESENTATION BY --VAIBHAV BIRLA MBA II
Money market Capital market
Money market Money market is a market for dealing with financial assets and securities which have a maturity period of up to one year. In other words,it is a market for purely short term funds. The money market may be subdivided into four. They are: Call money market Commercial bills market Treasury bills market Short-term loan market
The call money market is a market for extremely short period loans say one day to fourteen days. So, it is highly liquid. The loans are repayable on demand at the option of either the lender or the borrower. In India, call money markets are associated with the presence of stock exchanges and hence, they are located in major industrial towns like Mumbai, Kolkata, Chennai, Delhi, Ahmadabad, etc. The special feature of this market is that the interest rate varies from dayto-day and even from hour-to-hour and center-tocenter. It is very sensitive to changes in demand and supply of call loans.
It is a market for bills of exchange arising out of genuine trade transactions. In the case of credit sale, the seller may draw a bill of exchange on the buyer. The buyer accepts such a bill promising to pay at a later date the amount specified in the bill.
In India the bill market is under-developed. The RBI has taken many steps to develop a sound bill market. The discount and finance house of India was set up in 1988 to promote secondary market in bills. In spite of all these, the growth of the bill market is slow in India. There are no specialized agencies for discounting bills. The commercial banks play a significant role in this market.
It is a market for treasury bills which have ‘short-term’ maturity. A treasury bill is a promissory note or a finance bill issued by the government . It is highly liquid because its repayment is guaranteed by the government. It is an important instrument for short term borrowing by the government. There are two types of treasury bills namely: (i) ordinary or regular and (ii) ad hoc treasury bills.
It is a market where short term loans are given to corporate customers for meeting their working capital requirements. Commercial banks play a significant role in this market. Commercial banks provide short term loans in the form of cash credit and overdraft. Overdraft facility is mainly given to business people whereas cash credit is given to industrialists.
capital market The capital market is a market for financial assets which have a long or indefinite maturity. Generally, it deals with long term securities which have a maturity period of above one year. Capital market may be further divided into three namely: (i) Industrial securities market. (ii) Government securities market and (iii) Long term loans market.
(iii) (iv) (v)
Primary market is a market for new issues or new financial claims. Hence, it is also called new issue market. The primary market deals with those securities which are issued to the public for the first time. In the primary market, borrowers exchange new financial securities for long term funds. Thus, primary market facilitates capital formation. There are three ways by which a company may raise capital in a primary market. They are: Public issue Rights issue Private placement
Secondary market is a market for secondary sale of securities . In other words, securities which have already passed through the new issue market are traded in this market. Generally, such securities are quoted in the stock exchange and it provides a continuous and regular market for buying and selling of securities. This market consists of all stock exchanges recognized by the government of India. The stock exchanges in India are regulated under the Securities Contracts (Regulations) Act, 1956. The Bombay stock exchange is the principal stock exchange in India which sets the tone of the other stock markets.
It is a market where government securities are traded. In India there are many kinds of government securities- short-term and long-term. Long term securities are traded in this market while short term securities are traded in the money market. Securities issued by the central government, state government, semigovernment authorities like city corporations, port trusts ,etc. improvement trusts, state electricity boards, all India and state level financial institutions and public sector enterprises are dealt in this market.
Development banks and commercial banks play a significant role in this market by supplying long term loans to corporate customers. Long-term loans market may further be classified into: (i) Term loans market (ii) Mortgages market (iii) Financial guarantees market
Money market 1. It is a market for short term loan able funds for a period of not exceeding one year. 2. This market supplies funds for financing current business operations, working capital requirements of industries of the government. 3. The instruments that are dealt in a money market are bills of exchange, treasury bills, commercial papers, certificate of deposit.
Capital market 1. It is a market for long term funds exceeding a period one year. 2. This market supplies funds for financing the fixed capital requirements of trade and commerce as well as the long term requirements of the government. 3. This market deals in instruments like shares, debentures, government bonds.
•
4. Each single money market instrument is of large amount. A TB is of minimum for one lakh. Each CD is for a minimum of Rs.25 lakhs. 5. The central bank and commercial banks are the major institutions in the money market. 6. Money market instruments generally do not have secondary markets. 7. Transactions mostly take place over the phone and there is no formal place. 8. Transactions have to be conducted without the help of brokers.
4. Each single capital market instrument is of small amount. Each share value is Rs.10. each debenture value is Rs.100 5. Development banks and insurance companies play a dominant role in the capital market. 6. Capital market instruments generally have secondary markets. 7. Transactions take place at a formal place viz., stock exchanges. 8. Transactions have to be conducted only through authorized
BUYING AND SELLING OF SHARES
IN OUR STOCK MARKET MORE THAN 13,766 STOCKS
BSE (BOMBAY STOCT EXCHANGE )
NSE (NATIONAL STOCK EXCHANGE)
• • • • • • •
Started in 1850 in front of Town-Hall in Bombay currently known as Horniman circle Formed in 1875 as Bombay Stock Exchange In 1986 launched its first stock index named ‘SENSEX’ with base year 1978-79 Non-profit association & evolved as the premier stock exchange Oldest stock exchange of Asia Accounts for 75% of listed capital & 75% of shares in terms of market capitalization Its turnover is 1/3rd of the total turnover in securities in India
Transactions are carried by TM on behalf of their clients • Financial soundness, track record, experience, infrastructure and manpower
TM must be registered and pay fee to BSE & Regulatory Authority TM’s play a role of brokers, sub-brokers, floor-brokers, agents, jobbers, dealers, Badla financiers, dealer in G-Sec and underwriters
•
BSE has – A Board of 9 directors – Executive Director – 3 Gov Nominees – A RBI Nominee – 5 Public representatives
•
Executive Director is responsible for day-2day functioning and administration of Stock Exchange
• •
Outcry System Interaction based trading & settlement – If paid-up value= INR 10 & or 100 Sh. Trading lot is 50 or 100 Sh. – Paid-up value > 100 INR, market lot of 10 Sh.
• •
•
Settlement period 14 days or more Permission from board or president in special cases Physical settlement by TM at the clearing house
•
•
•
•
NSE was started in April 1993 as a corporate body. In July 2005, became the largest exchange in India. Trades over 1500 equity, 800 debt instrument with a corporate membership of 980. Companies are selected on the basis of record, the profitability, paid-up capital, market capitalization and dividend payment.
1.
2. 3. 4. 5.
6. 7. 8. 9. 10.
1
(SENSEX 30 STOCKS)
2
(NIFIY 50 STOCKS)
1. 2. 3. 4. 5. 6. 7.
ACC 21. SBI GRASIM 22.INFOSYS HINDALCO 23.DR.REDYS HLL 24.SATYAM ITC 25.CIPLA L&T 26.AIRTEL RIL
11.BHEL 12.GUJ AMBUJA 13.ICICI BANK 14.RANBAXY 15.REL 16.R.COM 17.HDFC BANK
1.ACC 11.GUJ AMBUJA 21.JET AIRWAYS 2.BAJAJ AUTO 12.HCL 22.ITC 3.BHEL 13.HDFC 23.L&T 4.BPL 14.HDFC BANK 24.MTNL 5.BHARTI AIRTEL 15.HERO HONDA 25.M&M 6.CIPLA 16.HINDALCO 26.MARUTI 7.DABUR 17.HLL
31.NATIONAL ALUMINIUM MOTORS 32.RANBAXY POWER 33.R.COM 43.TATA STEEL 34.REL 44.WIPRO 35.RIL 36.SATYAM 46.VSNL
41.TATA 42.TATA
45.ZEE
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
BANKING SECTOR CAPITAL GOODS SECTOR CEMENT SECTOR REAL ESTATE SECTOR INFRASTRUCTURE SECTOR POWER SECTOR TELECOM SECTOR AUTOMOBILES SECTOR METAL SECTOR INFORMATION TECHNOLOGY SECTOR
1. (ASIXS BANK)
4.
(PNB)
2. (ICICI BANK)
3. (HDFC BANK)
5.
(SBI)
1.
4.
2.
3.
5.
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.
1.
4.
2.
5.
3.
1.
4.
2.
5.
3.
1.
2.
3.
4.
5.
1
2.
3.
4.
5.
1.
2.
3.
4.
1.
2.
3.
4.
5.
3. 4. 5. 6. 7.
INFLATION MARKET TRENDS GLOBAL MARKETS GOVT. POLICIES FINANCIAL STATEMENT OF COMPANIES
INFLATION RATE CURRENT 0.57 MAIN FACTOR CRUDE earlier147$ BARRAL NOW CRUDE IS ON 49$ BARRAL
1.BULL MARKET
2. BEAR MARKET
PROFITS LOSSES GROWTH
FINANCIAL STATEMENT OF COMPANIES GROWTH OF CONPANIES ORDER BOOK MANAGEMENT LAND BANK POLICIES PLANS
1. 2. 3. 4. 5. 6. 7. 8.
GDP GROWTH RATE ORDER BOOK OF INDIAN COMPANIES Stock MARKET GROWTH INDIA GORWING FASTER FIIS INVESTING IN INDIA BIG FISHS GETTING BIGER NUCLEAR DEAL STRONG FUNDAMENTALS
ORDER BOOK Rs 85,000 CRORE INCOME GROWTH 26% NET PROFIT Rs 27,OOO CRORE
ORDER BOOK Rs 52,683 CRORE INCOME GROWTH 40% NET PROFIT Rs 29,883 CRORE
25000 20000 15000 SENSEX
10000 5000 0 1990
1994
1998
2002
2006
INFR AS TRUC TURE PROJECTS
POWER
3.
FOREGIN ECONOMY 2.INDIAN ECONOMY 2% GROWTH RATE DEVELOPED ECONOMY LESS EXPANSTION
8.5% GROWTH RATE DEVELOPING ECONPMY MORE EXPANSTION
75000 MW BY 2017
15000 MW BY 2015
POWER
FOR INDUSTRY GROWTH OF POWER SECTOR CHEAPER POWER OPPORTUNITY FOR COMPANIES
1. DIRECT
INVESTMENT
BY OPENING TRADING ACCOUNT BY OPENING DEMAT ACCOUNT
1.
2.
3.
4.
5.
3.
2.
2. MUTUAL FUNDS
FUND
MANAGERS SAFeTY OF YOUR MONEY
ESTABLISHMENT OF SEBI
The Securities and Exchange Board of India was established on April 12, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992. Basic functions of the Securities and Exchange Board of India “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected there with or incidental there to”
As an important entity in the market it works with following objectives: 1. It tries to develop the securities market. 2. Promotes Investors Interest. 3. Makes rules and regulations for the securities market.
1.1 Definition of Venture Capital Fund : The Venture Capital Fund is now defined as a fund established in the form of a Trust, a company including a body corporate and registered with SEBI which: ◦ has a dedicated pool of capital; ◦ raised in the manner specified under the Regulations; and ◦ to invest in Venture Capital Undertakings in accordance with the Regulations."
1.2 Definition of Venture Capital Undertaking: Venture Capital Undertaking means a domestic company :- ◦ Whose shares are not listed on a recognised stock exchange in India ◦ Which is engaged in business including providing services, production or manufacture of articles or things, or does not include such activities or sectors which are specified in the negative list by the Board with the approval of the Central Government by notification in the Official Gazette in this behalf.
1.3 Minimum contribution and fund size : the minimum investment in a Venture Capital Fund from any investor will not be less than Rs. 5 lacs and the minimum corpus of the fund before the fund can start activities shall be atleast Rs. 5 crores.
1.4 Investment Criteria : The earlier investment criteria has been substituted by a new investment criteria which has the following requirements : ◦ disclosure of investment strategy; ◦ maximum investment in single venture capital undertaking not to exceed 25% of the corpus of the fund; ◦ Investment in the associated companies not permitted; ◦ atleast 75% of the investible funds to be invested in unlisted equity shares or equity linked instruments. ◦ Not more than 25% of the investible funds may be invested by way of:
subscription to initial public offer of a venture capital undertaking whose shares are proposed to be listed subject to lock-in period of one year; debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity. It has also been provided that Venture Capital Fund seeking to avail benefit under the relevant provisions of the Income Tax Act will be required to divest from the investment within a period of one year from the listing of the Venture Capital Undertaking.
1.5 Disclosure and Information to Investors: In order to simplify and expedite the process of fund raising, the requirement of filing the Placement memorandum with SEBI is dispensed with and instead the fund will be required to submit a copy of Placement Memorandum/ copy of contribution agreement entered with the investors along with the details of the fund raised for information to SEBI.
2. QIB status for Venture Capital Funds : The venture capital funds will be eligible to participate in the IPO through book building route as Qualified Institutional Buyer subject to compliance with the SEBI (Venture Capital Fund) Regulations. 3. Relaxation in Takeover Code: The acquisition of shares by the company or any of the promoters from the Venture Capital Fund under the terms of agreement shall be treated on the same footing as that of acquisition of shares bypromoters/companies from the state level financial institutions and shall be exempt from making an open offer to other shareholders.
4. Investments by Mutual Funds in Venture Capital Funds: In order to increase the resources for domestic venture capital funds, mutual funds are permitted to invest upto 5% of its corpus in the case of open ended schemes and upto 10% of its corpus in the case of close ended schemes. Apart from raising the resources for Venture Capital Funds this would provide an opportunity to small investors to participate in Venture Capital activities through mutual funds.
5. Government of India Guidelines: The Government of India (MOF) Guidelines for Overseas Venture Capital Investment in India dated September 20, 1995 will be repealed by the MOF on notification of SEBI Venture Capital Fund Regulations. 6. The following will be the salient features of SEBI (Foreign Venture Capital Investors) Regulations, 2000 : 6.1 Definition of Foreign Venture Capital Investor : any entity incorporated and established outside India and proposes to make investment in Venture Capital Fund or Venture Capital Undertaking and registered with SEBI.
6.2 Eligibility Criteria : entity incorporated and established outside India in the form of investment company, trust, partnership, pension fund, mutual fund, university fund, endowment fund, asset management company, investment manager, investment management company or other investment vehicle incorporated outside India would be eligible for seeking registration from SEBI. SEBI for the purpose of registration shall consider whether the applicant is regulated by an appropriate foreign regulatory authority; or is an income tax payer.
6.3 Investment Criteria : ◦ disclosure of investment strategy; ◦ maximum investment in single venture capital undertaking not to exceed 25% of the funds committed for investment to India however it can invest its total fund committed in one venture capital fund; ◦ atleast 75% of the investible funds to be invested in unlisted equity shares or equity linked instruments. ◦ Not more than 25% of the investible funds may be invested by way of: subscription to initial public offer of a venture capital undertaking whose shares are proposed to be listed subject to lock-in period of one year; debt or debt instrument of a venture capital undertaking in which the venture capital fund has already made an investment by way of equity.
7. Hassle Free Entry and Exit : The Foreign Venture Capital Investors proposing to make venture capital investment under the Regulations would be granted registration by SEBI. SEBI registered Foreign Venture Capital Investors shall be permitted to make investment on an automatic route within the overall sectoral ceiling of foreign investment under Annexure III of Statement of Industrial Policy without any approval from FIPB.
8. Trading in unlisted equity : The Board also approved the proposal to permit OTCEI to develop a trading window for unlisted securities where Qualified Institutional Buyers(QIB) would be permitted to participate.
Some of the members of the Board felt that the mandated post listing exit time frame of one year for availing tax pass through by a domestic Venture Capital Fund could be reconsidered by the Government in the light of international experience and the need to avoid operational restrictions and optimize inflow of venture capital in the country. The Board also desired that a small Group within SEBI could be set up to codify the experience of the existing players, international experience including tax treatment and potential areas for venture capital funding
PRESENTATION BY --VAIBHAV BIRLA MBA II
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