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Financial Services V1
Assignment - A

Q1. What do you do you understand by the term "Credit Rating Agency"? Explain th
ere major function?
Q2. What do you mean by Book -Building? Explain the types of Book-Building?
Q3. What do you mean by hire purchase?
Q4. What do you mean by Consumer Credit? Explain the types of Consumer Credit?
Q5. What do you understand by Venture Capital? Explain the scope of Venture Capi
tal?

Assignment - B

Q1. What do you mean by Financial Services? Mention in brief following types of
financial services?
Q2. What do you mean by Initial Public Offer? Explain the different type of entr
y norm to make an IPO?
Q3. What do you mean by Leasing? Explain the different type of leasing?
CASE STUDY
HSBC's Restructuring in India
Period: 1999-2004 Organization: HSBC India Pub Date: Countries: India Industry:
Banking
Abstract:
The case discusses the operations of HSBC Group in India and the measures taken
by HSBC India in recent times to achieve a faster growth.
It discusses in detail the reorganization program launched by Booker, the CEO of
HSBC India to transform the conservative institution into an aggressive, perfor
mance-oriented one.
The case discusses in detail various internal reorganization measures including
the introduction of new work principles, downsizing, organizational reshuffling
and greater focus on potential growth areas.
Background

The Hong Kong and Shanghai Banking Corporation Limited (HSBC) entered India as e
arly as 1959. Despite being one of the oldest and well-established foreign banks
, HSBC had been lagging behind local private sector banks and other foreign bank
s in India in terms of business network and growth. HSBC's competitors and indus
try experts regarded it as a conservative bank that lacked competitive spirit.
Commenting on HSBC, the head of direct sales of one of its rival banks said, "HS
BC isn't seen as being as aggressive as its rivals in the market. It has extreme
ly good relationships with its branch customers and serves them very well, but i
t is just not seen as being aggressive in the rest of the market." HSBC's compla
cency was reflected in the bank's financial performance.
Local private sector banks like ICICI and HDFC were far ahead of HSBC in all bus
iness segments. When benchmarked against foreign banks, HSBC fared badly. HSBC's
net profits fell by over 25 per cent for two consecutive years in the fiscal 20
00-01 and 2001-02, while rival banks like Citibank3 posted a rise of 37 per cent
in profits for the same period.
On November 2002, Niall S K Booker (Booker) was appointed Group Manager and Chie
f Executive Officer (CEO) of the HSBC Group in India.
Booker soon realized that HSBC India followed a conventional approach to doing b
usiness and retained its old bureaucratic structure and culture. He believed tha
t the much criticized laidback work culture was the reason for the lacklustre fi
nancial performance of the bank.
Booker decided to transform the bank's work culture so that HSBC could shed its
bureaucratic and conservative image and gear up to face new challenges. He wante
d HSBC India to be proactive and aggressive like its competitors.
To achieve this, Booker concentrated on giving the bank a new direction by launc
hing a major restructuring program.
HSBC is a leading global player in the banking and financial services industry.
It is the third largest bank in the world in terms of market capitalization it p
rovided a comprehensive range of financial services, namely, personal financial
services, commercial banking, corporate investment banking, private banking and
other related businesses. HSBC was established in 1865 to finance the growing tr
ade between Europe, India and China. Scotland-born Thomas Sutherland (Sutherland
), who worked for the Peninsular and Oriental Steam Navigation Company, establis
hed the bank.
He found that there was considerable demand for local banking facilities in Hong
Kong and on the Chinese coast. Sutherland established a bank in Hong Kong in Ma
rch 1865, and another in Shanghai after a month. The banks' headquarters were at
Hong Kong.
Soon, the bank opened branches around the world. The emphasis continued to be on
strengthening the presence in China and the rest of the Asia-Pacific region. By
the end of the century, HSBC emerged as the foremost financial institution in A
sia.
World War I (1914-1919), however, brought disruption and dislocation for many bu
sinesses. The 1920s saw a revival with HSBC opening more branches. During World
War II (1941-1945), the bank was forced to close many branches and its head offi
ce was temporarily shifted to London. After the war, the headquarters was shifte
d back to Hong Kong.
The post-war political and economic changes in the world compelled the bank to a
nalyze and reorient its strategy for continued business growth. The acquisition

of the Mercantile Bankand the British Bank of the Middle East (BBME) in 1959 lai
d the foundation for the present day HSBC Group
HSBC in India
HSBC's origins in India could be traced back to October 1853, when the Mercantil
e Bank of India, London and China was established in Mumbai.
Starting with an authorized capital of Rs 5 mn, the Mercantile Bank soon opened
offices in London, Chennai (India), Colombo, Kandy, Kolkata (India), Singapore,
Hong Kong, Canton and Shanghai.
In the next 10 decades, the Mercantile Bank steadily expanded its geographical n
etwork and service offerings, keeping pace with the evolving banking and financi
al needs of customers. The Mercantile Bank was acquired by the HSBC Group in 195
9. The head office of Mercantile Bank at the Flora Fountain building in Mumbai c
ontinued to be the head office of the HSBC Group in India.
In the 1970s, HSBC decided to expand by acquisition and formation of its own sub
sidiaries. HSBC introduced India's first automated teller machine (ATM) in 1987.
In 2001, HSBC opened the first bank branch in Pune (Western India) that remaine
d open all 365 days a year.
The Restructuring
On his appointment, Booker's approach was to focus on fine-tuning and executing
existing strategies, rather than experimenting with new plans. He intended to ta
ke it slow and steady without radical changes.
He said that "the people issue" was very important to him. Therefore, the key co
mponents of the restructuring programmers included introducing new work principl
es, downsizing, organizational reshuffling and focus on new growth areas.
New Work Principles
HSBC's work culture was considered most bureaucratic among all foreign banks in
India. Reportedly, the top management had a laid-back attitude towards work. An
insider said, "There is a bunch of people at the top who aren't very competent a
nd who all play golf together. It is basically an old boys'club.
The Benefits
The impact of the restructuring programme was reflected by the improved financia
l performance of HSBC (Refer Exhibit IV and V for the financial highlights of HS
BC).
For the financial year 2003-04, the assets per employee and net profit increased
by 30 per cent; operating profit by 31 per cent and cost-to-income ratio came d
own from 47 to 43 per cent compared to the fiscal 2002-03. Personal financial se
rvices accounted for 36 per cent of total advances, against 31 per cent in the p
revious fiscal.
HSBC's retail assets doubled during this period from around a fourth to a third
of its total assets. HSBC expected that the retail business would grow by 40 per
cent in the fiscal 2004-05. Home loans business grew by 100 per cent; and the b
ranches' contribution comprised 30 per cent
Looking Ahead
Notwithstanding the benefits reaped from the restructuring, HSBC was still a sma

ll player in several financial services businesses including asset management, h

ome loans, stock broking, credit cards and retail banking in India.
For instance, HSBC Asset Management (India) Private Ltd. launched in December 20
02, had total assets under management amounting to Rs 540 bn by June 2004. Still
, it was only the 10th largest asset management company (AMC) in India. The slow
growth of advances was another problem for HSBC.
In the financial year 2003-04, HSBC's loan disbursals grew by just 4.67 per cent
over the financial year 2003 while for the same period, its competitors like St
andard Chartered and Citibank loan disbursals grew by 44 per cent and 11 per cen
t respectively. Moreover, in spite of improved financial performance, the change
s introduced by Booker did not go well among top managers.
Question to review:Q1: The need for old and well-established organizations to change their outlook
and the way they operate along with the changing times so as to compete with sma
ller, nimble-footed competitors successfully
Q2: Examine the restructuring program implemented by HSBC India to revive its fi
nancial performance
Q3: Critically analyze the strategies adopted by Niall SK Booker to make HSBC In
dia an aggressive, performance-oriented organization
Q4: Chart a growth strategy for HSBC India in the near future

Assignment - C

Q1. Approval from which body is required to start Factoring in India ?

a)Central Government
b)State Government
c)State Bank of India
d)Reserve Bank of India
Q2. How can Factoring help a Business ?
a) Cash Inflow
b)Low Costing
c)Bad Debts Recovery
d)Increase Sales
Q3. Who is a Factor ?
a)Buyer
b)Seller

c)Agent of Buyer
d)Agent of Seller
Q4. What kind of agreement do Factoring deals with ?
a)Cash Sales of Goods
b)Cash Sales of Fixed Asset
c)Credit Sales of Goods
d)Credit Sales of Fixed Asset

Q5. An Invoice is valued at Rs.10,000 & the seller received Rs.9000.

So what is the Advanced Rate in consideration with Factoring ?
a)9 %
b)10 %
c)90 %
d)100 %

Q6. Book Building is a

(a) method of placing an issue
(b) method of entry in foreign market
(c) price discovery mechanism in case of an IPO
(d) none of the above

Q7. "Sell Reliance Petro Shares at Rs 60" This order is a

(a) Best rate order
(b) Limit order
(c) Discretionary order
(d) Stop Loss Order

Q8. Stock exchange helps in

(a) fixation of stock prices
(b) ensures safe and fair dealing

(c) induces good performance by the company

(d) all of the above

Q9. Issue Management is a system under which concept of Management?

a)Human Resource Management
b)Financial Management
c)Project Management
d)System Management

Q10. ___________ refers to the process of generating, capturing and recording in

vestor demand for shares during an IPO (or other securities during their issuanc
e process) in order to support efficient price discovery.
a)Book building
b)Book keeping
c)Booking
d)Recording

Q11. What are the two types of obligations of merchant banker in issue managemen
t?
a)Ex issue and pre issue
b)Pre issue and next issue
c)Pre issue and post issue
d)Post issue and next issue

Q12. The company shall ensure that:

a) The letter of offer, the public announcement of the offer or any other advert
isement, circular, brochure, publicity material shall contain true, factual and
material information and shall not contain any misleading information and must s
tate that the directors of the company accepts the responsibility for the inform
ation contained in such documents.
b) the company shall not issue any shares including by way of bonus till the dat
e of closure of the offer made under these regulations
c) the company shall pay the consideration only by way of cash
d) All the above

Q13. What is IPO?

a) INITIAL PUBLIC OFFER
b) IN THE PUBLIC OFFER
c) INITIAL POSTAL OFFER
d) INTERNAL PUBLIC OFFER

Q14. Forex market deals with

(a) multi currency
(b) only domestic currency
(c) none of the above

Q15. The _____________ of a company is the maximum amount of share capital that
the company is authorized by its constitutional documents to issue to shareholde
rs.
a)Authorized capital
b)Issued capital
c)Reserve capital
d)Paid up capital

Q16. The type of lease that includes a third party, a lender, is called:a.) Sale and leaseback
b.) Direct leasing arrangement.
c.) Leveraged lease.
d.) Operating lease.

Q17. Medium-term notes (MTNs) have maturities that range up to ?

a.) one year.
b.) two years.
c.) ten years
d.) thirty years (or more)

Q18. The term of the lease may be ?

a) Fixed
b) Periodic
c) Infinite Duration.
d) ANY OF THE ABOVE

Q19. Mutual funds are valued with help of their

(a) NAV's
(b) NFO
(c) IPO
(d) None of the above

Q20. The SEBI __________lays down the overall regulatory framework for registrat
ion and operations of venture capital Funds in India.
a) The SEBI (Venture Capital Funds) Regulation, 1996[Regulations].
b) GUIDELINES.
c) NORMS.
d) RECOMMENDATIONS.

Q21. Right issue is:

(a) issue of securities by issue of prospectus to the public
(b) Securities are issued through some selected investors.
(c) Selling securities in the primary market by issuing rights to the existing s
hareholders.
(d) None of the above

Q22. Private placement has following advantage:

(a) Flexibility and high cost
(b) Accessibility and speed
(c) High cost and speed
(d) Speed and complexity

Q23. Book Building Process is completed with the help of a

(a) Book runner
(b) Underwriter
(c) Registrar
(d) Lead manager

Q24. What is FVCIs?

a) Foreign Value Capital Investors.
b) For Venus Capital Investors.
c) Foreign Venture Capital Investors
d) Foreign Venture Capital Institution.

Q25. Venture capital (also known as VC or Venture) is a type of _____ capital?

a) private equity .
b) Reserve.
c) Preference.
d) None of the above.

Q26. Total amount of called up share capital which is actually paid to the compa
ny by the members is called
(a) Subscribed capital
(b) Called up capital
(c) Paid up share capital
(d) None of the above

Q27. A shares par value is Rs 10 but it is issued at Rs 20 , then extra amount o

ver par value is called
(a) Coupon
(b) Interest
(c) Premium

(d) None of the above

Q28. "Bad news about a company can pull down its stock prices". This is called
(a) Market risk
(b) Non market risk
(c) Interest risk
(d) Callable risk

Q29. Debt/Income funds invest in

(a) Tax saving schemes
(b) Money Market Instruments
(c) High Rate fixed income bearing instruments
(d) Both debt and equity

Q30. Mutual Funds investor can not earn following return

(a) Dividend
(b) Capital Gain
(c) Increase in NAV
(d) Fixed interest earning

Q31. When approaching a VC firm, consider their portfolio:?

a) Business Cycle: Do they invest in budding or established businesses?.
b) Industry: What is their industry focus?
c) Return: What is their expected return on investment?
d) All the above

Q32. Most venture capital funds have a fixed life of _____ years?
a) 10.
b) 20.

c) 30.
d) 40.

Q33. HIRE PURCHASE IS ALSO CALLED .?

a) Closed-end leasing.
b) PURCHASING.
c) CREDIT PURCHASE.
d) LEASING.

Q34. Balanced funds provide:

(a) Steady return
(b) High return
(c) Increase volatility
(d) None of the above

Q35. Stock exchanges should ensure:

(a) Active trading and insider information
(b) Active trading and transparency

Which of the following is true?

(a) Both a and b
(b) Only b
(c) Only a
(d) Neither a nor b

Q36. Merchant bankers do not indulge in following activities

(a) Drafting of prospectus
(b) Appointment of Registrar
(c) Selection of Promoter
(d) Arrangement of underwriter

Q37. Private placement reduces ________________________ of public issue:

(a) Cost
(b) Subscription
(c) Issue size
(d) None of the above

Q38. Every hire-purchase agreement shall state.

a) The hire-purchase price of the goods to which the agreement relates.
b) The date on which the agreement shall be deemed to have commenced.
c) The goods to which the agreement relates, in a manner sufficient to identify
them.
d) All the above.

Q39. A person must be at least ___ years of age to enter into a valid hire purch
ase.
a) 21.
b) 30
c) 18
d) 15.

Q40. Preference shares means which fulfill the following two conditions
a) It carries preferential rights in respect of dividend at fixed amount and fix
ed rate
b) It does not carry preferential rights in regard to payment of capital on wind
ing up .

WHICH ONE OF THESE IS TRUE:

(a) Both a and b
(b) Only a
(c) Only b
(d) Neither a nor b.

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