PROJECT REPORT

ON

“Demat Feasibility & working of HSL

AS A Depository Participant”
Submitted For The Partial Fulfillment Towards The
awards of the degree Of Master
Of Business Administration

PROJECT GUIDE
Mr.Neeraj gogia

SUBMITTED BY
Gunjan Goyal
Roll No.-0700370016
MBA 4th semester

B.M.A.S. Engineering College, Keetham, Agra

Uttar Pradesh Technical University, Lucknow
 (2007-09)

DECLARATION

I, Gunjan Goyal, student of MBA-4th Semester, B.M.A.S Engineering College, Agra

hereby declare that the Summer Training Project titled “Demat Feasibility & working of
HSL as a depository participant ” is the outcome of my own work and the same has not
been submitted to any other University /institution for the award of any degree or
professional diploma.

DATE:
PLACE: GUNJAN GOYAL

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 ACKNOWLEDGEMENT

First and foremost I would like to express my sincere gratitude to Mr.Hem Chand Jain,
Director of Hem Securities Ltd. Jaipur Branch for giving me an opportunity to perform
my project in this organization .

I am grateful to corporate guide Miss. Nisha Sharma, DP Head, who has been an
inspiration for me, who has shown me the light of corporate world, who has guided me
eloquently during my project work and who has been my mentor through out my project.

I would also like to pay the acknowledgements to all the corporate executives, for taking
out time from their busy schedule and providing the relevant information, which
contributed significantly to the project analysis.

Finally, I would also like to thank all my dear friends for their kind cooperation, advice
and encouragement during the long and arduous task of preparing this report and carrying
out the project. And last but not the least, my family members whose blessings,
inspiration and encouragement have resulted in the successful completion of this project.

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 EXECUTIVE SUMMARY

Securities market is one of the leading Markets. Mainer services are related to this
market. And there are many organizations, which are providing services to the participant
of this securities market. There is lots of competition in this market and as my topic of
summer internship is Demat feasibility, so I got to know many things about this industry.
To understand about this market and to know about the competition among different
securities related organization, I have prepare a different part that is industrial scenario.
From this part I got to know about the different competitors, their offering, their present
position etc.

Hem securities limited is also an active part of this industry, which provides different type
of services to its clients. Hem securities limited is a part of Hem group. It has made a
significant place in stock market by its operations in different services. It is a well-
regulated organization, which is giving tough competition to many players of this market.
It is present in Equity market, Derivative market, Futures trading in commodities and it is
working as a depository participant also, and it is running successfully as a Depository
participant.

Hem securities limited is associated with CDSL (Central Depository Services Limited)
and to perform the operations of DP it is using software called CDAS, Masters
application, Being a Depository participant it is performing many operations like opening
and maintenance of Demat account, dematerializing the share certificates, rematerializing
the shares, settlement of trades, pledging, unpledging, managing Demat accounts
according to the corporate actions, transmission etc. It is performing all its operation very
efficiently.

As there are many DPs in jaipur, some of them are associated with CDSL and some are
associated with NSDL. All these are performing their operations on the basis of
guidelines provided by SEBI. Although all of them are performing almost in the same
pattern but still to find out the feasibility for Demat account Holders in Hem securities
limited a research has been conducted. The main motive of this research is to compare the
DPs in jaipur. For this research purpose only 6 DPs have been taken, and on the basis of
findings from this research some conclusion has been drawn.

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 TABLE OF CONTENT

I. Introduction
1. Industrial Scenario
2. Organization Profile
3. Organization Structure
4. Objectives of study
II. Body of Dissertation
1. Research Methodology
2. Data Analysis and Interpretation
3. Findings and Solutions proposed
4. Suggestions for implementation
III. Summary and Conclusion
IV. References and Bibliography

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 I. INTRODUCTION

NEED OF STUDY
 There is a need of complete implementation of prevailing Demat account in present
scenario.

 Dematerialization of securities is the basic trend followed by most of the securities

institutions in securities market.

 Dematerialized form of securities help all investors and financiers in scrip-less

trading and maintaining an account in reasonable & convenient form with ensuring
safe and security.

SCOPE OF STUDY
 The scope of this complete implementation of Demat account will be beneficial to
National Stock Exchange to a greater extent in getting all subscriptions in electronic
form with complete data-records.

 This is the main motive for which I have conducted research undergoing the
comparison of other securities institutions with the application of certain analytical
and statistical tools to make it universally applicable with all possible efforts.

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 1. INDUSTRIAL SCENARIO

The stock market industry is one of the main industries of any country, which contribute
to the economy of the country up to a large extent. The main operation of this industry is
buying and selling of shares, this market has given a vast opportunity of employment in
India because many Indians are indulges in this market. The Indian Securities Market is
one of the India’s leading markets. The Bombay Stock Exchange (BSE) and the National
Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In India, in
addition, there are 22 Regional Stock Exchange. However, the BSE and NSE have
established themselves as the two leading exchanges and account for about 80 percent of
the equity volume traded in India. Both exchanges have a different settlement cycle,
which allows investors to shift their positions.

The main focus of this industry is shares. Earlier the shares were in the form of physical
certificate but now approximately 99.99% companies are using electronic mode of
shares. This electronic mode of shares had removed many problems that were there with
physical share certificates. The electronic shares are called demat shares. In India There
are two depositories, NSDL & CDSL, which handle the demat form of shares, they work
like the main authority and under them there are depository participants.

These depository participants (DPs) handle the whole work related to demat shares.
Presently there are many DPs in India. Around 200 "depository participants" (DPs) offer
the demat account facility. Earlier there was not so much competition among them as
there were not so much DPs because many of them were afraid that whether this demat
mode of shares will be accepted by people or not but as the popularity of demat shares,
demat account grew and SEBI declared that all the trades done in stock exchange will be
done only in Demat mode many other DPs enter in to this market. And the number of
DPs is increasing day by day. Presently there is a big competition within this industry;
there are few key players also of this market. Few competitors of this industry are
Indiabulls securities limited, ICICI direct.com, HDFC, Rellegare, Hem securities limited,
India Infoline, Alankit, Mantri, Anand Rathi etc.

Many banks are also providing the demat account facility and Banks are advantageous
because of the number of branches they have. Some banks give the option of opening a
demat account in any branch, while others restrict themselves to a select set of branches.
Some private banks also provide online access to the demat account. So, clients can
check on their holdings, transactions and status of requests through the net banking
facility. A broker who acts as a DP may not be able to provide these services. Many of
the DPs are working on national level and some of them are providing their services up to

7
local level. But key players cannot underestimate these local players because these local
players have captured major portion of this market. These local players are increasing
their area of providing services. So all these DPs need to be very careful in providing
services to the clients. Most of the DPs are providing different type of services to their
clients. Although SEBI has provided the guidelines to the DPs to work in a prescribe
format so they have to perform most of the operations in the same format but still they
have the opportunities to prove themselves better than others in many ways.

Usually this is the mentality of clients that they will open a trading account also with the
same organization with which they have their Demat account. And the number of trading
account depends upon many factors, like, whether the organization is providing funding
facility or not if yes then how much, what are the brokerage charges etc. so the number of
Demat accounts also depends upon these facilities.

Competition within the industry

As the competition in this industry is very high and it is not an easy task to compete in
this industry. There are lots of new companies coming in this business. This market is
center of attraction to new entrepreneur because it is already successful market and it is
for sure that it will grow further, and there are many opportunities lying ahead in the way.
Hem securities limited has established its own identity among the investors but it also has
to face competition from its competitors. It has many competitors, some of them are
described below: -

 Indiabulls
An Indiabulls security limited is one of the leading companies in securities market. It
offers different type of financial product to their clients, these financial products are: -
Equity, Mutual Fund and Insurance. Their Equity product includes Normal indiabulls,
Power indiabulls and Equity analysis. It is providing services of DP also and its main DP
is situated in Gurgaon. It provides online and offline, both type of Demat account, it also
offers Trading account to its Clients. Now it has made it a compulsion to open a trading
account also with demat account. It provides margin for intraday and funding facility for
six days only.

 Anand Rathi
AnandRathi (AR) is one of the leading securities firms providing the entire range of
financial services. AR provides a breadth of financial and advisory services including
wealth management, investment banking, corporate advisory, brokerage & distribution of
equities, commodities, mutual funds and insurance - all of which are supported by
powerful research teams. Its products include Demat and trading accounts. It provides
margin for intraday to its clients, it does not provide funding for delivery.

 ICICI Direct.com
ICICI Direct.com is the most comprehensive website, which allows its clients the
opportunity to invest in Shares, Mutual funds, Derivatives (Futures and Options) and
other financial products. They offer their clients a product for every investment need.

8
This provides the facility of cash trading, margin trading, margin plus trading, spot
trading and BTST (Buy today and Sell tomorrow) facility to its clients. It also provides
the facility of margin and funding for facilitating its clients to trade with more money. It
has also the policy to open a saving bank and trading account also with Demat account.
This complete package is for 750 Rs. and 500 Rs. AMC. There is one more policy if you
will invest 20,000 Rs. in its Mutual Fund then the account opening cost will reduce to 1
Rs. and AMC for two years will be exempted. This provides the facility of overseas
trading also, which is a unique facility, which others are not providing.

 India Infoline
India Infoline Limited is listed on both the leading stock exchanges in India, the Stock
Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member
of both the exchanges. It is engaged in the businesses of Equities broking, Wealth
Advisory Services and Portfolio Management Services. It offers broking services in the
Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is
registered with NSDL as well as CDSL as a depository participant, providing a one-stop
solution for clients trading in the equities market. It has recently launched its Investment
banking and Institutional Broking business. Its financial product and services are related
to: Equity, commodities, insurance, research, Wealth management services etc. Its special
feature is that it is not charging any kind of AMC and it is providing margin for intraday
and funding for delivery to its clients.

 Mantri share broker limited

Mantri Share Brokers Private Limited is a corporate member of National Stock Exchange
of India Ltd. The company is doing business of Equity and derivative Broking with
commitment of highest standards of transparency and services. The Core business of the
company is to provide secondary market (Equity and Derivatives) broking services to
Clients.
Some of the imported services commenced by the group on a large scale are stock
broking, Commodity Broking, IPO Marketing, DP related services and Dematerialization
etc. These Services are being carried out on Mantri Share Brokers Private Limited.
 Pace
Pace is one of the successful organizations in the field of securities market. It is Gurgaon
based company. But it has branches in almost every part of India. It is providing different
type of financial services to its clients. It is working as a stockbroker, commodity broker
and depository participant in India. Its product includes Demat account and Trading
account. It provides funding facility for its trading account holder on the basis of the
holding of their Demat account, which allow its investors to purchase shares in more
quantity. Its main DP is in Gurgaon so its operations are initiated from that main DP
itself. The number of its Demat account holder is increasing day by day because of the
facilities provided by Pace to its account holders.

 Sherkhan
Sherkhan is also one of close competitors of Hem securities limited. It facilitates its
clients in many ways. Although it is not as big competitor for Hem securities limited as

9
its other competitors like Indiabulls, ICICI Direct.com, etc. but it is still going forward
speedly by winning the trust of its clients. Its product range includes classic trade, speed
trade and speed trade plus, which facilitates its clients during trading. It also has the
procedure for providing the margin and funding facility to its clients.

2. ORGANIZATION PROFILE

Hem Securities Limited (HSL) is established in Jaipur city. It has branches in almost
every part of India. But its main office is in Jaipur city because Jaipur is its origin place.
Mr. Hem Chand Jain established this organization. This organization is the work of Mr.
Jain’s dedication and his vision. He had made this organization from nothing to such a
big organization.

Hem Securities Limited is a part of HEM GROUP. This group pioneered its business in
financial service market products in Jaipur in 1981 with the establishment of their
original firm in the name of M/S H.C.Jain & Co. and then it became a member of Jaipur
Stock Exchange in 1983.That was a good sign for the organization to progress in future,
and from there onwards this group doesn’t look back and move further on the path of
success. This group started its work with a vision to get success and trust of its all clients,
and work hard to achieve them by moving further with its own principles. This group has
steadily spread its wings in all important financial markets and exchange to provide new,
better and all possible avenues. From its incorporation, this group is working very hard
and winning the trust of its clients by providing different type of services to them. And
the future plan of this group is, to operate at a most successful level by satisfying more
and more clients and by coming up with its own shares so that it will increase the worth
of the group and will become able to fight with the competition under this industry.

Reasons behind the position of this group are commitments and high regards for ethical
and transparent business practices, dynamic management and the sound investment in
cutting-edge technology which provide transparent and well integrated trading system to
their business associates and ultimate retail investing clients. As this group completely
understand that by the time it is better to change accordingly, otherwise it will be very
hard to survive, and changes in this market (security market) are very often so they adopt
the latest technologies and different type of back office Software’s which are made
especially to fulfill the requirement of this group and to serve up to the best level to the
clients.

Here in this group the working infrastructure is considered very important, because if the
working condition will be good and modern then it will be easy for employees to work
for long hours with full spirit and enthusiasm. As now a day employees are mobile
because there are many opportunities for talented people, so to retain the talent in the
organization it is required to provide some additional facilities. It is important that

10
employee feel themselves comfortable and familiar in the organization. In present
conditions, employees put more of their emphasis on the working condition of the
organization and if we want employees to work properly then we have to take care of all
the important aspect that are related to them. This is becoming the culture now a days to
facilitate the employees for having the healthy organization because employees are
considered the valuable assets not a machinery, and to retain the talent is the main task of
organization and HEM GROUP understand and follow that very well. They are trying to
maintain & develop the new technology & are also trying to increase their employee’s
knowledge for benefit of the group, and they are providing them particular information so
that it may help them to overcome from their own weaknesses & prepare them to move
forward by keeping main objectives of the organization in mind.

There are some milestones for the group, which have the great role in the position of the
company, these milestones have drastically changed the position of the company and
move it ahead from what it was previously. These milestones changed the fate of the
group. The group became able to have these milestones because of its continuous and
dedicated performance. These milestones are: -

 1983- M/S H.C Jain & Co., Jaipur commenced its venture in financial web world in
the country as a member of JSE (Jaipur Stock Exchange).

 1995-M/S HEM SECURITIES LIMITED, the flagship company of the HEM

GROUP acquired the membership of the Stock Exchange, Mumbai.
- M/S HEM SHARE BROKER LIMITED, another HEM group company
acquired the membership of OTC Exchange of India.

 1999-M/S HEM SECURITIES LIMITED acquired upgraded membership of the

BSE to the level of the composite corporate membership.

 2000-HSL became the trading member of the BSE, for the derivative segment of the
BSE, enabling the HEM GROUP to spread and carry its broking network,
providing new avenues for investment and profit making, to the doorstep of the
rural masses in the countryside.
-M/S HEM FINLEASE PVT. LIMITED became the member of the NSE of India
limited.

 2001-M/S HEM FINLEASE PVT. LIMITED acquired the membership of future and
option segments of the NSE of India limited.

 2004-HEM GROUP acquired the membership of the national commodities &

derivatives exchange limited in name of M/S HEM MULTICOMMODITIES
PVT. LIMITED. It got the membership of both MCX and NCDEX for trading
in commodities and derivatives since January 2004.

 2006-HFSL introduces online IPO and Internet trading.

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 2007-HEM group makes its presence in India through more then 250 business outlets
covering more then 90 cities.

These were the milestones, which change the HEM GROUP completely and launch it on
the path of success. This group claims that many more these type of milestone are about
to come which will take the company at height of success like it is planning to launch its
own share in the market which will again change the future and image of the company.

The success of this group lies in its working environment. The working environment of
this group is very professional and friendly. All the staff members of this group are very
close to Mr. Hem Chand Jain. Mr. Jain considers their employees as their family member.
They took all their problems as his own. As this group consist many company so he have
very big staff and to manage such a huge staff is really very difficult but Mr. Hem Chand
Jain has such leadership qualities which helps him to manage with that. He is the main
strategist of his own group or we can say that behind every important decision and
strategy of the group there is the mind of Mr. Hem Chand Jain. Although Mr. Hem Chand
Jain is the managing director of the group still he involves himself in day-to-day activities
of the group. He is informed with almost every activity of the group. He is very calm
person who handles every dispute related to the group very efficiently. We can say that in
this organization, there is chief architect approach, where a person sitting on the top
handle all things and disputes related to the organization, although he have many helping
hands which helps him in running this organization but overall he is the heart of the
group.

As he took care of all aspect related to the employees of the organization so in the return
of that all his staff members work with great dedication and sincerity.

In this group, there is a culture of corporate citizenship, where employees participate in

the organization’s welfare apart from the work what is assigned to them, In other words,
We can say that they all work voluntary also when there is requirement of that. We can
see their dedication for the group by looking at the issue of reliance power. At that time
there was lots work but limited time, at that time all the employees not only give their
hundred percent but they work beyond their working hours. That is the best example to
see the attitude of employees towards group. All the employees also give their best for the
improvement and success of the group.

Here, in this group customer is considered as God and the employees treat him very well.
The main policy of the group is that “ The success lies in the satisfaction of the
customers”, so they considered that if their clients will be satisfied with the services
provided to them then only this group could achieve its dream to be most successful. And
to work according with that policy they have instructed their employees in such a way so
that each and every client will be satisfied. Dissatisfaction of even a single client is
considered a failure of the group. In this way they are very careful with the client aspect
and adopt all the measure for the satisfaction of the clients.

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HEM GROUP provides different type of services to their clients. These services can be
called the salient features of the group. Some of These salient features are mentioned
below: -

1. This group allowed single screen trading in all market segment like in BSE/NSE/MCX
And NCDEX.
2. This provides maximum exposure against margin.
3. This provide the service of daily multiple research call flashes on trading screen during
Trading hours.
4. This provides powerful online back office for accounts.
5. This provides online depository back office.
6. There is hassle free auto pay in of shares.
7. This provide banking gateway through HDFC bank. Other bank cheque’s can be
directly deposited in the accounts.
8. This provides discounted brokerage for e-broking clients.

At present, this group is working with various stocks and commodity exchange so this
group is having their corporate offices in Mumbai and Jaipur with numerous business
associates spread over many cities through out the whole country to handle the business.

Company in equity market

In equity market, the HEM GROUP has acquired the knowledge of the financial markets
of the country during the last 24 years of its business. The group and all companies can
boast sound domain knowledge because its professional management and manpower are
well assisted by the hi-tech upgraded infrastructure, which has been put in place at a huge
cost.

This group serves multitude of their retail-investing customers through their own
corporate offices in Mumbai and Jaipur with numerous business associates spread over
many cities through the whole country. It is the matter of proud for this group that it is
serving more than 50,000 end use retail investors.

Company in derivative market

In derivatives also, HEM GROUP has promptly taken a plunge in making huge
investment to obtain membership of all concerned exchanges and has upgraded its
technology to serve all their business associates and investor to provide them better and
varied opportunities for profit making and capital appreciation.

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In this derivative market this group has achieved: -

M/s. HEM Securities limited has become trading member of Stock Exchange, Mumbai
(BSE) for derivatives segment in March 2000.

M/s. HEM Finlease private limited, has acquired membership of futures and options
segment of National Stock Exchange of India ltd.(NSE) in 2001.

M/s HEM multi commodities private ltd., too has acquired membership of both MCX
and NCDEX for trading in commodity derivatives since January 2004.

They feel very happy to pronounce that they have recorded excellent progress in having
very deep and wide client base from multi-centers and multi-states in the country with
good turnover in a wide spectrum of commodities. They are in a fast pace growth mode
in this vital segment and they wish to double-up and develop their client base to many
more centers and states to offer better services of HEM GROUP resulting in ever
increasing profit making chances to their existing and prospective clients.

Company’s future trading in commodities

As regards futures trading in commodities is concerned, it has resulted in transparent and

fair price discovering on account of large scale participations of entities associated with
different value chains and reflects views and expectations of wider section of people
related to these commodities. Futures trading also provide effective platform for price
risk management for all segments of market participants ranging from producers, traders,
processors, exporters/importers and end-users of the commodity.

Futures trading in commodities has opened up spectacular growth opportunities and

advantages not only for large cross section of market participants like producers,
processors, traders, corporates, trading centers, importers, exporters, cooperatives,
industry associations but for investors community too. It offers unparalleled efficiencies,
unlimited growth and infinite rewarding opportunities to all market participants and
investors.

This market affords a very dynamic field for diversified investment and trading
opportunities in addition to equity markets. The immense benefits of futures trading are
opened, for all market participants and investors alike, to be realized.

In our country, Multi Commodity Exchange of India (MCX) and National Commodity
and Derivatives Exchange ltd. (NCDEX) are two state-of-the-art commodity-trading
platforms for future trading, which commenced operations in November and December
2003 respectively. Both of them are related to national level, hi-tech driven and online
commodity exchanges, which provide a very wide spectrum of derivatives driven by best
global practices, professionalism and transparency for all market participants. Both MCX
and NCDEX- are headquartered in Mumbai and expert Management Teams with deep

14
domain knowledge of commodity futures market having integrated dedicated resources
and infrastructure leads these.

Following are some of the commodities traded on the MCX and NCDEX: -

1. Bullion - Gold, Gold M, Gold HNI, Silver, Silver M…….

2. Oil and oil seeds - Castor Seed, Soy Seeds, Castor oil…
3. Spices - Pepper, Red Chili…
4. Metal - Steel Long, Steel Flat, Copper…
5. Fiber - Kapas, Medium Staple cotton, Long Staple cotton….
6. Pulses - Chana, Urad, Yellow Peas….
7. Cereals - Rice, Wheat, Maize
8. Others - Rubber, Gur, Cashew Kernel etc.

The term commodity segment is one of the popular pillars of the strength of the HEM
GROUP. Therefore due to positive and enthusiastic response from their business
associates and their retail clientele spread over many trading centers in multi-states.

The constituents of HEM GROUP are well served by M/s. Hem Multi Commodities Pvt.
Limited, from Jaipur and Mumbai corporate offices. M/s. Hem Multi Commodities Pvt.
Limited has become trading and clearing member of both the commodity exchanges, viz,
MCX and NCDEX since January 2004. HEM GROUP has made huge investments in
acquiring membership of the two exchanges and technology up-gradation for best of
services to all of their constituents.

The performance of the HEM GROUP in this segment has been very satisfying one due
to whole-hearted involvement and encouraging response from their business associates
and retail investor-clients spread over many trading centers in multi-states in the country.

The HEM GROUP is in the high gear still to cover many more cities and trading centers
in wider variety of commodities reaching out to more and more retail end-use investors to
realize the country’s dream of making the India an international hub of trading in many
agricultural commodities and precious metals.

Company as depository participant

Capital market in India have been growing at a tremendous pace in terms of market
capitalization and number of investors, so as to facilitate paperless settlement, involving
buying and selling and transfer of shares and securities in the country, the government of
India promulgated the depository act, 1996 in August 1996.

A depository is the authority that holds shares and securities in electronic form in the
holder name just as a bank holds their deposits in their accounts. Besides holdings

15
securities a depository also provides services related to accountholder’s transaction in
securities.

Depository works only as an authority, under this there are Depository Participants (DPs)
to work. So Hem Securities Limited (HSL) works as a DP.

HSL has got approval from CDSL and SEBI authority under the Depository and
Participants Regulation, 1996 in 2000 for their two main DP offices at Mumbai and
Jaipur that are located as corporate offices. Further, HSL has branches at following ten
centers: -

Assam : Guwahati
Maharashtra : Mumbai
Madhya Pradesh : Gwalior
Rajasthan : Jaipur, Bikaner, Kota, Bharatpur, Alwar, Indore,
Hindaun.

They have so far opened more than 50,000 demat accounts in which very sizeable
amount of shares and securities are held by their investing and trading clients. In a short,
span of 4 years they have been successful in opening so many accounts. Due to their best
of services as DP to their clients, they have changed their competitive fees to their clients
in respect of their host of services.
HSL is in the growth mode, they are likely to open more branches to reach out to many
more of their customers in other important centers while at present, they are affiliated to
CDSL as their DP, they shall also get affiliated to NSDL as their DP.
They offer following services as DP: -
1. Opening of demat account.
2. Dematerialization of shares.
3. Rematerialization
4. Maintaining record of holding in electronic form
5. Settlement of trades by delivering/receiving underlying securities.
6. Settlement of off-market trades
7. Providing electronic credit in respect of securities allotted under IPO
8. Receiving non-cash corporate benefits, such as allotment of bonus & right shares,
stock split etc. pledging and unpledging of securities.
9. Providing periodical settlement of transactions.
10. Registering nomination.

At HSL, they also offer client the facility called “easiest” electronic access to securities
inference and execution of secured transactions.

As a depository client they can submit debit and credit transaction to get Off-market, On-
market, Inter-DP and Early pay in transactions. Clients can also view their holdings and
they can obtain transaction details for preceding seven days.

16
 Divisions of the HEM GROUP

This group is further divided in five divisions. These divisions or companies are: -

1. HEM SECURITIES LIMITED

2. HEM FINLEASE PVT. LIMITED
3. HEM MULTICOMMODITIES PVT. LIMTED
4. HEM FINANCIALS SERVICES PVT. LIMITED
5. HEM SHARE BROKERS LIMITED

All these are performing different types of functions but the aim is same, to satisfy the
client and to work for the success and welfare of the group. All these are separate entities
and they work separately but there is connectivity and full of cooperation among them
that is the reason for the success of the whole group. This is the plan of management that
In future as the business of this group will grow, these companies will become the
subsidiaries, like they all will operate as different subsidiaries. The different workings of
these companies are mentioned below: -

 Hem Securities Limited

HSL is providing different type of services to its clients. These services are: -
1. Different services as a depository participant,
2. Research & analysis related services,
3. Risk management related services,
4. Trading in shares related services,

HSL is working as a Depository Participant. It is a successful DP. It is serving all its

clients very efficiently. As a depository, it is linked to CDSL, and it is following all the
guidelines provided by CDSL. At the time of reliance power’s IPO, HSL worked as a DP
very hard. It opened many demat accounts at that time and for this staff worked very
hard.
HSL has one research department also. The work of this department is to forecast the
future and come up with estimation on the working, price and profit from shares and
securities. They provide guidelines to their clients regarding trading in share market.

This department is working very hard to come up with almost correct estimation
regarding shares/securities and its market.

17
The advice of this department matters very much for the investors. There are many
shareholders whose decisions or trading is done on the basis of the forecasting of this
department.

This department uses many tools for forecasting and providing the accurate results; this
department has very efficient, hardworking & dedicated working staff. They work on
topics like equity research, market research, profits from different type of offerings and
many more. There work is very hard, because it is not an easy task to estimate about
future, it is all uncertain. So they need to be very careful while performing their work.
There work provides base for many important actions taken by investors. So HEM
GROUP has taken very intelligent and intellectual and highly qualified type of people
into their department. They need to be very intellectual so that they can see those things
that are not seen by everyone. The success of estimation of this department works for the
success of HEM GROUP.

The success and position of HEM GROUP depends very much on the accuracy of the
forecasting of this department, all the research employees keep this thing into their mind
while working.

So this department is not only an important part of HSL but also for HEM GROUP.

 Hem Finlease Private Limited

Hem finlease is one company from HEM GROUP. It was established during 1995-1996,
Then it acquired the membership of National Stock Exchange of India in 2000 and the
membership in future & option segment of NSE of India in 2001.
At the time of establishment its main objective was to carry on its business as share and
stockbrokers, finance brokers and act as sub-broker to execute all type of financial,
commercial and trading operations.
There are many services provided to customer by this company. All these services are: -
1. Services related to mutual fun
2. Services related to trading,
3. Services related to risk management,
4. Services related to research,
5. And most of all, marketing of IPO.
This is providing all these services to their clients very efficiently. This is managing all
these services very well, and satisfying its clients.

 Hem multicommodities private limited

Hem Multi Commodities Private Limited was established with the name of M/s Bairathi
Multi Commodities Private Limited in 1995, but in 2004 it changed its name. Now it is
known by the name of Hem Multi Commodities Private Limited.

18
It became the member of National Commodities and Derivative Exchange Limited in
2004; it got the membership of both MCX and NCDEX for trading in commodities &
derivatives.

Its main objective at the time of establishment was to carry on the business of trading in
agricultural products, metals including precious metals, precious stones, diamond,
petroleum and energy products and all other commodities and securities, in spot markets
and in futures and all kinds of derivatives of all the above commodities and securities.

Hem Multi Commodities is involved in providing these services: -

1. Research & analysis related services,
2. Trading in commodities market,
3. Risk management of clients.

 Hem financial services private limited

Hem Financial Services Pvt. Limited was incorporated in 1990. Hem Financial Services
Pvt. Limited is a non-banking financial company. It is performing its entire task under
RBI act (1934). As a qualified merchant banker this company provide each and every
transaction with confidence, expertise, ability to value the business after analyzing all
factors and thus increase in the odds of successful transaction.

This company provides these services as a capital merchant banker: -

1. Private equity placement,
2. Managing the IPO as lead manager,
3. Underwriting,
4. Syndicating IPOs and FPOs,
5. Project counseling and advisory assistance,

This company believes that, it requires specialized expertise to deal with capital market.
It is the planning of HFSL that it would offer as a promising company an opportunity to
access the capital markets and recognition through their listing on Stock Exchanges. The
process of coming up with an IPO and beyond is well handled and escorted by
individuals of great caliber and experience that are working here. Their strength lies in
making sure that the company is optimally priced and positioned well in the financial
marketplace to procure the right profile of institutional and retail investors. They really
work hard to achieve these targets.

 Hem Share Brokers Limited

Hem Share Brokers Limited was established in 1995, with its establishment, this
organization acquired the membership of OTCEI (Over The Counter Exchange Of

19
India). This company is regulated by securities & contracts (regulations) rules, 1957 and
the rules, byelaws & regulation of the Stock Exchange.

The main object of the company at the time of establishment were to carry on the
business as share & stock brokers, underwriter, sub-underwriter, agents & brokers for
taking holds, dealing in converting stocks, shares & securities of all kinds, brokers for
units of UTI, broker for debentures, bonds, government securities, national saving
certificates, small savings scheme & for securities of all kinds& to carry on the above
business in India and abroad.

From the time of its establishment itself it is trying to achieve all these objectives. And
now it is successfully running as a brokerage firm. It is providing different service as a
broker to its clients. Its long-term objective is to run itself at a most successful level by
fighting with competition with the help of its most efficient services and trust of its
clients, that it had gain during the entire period of its services.

20
 3. ORGANIZATION STRUCTURE

Mr. HemChandJain
Managing-
Director

Hem Hem Hem Multi Hem Hem Share

Securities Finlease Commodi- Financi- - brokers
ltd. Pvt. Ltd. ties pvt. al ltd.
Ltd. services
pvt. Ltd.

DIRECTORS

Mr. Hem Mr. Hem – Mr. Gaurav Mr. Hem- Mr. Hem –
-chand Jain chand Jain Jain chand Jain chand Jain
Mr. Anil Mr. Kuldeep Mrs. Indu Mrs. Indu Mrs. Indu
Bhandari Kumar Gupta Jain Jain Jain
Mr. Gaurav Mrs. Indu Mr. Kuldeep Mr. Kuldeep
Jain Jain Kumar Gupta Kumar Gupta
Mr. Kothari Mr. Anil Mr. Gaurav Mr. Anil
Bhandari & Jain Bhargava
Mr. Gaurav Mr. Vinod
Jain (Additio Lodha
-nal) Mr. Vivek
Lodha

21
 5. OBJECTIVES OF STUDY
In present era the stock market is one of the popular markets in India, the economy of any
country affects very much by the bull and bear condition of the stock market. Previously
all trade in the stock exchanges were done in the physical form of the share certificates
but presently because of the inconvenience of that physical mode all the trades in stock
exchanges are done in demat mode.

Dematerialization is converting physical shares into electronic shares. This mode is very
feasible to work with. This demat mode is beneficial for all the investors, companies,
stock exchanges etc. For managing the electronic balance of shares into the account, there
are depositories. These depositories work or manage through depository participants
(DPs).

Being a management student it is really beneficial to know about this present trend of
securities and how they are being handled, So I had done my training in a DP. And my
main objectives to have my training in HEM SECURITIES LIMITED are: -

 To study the demat feasibility in present condition.

 To understand the working of HEM SECURITIES LIMITED as a DP of CDSL.

 To know the general things about the investment in share market.

22
 Introduction

There is a market called capital market, which is a very important part of Indian financial
system. This market facilitates companies by meeting their requirements of the long-term
funds. It means whenever the companies require funds for its business operations, it can
raise money by issuing equity shares, debentures and etc to the public. These shares &
debentures raise the need for such organizations which will facilitate the buying & selling
of these shares & debentures. Then stock exchange came into existence.
In this securities market, there are three categories of participants first category contain
issuer of securities, second type of participants are the investors in the securities and last
category contain intermediaries. The issuers are the borrowers, who issue securities to
raise funds. The investors, who have money in surplus to invest in securities and the
intermediaries, are the agents who match the needs of users and suppliers of funds by
charging commission for that. These intermediaries perform their function to help both
the issuers and investors to achieve their respective goals. There are large variety and
number of intermediaries providing various services in the Indian securities market.

Meaning of stock exchange

The stock exchange in India has witnessed a spectacular growth during the last decade.
The development of the capital market is by and large linked with the development of
public limited companies. The stock exchange is an important segment of capital market,
which, not only provides capital but also helps investors to trade in the securities. The
Stock Exchange is basically a market place where securities are purchased and sold for a
consideration through its members acting as brokers. The Stock Exchanges are very
important in the economic life of the country. Stock market helps in the growth of
industry and trade.
According to sec. 2(j) of the securities contracts (Regulation) act. 1956, “ Stock
Exchange means any body to individuals whether incorporated or not constituted for the
purpose of assisting, relating or controlling, the business of buying, selling or dealing in
securities.”

Importance of Stock Exchange

The Stock Exchange are the important segments of their capital market, if the Stock
Exchange are well regulated and work smoothly then it is an indicator of healthy capital
market. If the state of the Stock Exchange is good and overall capital market will grow
and otherwise it can suffer a great set back which is not good for the country.
Government at various stages controls the stock market and capital market. The
importance of Stock Exchange is as follows: -

23
 Providing regular market to the securities.
 Encouraging investment habits in general public.
 Providing liquidity to the securities.
 Providing a mechanism for continuous evaluation of the securities.
 Encouraging capital formation.
 Acting as an intermediary between buyers and sellers.
 Providing stability in the prices of securities.
 Publishing regularly stock price quotation.
 Providing facility of a trading hall for the members transact business.
 Protecting the interest of the investors.
 Providing a better platform for investors to invest their valuable money.
 Making the transaction more convenient for both, the buyers and sellers.

Origin and Development of Stock Exchange

The first Stock Exchange was established in London in 1773, and then the trend of Stock
Exchange goes on. Later on many other countries like France, Germany, USA and India
etc followed the culture of stock exchange. In India the first stock exchange was
established in Bombay in1875. After the establishment of first stock exchange many
more stock exchange came into existence. So far government of India has recognized 23
Stock Exchanges in the country.
After the establishment of various Stock Exchanges in India, there was a need for such
organization, which can control the operations of the stock exchanges. Then government
of India introduced SEBI Act, 1992, under this act SEBI (Securities and Exchange Board
of India) came into existence. Now SEBI is there, to protect the interest of investors in
securities market, to monitor and regulate the working of the Stock Exchanges. SEBI
took care of the development of these Stock Exchanges also.

Securities market

Securities market is the market, where activities related to shares, debentures. Preference
shares, bonds, etc. are dealt. These provide the market place where buying and selling of
securities and shares are done. There are two type of securities market, these are: -
 Primary market
Primary market deals with new securities that are securities, which were not previously
available and are offered for investing to the public. It is the market for raising fresh
capital in the form of shares and debentures. It provides the issuing company with
additional funds for starting a new enterprise or for either expansion or diversification of
an existing one, and thus its contribution to company financing is direct. The new
offerings by the companies are made either as an initial public offering ( IPO) or right
issue.

 Secondary market
Secondary market is the market for buying and selling securities of the existing
companies. Under, these securities are traded after being initially offered to the public in

24
the primary market and listed on the stock exchange. The stock exchanges are the
exclusive centers for trading of securities. It is a sensitive barometer that reflects the
trends in the economy through fluctuation in the prices of various securities. It can be
define as, “a body of individuals, whether incorporated or not, constituted for the purpose
of assisting, regulating and controlling the business of buying, selling and dealing in
securities.” SEBI has issued various guidelines for the operations of secondary market.
The secondary market operates through two mediums, namely, the over-the-counter
(OTC) market and the exchange-traded market. OTC markets are informal markets where
trades are negotiated. Most of the trades in the government securities are in the OTC
market. All the spot trades where securities are traded for immediate delivery and
payment take place in the OTC market. The other option is to trade using the
infrastructure provided by the stock exchanges. The exchanges in India follow a
systematic settlement period. All the trades taking place over a trading cycle (day=T) are
settled together after a certain time (T+2 day). The trades executed on exchanges are
cleared and settled by a clearing corporation. The clearing corporation acts as a counter
party and guarantees settlement. A variant of the secondary market is the forward market,
where securities are traded for future delivery and payment. A variant of the forward
market is Futures and Options market. Presently only two exchanges viz., National Stock
Exchange of India Ltd. (NSE) and Bombay Stock Exchange (BSE) provide trading in the
Futures & Options.

Trading

Trading is the transaction held between the buyer and seller of the securities. In the
process of trading people buy and sell securities and this buying and selling is done
through the members of the stock exchange.
These members are called brokers and they perform the task to intermediate between
buyer and seller for the brokerage. There are two types of trading, these are: -

Online share trading

Realizing there is untapped market of investors who want to be able to execute their own
trades when it suits them, brokers have taken their trading rooms to the Internet known as
online brokers, they allow you to buy and sell shares via Internet.

Investors can have complete control of their stock investing actions, now that they have
the convenience of buying and selling shares on the NSE online and in real time. Each
individual has access to the latest information and tools to analyze any stock investment
decision and the power to execute the sale or purchase right before them on their personal
computer screen.

Margin trading

Margin Trading is nothing but borrowing money to invest in stocks, here the investor
borrows money from his/her broker to invest in stocks through the same broker. The

25
“margin” here is the money actually borrowed from the broker. The margin loan can be
up to 50% of the total amount invested. This effectively means that you can invest in
shares worth Rs 100 by borrowing Rs 50 from your broker. This is called buying shares
on a 50% margin. If the value of the shares goes down, the investor has to pay a
“maintenance margin” to bring the margin up to 40% of the market value of the shares.
This margin is paid when the broker makes a “margin call” to the investor, and investor
has to pay the difference between current margin and maintenance margin to take it to
40%. If the margin falls below 30%, the broker has the discretion of liquidating the
client’s holdings and thus recovering the loan advanced.

Introduction of depository

At the start of selling and buying of the securities, there were limited transactions. The
numbers of transaction was so small that it was easily handled in the physical form. But
as this securities market get popularize, the numbers of transactions increased, there was
rapid growth in the securities market, it became quite hard to handle all the transactions
in physical/ paper mode. There were lots of problems with physical form of shares for
example these problems were: -bad deliveries, delays in transfer and irregular settlement.
Then because of these many problems the electronic mode of securities came into
existence. There were two ways to ignore all the problems related to physical form of
shares, these were: -

1. Immobilization

In this securities are held in the physical form but transfer is done electronically or we
can say through book entries only.

2. Dematerialization

In this share certificates are destroyed once and then they are admitted to the depository
and the credit against this is credited in the account, which is maintained electronically.
India has opted for the dematerialization route which is better option given the large
amount of paper work involved.

This electronic medium of trading was firstly introduced by national stock exchange
(NSE) followed by the Stock Exchange, Mumbai (BSE) in 1995 inducted efficiency in
trading system but physical mode of delivery continued to be a drag. Depository system
provided for dematerialization of securities, custody and trading in electronic book entry
form became the unavoidable answer to the capital market plagued by ills. The
government of India promulgated Depositories Ordinance in September 1995, which was
replaced by the Depository Act, 1996.

The depository act

The depositories act, 1996 changed the capital market entirely. It makes the capital
market more efficient by providing it a improved infrastructure, improved investor

26
protection in the securities market. With the introduction of this depository act not only
investors are benefited but all the issuer companies are also benefited, like they enjoy less
cost in issuing electronic shares than issuing physical shares and it is easy for them to
manage all its shareholders if they have securities in electronic form. So this depository
act is beneficial for all for issuer, investor and intermediary.

This depository act helps in removing irregularities, bad deliveries, odd lots etc., now the
tradable lot is reduced to one unit of share. It also protects the interest of the investors.
This helps financial market also by making all the things in a particular order. Now
because of depository act, there is free transferability of securities with speed, accuracy,
transparency etc.

Depository

A depository is an organization where the securities of a shareholder are held in

electronic form at the request of the shareholder through a medium. This medium is
called depository participant (DP).
Presently in India, there are two depositories, these are: -
1. National Securities Depository Limited, (NSDL)
2. Central Depository Services (India) Limited (CDSL)
These two types of Depositories work under Depositories Act, 1996. They hold the
securities of investors in the electronic mode.
Depository has many salient features. These features are: -

 Investors has option to join the depository

In this act it is not a compulsion that every investor have to retain all securities only in
dematerialized form. This all depend on the wish of investor that weather he want to keep
his securities in dematerialized form or in physical form. He have the option that he can
some part of shares in dematerialized form and rest in physical form.

 Dematerialized holdings are fungible

According to this if once securities are dematerialized, they will not have any unique
characteristics such as distinctive numbers, folio numbers, etc. These holdings of a
particular security will be identical to each other and interchangeable.

 No stamp duty
It is mentioned that if the securities will be in dematerialized form then it will be
exempted from stamp duty that is 0.5% for physical shares.

 Customers can interact through participants

According to this feature, the depository will not directly communicate to shareholders,
there will be an intermediary between them. With the help of this intermediary only the
investor will be able to take the benefit from depository. These intermediaries are
depository participants (DP). There are two types of depositories; customer can choose
any of them on the basis of the services offered by these depositories.

27
 Dematerialization as the only way for depositories in India
There are two ways for investors to be attached with depositories. But India had chosen
the way of dematerialization. In India if investors wants to take the facilities of
depositories then they have to dematerialize their securities.

Need of depository
Need of depository can be understood by looking at the scenario of securities market
before and after depository act, 1996.

Traditional system of physical share certificates

The Indian capital market has seen an unprecedented boom in its activity in the last
decade. We can now boast of a very large investor population and substantial volumes of
trade. However, this surge in activity has brought with it, numerous problems that
threaten the survival of the capital market in the long run. A closer inspection of the
problems would reveal that most of them arise due to the intrinsic nature of paper based
trading and settlement.

This century-old system of trading and settlement requires handling of huge volumes of
paper leading to increased costs and inefficiencies. Simultaneously, they export the
investors to greater risks. Some of these are:

 Unwanted delay in transfer of shares. It takes 30-60 days for the investors to get
the shares lodged in their name.

 Theft of shares leading to defective title in shares purchased and subsequent

litigation.

 Possibility of forgery on various documents leading to bad deliveries, legal disputes

etc.

 Prevalence of fake certificates in the market;

This has made the investors, both retail and institutional, disturbed of entering the Indian
Capital Market. In this scenario, it was felt that the setting up of a depository and the
introduction of scrip-less trading and settlement is imperative for the efficient functioning
of the market.

28
Benefits of scrip-less trading and settlement:

In the depository system, the ownership and transfer of securities takes place by means of
electronic book entries. At the outset, this system rids the Capital Market of the dangers
related to handling of paper. That is not all; the depository provides numerous other direct
and indirect benefits like: -

 Elimination of bad deliveries and all risks associated with physical certificates, such
as loss, theft, mutilation, etc.

 Reduction in handling of huge volumes of paper.

 No stamp duty for transfer of equity instruments and units of mutual funds in the
depository (in case of physical shares, stamp duty of 0.5% is payable on transfer of
shares).
 Immediate transfer and registration of securities, increasing liquidity of stocks with
the investor.

 Pay in and pay out of securities and funds is on the same day for scrip-less trades.

 Faster settlement cycle.

 Faster disbursement of Corporate Benefits like rights, bonus, etc.

 Reduction in rate of interest on loans granted against pledge of dematerialized

securities by many banks.

 Reduction in brokerage by many brokers for trading in dematerialized securities.

 Periodic status reports to investors on their holding and transactions, leading to better
control.

 Substantial reduction in transaction cost in dematerialized securities as compared to

physical securities.

 This makes pledging of securities /shares more easier than physical form of
shares.

 It enables quick ownership of securities on settlement resulting in increased

liquidity.

 It avoids confusion in the ownership title of securities & provides easy receipt of
public issue allotment.

29
 It avoids risk associated with forgery, counterfeiting, and loss due to fire and loss
because of theft.

 It avoids inconvenience related to filling the transfer deeds again and again.

 It makes the faster payment on sale of shares.

 There is no risk of buying fraudulent share certificates.

These were the benefits that securities market is enjoying because of depository system.
And rest of the benefits can be understood through this table: -

Comparison of cost – physical v/s dematerialized form of shares

Types of account Physical shares Dematerialized shares

0.75% – 1.25% 0.25%
Brokerage
0.5% of market value Nil
Stamp duty on
transfer
Postal charges Actual Nil

Transfer deed INR 0.35% TD Nil

Follow ups Actual Nil

Settlement charges Nil .05% of transaction value

Custody charges Actual cost 0.02% of share value

Bad delivery Not quantifiable Nil

Loss/theft Actual Nil

Non receipt of Actual Nil

bonus/right shares

30
From this table we can easily figure out the benefits of dematerialization of shares. Now
just because of inconvenience from physical form and benefits from dematerialized form
of shares, SEBI has instructed that transaction of more then 500 shares will be done only
if the shares are in dematerialized form. And some of the have also took initiative to issue
their new offering only in dematerialized form of shares.
Like in January when reliance power’s IPO came then it was allotted only in
dematerialized form in demat accounts. Such types of compulsion, makes the investors to
open their demat accounts.

Participants in depository system

This depository system does not work alone; there are many participants of this
depository system. These participants may provide work to depository or may perform
work on behalf of depository or may perform task, which will facilitate the Indian
depository system. These participants of depository system are: -

 Issuer or company
Issuer is a company, which issues share/ securities for raising fund from market.
Whenever a company requires funds for its operation, it has option to ask funds from
public by issuing shares, debentures, bonds, preferential shares, etc.

 Issuer registrar
Many times company appoint registrar to handle all the disputes related to issue of shares
or IPOs. These registrar work on behalf of the company and manage all the things related
to shares/ securities of the company.

 Depository participant (DP)

A DP is a market intermediary, which interacts with customers on behalf of depository.
For obtaining the services provided by DP customers firstly are required to open a demat
account with it, then only they can avail the services of a DP.

 Investor
Investors are the people who invest in securities or who buys shares from securities
market. These investor purchases the securities for making profit out of it.

 Stock brokers
Stockbrokers are the market intermediaries who intermediate the transaction of buying
and selling among different people. With the help of these peoples two people who don’t
know each other can sell and purchase securities. They work for brokerage.

 Clearing members
Clearing members (CMs) are the members of the clearinghouse or clearing corporation
who facilitates settlement of trades done on stock exchanges. They could be a broker or
custodian registered with SEBI as such is an important intermediary in the capital market
and an essential link in the depository system. The various categories of CMs are: -

1. Trading member

31
 2. Custodian
3. Subsidiary companies by regional stock exchanges to facilitate their members to
trade on BSE/NSE.

 Clearing corporation
Clearing corporation are called clearing house also. These are the organization, which
facilitate the settlement of trades. These are very important part of trading system.
The relationships among all these participants of the depository system can be understand
by looking at this chart.

DEPOSITORY ISSUER/ R&T

AGENT

CLEARING CLEARING DEPOSITORY

CORPS. MEMBERS PARTICIPANT

STOCK TRADING INVESTOR

EXCHANGE MEMBERS

Introduction of CDSL as a depository

A depository facilitates holding of securities in the electronic form and enables securities
transactions to be processed by book entry by a depository participant (DP), who is an
agent of the depository, it offers depository services to investors. As there are two
depositories in India, NSDL & CDSL.

CDSL (Central Depository of Securities Limited) is a depository in India to facilitate the

Indian securities market. Earlier there was only one depository called NSDL, but when
the volume of the transactions in the securities market increase, then CDSL came into
existence to serve the investors in the securities market. CDSL received approval from
SEBI in February 1999. This was promoted by the Stock Exchange, Mumbai (BSE)
jointly with leading banks such as State Bank Of India, Bank Of India, Bank Of Baroda,
HDFC Bank, Standard Chartered Bank, Union Bank Of India and Centurion Bank. CDSL
commenced its operations from July 1999. It has depository participant all over India.

There are some milestones in the journey of CDSL. These milestones are: -

32
 1. CDSL received the certificate of commencement of business from SEBI in
February 1999.
2. Honorable union finance minister, Shri Yashwant Sinha flagged off the operations
of CDSL on July 15,1999.
3. All leading stock exchange like the NSE, Calcutta Stock Exchange, Delhi Stock
Exchange, The Stock Exchange, Ahmedabad, etc have established connectivity
with CDSL.
4. Till December 2007, over 5000 issuers have admitted their securities certificates
of deposits etc. into CDSL system.

Benefits to be attached with CDSL

There are many benefits to accountholders, DPs, issuer companies to be attached with
CDSL. Some of these benefits are mentioned below: -
 CDSL provides wide network of DPs. It is connected with 375 DPs spread across 124
cities in India, so investors have wide option to choose their DP as per their
convenience.

 All the DPs are directly connected to CDSL, This provide on-line and efficient
depository service to investors.

 There is wide variety of securities admitted with CDSL for demat purpose. There are
5500 issuer companies admitted with CDSL, thus an investor can hold almost all his
securities in one demat account.

 CDSL has kept its tariffs vary competitive to provide affordable depository services
to investors.

 CDSL’s system is built on centralized database architecture and thus enables DPs to
provide on-line depository services with the latest status of the investor’s account.

 CDSL has made provisions for contingency terminals, which enables a DP to update
transactions, in case of any system related problems at the DP’s office.

 CDSL provide security by providing unique BO account number and it has the
facility of insurance cover in the unlikely event of loss to a BO due to the negligence
of CDSL or its DPs.

Objectives of CDSL

CDSL has some objectives, which it took in consideration at the time of its establishment.
These objectives are: -

1. It wants to accelerate the growth of scrip less trading.

2. It wants to make the trust of its individual investors in CDSL.

33
 3. It wants to create a competitive environment and wants to be responsive to user’s
interest and demands.
4. It wants to enhance liquidity.

Central depository accounting system (CDAS)

CDSL has one depository software, which is called CDAS. This software is developed
and supported by CMC Ltd. CDAS is equipped with centralized database architecture.
This implies that CDSL, centrally performs the major activities such as processing,
storing and maintenance of data and its backup, not only at CDSL’s main site of
operation, but also at the disaster recovery site (DRS) situated at a remote location. This
develops a safety net such that the users may devote their entire concentration in
business.

Hardware

Hewlett Packard, a company, provides the hardware RP 8400 bundled with main features
available in mainframe computers. It is capable of handling 16 numbers of CPUs with
1,00,000 TPMC. RP 8400 has maximum 64 GB memory with advance ECC protection.

Database architecture

CDSL system has centralized database architecture. As the term suggests, the architecture
involves the storage and updating of records at single location at CDSL’s main site of
operation. There is no separate database at the user’s site of operations. All transactions
by users from anywhere in the country are updated the moment they are committed,
requiring no reconciliation between CDSL’ records and the records of users, since there is
effectively only a single database. Moreover, credit of securities arising from demat
confirmation, corporate actions and transfers are available instantaneously for further
processing.

Front end

Front end is the user interface for a DP/RTA to access various features of CDAS and to
conduct all daily operations. This pat of the software is installed in users office. Hardware
required to install this component will typically be a Pentium based system with windows
operating system and is referred as workstation. From this feature only the DPs can make
changes in demat accounts anytime.

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Back end

Back end can also be called HOST. It is a component of system, installed at CDSL’s
premises, which process and store all data related to depository and is accessed by user
through front end. This part of the system is installed on RP 8400 system.
Communication channel

Communication gateway system (CGS) provides a link between front end and back end
to allow the file transfer and data flow.

Disaster recovery system

CDSL has in place, a robust system with multiple back-up levels including a redundant
fail-over cluster and a DRS, which has achieved “disaster-ready connectivity” status.
Consequently, in the event of a disaster at the main site, users connected to the CDSL
because of disaster recovery site. DP, clearing corporations and registrar & transfer agents
(RTA’s) can electronically connect to the DRS for carrying on day-to-day operations.
CDSL’s disaster recovery site is situated at remote location. This is housed in ultra
modern facilities and has the following features: -

 Vibration-proof, foolproof from EMI/RFI interface, flooding and environmental

pollution, tightly sealed and thermally insulated.
 Three layers of power supply: main feeders from MSEB, dual DG sets, Dual UPS and
dual electricity distribution system.
 Precisely controlled environment for humidity, ventilation and air-conditioning.
 High sensitivity smoke detection system.
 Centralized operations from building management system.
 Multiple layers of physical security.
 Stringent fire detection and protection norms.

CDAS Application

To start CDAS, the user has to first establish communication with the HOST. Clicking on
communication Gateway server (CGS) icon of transmission tower does this. A screen is
shown on the adjacent page.

Upper part of the screen contains technical details. For normal users the most important
display is STATUS-ONLINE displayed at the bottom of the window. Minimize the screen
after checking the status. CGS should be ON as long as the user wants to work.

Next step is to click on spaceship icon labeled as MASTER present on the screen to start
main CDAS application. This action will display the login window.

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For security purpose, each user is provided a user identification number referred as
LOGIN ID and a user definable password .To access CDAS, the user has to enter his
Login ID and password in the space provided and click on OK button.

CDSL upgrades the CDAS system as and when new functionality is introduced or
existing functions are modified to suit user requirements or to meet SEBI guidelines.
Whenever such new version is available, the system will flash a version change message
during login phase.

It is not mandatory to download the new version immediately, but it is always advisable
to do it. To apply release for new version, close Master application as well as CGS
applications and click on Release icon to download new version.

After login procedure is completed, the system displays the main screen of the CDAS
application for DP. Main screen of the CDAS application for RTA has a menu bar at the
top of the window, which has options namely File, Applications, Information, SOD /EOD
time and Help.

At the bottom of the window a status bar is displayed which shows following
information:

 Status of the workstation and Host, whether online or offline.

 Day, Date and time .The date displayed is the business date.
 On extreme right hand corner of the status bar three characters C R S will be
displayed.
C - Indicates communication gateway status
R -Indicates workstation registration status
S – Indicates user’s sign –on status.

Between menu bar and status bar various application icons will be displayed. A short
explanation of these icons is given below.

Function of CDAS for a DP

 Beneficiary owner module

This module allows a DP to set up accounts for various categories of investors
various details like names and address of the BO, additional details of the BO’s
signatures and power of attorney can be stored in the system. User can also provides
facility for closing an account.
 Dematerialization
This module allows DP to set-up, modify or delete demat requests and monitor their
status.
 Rematerialization

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 This module allows DP to set-up, modify or delete remat requests and monitor their
status.
 Transfer and transmission
This module is used only in the event of death of an A/C holder. The balance can be
moved in two ways.
1. One to many (ISIN wise)
2. One to one (All ISINs)

 Off market
Off market trades result when securities are transferred between two accounts already
maintained with CDSL DPs.

 Interdepository
This module is used to transfer /receive the securities from an account in CDSL
to/from any other account of the other depository.

 Settlement
Through this module, the DP can enter ON-market instructions for delivering the
securities for respective settlements, for which the BO/CM has traded on the
exchange. Facility for early pay-in is also provided in this module

 BO upload
The DP can capture the details of the intending BOs in his back office software and
then upload the files through this option for setting up BO accounts in CDSL.

 Upload
Similar to BO upload, this module allows a DP to upload files for transactions such as
Demat, off market, Inter depository, Settlements, Early pay –in etc

 Pledge and unpledge

The DP can set up, modify, delete, accept or reject the pledge request for his BO.
Unpledge or invocation of the same can also be done through this module.

 Corporate action
This module facilitates DPs to inquire the details of corporate actions set up by issuer
/ RTA

 Initial public offer (IPO)

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 This module facilitates DPs to inquire the details of initial public offers set up by
issuers /RTA

Special services of CDSL

There are three types of services, which are for the benefit of the investors. These
services facilitate customers in many terms. These services are: -

Easi
Electronic access to securities information (easi) is CDSL’s internet facility, which
enables beneficial owners/clearing members having demat account with CDSL system to
view their holdings and obtain transactions status through the internet easi is accessible
anywhere-anytime through CDSL’s website- www.cdslindia.com

Facilities offered by easi:

Any BO (Beneficiary Owner) who has an account with a DP of CDSL and whose DP has
registered under easi can avail of the easi facility. All that is required is a computer with
Internet access. A BO (Beneficiary Owner) can use easi for:

1. Viewing his holdings.

2. Viewing the status of his instructions.
3. Obtaining transaction details for preceding 7 days.
4. Viewing the value of his holdings based on the previous day’s closing price on BSE.
5. Obtaining print of statement of account.

Easiest
Easiest is an Internet facility which permits Bos and CMs to submit debit and credit
transaction instruction to effect off-market, on-market, inter-depository and early pay-in
transactions. Moreover, all the facilities and benefits of easi are automatically available to
a subscriber of easiest. There are two options available on easiest:

1. Trusted account transfer- trusted accounts are settlement accounts of clients’ broker.
A BO can specify up to four settlements accounts.

2. Account of choice transfers- in the account of choice option, transfer of securities

will be permitted to any demat account.

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Smart
Smart is a SMS alert facility to BOs. In this facility BO will get a message from CDSL
whenever there will be any transaction related to his account. At every debit and credit he
will receive a message. A BO can obtain this facility after applying for by filling a form.
This form for application can be obtained from DP itself.

Depository participant

Up till now it is very much clear that depository works as an organization like a central
bank where securities of a shareholder are held in the electronic form at the request of the
shareholder through the medium of depository participant (DP). So DP is a very
important organization in the present scenario of securities market.
Similar to the broker who trade on behalf of client in and outside the stock exchange, a
depository participant is representative or agent of its clients in the depository system.
The depository participant is there to maintain the balance of securities in demat account
& provide the status of holdings to its clients on a timely basis. According to the
guidelines of SEBI financial institutions like bank, custodian, stockbrokers etc. can
become participant in the depository. If we want to avail the services of a depository and
depository then we have to open a demat account with a DP to deal in electronic
securities. We can say if depository can be called a bank then DP can be called a branch
of bank, through which we can be connected with depository.

Services provided by DP

DP is there to serve its clients in many ways. DP is responsible to handle the securities in
the electronic form in the accounts of BO’s and apart of that it provide many other
services or facilitate its clients in many ways. Here are the services provided by DP to its
clients: -

Demat account opening and maintenance

An individual who want to keep his /her cash safe in a bank has to open an account with
the bank as a first step and maintain cash in book entry form. Similarly, an investor has to
open an demat account with any DP of CDSL as a first step to hold securities in Demat
form in the Depository system .The investor can open an account with nay DP of CDSL.
CDSL system facilities opening of demat accounts for different categories of investors.

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Demat accounts opened with CDSL are referred as ‘Beneficial Owner Accounts’ or ‘BO’
account’. As explained earlier, when securities are held in physical form name of the
investor is recorded in the books of the company as ‘Registered owner’. When the same
securities are converted into electronic form and held in a demat account, the depository
becomes registered owner of the securities. Since depository is acting as a custodian of
the securities, original investor is legally entitled for all rights / liabilities attached with
securities and hence are called a ‘Beneficial Owner’. All accounts opened on CDSL
system are beneficial accounts irrespective of the type of account.

A Demat account may be opened and maintained in the name of one person or more then
one persons (joint holders). All the joint holders have to sign the application form and the
agreement .The supporting documents and photographs should also be provided for all
joint holders. Though the beneficial ownership of the jointly held securities Rests equally
in all joint holders, communication about the joint depository account are provided only
to the first holder. The dividend and interest warrants, annual reports and notice for
meetings are also issued to the first named joint holder only.

All BO accounts are operated at DP level; however, data is maintained at CDSL level. A
BO does not have direct access to CDSL system and must act through His/her DP. While
opening an account, the BO can give a standing instruction (confirmation waiver of
purchase waiver) to allow credits automatically to the account without separate
instructions.

Account opening procedure

There is a pre-decided account opening procedure, this procedure is presented below: -

1. The person who wants to open a demat account is required to submit duly filled
account opening form along with necessary documents.
2. DP will verify signatures and all the documents presented.
3. The DP will capture details from the account opening form filled by the BO in the
front-end system provided by CDSL. While putting the details into the system it is
required to be very careful at least at the time of entering name of BO because all
other details can be modify further but the BO name will enter once, will remain
forever till the account is operating. The DP will scan the signatures of the BO as well
as the power of attorney signatures, if applicable. Once, the DP commits the
transaction, the data is captured and stored at CDSL.
4. A unique BO account number is generated by the system and this can be seen at the
DP front-end system. This will be done on-line and the information gets transmitted
to CDSL instantaneously .The DP will record the BO ID on the original application
form and on the DP-BO agreement for cross-reference.
5. On committing the BO details in the front-end, system will generate a confirmation
letter, which includes all the necessary information regarding BO. This letter is called
“client master”.
6. Then DP will send this letter to the concerned client.
7. DP will issue a delivery instruction book for account holder.

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Documents required
There are the documents, which are required to submit with the account opening form.

Individual investor

1. PAN card as identity proof.

2. Address proof (Ration card, Bank pass book, electricity bills, landline bills latest of 2
months, voter I.D card, driving license, etc.)
3. Bank proof with all the required bank details like name of bank, MICR code, account
number, account type and branch name.( pass book, canceled cheque with printed
name, bank statement of latest 6 months, etc)
4. Stamp paper
5. One passport size photograph, it should be signed.

Additional documents for HUF

1. HUF declaration certificate,

2. PAN card of HUF.

Additional documents for MINOR

1. Certificate of guardian declaration if the guardian is not one from the natural
guardian.

Documents for corporate investors

1. Certified true copy of board resolution for persons authorized by the board to act as
authorized signatories.
2. Name of the authorized signatories, designation, and their specimen signatures.
3. POA given to the authorized signatories.
4. Memorandum and article of association.
5. One passport size photograph of each authorized signatories with their signatures
across the face of the photograph.

Additional information

 At most three holders can open a joint account.

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 One time standing instruction for credits to DP.
 HUF account holder cannot nominate any body.
 Only individual can appoint nominee and nominee can be an individual only.
 Account cannot be open in the name of partnership firm.

Modification in demat account

If in future a BO wants to change some of his details then it can be done through
modification function of MASTER application.
1. BO will submit a duly filled modification form along with required proof for that.
2. DP will verify the information.
3. DP will put the information in modify option of BO obligation.
4. System will generate an acknowledgement.
Name of the BO and BO status cannot be changed, for the change of name the existing
account will be closed and new account will be opened.

Closure of demat account

Account closure can be initiated by any of them: BO, DP or CDSL. The account can be
closed by CDAS system only when all the balance in the accounts is reduced to zero.
There should be no holding in the account and all the AMC charges should be paid, and
no due should be there. And the form should also specify that whether the balances in the
BO account be rematerialized or transferred to another BO account of CDSL.

Procedure

Closure initiated by BO himself

1. BO will submit a duly filled account closure request form to DP.

2. On receiving the form, DP will verify the details available in the CDSL system and
will see if there is any balance left to be paid.
3. If DP will find everything correct then it will execute the closure request.

Closure initiated by DP
DP has right to close the account of BO, if there is any problem with that account. The
account closing reason can be anyone of them: -
1. Mistake in entering BO details in the system.
2. Non-payment of fees and other charges.
3. Submission of fake/ forge/ stolen documents for dematerialization.
4. Commission of fraud.
5. Non-compliance with any clauses in the DP-BO agreement.
6. Any other reason which CDSL think invalid.

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The procedure of account closure is following: -
1. DP will give a notice regarding the closure of account before a specified period
decided by CDSL.
2. DP will enter account-closing request in to CDAS system.
3. The request will approve internally in DP office through CDAS.
4. CDSL will approve the request initiated by DP if the reasons are satisfactory.
5. Finally account will be closed.

Closure initiated by CDSL

CDSL may direct the closure of a BO account under specific circumstances such as order
of a competent court or tribunal, or an order of the central or state Govt., or SEBI or that
of any other competent authority or if CDSL otherwise feels it not to be in the interest of
CDSL, DP’s and the BO’s.

Benefits of having a demat account

For holding securities in dematerialized form it is mandatory to have a demat account
with any DP of any Depository. Having a demat account is beneficial in many terms.
Here are some of the benefits or advantages of demat account presented below: -

 SEBI had made it compulsory for most of the scrip to be traded only in demat
segment. There are many companies, whose scrips can be traded only in demat
segment, so to trade in those securities it is required to have demat account.

 Demat account holder may enjoy reduced cost in term of transaction as transaction in
demat mode of securities is exempted from the stamp duty that is 0.5% in case of
transaction in physical mode of shares.

 A demat account holder will be free from all the risks associated with physical form
of securities like delays, theft, mutilation, bad deliveries etc.

 A demat account have an option also to have its securities in frozen mode his demat
account.

 A demat account holder is free from the problem of odd lot of securities, that exist in
physical mode of securities, in demat mode of securities, market lot is reduced to one.

 It is beneficial to have demat account because dematerialized securities are most

preferred by banks and other financiers for providing credit facility against securities.
Generally, demat securities attract lower margin and lower rates of interest compared
to physical securities.

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 After the settlement, pay in and pay out are there on the same day for scrips less
trading which means clients get their securities as well as cash immediately.

 Shares bought or sold are transferred in the name of client on the very next day of pay
out. In case of physical shares, transfer of ownership takes 30 days or sometimes even
more than that.

 There is no courier and postal charges for sending share certificates and transfer deed.

 There is facility for freezing or locking of investor’s account, which enables the client
to make its account non-operational.

 There is the facility of pledge and hypothecate all the securities of the clients on their
wish if they have a demat account.

 It is for sure that as the depository system becomes popular, brokers will be
increasingly reluctant to deal with physical shares so it’s better to have all the
securities in demat mode only from now itself. And for that it is required to have a
demat account.

 Investors prefer to buy shares, which are already in dematerialized form.

Accounts other then demat account

Accounts maintained by DP

 CM principal account for BSE

This account is opened by a BSE CM in his own name with any DP of CDSL for the
purpose of holding securities owned by him or the securities sold / purchased by him or
his clients during the course of trading on the stock exchange. This account is used for the
purpose of pay-in of securities for BSE settlement.

 CM pay-out account or CM Pool account for BSE

This account is opened by a CM with any DP of CDSL for the limit purpose of
temporarily holding securities in this account received by him from the CC /CH against
purchase under any given settlement.
The CM should ensure that the securities received in this account are transferred to the
concerned BO account within 4 calendar days or 2 working days, whichever is later or
such time as may be notified by SEBI from time to time, from the date of payout .If such
securities are not transferred to the concerned BO account, then the depository shall
transfer the securities lying beyond the stipulated period to the CM Investors’ Securities
Account (CISA).

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 CM investors securities account (CISA)
This account is opened by a CM in his own name with any DP of CDSL and is used for
the purpose of temporarily holding those securities which are lying in the CM pool
account /CM Clearing Account beyond the time limit notified by SEBI from time to time.

 CM clearing account for all exchanges other than BSE

This account is opened by a CM in his own name with any DP of CDSL for the purpose
of receiving securities from his clients who have sold securities and from the CH/CC for
the purchases made by his clients .The CM will have to open separate a/c for each
exchange on which he is trading as a recognized CM of that exchange .The CM’s of those
exchanges, which are following the CM level settlement model, will open this account.
All corporate benefits that may accrue in respect of the securities held in the above
accounts shall be availed of and held by the CM in trust for the benefit of the concerned
BO.

Accounts maintained by clearing house/ clearing corporation

 Settlement default (CH pool) account

This account is opened for the purpose of holding securities deliverable to a defaulting
CM in respect of any transaction or dealing and withheld by the CC/CH /stock exchange
as per the Bye-laws, rules and regulations of the concerned CC/CH or stock exchange.
The securities from the settlement Default (CH Pool) account can be transferred to any
one of the following accounts as may be required: -
1. CM principal Account
2. BO Account
3. Clearing Member Account
4. Or any other a/c as may be specified by CDSL from time to time

 CC/ CH house account

This account is opened by CC/CH in its own name with CDSL for the purpose of routing
securities to be received / received from the delivering CM and / or securities to be
delivered /delivered to the receiving CM. The CC/CH may open multiple accounts for
this purpose based on its requirement and settlement procedure.

Dematerialization

Dematerialization (demat) means conversion of a share certificate from its physical form
to electronic form for the same number of holding which is credited to client’s demat
account which they open with a DP.
Dematerialization is the process by which the company takes the physical share
certificates of an investor back and equal number of securities are credited in the
electronic form in the demat account of client. This whole process is done at the request
of investor. An investor will have to first open an account with a depository participant

45
and the request for dematerialization of his share certificates through DP, so that the
dematerialized holdings can be credited into that account.
Dematerialization of shares is optional and an investor can still hold shares in physical
form. But it is compulsory that if any investor will sell his securities through stock
exchange then he has to demat the shares first and any investor purchase securities
through stock exchange then he will get delivery of the shares in demat form.
There are some requirements which have to be filled before demat of securities. These
requirements are: -
1. Investor should have a demat account with any DP of CDSL.
2. Securities to be dematerialized must have been admitted in CDSL.
3. Investor should be registered holder for the securities in the books of the
company.

Procedure for converting physical shares into electronic form

1. To convert the shares into electronic form the investor should open an account with
any DP.
2. BO will surrender all his physical share certificate which he want to get converted
into demat mode along with demat request form (DRF) to his DP.
3. The DP will verify the information on the DRF and physical certificates and enters
the details in the system to set a request electronically. And then it will send a request
to Depository.
4. DP will send the physical certificates along with DRF to concerned Issuer/RTA.
5. CDSL will also send the request to Issuer/RTA.
6. If Issuer/RTA will find everything correct then he will give his confirmation to CDSL.
7. CDSL will credit electronic securities in the account of the BO.
8. DP will provide the statement of holding to BO.
9. If Issuer will not find everything correct in demat request form then he will send
rejection to the clients DP.
10. And then DP will send those rejected certificates to the investor again.

Safety to the investor from demat mode of securities-

1. Securities exchange board of India (SEBI) has laid down certain rules and regulations
for getting registered as a depository participant. With the recommendation of the
depository and SEBI’s own independent evaluation a DP will be registered under
SEBI.
2. The investor’s account will be credited/debited by the DP only on the basis of valid
instruction from the client.
3. The system driven mandatory reconciliation is done between the DP and Depository.
4. Periodic inspections of both DP and R & T agent are conducted by CDSL.
5. The data interchange between CDSL and its business partners is protected by
standard protection measures such as encryption.
6. No direct communication links exist between two business partners and all
communications are routed through CDSL.
7. The investors receive a statement of account periodically. CDSL sends statement of
account to a random sample of investors as a counter check.

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8. The investor has the right to approach CDSL if the concerned DP does not resolve the
grievances of the investors.

Advantages of dematerialization

1. There is no risk due to loss on account of fire, theft or mutilation.

2. There is no chance of bad delivery at the time of selling shares as there is no signature
mismatch.
3. Transaction costs are usually lower than that in the physical segment.
4. The bonus/rights shares allotted to the investor will be immediately credited into his
account.
5. Share transactions like sale or purchase and transfer/transmission etc can be effected
in a much simpler and faster way.

Problems of dematerialization

Before the dematerialization there was almost a gap of three months between application
date and listing of shares. Dematerialization has reduced this gap to a great extent. But
quick money brings with itself a host of problems. Current regulation prohibit multiple
bids or applications by a single person, but the investors open multiple demat accounts
and make multiple applications to subscribe to IPO’s in the hope of getting allotment.

Remedial measures
There are some solutions of this problem. These are: -
1. To prevent the sprouting of fictitious demat accounts at DP’s the allotment of shares
should be checked thoroughly.
2. The concerned DP should strictly enforce “The know your clients (KYC)” norms
rather than relying on bank documents and verification of brokers.
3. DP’s should be asked to give monthly figure of accounts opened for public.
4. Coordination and clear definition of roles is important to avoid manipulations.

So we can say that dematerialization is very beneficial for investors although it has some
problem also but still its benefits can’t be ignore and in upcoming time in securities
market the tradition of physical certificates will be removed totally.

Transfer-cum-dematerialization

When physical securities are sent to the Issuer /RTA for transfer by the buyer, the issuer /
RTA completes the transfer process and records the securities in the name of the
concerned buyer in the Register of the Members. If the Issuer /RTA is providing transfer
cum dematerialization facility, the certificates are not dispatched to the concerned buyer.
Instead the Issuer /RTA intimates the buyer about the transfer and gives the buyer an
option to hold the transferred securities in demat form by issuing an “Option letter”

47
The investor on receiving such an option letter opts for holding the transferred securities
in demat form. In such a case, the investor has to open a demat account, if not already
opened, fill up a DRF, attach the option letter along with the DRF and submit it to the DP.
Transfer-cum-demat request can be set-up for a quantity up to 500 securities only. In case
the Issuer / RTA does not receive demat request within 30 days of the date of issuing the
option letter then the physical securities may be dispatched to the concerned buyer
directly.

Transposition-cum-dematerialization

The companies act, 1956 permits joint holding of shares. When shares are issued in
physical form, the names of all the joint holders are printed on the share certificates. All
the joint holders are recognized as members of the company. However, the company will
deal with the member whose name appears first among the joint holders for payment of
dividend and delivery of documents/communication/notices. The joint holders are
entitled to change the sequence of names by making a written request to the company.
This does not constitute a transfer. Changing the sequence of joint holders is called
‘transposition’. However, transposition is to be availed for the entire holding in a folio
and is not allowed for part of holding.

If the same set of joint holders held securities in different sequence of names, these joint
holders were earlier required to open different depository accounts in the CDSL
depository system. The CDSL has introduced ‘transposition-cum-demat facility’ to help
joint holders dematerialized securities in the same account even through share certificates
are in different sequence of names.

For this, dematerialization request form (DRF) and an additional form called
transposition form should be submitted to the depository participant (DP).

For an example, Transposition is applicable in situations where the demat account has
been opened in the name of A, B, C and some of the certificates are in any other order of
holder names such as A, C, B or B, C, A or C, B, A etc i.e. holders names are same but
order in which they appear is different. Such certificates can be dematerialized in the
account of A, B, C by filling up a Transposition Request Form (TRPF), attaching the
same with the DRF and submitting to the DP.

Rematerialization

Rematerialisation is the process of converting securities, held in a demat account (i.e.

electronic form) to physical form. If investor wants to convert their securities back in
physical share certificate form then they have to follow a particular procedure for that.

Procedure of rematerialization of shares

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1. A BO intending to convert the securities into physical form has to submit a remat
request to the DP in a Rematerialisation Request Form (RRF). He will specify the
quantity in RRF. There will be separate RRF for free and lock-in securities.

2. DP verifies the information on the RRF and enters the details in the system to setup a
request electronically .The system generates a unique serial number called as
Rematerialisation Request Number (RRN), which can be used for future reference.

3. The DP sends the RRF to the concerned Issuer /RTA.

4. CDSL pass the electronic request to Issuer/ RTA.

5. If the remat request is in order, the Issuer/RTA approves the same and confirms the
RRN electronically to CDSL.

6. On receiving such confirmation, CDSL debits the BO account.

7. DP will send new statement of holding to investor.

8. Physical certificates are sent by the Issuer /RTA directly to the investor.

Pledge

As per section 12 of the Depositories Act 1996, securities in demat mode can be pledged.
Regulation, 58 of SEBI Regulations on depositories prescribe the manner in which a
pledge is to be created.

When securities are to be pledged for advance /loan, two entities are involved in this
transaction the pledgor and the pledgee. The entity-taking loan against securities is called
‘pledgor’ and the entity that gives the loan is called pledgee. Pledgee may be a financial
institution or any other entity providing advance /loan against securities. The ownership
of securities continues to remain with the pledgor but the pledgee has a lien on them.

For creating pledge in depository system, the pledgor as well as the pledgee should have
demat accounts .For the securities in demat form, the pledgor may be able to get higher
loan amounts, with reduced margins and lower rate of interest as compared to securities
in physical form.

Bankers, share brokers, investors and other entities dealing in securities make frequent
use of the pledge facility in the normal course of their business. CDSL system permits
creation of pledge against such securities held in demat mode.

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Salient feature of pledge in CDSL’s DP
Pledge in DP related to CDSL has some salient features, which are as follows: -
1. The pledgor or an acquisition by the pledgee does not treat pledging as a disposal.

2. Beneficial interest in the securities pledged continues to remain with the pledgor.

3. Part unpledging /invocation is permitted.

4. Only unencumbered and free quantity can be pledged. Securities, which are under
lock-in, can also be pledged, but the pledgee cannot invoke such securities till expiry
of the lock-in period since, as per the Companies Act, transfer of ownership of lock-in
securities is not permitted till lock-in period is over.

Procedure to pledge the securities

Any BO who want to pledge his securities has to follow a predetermined procedure for
this pledging, so here is procedure presented below: -

1. The BO who wants to pledge his securities will submit a dually filled pledge request
form (PRF) to his DP.
2. The pledgee will countersign the PRF.
3. When pledgor’s DP get this PRF, it will verify that is there enough balance of
securities in his account or not and the balance should be free.
4. The pledgor’s DP creates a pledge request in CDSL system by entering the detail
of the PRF in the front-end system. This system will allocate a unique pledge
sequence number to each pledge request setup.
5. Then CDSL system generates a confirmation letter for the pledgor on setup of a
pledge request.
6. Then anyone from DP will write the pledge sequence number on PRF and a
duplicate copy of this request will be given to the pledgee.
7. The pledgee will submit that copy to his DP with the instruction to accept it or
reject it.
8. When the pledgee will accept the pledge then CDSL system will generate a
confirmation letter.
9. The pledge quantity will be locked in the account of pledgor.
10. If the pledgor wants to cancel the pledge then it can be done before the acceptance
of pledge request setup.

Unpledge

If the pledgor want its securities to get free then it can make it possible by making a
agreement with the pledgee. This process is known as unpledge of securities.

50
Procedure of unpledge
1. For unpledging the securities, the pledgor submits a request on Unpledge Request
Form (URF) in duplicate to his /her DP.The pledge may countersign the URF.
2. One copy of URF is given to the pledgor’s DP and the other copy to the pledgee.
3. The pledgor’s DP will set up an unpledge request based on the URF, in the CDSL
system.
4. Pledgee submits the duly acknowledged copy URF to his/her DP who either accept or
reject the unpledge request.
5. On acceptance /rejection of the unpledge request, the status is changed from ‘
unpledge set-up’ to ‘unpledged accepted ‘ or ‘Unpledge Rejected ‘, as the case may
be.
6. If the unpledge request is accepted, the pledged quantity of ISIN under this PSN is
transferred from ‘Pledged Balance’ to ‘Free Balance’ in the pledgor’s BO account .An
Unpledge request can be setup for partial quantity also.
An unpledge request setup can be cancelled by the pledgor before the same is accepted
/rejected by the pledgee.

Pledge invocation

CDSL system allows pledge invocation by the pledgee in case of need, whereby the
securities are transferred from Pledgor’s account to Pledgee’s account.

1. Subject to the pledge document, the pledgee can invoke the pledge.
2. The pledgee, through his DP, submits a request for invocation of the pledged
securities on an Invocation Request Form (IRF). Each IRF will be based on the PSN,
which the pledgee seeks to invoke.
3. The pledgee’s DP sets up an invocation request for the pledgee based on the IRF, and
the balance is transferred from pledgor’s account to pledgee’s account. Balance
transfer from pledger’saccount to pledgee’s account takes place only if the pledge is
setup against securities, which are not under lock-in.
4. If the invocation request is for a part quantity, the pledgee’s DP can once again set up
invocation request for the balance quantity of the pledge, f required.
5. The pledger’s DP and pledgee’s DP will inform the pledgor and pledgee about the
status accordingly.

Corporate actions

Many times company provides some benefits to its shareholders. These benefits may be
in the form of dividends, interest, bonus shares, rights, etc. these benefits are called
corporate benefits.

For crediting the corporate benefits to the account of client, it is required to know the
exact BO to whom Issuer will give benefits. Like everyday there is sell and purchase of

51
many scrips so for issuer it may be difficult to find out the real BO. To solve this problem
CDSL help Issuer by providing information related to BO at a record date.
For this CDSL announce a cut off date, on this date that so ever will be the securities
holder will be entitled to enjoy the corporate benefits.

At the end of record date CDSL provide all the information related to the entitled BO to
the Issuer/RTA. Information regarding the BO needs to be provided to Issuer before the
book closure date.

Types of corporate actions

There are two types of corporate benefits. These are: -

 Cash based corporate benefits

These benefits are paid or given to the securities holder in the form of cash, like: -
dividends, interim dividends, and debenture interest etc. for this type of benefit CDSL
only required to provide information regarding BO and then it is free from rest of the
things.

 Non cash corporate benefits

These benefits are paid in the non-cash form to investors. Like: - bonus shares (recently
reliance power), rights, preferential allotments, merger, amalgamation, conversion of
securities, etc.

For non-cash benefits investors have option to receive the shares either in physical form
or in demat form. If investor did not inform the Issuer regarding the form of shares then
issuer issues the shares in the same form of their holdings. Like if he had shares in
physical form then Issuer will also send physical share certificate to the investor or vice
versa.

Freeze

Freeze is the process in which securities from the account, which has been freezed,
cannot be debited or credited on the wish of the accountholder. This may be on debit or
credit or even on both. A BO or DP or CDSL, any of them, can initiate freeze. This
Freeze can be on a whole BO account or ISIN of a BO ID or partial quantity in ISIN of a
BO ID. Freeze may be for limited period or unlimited period. It is not compulsory that
freeze will be activated at the very same day; it may be for any future date also.

Procedure of freezing the securities:

If freeze is initiated by BO himself

1. BO will give a duly filled freeze request form (FRF) to his DP.

2. DP will verify the signatures of BO and will check if the quantity that is asked to
freeze is available in the account or not. After verification DP will enter freeze request
on the system. And then the account will be freezed.

52
3. DP will provide a letter to concerned BO.

If freeze is initiated by DP
1. Before freezing the account DP will send a notice/ order from a statuary body.

2. DP will prepare and pass on an internal request for freeze.

3. DP will enter the freeze request in the CDSL system.

4. System will generate a Freeze letter.

5. DP will keep freeze letter as record.

Unfreeze

Unfreeze is the process of making the account unlock or free from freeze so that any
number of securities may be debited or credited as per the wish of accountholder.

Procedure of unfreezing the securities:

If unfreeze is initiated by BO himself

1. An authorized official of the DP should verify that the unfreeze request form received
from the BO is filled completely and signature(s) of the holders are matching before
the same is entered in the system.

2. System generated acknowledgement for unfreeze, duly signed and stamped by the
authorized official of the DP should be sent to the BO.

If unfreeze is initiated by DP
1. The DP can initiate unfreeze either to clear the lien created on the balances of the BO
or to adhere to the orders from statutory authority/regulatory authority.

2. The acknowledgement letter for unfreeze should be duly signed and stamped by the
authorized official of DP and sent to the BO.

3. All documents/letters received from CDSL/statutory/regulatory authority, DP should

carefully maintain acknowledgement copy of freeze/unfreeze letters sent to BO.

53
 Settlement

In trading system, securities are sold and purchased and when securities are sold and
purchased it is required to make adjustments in buyer’s and seller’s demat account. Since
SEBI has made it compulsory that settlement of trades in all listed securities is to be done
in dematerialized form. There are two options before investors either they can make their
transaction possible through stock exchange or personally.

When any BO purchase or sale securities then DP have to credit or debit his account
accordingly. If he is selling his securities then he will submit a duly filled delivery
instruction slip (DIS) to instruct his DP to debit his account and provide delivery to
counter party. He will specify the name of the securities along with quantity, ISIN
number, transaction type and signatures etc. This booklet is issued to BO after an account
has been opened. The instruction slips have the BO ID and a serial number preprinted on
them.

When the BO purchase securities then DP will credit his account with the purchased
amount of securities. For this BO can give one time standing instruction to the DP, for
crediting the account at the time of account opening, this is called “purchase waiver”.

Types of transactions

There are mainly three types of transaction types on the basis of their different
characteristics. These all types are mentioned below: -

 Off-market transaction
In off-market transactions, the transaction is done between two accounts on mutually
agreeable terms. It is done person-to-person basis, without going through the stock
exchange mechanism. Off-market transaction can be used for transfer securities from: -
1. One BO account to other BO account
2. BO account to CM account for pay-in
3. CM account to BO account for pay-out.
The seller BO will submit a duly filled in instruction slip, giving details of the buyer BO,
ISIN, Quantity etc. to the DP. On receipt of the instruction slip, the DP will verify the
same and enter the off-market instruction in the CDSL system. If the buyer BO has not
given one time standing instruction to his DP for receiving securities in the account

The instruction entered by the DP will be executed on the “execution date “as specified
by the BO in the instruction slip. At the time of Execution, if a sufficient balance is
present in the seller BO account, the account will be debited and corresponding credit
will be given in the buyer BO account.

If the balance in the seller BO account is in sufficient, the instruction will remain in the
“overdue” status. For all instructions with “overdue” status, CDSL system will check for

54
availability of balances at pre-defined intervals till the end of the execution date (till
EOD). At the end of the day of the execution date, if balances are still insufficient the
instruction will be marked as failed.

 On market transaction
When Investors buy/sell securities on the trading platform provided by the stock
exchanges through SEBI registered CMs. The day on which the trade is executed is called
as the Trading day or the “T” day .On receiving confirmation, from the CM, of execution
of the trade, the buyer BO has to deliver the funds (money) to his / her CM and the seller
BO has to deliver the securities to his /her CM. The CM delivers the funds and the
securities received from the BO to the CH/ CC of the stock exchange before the
stipulated time specified by the stock exchange. The CH/CC of the stock exchange then
delivers the security to the buying CMs and fund to the selling CMs who have executed
trade on behalf of their client. This activity of the CH /CC of the stock exchange of the
delivering fund and securities to the respective seller/ buyer is known as “settlement of
market trade “. The date on which settlement takes place is known as “settlement date”.
Settlement of on market trades is currently done on a T+2 basis i.e. settlement takes place
on 2nd working day after the trade has been executed by the CM.
Settlement of funds is effected through the clearing banks and depository plays no role in
this, whereas settlement of securities in dematerialized form is effected through
depository system.

The process of delivery of security by the seller CM to the CH /CC for settlement is
known as “pay-in of securities” and the process of delivery of security by the CH/CC to
the buyer CM is known as “pay-out of securities”. Pay–in and pay-out of securities take
place at pre determined timing decided by the stock exchanges.

Pay-in of securities

Procedure of pay-in

A CM has to open designated depository accounts for settlement of securities through

CDSL. On receipt of confirmation of execution of a trade from the CM, the seller BO has
two options: -
1. Deliver the securities on CM’s designated accounts who in turn will deliver the
securities to the CH /CC of the exchanges. For the delivery of securities to the CM’s
designated account a BO has to give off market instruction to the DP, while giving
instructions, BO must mention the settlement no. For which the transfer of securities
is being done.
2. Or Deliver the securities directly to the CH/CC of the stock exchange by giving
on –market / early pay-in instruction to the DP.

On receipt of securities from the seller BO in the CM account, CM has three options to
deliver securities to the CH / CC of the exchanges-

55
1. CM can use “normal pay-in option“ and give on-market instructions to the DP,
specifying the settlement number for which the instructions are given.
2. Or CM can give auto pay-in instruction to the CH/CC.
3. Or CM can give early pay-in instruction through his/her DP.

 Normal pay-in

1. Normal pay-in can be used by a CM to deliver the securities to the CH / CC of the

stock exchanges by giving on-market instruction to the DP.
2. Normal pay-in can also be used by a seller BO to directly deliver the securities to the
CH /CC of the exchanges by giving on-market instruction to the DP.
3. Seller BO / CM can give on market instruction to the DP, any time from the “T” day
itself to T+2 day before pay-in time, even if no balance is available in the account.
Balances can be made available by the seller BO / CM till the pay-in time.
4. At the pay – in time of the BSE, CDSL earmarks the balance in the accounts for
which the on-market instruction has been entered by the DP. Earmarking of balances
will only be to the extent of quantity specified at the time of the set up of the BO
obligation confirmation.e.g: if BO obligation confirmation is set-up for 200 shares by
the DP and if the BO account has a balance of 500 shares, earmarking would be done
for 200 shares only.
5. Part earmarking is also permitted i.e. if BO obligation confirmation is set-up for
300shares and at the pay-in time if 200 shares are available in the BO account, part
balance of 200 shares will be earmarked.
6. In case of trades done on BSE, the accounts of the BOs / CMs for which on-market
instructions have been entered will be debited at the time of pay-out whereas for
trades done on all other exchanges, the accounts of the BOs / CMs will be debited at
the pay-in time.
7. For other stock exchanges, CDSL blocks all the securities present in the account and
the account block are released only at the time of actual pay-in.

 Auto pay-in

When the trade is done on BSE, a CM has an option to give a one-time auto pay-in
instruction to the CH of the stock exchange. A CM will provide in writing to the CH of
BSE that he wants to go with this option. And he is required to follow the procedure for
that. If CM chooses this option then securities will be debited automatically from the
CM’s account for pay-in. in case of trades of other exchanges, securities in the designated
account will be automatically picked up for pay-in. For the CM of BSE, the following
procedure is followed: -

1. CDSL will generate auto pay-in instruction based on information of the trades
received from CM of BSE who have opted for this way of pay-in.
2. DP of the CM can view the details of the auto pay-in instruction through the inquiry
option in the CDSL system on T+1 evening.
3. At the time of pay-in the securities will be picked up for pay-in.

56
If CM wants to terminate this option then he has the facility to do so, He just need to
inform his concerned CH.

 Early pay-in

A CM can use this pay-in option to avail margin exemptions. Following is the procedure
to avail this facility: -

1. CM wishing to avail of the early pay-in facility is required to apply to the CH/CC.
2. BOISL, the CH of BSE maintains a single early pay-in account, where the securities
for early pay –in have to be delivered.
3. NSCCL, the CC of NSE maintains separate early pay-in accounts for each CM, where
the securities for early pay-in have to be delivered.
4. For availing margin exemption, the BO or the CM can give early pay-in instructions
to the DP from the day of trading up to one day prior to the pay-in day or any such
time as specified by the stock exchanges.
5. On receipt of the instructions from the BO/CM, the DP verifies the same and enters
the early pay-in instruction in the CDSL system and on successful commit, the
securities will be transferred from the concerned BO / CM account to the early pay-in
account.
6. In case balances in the BO / CM account are insufficient at the time of entry, the
instruction will fail and will have to be re-entered after the balance is available in the
BO / CM account.
7. On the settlement date, the securities transferred in the early pay-in account will be
used by the CH /CC for settlement of trades.

Pay-out of securities

For the pay out process there are two options available. These are: -

 Pay-out of securities to CM pool account by the CC/CH & Then by CM pool

account to Clients
After the pay-in of securities the CH / CC transfers the securities to the buying CM’s
account, for the quantity of securities purchased by the concerned CM. This process of
transfer of securities by the CH /CC for the securities purchased by the CM on behalf of
its clients is commonly referred to as “Pay-out” of Securities .In case of trades done on
BSE, the pay-out of securities is transferred to the CM’s, “ CM unified settlement”
account, commonly referred to as “CM pool account”. For trades done on other
exchanges, the securities are transferred to the “CM Clearing member account” .On
receipt of securities in the designated accounts; the CM can give delivery instructions to
his DP for transferring the securities to the respective buyer client’s account. For giving
the securities to client’s account, there is following procedure: -

57
1. Securities received as payout in the CM pool account / CM clearing member accounts
can be transferred to any BO account or CM principal account or CM clearing
member account of any other exchange.
2. The CMs transfer the securities received as payout, out of the CM pool account / CM
clearing member account within two working days or four calendar days from the
date of receipt of securities, which ever is later, or within such time as may be
decided by SEBI from time to time.
3. In case the securities are not transferred out, within two working days or four
calendar days from the date of receipt of the securities, the securities shall be
automatically transferred to a special account known as CM Investors’ Securities
Account (CISA). Each CM is required to compulsorily open a separate CISA account
per exchange.
4. The securities in the CISA account can be directly transferred to CH / CC for pay-in
purpose.
5. A penalty charge is levied by the depository to the CM, on a daily basis, for the
securities lying in the CISA account. Such charges recovered are used for “Investor
Awareness Program”.

 Pay-out of securities directly to client’s account by the CH/CC

In this CH/CC directly provide credit in the account of concerned client. For this purpose
CM provide demat account details to the CH/CC, and then CH/CC credited the account
of buyer immediately.

 Inter depository transaction

As there are two depositories in India, NSDL and CDSL. So if there is transaction
between the investors who are having their demat account in different depositories it will
be called Inter depository transfer. Like transfer of shares from CDSL to NSDL or NSDL
to CDSL will be Inter depository transfer. For this type of delivery the BO/CM will
submit a duly filled instruction slip, they should clearly specify the type of transaction,
quantity, name of scrip and execution date etc. the procedure of this type of transaction is
presented below: -

In case of debit

1. On the execution date CDSL will check the balance in BO account, if there is
sufficient balance then it will earmarked this balance or if it is not sufficient then
CDSL will check the availability of balance at pre defined intervals till stipulated
cutoff time on the execution date, if still balance is not available then instruction will
fail.
2. CDSL will transfer the instruction to other depository, this is done for the verification
of the counter BO details, ISIN, settlement number etc.
3. If the counter BO details are confirmed as “OK” by the other depository, the
delivering BOs account will be debited and counter BO account on the other
depository will be credited.

58
4. If the counter BO details does not match, the other depository will reject the
instruction.

In case of credit

1. If the receiving BO has opted for “purchase waiver” as “YES” then instruction to the
DP for receiving credits of securities from the other depository is not required.
2. If the receiving BO has opted for “purchase waiver” as “NO” then instructions to the
DP for receiving credits of the securities from the other depository is necessary. In
such cases, credits received from the other depository would be processed only if
corresponding matching instruction is found in the CDSL system.

Transmission
Transmission is the process by which securities of a deceased account holder are
transferred to the account of his legal heirs/nominee. Process of transmission in case of
dematerialized holding is more convenient as the transmission formalities for all
securities held in a demat account can be completed by submitting necessary documents
to the DP.

Features

 This is used in the event of death, lunacy or adjudicated insolvency etc of an account
holder.
 The securities are transferred into the account of the surviving holders in case of
death of one of the joint holders.
 In case of death of sole holder the securities are transferred to the legal heir or
successor of the deceased BO.
 The transmittee BO should have an account with CDSL.
 There are two method of transfer: -
1. From one account to many account-ISIN wise
2. From one account to one account-all ISIN

Precaution

 Only written and signed instructions to be executed.

 DP to verify the signatures before executing any request for transmission in the BO
account.

59
 DP shall not allow any instruction other than transmission request in the deceased
BO’s account.
 If the transfer is because of the death of the sole holder then the copy of the
documents submitted by the successor should check with original documents
carefully.
 The copy of the death certificate should be duly notarized.

Procedure- death of the sole holder

 If the deceased BO has nominated a person then the nominee shall be the successor to
the securities in such BO’s account. In such a case the nominee shall submit the
following documents to the DP.
- Transmission Request Form duly filled.
- Notarized copy of the death certificate of the deceased holder.
If the deceased BO has not appointed a person as a nominee then the successor(s)
claiming title to the securities of the deceased BO must fill up the transmission form
and submit a duly notarized copy of the death certificate of the deceased BO and any
one of the following: -

1. A Succession Certificate
2. A Letter of Administration
3. A Probate of the Will of the deceased

However, if the successors express their inability to produce any of the documents
mentioned in 1,2 and 3 above, and the market value of the securities held in each of
the accounts of the deceased BO, as on the date of death, for transmission does not
exceed Rs. 1,00,000/- or such other amount as may be specified by CDSL from time
to time, the DP shall process the transmission request on the basis of the following
documents:

- Transmission Request Form.

- Copy of death certificate of the deceased BO duly notarized.
- Letter of Surety from an independent surety who is not the spouse /
family member of the applicant, and who I acceptable to the DP.
- Letter of Indemnity executed by the applicant and surety on non-
judicial tamp paper of appropriate vale.
- An affidavit from the applicant executed on non-judicial stamp paper
of appropriate value and notarized.
- ‘No objection letter(s)’ from all legal heir(s) who are not applicants
conveying no objection to the transmission of the relevant securities in
favour of the applicant(s)

 The DP will verify all the documents presented by the successor. If he will find them
correct then DP will set a transmission request in CDSL system and then transmission
of balances of all ISINs will be done in to the account of successor.

60
 If DP will find that details are not appropriate then DP will inform successor about the
errors in the transmission form.
 Then successor will make the necessary corrections and return the form to the DP
back.
 The DP of the Deceased BO gives a statement of account to the new BO. After all the
holdings have been transmitted from the deceased BO’s account, the deceased BO’s
DP closes the same account.
Procedure-death of any joint holder (S)

 On the death of any joint holder, the surviving joint holder should fill up the
transmission form and forward the same to the DP along with the duly notarized copy
of the death certificate of the deceased holder to the DP.
 On submission of the above-mentioned certificates and documents, the DP should not
allow prospective debits to the deceased BO’s account and awaits instructions from
the successor.
 The DP verifies the details in the transmission form with the original BO account
details available at CDSL .If the details are found to be incorrect in any manner, the
DP informs the successor about the errors in the transmission form.
 The transmittee BO’s makes the necessary corrections and returns the transmission
form to the DP.
 Once the details on the transmission form and the documents are found to be in order,
the DP sets up a transmission request In CDSL system, the DP opens a new account,
if an account does not exist in the names of the surviving joint holders as appearing in
the original BO account .The transmission of balances of all the ISINs will be done
into the account of the transmittee BO.
 The DP gives a statement of account to the new BO. After all holdings have been
transmitted, the deceased BO’s DP closes the original account.

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 II. BODY OF DISSERTATION

1. RESEARCH METHODOLOGY

Objective of research: To find out the feasibility of having a Demat account in Hem
securities limited.

Type of research: Exploratory research

Sample size: 120 Demat accountholders of 6 different depository participants.

Sampling:

Sampling method: Stratified sampling technique has been used in this research.

Data type: Primary data and Secondary data.

Data collection technique and tools: Questionnaires, Websites.

Area under research study: Jaipur city.

Statistical analysis: Data analysis is done with the help of bar charts, pie charts, tables
and certain mathematical tools are also applied to derive the results.

62
NAME: …………………………………….
CONTACT NUMBER: …………………………………….

Questionnaire

Q.1 Do you have Demat account?

a.) Yes b.) No

Q.2 If yes, what do you prefer?

a.) Trading b.) Investment

Q.3 Your Demat account is with which organization?

a.) Hem securities limited b.) Pace
c.) Indiabulls d.) India Infoline
e.) Anand Rathi f.) Mantri share broker limited

Q.4 The organization, with which you have your Demat account is associated with?
a.) NSDL b.) CDSL
c.) Both of these

Q.5 Is there any compulsion found to open a Trading account or Saving bank account
also, with the organization with which you had opened your Demat account?
a.) Yes b.) No

Q.6 If there is urgency (like the last stage of any IPO), Does your DP (Depository
Participant) provides you your Demat account number immediately? Or does your
DP open your Demat account immediately?
a.) yes b.) No

Q.7 For your Demat account activation what does your DP charges from you?
a.) AMC (annual maintenance charges) b.) Life time free
c.) Both of these

63
Q. 8 If it is charging AMC then, How much AMC is being charged?
………………

Q.9 Does your DP charges for following the instruction to debit your Demat account? If
yes then how much?
a.) Yes …………… b.) No

Q.10 What does your DP charges to dematerialize your physical share certificates?
……………………

Q.11 Does your DP lenient in receiving the charges like AMC and Delivery instruction
charges?
a.) Yes b.) No

Q.12 Is there any time boundation related to receiving the delivery instruction slips
before the closing of the office?
a.) Yes b.) No

Q.13 Does your DP provide you the facility to cancel your delivery instruction before
being online on the Depository software?
a.) Yes b.) No

Q.14 If there is urgency then, Does your DP provide you the new delivery instruction
book immediately?
a.) Yes b.) No

Q.15 Does your DP provides you regular facility of SMS on every debit in your Demat
account?
a.) yes b.) No

Q.16 Does your DP provides you statement of holdings and financial statements
regularly?
a.) Yes b.) No

Q.17 Does your DP provide you the information of overdue and failed transaction before
being asked for it?
a.) Yes b.) No

Q.18 Does your DP solve the grievances / follow up from registrar for delay in
dematerialization process of share certificates?
a.) yes b.) No

Q.19 Are you satisfied with all the services of your DP?
a.) Yes b.) No

64
Q.20 Have you ever think to transfer your Demat account from your DP to another DP?
a.) Yes b.) No

2. DATA ANALYSIS & INTERPRETATION

Q.1 Do you have Demat account?

a.) Yes b.) No

Response.
No. of Demat accountholder

Respondent having Demat a/c

25
20
15
10
5
0
IndiaInfoline

Anand
Indiabulls
Securities

Pace

Broker ltd.
Rathi
Limited

Mantri
Share
Hem

Yes
No

1 2 3 4 5 6
Name of company

65
Interpretation

 As this research is conducted to find out the feasibility of having a Demat account
in Hem securities limited, so it is required that all the respondents who have been
part of this research will also have a Demat account. So this chart shows that all
the respondents from every Depository Participant (DP) are at least having one
Demat account.

 As all these respondents are having their Demat account so they are able to tell us
about the services of their DP, which will create the basis for comparison among
these Six Depository Participants.

Q.2 If yes, what do you prefer?

a.) Trading b.) Investment

Response.

Respondent interested in Trading or

Investment
No. of respondents

14
12
10 Trading
8
Investment
6
4 Did not answer
2
0
Indiainfoline

Anand
Indiabulls
Securities

Pace

Broker Ltd.
Rathi
Limited

Mantri
Hem

Share

1 2 3 4 5
Company

Interpretation

66
  This chart represents that this research is conducted with the opinion of both type
of respondents, traders and investors so that the research will come out with more
accurate results, because there are different type of expectations of traders and
investors, so the combination of both type of clients will provide good results..

 We can see here that traders are more in number in Pace, Indiabulls & Infoline, it
may be because there is compulsion of having a trading account also in indiabulls
and India infoline so traders usually are benefited by this package of compulsion
& they all provide funding facility to its clients so for a trader it is beneficial to
have a Demat account in such type of organization.

Q.3 Your Demat account is with which organization?

a.) Hem securities limited b.) Pace
c.) Indiabulls d.) India Infoline
e.) Anand Rathi f.) Mantri

Response.

Number of Respondent

Hem Securities
Limited
Pace

Indiabulls

IndiaInfoline

Anand Rathi

Mantri Share
Broker ltd.

Interpretation

 This pie chart depicts that equal number of respondent has been taken from these
entire six depositories participant, to come with right analysis part.

 The number of respondent from each DP is twenty. These respondents are taken
randomly so that accurate information can be drive out from this research.

67
Q.4 The organization, with which you have your Demat account, is associated with?
a.) NSDL b.) CDSL
c.) Both of these.

Response.

Name of the Company Depository

1. Hem securities Ltd. CDSL

2. Pace CDSL
3. Indiabulls CDSL & NSDL Both

4. IndiaInfoline CDSL

5. Anand Rathi CDSL

6. Mantri Share Broker Ltd. CDSL

Interpretation

 From this table we can easily conclude that Indiabulls is the only DP, which is
associated with NSDL and CDSL. Rests all are associated only with CDSL.

 HSL is only associated with CDSL like most of its competitors.

 As Indiabulls is associated with both the Depositories presented in India so it is

able to serve its clients in more efficient way because there are many companies
which are only listed with NSDL, so if client want to hold the securities of these

68
 companies also than it is not require to open other Demat account with another
DP which is having its association with NSDL.

 NSDL is bigger Depository of India than CDSL so the organization, which is

associated with it, will be able to serve its clients in better way.

Q.5 Is there any compulsion found to open a Trading account or saving bank account
also, with the organization with which you had opened your Demat account?
a.) Yes b.) No

Response.

Compulsion of opening other A/Cs

25
20
Responses

Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 This chart depicts that only 3 respondents believe that it is a compulsion to open
other accounts like Trading account also with HSL if you want to open a Demat
account here, this shows that people are free to choose the organization with

69
 which they want their Trading account, HSL does not force its client in any way.
While most of its competitors do so.

 This also shows that HSL is so confident about the quality of its services that it
does not feel the requirement to bound its clients. It is sure that if clients will like
its services and facilities than they will automatically open their other account
also in HSL.

Q.6 If there is urgency (like the last stage of any IPO), Does your DP (Depository
Participant) provides you your Demat account number immediately? Or does your
DP open your Demat account immediately?
a.) Yes b.) No

Response.

Facility of urgent a/c no.

25
20
Responses

Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 This chart tells us that if there is any urgent requirement of a new Demat account
number than HSL can provide it immediately although its other competitors like
Anand Rathi, Mantri and Pace are also providing the same facility but the most
popular DPs of India like Indiabulls and India infoline are not able to provide or

70
 to open a demat account immediately, they usually take 7-10 days to open the
account.

 This is an advantage for people that they can open their account at any time with
HSL because it is having Online software or we can say that this Jaipur branch is
its main DP. Many times conditions arose like last stage of any IPO when it is
required that account will start operating immediately so at that time HSL may
prove itself better and fruitful than others.

Q.7 For your Demat account activation what does your DP charges from you? And if
your DP is charging AMC than, how much AMC is being charged?
a.) AMC (annual maintenance charges) b.) Lifetime free
…………………….
c.) Both of these

Response.

Company Activation AMC

Charges
1. Hem securities Ltd. AMC 224/-

2. Pace AMC 250/-

3. Indiabulls Life Time Free -

4. IndiaInfoline AMC & Life time free 280/-

Both type of facilities
5. Anand Rathi AMC 225/-

6. Mantri Share Broker AMC 250/-

Ltd.

Interpretation

 This can be interpreted with the help of this table that HSL is charging the least
amount of AMC (Annual Maintenance Charges) among all its competitors, so that
its clients can enjoy the benefit of same services in less cost.

71
  Although Indiabulls is providing the facility of Life Time Free Demat account
where no AMC will be charged but if there is a client who just want to invest in a
single IPO. Then having this Life Time Free facility will be more costly for him
than AMC, because to avail this facility (Life Time Free facility) we need to pay
more account opening charges.

 India Infoline is providing both type of facilities but its AMC is very much higher
from the AMC of HSL.

Q.8 Does your DP charges for following the instruction to debit your Demat account? If
yes, than how much, is being charged?
a.) Yes …………… b.) No

Response.

Company Delivery Slip Charges

Hem Securities Ltd. 12/- Per scrip

Pace 11/- Per scrip

Indiabulls 8/- Per scrip

IndiaInfoline 15/- Per scrip

Anand Rathi 12/- Per scrip

Mantri Share broker Ltd. 12/- Per scrip

Interpretation

 This chart depicts that HSL is offering the ongoing rate of transfer of securities
from one account to other account. So it is not charging anything extra or more
from its clients.

 Although Indiabulls & Pace are charging less but both of these DPs took 48 hours
to follow the instruction of transfer whereas HSL follow and put the transaction

72
 details on CDSL’s software within the same day of receiving of Delivery
Instruction Slip.

Q.9 What does your DP charges to dematerialize your physical share certificates?
……………………

Response.

Company Dematerialization Charges

Hem securities Ltd. 30/- Per Share Certificate

Pace 30/- Per Share Certificate

Indiabulls 30/- Per Share Certificate

IndiaInfoline 40/- Per Share Certificate

Anand Rathi 23/- Per Share Certificate

Mantri Share Broker Ltd. 25/- Per Share Certificate

Interpretation

 This table depicts that HSL is charging normal amount of money from its clients
to dematerialize the shares. It is charging at ongoing rate.

 Although Anand Rathi and Mantri Share Broker Ltd. are charging very less but
their follow up rate is low so after charging low charges they are not able to
perform the whole process of dematerialization efficiently.

 India Infoline is charging highest among all these competitors.

73
Q. 10 Is your DP lenient in receiving the charges like AMC and Delivery instruction
charges?
a.) Yes b.) No

Response.

Leniency in Receiving of charges

25
Responses

20
Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 We can see here that HSL is very lenient in receiving the charges from its clients,
so it does not stop the transaction or delivery from the account in the term of
delay in payment of AMC and Instruction charges. It provides enough time to its
clients for payment.

74
  Leniency in receiving charges makes the organization more popular and
trustworthy.

 Because of this leniency the transaction of clients are not affected adversely, like
in other DPs if there will be delay in payment of charges than they do not follow
the instruction of client to transfer the securities, which in return can create
problem for clients.

Q.11 Is there any time boundation related to receiving the delivery instruction slips
before the closing of the office?
a.) Yes b.) No

Response.

Time boundation of receiving D.I.S

25
20
Responese

Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 This chart clearly shows that, HSL serves its clients in late hours also, maximum
clients says that there is no boundation of time for receiving the Delivery

75
 Instruction Slip, which is an advantage of having a demat account in HSL.
Because of this facility people usually feel safe from auction related problems.

 Most of other DPs usually receives the Delivery Instruction Slips up to 4:00 p.m.,
after this time they usually not entertain their customers, this may affect the
business of its clients like if there is any client who have to transfer his securities
at the same day otherwise these securities will be auctioned than this type of
boundation can create problem for him.

Q.12 Does your DP provide you the facility to cancel your delivery instruction before
being online on the Depository software?
a.) Yes b.) No

Response.

Cancellation facility

25
Responses

20
Yes
15
No
10
5 Did not answer
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 We can see here that HSL is the one which is providing the facility of cancellation
of slips up to a large level, this provide benefits to its clients.

76
  If after giving the instruction slip, a client got to know that he had made a mistake
in that instruction slip then if he will not stop this slip all the securities will be
auctioned, this problem occurs in other DPs because they usually did not provide
the facility to cancel their slip at large level. Because of this many times clients
have to face problems.

Q.13 If there is urgency then; does your DP provide you the new delivery instruction
book immediately?
a.) Yes b.) No

Response.

Urgent issue of Delivery instruction

book

25
Responses

20
Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 As HSL, Jaipur is the main DP so it may provide new Delivery Instruction Book
to its clients immediately, so if there is any emergency for the client and he is not

77
 having of Slip than he will not facing problem in that case, he will be provided
new Delivery Instruction Book at the very same time.

 Most of its competitors except Mantri are not providing this facility to a large
scale and India Infoline is not a tall providing this facility. So it may create
problems to its clients many times.

 We may conclude that it is feasible for clients to have a Demat account in HSL,
they can protect themselves from the problem of not having the Slip to do transfer
of securities at a particular time.

Q.14 Does your DP provides you regular facility of SMS on every debit in your Demat
account?
a.) Yes b.) No

Response.

SMS Facility

20
Responses

15 Yes
10 No
5 Did not answer
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 This chart depicts that maximum clients of HSL are satisfied with the SMS
facility on every Debit in the Demat account.

78
  Although Indiabulls is satisfying its clients in a more efficient manner but if we
look at other competitors like India Infoline and Anand Rathi than they are not
able to satisfy large amount of clients with their facility of SMS in comparison to
HSL.

Q.15 Does your DP provides you statement of holdings and financial statements
regularly?
a.) Yes b.) No

Response.

Holding & Bill Statements

25
20
Responses

Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 In this service of making the statement of holdings and bills available to the
clients, HSL is lacking behind in comparison of its competitors.

79
  HSL is working on this part and it is dispatching the statements to its clients
regularly.

Q.16 Does your DP provide you the information of overdue and failed transaction before
being asked for it?
a.) Yes b.) No

Response.

Information about overdue & failed

transaction

25
Responses

20
Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

80
  We can say that HSL is not working well in the service of providing information
about overdue and failed transaction to its clients. While most of its competitors
are performing better in comparison.

 Even HSL is not doing so good but still it is performing better than Indiabulls,
which is a big achievement for HSL because Indiabulls is one of the successful
DPs in India.

 HSL is working out upon this problem to face the competition in more effective
manner.

Q.17 Does your DP solve the grievances / follow up from registrar for delay in
dematerialization process of share certificates?
a.) Yes b.) No

Response.

Follow up from registrar

20
18
16
14
Responses

12 Yes
10 No
8 Did not answer
6
4
2
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Comapnay

81
Interpretation

 In providing this service HSL is working best from its competitors. It is satisfying
its entire clients by providing follow up from registrar without waiting for the
request of its clients. This is a big achievement for HSL.

Q.18 Are you satisfied with all the services of your DP?
a.) Yes b.) No

Response.

Satisfied people

25
Responses

20
yes
15
No
10
Did not answere
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 From this we may conclude that most of its clients are satisfied with all the
services provided by HSL, which is a good sign for HSL.

82
  If we will compare all these DPs than we will find that although Pace is securing
1st position but HSL also standing on 2nd position along with India bulls and India
Infoline, which are successful DPs of India this all is because of service quality of
HSL.

Q.19 Have you ever think to transfer your Demat account from your DP to another DP?
a.) Yes b.) No

Response.

Transfer rate

25
20
Responses

Yes
15
No
10
Did not answer
5
0
Indiainfoline

Anand
Indiabulls
HSL

Mantri.
Pace

Rathi

1 2 3 4 5 6
Company

Interpretation

 From this chart we may conclude that most of its client wants to retain their
Demat account with HSL itself. This shows that HSL is able to provide good
services to its clients and it is able to satisfy its client.

83
  Pace and India Infoline are also at the same position.

 Although its competitors like Indiabulls and Mantri are more able to retain its
client but if we will look at Anand Rathi than we will find that it is facing the
problem of loosing its clients.

3. FINDINGS AND SOLUTIONS

After conducting this research I found out some facts, which were hidden before this
research. I found that there is a high competition among different Depository participants.
Hem Securities Limited (HSL) is working as a successful DP. It is serving its clients up to
the best level and satisfying its clients by providing best services comparative to its
competitors.
Its best key services or facilities are: -

 It is not bounding its clients to open their trading account also in HSL.
 It is providing urgent account number to its clients.
 It is charging lowest AMC.
 It is very lenient in receiving different type of charges from its clients.
 It serves its clients in late hours also.
 It issues new delivery instruction book immediately.
 It provides slip cancellation facility also to its clients.
 It solves the problem related to delay in follow up of dematerialization process.

But it has to improve in some areas also where it is lacking behind from its competitors.
As every organization has some Strengths and Weaknesses, HSL is also a party of that
normal phenomenon. HSL is working upon its Weaknesses. Some of its weaknesses are: -

 Irregularity in providing SMS of every debit in account.

 Irregularity in providing holding statement and transaction statements.
 Irregularity in providing details of failed and overdue transactions.

All these weaknesses are putting HSL behind in some areas from its competitors but still
HSL is working well as a Depository Participant. It is working on its weak areas and
trying to provide best services to its clients in these areas also.

84
If HSL will overcome from these weaknesses than it will be one of the best DPs in Jaipur.
As it has realized its weaknesses and working upon that so those people who are having
their Demat account with HSL are really benefited because they are having their account
with such organization which is already providing good services to its clients and still
working hard to improve more so finally we can say that it is very feasible for a person to
have a demat account with HSL.

4. SUGGESTIONS FOR IMPLEMENTATION

Hem securities limited is working very fine as a depository participant. It is serving its
customers in a very efficient manner and it has gained loyalty and trust of its clients by
satisfying them up to a extent. But still as I have to give some suggestions after doing the
comparative analysis of 6 depository participants of Jaipur so I may suggest that: -

 Company should provide proper SMS facility regarding every debit and credit in the
Demat account. Although it is providing this facility now also but it can provide it in
more efficient manner.

 Company should make it sure that holdings and bills reach to the clients timely, there
should be no delay in this because affect the goodwill of company in market.

 Company should make clients aware regarding overdue and failed transaction
properly.

 As Hem securities is having trust of clients and very efficient working staff so it
should marketed itself in more attractive manner to gain more and more clients as
base.

 During the period of research I got to know that facilities given to the trading account
holders indirectly affects the number of Demat accounts also, so the company should
think to provide funding facility to its clients for delivery also.

 Company should appoint relationship managers also for the welfare of the
organization.

85
 III. SUMMARY AND CONCLUSION
Overall Hem securities limited is providing good and healthy services to its clients in
jaipur city. As its head office is situated in its Jaipur branch so it is able to serve or offer
those services to its clients, which its competitors can’t provide.

It is having Online system here so it can open Demat account immediately at the time of
urgency, it can issue Delivery instruction Book immediately, it can solve account related
grievances immediately which its competitors can’t, Like ICICI and Indiabulls used to
take 7 to 10 days minimum to open the Demat account, so its accountholders are usually
benefited of having their account in Hem securities limited, Jaipur.

There is almost nil possibility for a slip to be auctioned because these slips are usually
punched on online software at the very same day, so it protects its clients in many ways.

It also tries to satisfy its clients up to its best level. As it has very professional and
efficient working staff so it facilitate its clients in many ways. Its charges like AMC and
charges for following the debit instructions are very reasonable and there is no hidden
cost charged behind that.

So in many terms it is better than its competitors and provides as much services to clients
as it can.

86
V. REFERENCES AND BIBLIOGRAPHY

 www.ideas.nsdl.com
 www.sebi.gov.in
 www.google.com
 www.yahoo.com
 Hand book of CDSL by BSE
 Hand book of NSDL Depository operations module
 CDSL Manuals of the company
 Compliances manual for DP, December 2006
 Memorandum of association of Company

87
88