Submitted To Xcellon Institute School OF Business, Ahmedabad Batch-2010-12

BMA Wealth Creators A SUMMER INTERNSHIP PROJECT REPORT On INDIAN BROKERAGE INDUSTRY (STUDY OF EQUITY, COMMODITIES AND MUTUAL
FUND) At
SUBMITTED TO Xcellon Institute School OF Business, Ahmedabad Batch-2010-12

(In the partial fulfilment of the requirement of Post Graduate Programme in Management)
Mentor: Mr.Devang Patel (Faculty Incharge)
Company Guide: Mr. Abbhas Bhojani Ms. Hetal Shah Mr. Jay Valani Mr. Bhagat Singh
SUBMITTED BY: Mr. Ghanshyam Gurjar (M00095)
Ghanshyam Gurjar-Xcellon Institute School of Business
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BMA Wealth Creators A SUMMER INTERNSHIP PROJECT REPORT On INDIAN BROKERAGE INDUSTRY (STUDY OF EQUITY, COMMODITIES AND MUTUAL FUND) At BMA Wealth Creators
SUBMITTED TO Xcellon Institute School OF Business, Ahmedabad Batch-2010-12

(In the partial fulfilment of the requirement of Post Graduate Programme in Management)
SUBMITTED BY: Mr. Ghanshyam Gurjar (M00095)
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CERTIFICATE
Date: ______________ Signature Of The Project Co-ordinator ( )
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DECLARATION
I hereby declare that, the project entitled Indian Brokerage Industry assigned to me for the partial fulfilment of MBA degree from Xcellon Institute School of Business, Ahmadabad. The work is originally completed by me and the Information provided in the study is authentic to the best of my knowledge. This study has not been submitted to any other institution or university for the award of any other degree.
___________________
Signature of Student (Ghanshyam Gujer) MBA First Year (Batch-2010-11) G.R.NO. - M00095
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ACKNOWLEDGEMENT
As any good work is incomplete without acknowledging the people who made it possible, this report is incomplete without thanking the people without whom this project wouldn't have taken shape. This project is a result of continuous cooperation, effective guidance and support from all the people associated with this project. We would like to express our regards and thanks to Devang Patel, (Faculty Incharge) my faculty mentor, for giving us the opportunity to work on this project and learn something new. I am indebted to him for clarifying our concepts by sharing his valued experience in teaching, and training which have thereby become an unconscious part of our ideas and thoughts while analyzing the brokerage industry. I am also immensely indebted to my College Prof. Jitendra Sharma and Mrs. Daisy kurien Lecturer, for his illumining observation, encouraging suggestions and constructive criticisms, which have helped me in completing this project successfully. I am also immensely indebted to my project guide in the company Mr. Abbas Bhojani (Branch Head) Ms. Hetal Shah (H-R Manager) Mr. Bhagat Singh Marl (Branch Assistance Manager) and Mr. Jay Valani (Franchisee Manager) BMA Wealth Creators. I take this opportunity to thank all those who have directly and indirectly inspired, directed and helped me towards successful completion of this project report. Lastly I would like to thank my family members and friends for their continuing support, blessings and encouragement.
Ghanshyam Gurjer
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PREFACE
Summer Training is the bridge for a student that takes him from his theoretical Knowledge world to practical industry world. The main purpose of industrial visit is to expose for industrial and business environment, which cannot be possible in the classroom.
The advantages of this sort of integration, which promotes guided to corporate culture, functional, social and norms along with formal teaching are numerous To bridge the gap between theory and practical. To install the feeling of belongingness and acceptance. To help the student to develop the better understanding of the concept and questions already raised or to be raised subsequently during their SIP period. The present report gives a detailed view of the Indian Brokerage Industry The Project is definitely going to play an important role in developing an aptitude for hard self-confidence.
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Executive Summary
This report analyzes the Indian brokerage industry taking into account the health of the capital markets and the intensity of competition among the brokerage companies. Michael Porter's Five Forces Analysis has been employed to present a picture to gain an understanding of the competitive landscape and industry attractiveness. It covers important segments of the industry and analyses market dynamics. A differentiating aspect of this report is a comparative assessment of the top brokerages firms on various value indicators. The report also includes a comparative product grid of the companies under consideration.
The major growth drivers for brokerage revenue and trading volume are: Continuous fall in brokerage fees Adoption of technology-screen-based trading, electronic matching, and paperless securities Centralized operations, effective risk management, and control on large interconnected operations spanning multiple locations, which is enabled by telecom connectivity and low costs Increasing access to capital and the ability to provide margin finance
Though the Indian brokerage industry has been consolidating steadily over the last 10 years, the share of the top 10 brokers has risen to only around one-fourth of the total industry revenues. In this fragmented market, leading players like BMA Wealth Creators, India Infoline, Edelweiss Capital and Motilal Oswal, apart from many small players, compete on the basis of low brokerage fees and customer service. The major growth drivers of the Indian brokerage industry are the increasing appetite for equities among investors as an asset class, the convenience of online trading, and declining brokerage fees. I have also found that company brokerage is go down Because competition is very high in Indian brokerage industry and I have learnt so many things in companies. I have learnt all new things in the company its my learning. I have seen the online trading; I have seen people Behaviours and their culture. I learn that how to do online trading EXP.-stock market equity nifty silver gold and commodities. People behaviours are good because all the Ghanshyam Gurjar-Xcellon Institute School of Business Page 7
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people help to me and understand their culture .culture is frank and no one is above 27 to 28 ages. And all the people have formal dress. Saturday formal not compulsory because Saturday market have closed. I meet the branch manager and understood the basic concept of stock market, commodities market and demat account and other services. I learn that how to do open demat account and which are the scheme going on BMA Wealth Creators. I understood the company policy and stock market .commodities market policy. For example commodities market start of 10 am to 3 to 11 pm and man-day to Saturday. Saturday only 10 am to 3 pm open. Equity market starts 9:15 to 3 pm man-day to Friday and Saturday and Sunday close. And demat account require the pan card is compulsory residences proof and licence. I meet the client in navrangpura post office with my friend and he has the talk person. I learn that how to talk and convince the client and how to give information about company product and services. I understand how to talk the customers. For example first ask the about customers trading equity or
commodities customer say that equity that which company you have doing equity trading and how much brokerage you give after that understand the BMA UTS scheme. Customer says commodities than I will understand the ABS scheme. Because UTS scheme not allowed in commodities market. I have seen the Tele calling. I have learnt how to do telecalling and which time. I have learnt about how to understand customers behaviour and after that give information about company and product and scheme. Some time people not give time to talk with you and our company give new offers so some people very excited because other company not give a 1 paisa per trade offers and some people not aware the company and there product. First I have understood them and their product.Some very early response because other company not give 1 paisa per trade. And I have express and
communicate the product in detail of the client. Some time I am not able to express product detail than I have transferred the call in mam or sir because some client ask very tuff question. I do not know this question. I have understood the offers of the client ABS and UTS first ABS offers This offers available of equity and commodities market .abs means advance brokerage Ghanshyam Gurjar-Xcellon Institute School of Business Page 8
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scheme For example Client pay 1000 RS than We give brokerage of 40 paisa of delivery and 0.4 paisa of intraday. And client gives 2000 Rs than brokerage of 30 paisa of delivery and 0.3 paisa of intraday. So on You have increase a advance brokerage decrease the brokerage of delivery and intraday .second scheme is UTS .UTS means unlimited trade scheme this offers available only equity market and cash market client gives 7500 RS than we gives 1 paisa brokerage per trade not quantity or volume only one transaction and three month validity. For example I have buy ongc share of 50 than I give only 1 paisa of buy ONGC share not a 50 share. Plus 10.3% tax and no account opening charges and give free online trading software. And client pays 15000 RS than we gives future and currency 1 paisa and option we take 1RS per trade and 10 times limits Plus 10.3% tax. I have study about company franchisee term and condition. I have learnt about company franchisee Company offers franchisee of 50000RS and Company take brokerage of 10000000 transaction on 1000 RS company. I understand BMA marketing strategy First understand the customer business income and how much turnover they have done in per day and which facilities give of the others company. I have also made the questionnaire and find out the investor behaviour. I have learnt that questionnaire fill up is very difficult because customer not give them too much time to fill up the questionnaire. I have meet 30 people and fill up the questionnaire. Some people not give the time. I have study of BSE and NSE Security transaction tax. Its national stock exchange of India and this is India largest stock exchange and world third largest stock exchange in term of transaction. It is located in Mumbai and was incorporated in November 1992 as taxpaying company I have also learnt that what security transaction tax is. Security transaction gives the investors. India prime minster p chindbram its annocence Its take equity mutual fund and other trading its depend on share.Its take government.
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Table of Contents
Chapter No. 1 Particular 1.1 Overview 1.1.1Primary Market 1.1.2 Secondary Market 1.2 Evolution of the Indian Brokerage Market 1.2.1 Early Years 1.2.2 Beginning of a new equity culture 1.2.3 Rapid Growth Page No. 12-13 13-13 13-13 13-15 13-14 14-15 15-15
2.1 Brokerage Industry in India 2.1.1 India in Global Markets 2.1.2 Investment rationale 2.1.3 Risk and concerns to our call
16-19 16-17 17-18 18-19 20-26 20-22 22-22 23-26
3.1 Industry Outlook 3.1.1 Increase in FII participation 3.1.2 Increase in DII inflows 3.1.3 Increasing retail participation
4.1 Companies profile 4.1.1 BMA Wealth Creators 4.1.1.1 Product and Services 4.1.1.2 Financial Products Distribution 4.1.1.3 Scheme 4.1.1.4 Competitive Strength 4.1.1.5 Channels of Distribution 4.1.2 India Infoline Ltd. 4.1.2.1 Investment rationale 4.1.2.2 Company Background 4.1.2.3 Financials Ghanshyam Gurjar-Xcellon Institute School of Business
27-65 27-38 32-33 34-36 36-37 38-38 38-38 39-45 39-40 40-45 45-45 Page 10
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4.1.3 Motilal Oswal Financial Services 4.1.3.1 Investment rationale 4.1.3.2 Company Background 4.1.3.3 Financials 4.1.4 Edelweiss Capital Ltd. (ECL) 4.1.4.1 Company Background 4.1.4.2 Investment Rationale 4.1.4.3 Financials
45-57 45-47 47-54 54-57 58-65 59-61 61-63 63-65
5.1 Task assigned 5.2 Learnings of SIP 5.3 4ps 5.4 Porter's Five Forces Model Applied 5.5 SWOT Analysis 5.6 Conclusion 5.7 Bibliography 5.8 Annexure 5.8.1 Questionnaire 5.8.2 Log Book
66-67 68-71 72-72 72-74
75-76 77-77 78-79
80-87 80-82 83-87
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Chapter-1 1.1 Overview
India has witnessed a consistently strong growth of over 7%+ over the past 5 years. This, along with the positive regulatory environment, has attracted foreign investors to India. The number of FIIs registered in India has increased to 1711 in April 2010 from 513 in 2003. Increasing foreign participation has been significantly positive for capital market intermediaries in India1. FY09 remained a lacklustre year, with FII being net sellers for ~US$10bn. Retail investors participation also remained low during FY09, which impacted performance of capital market intermediaries. With Indian economy moving on an up cycle during FY10, FIIs infused ~$20bn in Indian capital markets, and retail participation also improved through insurance and mutual fund route. Corporate fund raising activity (through QIPs, IPO, and debt syndication) has also gained momentum during FY102.
This has aided capital market intermediaries' fee-income. The secondary capital market volumes clocked a growth of 60% yoy to Rs. 978bn (annual average) during FY10 from Rs609bn in FY09. Presently close to 77% of the capital market volumes comprise of F&O volumes as compared to 61% in FY05. Change in the capital market volume mix has tempered market share of top 10 capital market intermediaries during FY10. Moreover, lower delivery volumes in the cash segment have impacted brokerage yields during FY10. We opine that the market share of most of the capital market intermediaries will remain under pressure going forward. With increased competition, brokerage yields are expected to remain flat despite higher focus of the intermediaries on the cash segment. We have assumed a 15% CAGR over FY11-12 in capital market volumes from current average of Rs 978bn. Operating cost of capital market intermediaries is largely variable in nature. Cost effective distribution model - franchisee and online trading through portals also helps in keeping a check on operating cost. And, thus operating and net profit margins are likely to remain stable. Post recent correction stock prices of capital market intermediaries are trading at significant discount to the benchmark index valuations. The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar Ghanshyam Gurjar-Xcellon Institute School of Business Page 12
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financial instruments) on a commission or transaction fee basis. It has two main interdependent segments: 1.1.1 Primary market Primary Market also called the new issue market is the market for issuing new securities. Many companies, especially small and medium scale, enter the primary market to raise money from the public to expand their businesses. They sell their securities to the public through an initial public offering. The securities can be directly bought from the shareholders, which is not the case for the secondary market. The primary market is a market for new capitals that will be traded over a longer period. 1.1.2 Secondary market The market for all investors in a security, except for the first ones to whom a new issue of a security is sold. The secondary market consists of all sellers and buyers, except for the issuer and the first group of investors who bought the issue. The secondary market is often less volatile than the primary market because it is easier to determine the underlying value of a security after it has already begun trading. Nearly all trading of a security occurs on the secondary market.
1.2 Evolution of the Indian Brokerage Market

The Indian broking industry is one of the oldest trading industries that had been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its way towards sustainable growth. The evolution of the brokerage market is explained in three phases: pre1990, 1990-2000, post 2000.
1.2.1 Early Years The equity brokerage industry in India is one of the oldest in the Asia region. India had an active stock market for about 150 years that played a significant role in developing risk markets as also promoting enterprise and supporting the growth of industry. The roots of a stock market in India began in the 1860s during the American Civil War that led to a sudden surge in the demand for cotton from India resulting in setting up of a number of joint stock companies that issued securities to raise finance. This trend was akin to the rapid growth of securities markets in Europe and Ghanshyam Gurjar-Xcellon Institute School of Business Page 13
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the North America in the background of expansion of railroads and exploration of natural resources and land development. Bombay, at that time, was a major financial centre having housed 31 banks, 20 insurance companies and 62 joint stock companies. In the aftermath of the crash, banks, on whose building steps share brokers used to gather to seek stock tips and share news, disallowed them to gather there, thus forcing them to find a place of their own, which later turned into the Dalal Street. A group of about 300 brokers formed the stock exchange in Jul 1875, which led to the formation of a trust in 1887 known as the Native Share and Stock Brokers Association. A unique feature of the stock market development in India was that that it was entirely driven by local enterprise, unlike the banks which during the preindependence period were owned and run by the British. Following the establishment of the first stock exchange in Mumbai, other stock exchanges came into being in major cities in India, namely Ahmadabad (1894), Calcutta(1908),Madras (1937), Uttar Pradesh and Nagpur (1940) and Hyderabad (1944). The stock markets Gained from surge and boom in several industries such as jute (1870s), tea (1880s and 1890s), coal (1904 and 1908) etc, at different points of time. 1.2.1 Beginning of a new equity culture A new phase in the Indian stock markets began in the 1970s, with the introduction of Foreign Exchange Regulation Act (FERA) that led to divestment of foreign equity by the multinational companies, which created a surge in retail investing. The early 1980s witnessed another surge in stock markets when major companies such as Reliance accessed equity markets for resource mobilisation that evinced huge interest from retail investors. A new set of economic and financial sector reforms that began in the early 1990s gave further impetus to the growth of the stock markets in India. As a part of the reform process, it became imperative to strengthen the role of the capital markets that could play an important role in efficient mobilisation and allocation of financial resources to the real economy. Towards this end, several measures were taken to streamline the processes and systems including setting up an efficient market infrastructure to enable Indian finance to grow further and mature. The importance of an efficient micro market infrastructure came into focus following the incidence of Ghanshyam Gurjar-Xcellon Institute School of Business Page 14
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market abuses in securities and banking markets in 1991 and 2001 that led to extensive investigations by two respective Joint Parliamentary Committees. The Securities and Exchange Board of India (SEBI), which was set up in 1988 as an Administrative arrangement was given statutory powers with the enactment of the SEBI Act, 1992. The broad objectives of the SEBI include to protect the interests of the investors in securities to promote the development of securities markets and to regulate the securities markets
1.2.2 Rapid Growth The last decade has been exceptionally good for the Stock markets in India. In the back of wide ranging reforms in regulation and market practice as also the growing participation of foreign institutional investment, stock markets in India have showed phenomenal growth in the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of the gross domestic product as compared to about 25 percent of the latter in the early 2000s. Investor base continued to grow from domestic and international markets. The value of share trading witnessed a sharp jump too. Foreign institutional investment in Indian stock markets showed continuous rise reaching about USD10 bn in each of these years between FY04 to FY06. Stock markets became intensely technology and process driven, giving little scope for manual intervention that has been the source of market abuse in the past. Electronic trading, digital certification, straight through processing, electronic contract notes, online broking have emerged as major trends in technology. Risk management became robust reducing the recurrence of payment defaults. Product expansion took place in a speedy manner. Indian equity markets now offer, in addition to trading in equities, opportunities in trading of derivatives in futures and options in index and stocks.
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Chapter-2 2.1 Indian Brokerage Industry

2.1.1 India in Global MarketsThe stature and significance of India is growing in the world capital markets. India is not only attracting greater interest from world markets, but is also assuming increasing importance in global finance6. India is a major recipient of foreign institutional flows amongst the emerging markets. Since the opening up of domestic stock markets to foreign investors, cumulative net FII investments reached Rs 517 Bn by 2008 end. India is major destination of private equity flows into the emerging markets. India was host to the annual meetings/conference of the World Federation of Exchanges (2005) and International Organization of Securities Commission (IOSCO) (2007). India emerged a trillion dollar market capitalisation market in 2007, and was among the top 10 stock exchanges in the world in terms of market capitalisation. India is amongst the top fifteen stock exchanges in the world in respect of equity turnover. India emerged as a leading player in commodities futures market India is amongst the top five in the number of transactions India is among the top five in respect of volume traded in Stock Index Futures and Stock Futures. India is one of the few markets with extensive dematerialisation of shares. Indias T+2 securities settlement cycle is at par with the global standards. Indian stock markets have the largest number of listings, with trading taking place in about 2,500-3,000 stocks. Indias most popular stock index (Sensex) is constructed on the basis of full float methodology, one of the firsts in the Asian region and a global standard. Indian market indices such as Sensex and CNX Nifty are listed in foreign exchanges for trading as ETFs.
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2.1.2 Investment rationale
Brokerage revenue growth; largely stable brokerage yield, while market Share of the leading players to remain under pressure. Despite diversification into related business - fund management, investment banking etc- Indian capital market intermediaries reap their revenue largely from equity brokerage business. The factors which drive the equity brokerage revenue are secondary capital market volumes and brokerage yield. Secondary market Volumes have grown at a CAGR of 55% over FY05-10. Volume share of low brokerage yield Futures & Options (F&O) trading has increased over cash and delivery based volume share. The cash segment delivery volumes have experienced some stabilisation over the past two quarters. This we opine will provide cushion to brokerage yield of capital market intermediaries with higher thrust on cash and delivery based volumes. We are of the view that, pressure on market share may keep the yields stable at ~6bps8. We expect stock market volumes to grow at 15% CAGR over FY10-12. In the wake of global financial market turmoil, Indian stock markets remained subdued during FY09, clocking de-growth in overall volumes of 15% yoy. Revival in economic activity and improving Indian corporate performance has abetted capital market rally during FY10. The overall stock market volumes grew by 61% in FY10. Strong growth in capital market volumes was largely driven by F&O volumes, which comprise of 77% of the total volumes and have grown at 66% CAGR over FY05-10 as compared to overall capital market CAGR of 55%. A strong expected economic growth (nominal) of 14.5% in FY11 and 15% in FY12 is expected to lead to a healthy growth in household financing savings. This, along with an expected rise in FII investments, will be the key driver for capital market volumes. We expect the overall stock market volumes to grow at a CAGR of 15% during FY10-12; the same has been factored in our work in for the companies to arrive at the fair price target for the stocks 9.
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Margins to remain stable- aided by cost effective distribution model; operating expenditure largely variable in nature In the wake of a healthy growth across all revenue streams coupled with cost effective operating structure and cost control initiatives, we opine that capital market intermediaries will be able to maintain EBITDA and PAT margins. Revenue growth will likely see a healthy growth during FY11-12 following improved capital market volumes, steady investment banking pipeline, and revival in the lending business. Higher impetus is being given to cost effective distribution network of franchisee and sub-brokers and this may aids margin preservation during down turn. We expect firm operating and net profit margins for capital market intermediaries over FY11-12.
____________________________________________________________________________________ Margins(%) FY09 F Y10 FY11E FY12E _ EBIDTA (%) PAT (%) EBIDTA (%) PAT (%) EBIDTA (%) PAT (%) EBIDTA (%) PAT(%)
________________________________________________________________________________
BMAWC Edelwiess 36.7 20.8 34.3 23.7 36.4 22.9 36.9 23.2 Motilal Oswal 37.9 19.5 41.1 27.3 41.3 27.2 41.7 27.3 India Infoline 30.3 15.0 38.9 20.6 38.4 20.5 39.1 21.2 ___________________________________________________________________________
2.1.3 Risk and concerns to our call

Businesses significantly correlated to capital marketsBusiness
diversification notwithstanding, all business verticals of the stock broking companies like the securities business, investment banking, private equity, asset management, venture capital etc are directly correlated to performance of the capital markets. In the event of any severe downturn in capital market, stock broking companies' Profitability may adversely get impacted. Increasing competition-Brokerage industry has been highly fragmented in nature has relatively lower entry barriers. Hence, it has seen an increase in participation of foreign and domestic brokerage houses. Besides impacting the overall market share, it may further impact pricing power and profitability of the stock broking companies.
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Brokerage yields may witness pressure- Of late stock broking companies have witnessed slippage in the brokerage yield. This is mainly on the back of change in the market volume mix, which is now more skewed towards options, where yields are relatively lower. Only those players who are able to maintain some consistency in margins will be better off and will be able to stay put even during the turbulent market scenario10.
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Chapter-3
3.1 INDUSTRY OUTLOOK

Steady economic growth supporting improvement in stock market volumes; positive for capital market intermediaries Indian capital markets have witnessed steady growth in volumes over the past 5 years following increased participation from institutional (both foreign and domestic) as well as retail investors. The strong GDP growth at 7%+ has attracted investors to the capital markets. Liberalisation has opened up Indian economy and conducive regulatory environment has attracted foreign participation in India. FII registration over the past10 years has increased significantly from 517 in 2003 to 1711 in April 2010.Moreover, individual investor participation in capital markets has also increased. Indias household financial savings in share & debentures, mutual funds and insurance has also seen an uptick. Capital market volumes were impacted during FY08-09, in the backdrop of global financial turmoil. Improved economic activity and strong corporate earnings growth has revived trading volumes in the Indian capital markets during FY10. Going forward, we opine that the extension of trading session by another hour is less likely to aid improvement in volumes; however, a largely stable brokerage yield and steady fee based income growth will boost revenue growth for capital market intermediaries11.
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3.1.1 Increase in FII participation

Growing FII registration in India, FII inflow remain strong12 Improving global macroeconomic scenario and revival in Indian economic growth has allured foreign investors to India. The number of foreign institutional investors (FIIs) registered in India has gone up materially over the last five years from 517 in 2003 to 1711 in April 2010. The global financial meltdown of FY09 impacted fund inflow to India also. FII were net sellers to the tune of $10bn with cumulative investments of $50bn in FY09. Nonetheless, foreign investments saw significant improvement during FY10 following revival in economic activity and healthy corporate earnings growth. FII were net buyers to the tune of $20bn during FY10 with cumulative investment of $78bn. Foreign Direct Investments (FDI) in India has also clocked an uptick during FY10, up by 4% yoy to Rs.1178bn (as on February 2010) from Rs. 1130bn. Increased foreign institutions participation in India offers immense opportunity to capital market intermediaries with improved volumes in investment banking activity.
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3.1.2 Increase in DII inflows

In the wake of global financial turmoil during FY09, Indian Mutual Funds (MFs) witnessed significantly higher withdrawals, as the asset under management (AUM) also declined due to stock market correction. MFs saw a net redemption of Rs. 283bn which pulled the total AUM down to Rs. 4173bn in FY09. FY10 saw a revival in investor confidence amidst improvement in economic activity in India. Resultantly, MFs saw a net inflow of Rs. 1,416bn increasing the total AUM toRs.6, 651bn 13.
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3.1.3 Increasing household financial savings will led to increasing retail participation; and thus higher retail penetration
Indian equity markets have relatively lower penetration levels. The same is reflective in the proportion of investment to financial saving of Indian household. Investment in equities as a percentage of total investments has witnessed an increase over period of time as compared to small saving instruments like NSC's and post office deposits to Mutual Funds (Equity), ULIPs etc, from less than 2% to ~10% in FY2008. Secondly with the rising interest rate major part of the public savings has also moved to fixed deposits with banks14.
Overall capital market volumes are more skewed towards futures and options segments
The overall stock market volumes over FY04-09 witnessed a CAGR of ~43%. This was largely driven by increased volume in the Futures & Options (F&O) segment, which has witnessed a CAGR of 52% over FY04-09. F&O segment comprise of 74% of the total stock market volumes. F&O segment carries a relatively lower yield than cash segment and thus leads to a lower blended brokerage yield 15.
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F&O segment forms majority of capital market volume
Moreover, over the period, the mix of F&O volumes has also changed. The share of low yield -Options (largely index options) has increased materially, comprising of close to 50% of the total F&O volumes. This is one of the major reasons which have impacted the overall brokerage yield for these capital market intermediaries
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Cash segment deliverable volumes showing signs of improvement Over the past 3-4 quarters, brokerage firms are experiencing pressure on their brokerage yields. As mentioned above, the southward trend had been largely at the back of change in the volume mix (increasing share of low yield index and stock options). Moreover, this is also due to a decline in deliverable volume (cash segment) which is relatively more profitable for stock broking companies as compared to future and options segment. However, over the past 4-5 months improvement in retail participation and some improvement in retail investor sentiments led to an improvement in the overall deliverable volumes; it stood at 23.1% duringDec-09. Further, a polynomial trend line indicates improvement in the overall deliverable volumes. We are of the view that improved deliverable volumes will aid brokerage yields of capital market intermediaries16.
We expect stock market volumes to grow at 15% CAGR over FY10-12 In the wake of global financial market turmoil, Indian stock markets remained subdued during FY09, clocking de-growth in overall volumes of 15% yoy. Revival in economic activity and improving Indian corporate performance has abetted capital market rally during FY10. The overall stock market volumes grew by 61% in FY10. Strong growth in capital market volumes was largely driven by F&O volumes, which Ghanshyam Gurjar-Xcellon Institute School of Business Page 25
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comprise of 77% of the total volumes and have grown at 66% CAGR over FY05-10 as compared to overall capital market CAGR of 55%. Considering a strong economic growth (nominal) of 14.5% in FY11 and 15% in FY12 leading to a healthy growth in household financing saving will be the key driver for capital market volumes. We expect the overall stock market volumes to growth at a CAGR of 15% during FY10-12; the same has been factored in our working for the companies to arrive at the fair price target for the stocks17.
Capital market volume estimate
GDP % chg Household Financial Savings % chg Financial savings/ GDP Share & Debenture of Financial Savings % chg Share & Debenture/Household savings (%) Share & Debenture/GDP (%) Capital Mkt Volume % chg CAGR (%) FY08 FY09 FY10E FY11 FY12 4,540,987 5,228,650 5,868,332 6,719,240 7,727,126 13 15 12 15 15 715,994 746,865 747,612 748,546 749,669 10 4 10 13 15 16 14 13 11 10 89,134 19,349 38,698 48,373 62,884 52 -78 100 25 30 12 3 5 6 8 2 0 1 1 1 5,660,392 14,861,665 23,177,844 25,869,075 30,908,505 74 163 56 12 19 15
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Chapter-4
4.1.1 Company Profile

BMA Wealth Creators Limited A premier in the financial services industry, BMA Wealth Creators Specializes in extending customized financial solutions to individuals and corporate.The Company works towards understanding your financial ambitions and adjusts to your risk profile. Their expertise combined with thorough understanding of the financial markets results in appropriate investment solutions for you. The 1000 cr. BMA Group has created its forte by promoting successful ventures in the fields of coal mining, refractory, steel and Ferro alloy in the form of established names in the market such as BMA Stainless Steel (Captain TMT Bars), Prop. Snowtex Udyog Ltd, Anjanery Ferro Alloys Limited, Maithan Alloys Limited, Maithan Smelters Limited and BMA International. Its continuous strive to achieve excellence and growth keeps it abreast of the latest in technology and best business practices, thereby making it customer oriented while forging alliances, high quality standards and proactive business cultures22. They, at BMA Wealth Creators, realize your dreams, needs, aspirations and concerns as closely as you do. This is reflected in every move we make with and for you because our relationship with YOU matters to us. Companys Competitive Strength lies in its people. Their Regional Management Team works hand in hand with the Companys Risk Management System and specializes in retail operation handling a large and diverse distribution network, putting in record an unfaltering track of growth and profit23.
Mission-To establishes itself as a financial supermarket providing integrated

investment services.
Vision-To provides integrated financial services thereby building Investor wealth

and confidence.
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BMA Wealth Creators

Promoter Group
Founded by Late shri Bhuramal Agarwalla in 1920 with coal mining business which was nationalized during 1971 and 1973, BMA is an INR 11 billion business group today. The group currently has business interests in refractories, ferroalloys, iron & steel, financial services and cement industries. It has geographic presence across the country through manufacturing facilities in west Bengal, Jharkhand, Assam, Meghalaya and Andhra Pradesh. These facilities are supported by marketing office all over India. The group has sourav ganguly, Kolkata knight riders, ICC Corporate Olympiad (Kolkata), The CNBC money Yatra as its endorsements. It is also the principle sponsors of CNBC Awaaz Yatra.
Management Team
This Company is managed by a team of highly qualified and experienced professionals from the finance industry across the country. Know more about them:
Anubhav Bhatter Managing Director & CEO
Saikat Ganguly COO
Shiv Kumar Damani Director
Avinash Agarwal Director
Asit Kumar Ghosh Director
Anubhav Bhatter (Managing Director & CEO) As the Managing Director and Chief Executive Officer, Mr Anubhav Bhatter is the guiding force of the Company. A graduate in Commerce from St Xaviers College, Kolkata and a Chartered Financial Analyst, Mr Anubhav Bhatter founded one of the leading financial services company in India, BMA Wealth Creators Limited. With over nine years of financial experience, he has set new standards and established niche
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operations to bring BMA Wealth Creators Limited to a position that it has reached today.
Avinash Agarwalla (Director) An MBA from Xavier Institute of Management, Bhubaneshwar, and Mr Avinash Agarwal is the voice of knowledge on the Board of Directors of the Company. With over nine years of severe market experience in Financial as well as the Product Manufacturing industry, Mr Avinash Agarwal has given shape to the growth of BMA Wealth Creators Limited. With an extensive knowledge of the nuances involved in the financial sector and a strong foot hold over the market, the entire Group looks up to his contribution.
Asit Kumar GhosH (Director) A pillar of strength to the Company, Asit Kumar Ghosh has been associated with BMA Wealth Creators Limited since the day of its inception. Having joined in the capacity of a Vice President, currently he is operating as Director, BMA Wealth Creators Limited. From establishing and strengthening the customer base to setting up the entire Retail Channel, he has played a vital role in the formation of the Company. A Bachelor of Science from the University of Kolkata and a Post Graduate in Computer Applications, Mr Asit Kumar Ghosh has worked in the capacity of various managerial positions for numerous organizations including Alliance Credit & Investments, Tata TD Waterhouse, Anagram Securities and IL&FS where he successfully proved his worth. With over fifteen years of experience and his extensive knowledge, Mr Ghosh keeps adding value to the Company.
Shiv Kumar Damanl (Director) Experience is the greatest education. And you know it when you meet Mr Shiv Kumar Damani. With a financial career spanning over twenty years, currently he is operating as Director, BMA Wealth Creators Limited. He has been associated with the Company since its inception and ever since, he has nurtured the growth and operation of the Company just as a parent would do for its child. A Bachelor in Ghanshyam Gurjar-Xcellon Institute School of Business Page 29
BMA Wealth Creators

Commerce from the University of Calcutta, Mr Shiv Kumar Damani has studied the financial market from close quarters to manage the risks involved while working towards the benefit of the Company and the people it is associated with, thus saving them the wrath of the global economic slowdown.
Saikat Ganguly (COO) With over twelve years of financial market experience, Saikats knowledge of the industry is comprehensive. A certified Chartered Financial Analyst and an MBA from Birla Institute of Management, he held several top managerial positions in various organizations including Reliance Money before he joined BMA Wealth Creators Limited in the year 2009 as its Chief Operating Officer. Ever since, he has led BMA Wealth Creators Limited in handling several niche Sales, Distribution and Product Management initiatives. He has been instrumental in setting the pan India foot print of the organization by setting up Branches and distribution network in every nook and corner of the country. His extensive knowledge, along with his leadership skills will surely help BMAWC touch zenith.
Corporate Entities BMA Wealth Creators heads two companies under its corporate umbrella. They are: BMA Wealth Creators Limited: A leading financial organization, BMA Wealth Creators Limited is a one-stop solution centre for all financial services, queries and ideas of its clients. The Company holds corporate membership in two of the leading bourses of the country viz. National Stock Exchange Limited and Bombay Stock Exchange. BMA Commodities Private Limited: The Company holds corporate membership in commodities exchange NCDEX and MCX besides being SEBI approved, AMFI registered Mutual Fund advisory and intermediary23.
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BMA Wealth Creators
Their Presence
Existing Business Networks: BMA Wealth Creators Limited has a total of 650 strategically located branches across India. Headquartered in Kolkata, the Company makes its presence felt through 1500+ business outlets.
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4.1.1.1 Product & Services
Equity & Equity Derivatives (NSE,BSE)

BMAWC, as a member of the National Stock Exchange and the Bombay Stock Exchange, offers you equity trading through a network of various offices across the country. It is their objective to offer you a range of services to suit your trading
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needs. Therefore, apart from investment activity, you can undertake day trading at both the above exchanges. Seamless Execution BMAWC provides unmatched flexibility and the power of choice to the clients for executing trades through multiple channels, viz., through their main office or branches, at any of their franchise centres or over telephone. A client may use any of these secured channels to communicate his/her orders, and he/she would be identified by his/her account code. They have endeavoured to design all their processes and systems with a client-centric focus to provide a client the convenience of transacting with us through the mode and channel of his/her preference. Technical Analysis BMAWC has its own Equity Research team with rich experience in identifying and analyzing attractive investment opportunities with fundamental long-term growth potential. The team also has a division specializing in Technical Analysis, which offers technical tips for short term and day trading. Daily Analysis Outlines the days market outlook, latest domestic and international market developments, their call on the upcoming economic and market environment and highlights the stocks which we expect to outperform over the months ahead.
Derivatives Trading
BMAWC provides trading facilities in Equity Derivatives at National Stock Exchange (NSE) since 200 and over the years, been able to generate substantial revenues with rising volumes from wide scale participation of retail investors in this segment.
Depository Services
BMAWC is a depository participant with CDSL and NSDL. BMAWC offers a range of Services including: Account opening facilities Dematerialization of physical shares Re-materialization Pledging
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BMA Wealth Creators 4.1.1.2 Financial Products Distribution

Product Basket
Their Financial Products Distribution (FPD) desk handles all types of primary market investments you may require. Be it a Mutual Fund, Life Insurance, General Insurance, Bonds, Fixed Deposits of blue chip corporates or IPO are of Equities. A strong distribution Channel across the country providing easy access to our clients is dispersed over several States.
Mutual Funds
Their team tracks the performance of Mutual Funds across the gamut of investor options and advises investors. In addition to tracking the key performing funds and analyzing the Portfolios and maturity profiles of different funds, our FPD team are geared to advice investors on the available options / NFOs to best suit their investment needs.
Mutual Fund Operation Flow chart
NAV =
Total Value of Fund _ No. of Share Currently issued and outstanding
Types OF Mutual Fund Schemes
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Insurance
BMAWC is a leading intermediary in the LIFE and General Insurance market licensed by Insurance Regulatory and Development Authority of India. At BMAWC, we analyze the client's requirement and capacity to understand their risk exposure and then evaluate their insurance portfolio in terms of its adequacy to protect the same. Their focus is to develop cost effective and near foolproof insurance package for their clients. In the event of a claim, their team facilitates the process to ensure speedy Settlements. BMAWC has professional relationships with major Life and non-life insurance companies in the country and is well poised to provide its clients a comprehensive risk management strategy. (Reliance Life Insurance, Birla Sun Life Insurance, Apollo DKV Health Insurance, National Insurance Company and Reliance General Insurance are their Key Partners)
Bonds
For investors who prefer risk-free returns without the tension of volatile markets, the best Option is the GoId Savings Bond. These bonds have sovereign guarantee and thus give safe returns.
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Corporate Fixed Deposits
BMA WC takes the help of its own Research Desk in order to choose and cater Fixed Deposits of blue chip corporate.
IPO's
In case of IPOs of Equities, PSL markets almost all the major issues that hit the Indian Capital Market.
Customised Services
And if you are interested in any of the above investments, we would be privileged to be of assistance to you to invest your money safely. All you have to do is to call your nearest BMAWC Office and any of our team members will get in touch with you.
4.1.1.3 Scheme
Free Life Time D.P: In this scheme, company provides: Life time free demat account in just Rs. 900 Free trading software (NEST TRADER SOFTWARE) Intraday charting Daily tips through SMS & E-Mail Modern Portfolio Trading allowed in both equity and commodity Advance Brokerage scheme (ABS): No account opening charges Flexibility of choosing slab as per your trading pattern Subscription starts from as low as Rs.1000 Time validity of 12 month Free trading software (NEST TRADER SOFTWARE) Intraday charting Trading allowed in both equity and commodity Research call on mobile and trading market watch Client has the flexibility of trading through branch, online or integrated desk
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You Pay Rs. Variable Brokerage (%) Delivery 1000 2000 5000 10,000 20,000 25,000 50,000 0.40 0.30 0.25 0.20 0.15 0.10 0.05 Intraday (each Leg) 0.04 0.03 0.025 0.02 0.15 0.01 0.005 Future (Each Leg) 0.04 0.03 0.025 0.02 0.15 0.01 0.005 Option (each leg) Time limit
75 60 50 40 30 25 20
12 month 12 month 12 month 12 month 12 month 12 month 12 month
Unlimited Trade scheme (UTS):
Plan
CASH MARKET
CASH + FUTURE + OPTION + CURRENCY
FEES OFFER PERIOD Exclusive of service tax
7500 3 Months
15000 3 Months
No account opening charges Flexibility of choosing slab as per your trading pattern Free trading software and Intraday charting Research call on mobile and trading market watch Client has the flexibility of trading through branch, online or integrated desk Note:-Equity Intraday Delivery, Brokerage & Future 0.01 per Trade Option 1Rupees per Lot (Each Leg)
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4.1.1.4 Competitive Strength
Regional management (regional hub and spoke topology) for retail operation Large and diverse distribution network of 52 Own branches, 1500 franchised outlets & 26 venues (Expected to go up to 100 by December) Experienced sales team of nearly 1800 executives on ground Strong track record of high growth and profitability Strong risk management system Well established brand
4.1.1.5 Channels OF Distribution Direct Sales Force of More than 1800 Spread across 52 location in the 10 country Network of more than 2000 sub brokers Network of more than 1000 empanelled Distribution associates for third party product Exclusive Venues selling insurance and others product following the seminar sales model.
BMA Associations
BMA associated with some of the most prestigious events of the country.
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4.1.2 India infoline Ltd.
India Infoline (IIFL) is one of the leading brokerage houses in India offering a spectrum of investment related services to institutional and retails customers. With a well established retail branch network of over 2000 outlets and expansion into institutional equity business, IIFL is expected to maintain its market share at around 4%, while its brokerage yields are likely to remain largely stable at close to 0.070.08%. We are of the view that, growth in other businesses including investment banking, insurance distribution, wealth management and lending business is expected to remain steady. Higher thrust on lending and investment banking business is expected to boost IIFL's return ratios. We expect a net profit of Rs.2.6bn andRs.3.1bn for FY11 and FY12 respectively, with an EPS of Rs.9.3 and Rs. 11.0.
Strengthening return ratios are expected to support premium valuation. The stock is currently trading at P/Ex of 10.7x based on FY11 estimates and 9.1x its FY12 earnings estimates. At the current levels, stock valuations appear attractive. Therefore, we are initiating coverage on India Infoline Ltd with accumulate recommendation and 12-month price target of Rs. 12624.
4.1.2.1 Investment Rationale

Brokerage income likely to remain significant part of the total operating income. IIFL's strong retail presence and a foray into institutional business have aided healthy brokerage income growth over FY06-10. IIFL's brokerage income contributed close to 54% of the operating income in FY10 as compared to 70% in FY05, witnessing a CAGR of 44% over FY05-10. With stable market share of 3.8% (FY10) and brokerage yield of close to 8bps, we expect a healthy CAGR of 14% in IIFL's brokerage revenue over FY10-12. We expect the secondary capital market volumes to witness a CAGR of 15% over FY10-12 and the IIFL's brokerage revenue to total income will continue to form close to 50-55% of the total revenue during FY11 and FY12. IIFL has a healthy mix of fund based and fee income. While brokerage revenue will continue to have significant contribution to the overall earnings, we opine that increased thrust on both fund-based (interest income from lending business -26% of the revenue) and fee- based (life insurance distribution, asset Ghanshyam Gurjar-Xcellon Institute School of Business Page 39
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management and investment banking etc) business will boost return ratios for IIFL going forward25. Retail broking & distribution- robust branch network offers opportunity to cross sell; well developed online trading platform offers cost effectiveness. IIFL follows a multi-channel delivery model for its retail broking and distribution business. It has rapidly enhanced its retail broking business over the past 5-year, increasing the branch network from 80 in FY05 to over 2300 outlets in FY10. This includes close to 500 owned branches and over 1800 franchisees. Additionally it has efficiently developed the online broking platform through its websites
www.indiainfoline.com and www.5paisa.com to enhance its reach to the customers and offer service through this cost effective distribution Platform. We opine that although the franchisee model is beneficial during the downturn due to its cost effectiveness; however, in the long run strong network of owned branches aid higher trading volumes support firm brokerage yields26.
4.1.2.2 Company Background

India Infoline Ltd. (IIFL) is one of the leading financial services company engaged in the stock broking and financial services business. The company provides equity and debt related products and services like equity broking to retail and institutional clients, investment management (wealth management), insurance distribution, and consumer financing. IIFL broadly operates in six business segments, through its subsidiaries which include stock broking, investment banking, asset management & wealth management, consumer finance, and insurance distribution28. Brokerage income likely to remain significant part of the total operating income29 In the wake of global financial market turmoil stock market volumes witnessed de-growth during FY09. However, with a revival in economic activity and a positive outlook on the India's corporate earnings growth, outlook for capital market intermediaries appears positive going forward. IIFL's strong retail presence and a foray into institutional business have aided healthy brokerage income growth over FY06-10. IIFL's brokerage income
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contributed close to 54% of the operating income in FY10 as compared to 70% in FY05, witnessing a CAGR of 44% over FY05-10. With stable market share of 3.8% (FY10) and brokerage yield of close to 8bps (expected to witness pressure due to increasing pressure on institutional brokerage yield), we expect a healthy CAGR of 14% in IIFL's brokerage revenue over FY10-12. We expect the secondary capital market volumes to witness a CAGR of 15% over FY10-12 and the IIFL's brokerage revenue to total income will continue to form close to 50-55% of the total revenue during FY11 and FY12. IIFL has a healthy mix of fund based and fee income. While brokerage revenue will continue to have significant contribution to the overall earnings, we opine that increased thrust on both fund-based (interest income from lending business -26% of the revenue) and fee- based (life insurance distribution, asset management and investment banking etc) business will boost return ratios for IIFL going forward. Institutional business drives market share while retail segment aids brokerage yield- IIFL ventured into institutional brokerage business during FY2007 after the competitive management team from CLSA joined in. This led to strong growth in its brokerage revenues over FY07-08. At its institutional equities arm, IIFL has been able to scale up its research capabilities along with client base significantly. IIFL's client list embraces practically all large domestic as well as global institutional investors active in India.
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Its average daily volume clocked a CAGR of 53%, from Rs.9.7bn in FY07 to Rs.35.0bn in FY10 as compared to a 22% CAGR in overall stock market volumes. Its market share improved to 3.8% in FY10, along with healthy brokerage yields of close to 8-9bps, which is one of the best in the brokerage industry. From current levels, we expect marginal pressure on IIFL's brokerage yield, which is expected to be maintain at around ~8bps, coupled with firm market share of ~3.8% over FY11-12. We expect a CAGR of 15% in its brokerage revenue over FY09 - FY12.
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Retail broking & distribution- robust branch network offers opportunity to cross sell; well developed online trading platform offers cost effectiveness IIFL follows a multi-channel delivery model for its retail broking and distribution business. It has rapidly enhanced its retail broking business over the past 5-year, increasing the branch network from 80 in FY05 to over 2300 outlets in FY10. This includes close to 500 owned branches and over 1800 franchisees. We opine that although the franchisee model is beneficial during the downturn due to its cost effectiveness; however, in the long run strong network of owned branches aid higher trading volumes support firm brokerage yields. Additionally it has efficiently developed the online broking platform through its websites www.indiainfoline.com and www.5paisa.com to enhance its reach to the customers and offer service through this cost effective distribution platform. A strong branch network has not only facilitated in building a larger customers base of over 6-lakh customers, but has also aided in cross selling various financial products and services like life insurance and mutual funds to retail customers. Moreover, its pan-India presence has offered IIFL a business edge in extremely competitive retail broking business. It has aided in developing other related businesses such as financing, wealth and asset management etc. IIFL has also started international operation through its offices in key locations, which are -New York, Singapore, Dubai, Brazil, Russia and UK. This augments accessing non-resident Indians and large institutional investors, through which it offers advisory and investment services to its customers.
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4.1.3 Motilal Oswal Financial Services

Motilal Oswal Financial Services is one of the leading capital market intermediaries, offering a bouquet of services to institutional and retail investors. Equity brokerage business contributes over 70% of its total revenue, while asset management business (including wealth management), and financing business forms the rest. MOFS lays impetus on high brokerage yield cash segment than low yield futures and option business, which forms over 50% of the total stock market volumes. This strategy has helped MOFS in delivering a strong growth in its operating income. Additionally, its franchisee based distribution network coupled with thrust on online trading has aided improved operating efficiency. We expect healthy operating margins and net profit margins going forward. We expect a net profit of Rs.1.8bn for FY11 and Rs.2.1bn in FY12 leading to an EPS of Rs.13.1 and Rs 14.6 for FY11 and FY12 respectively. At the current market price, the stock is trading at P/Ex of 13.1x its FY11 earnings estimates. We opine that the stock is trading close to its historic median P/Ex of 13.5x. We are valuing MOFS at P/Ex of 13.5x (at median P/ Ex) to arrive at a fair price target of Rs. 177. Our price target offers a limited upside of 3% from current levels and therefore we recommend investors to Accumulate the stock at declines32.

Steady capital market volume to aid top-line growth. MOFS's brokerage business (under is 100% subsidiary- Motilal Oswal Securities (MOS)), akin to other brokerage house, is expected to remain the key revenue contributor for MOFSL. Ghanshyam Gurjar-Xcellon Institute School of Business Page 45
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The equity brokerage business has witnessed a strong revival during FY10. We opine that this revenue stream will remain the key contributor to the topline going forward. Its brokerage revenue comprises of close to 74% of the total revenue and has grown by 32.5% yoy during FY10 in the wake of steady brokerage yield and improved stock market volumes. We expect a 10% CAGR in its top-line over FY10-12, which will be largely driven by a strong growth fee based businesses- particularly asset management and investment banking. We are of the view that the diversification in to other businesses notwithstanding, brokerage will continue to be the key revenue contributor at ~70% over FY11- 12. Healthy growth in brokerage revenues; courtesy higher impetus on brokerage yields, while market share may witness pressure. Secondary market average daily volumes have improved during FY10 to Rs.973.9bn as compared to Rs. 608.9bn in FY09. However, average daily volumes have remained largely stagnant over 3QFY10 (Rs. 954.9bn) and 4QFY10 (Rs.943.3bn). MOFSL's market share has declined to 2.9% in FY10 from 4.2% in FY09. Since, high yield cash segment is MOFS's key focus area, lower cash segment delivery based volumes has impacted its market share during FY10. While company remains relatively less active in the low yield F&O segment, which forms close to 77% of the total capital market volume. We are of the view that, with the company, continuing to focus on high yield cash segment its brokerage yield is expected to remain largely stable going forward. We have factored in a 15% CAGR in capital market volumes in our model. Since, brokerage revenue tram contributes a sizeable 74% to its total revenue; we expect a moderate growth of 6% yoy and 5% yoy during FY11 and FY12, which we opine will be largely driven by stable brokerage yields despite pressure on market share33. Expanding distribution network for greater penetration- higher thrust on franchisee based model. India has lower retail penetration level (reflective in household financial saving in capital markets). The share of household financial saving invested in private corporate business stood at 2.6% in FY2008-09 following de-growth in Mutual funds. Ghanshyam Gurjar-Xcellon Institute School of Business Page 46
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MOFSL has enhanced its reach with a robust pan-India network at 1293 locations; of which 61 are owned branches, while 1232 are franchisee. MOFS is placing higher impetus on increasing its retail client base. Currently, it has presence in 581 cities through its vast network of branches and franchisees. MOFS's franchisee and sub-brokers model has helped MOFS in maintain strong operating margins compared to its peers. However, we are of the view that with the revenue sharing being in favor of franchisee (generally a 60:40 ratio), may to impacts the cash inflows over the longer term34.
4.1.3.2 Company Background

Motilal Oswal Financial Services (MOFSL) is an integrated financial service player offering a large spectrum of investment services to institutions and retail customers. In a bid to expand fee based income streams it initiated its Investment Banking venture during 2006-07 and asset management business during FY2008. It is leveraging upon its strong research skill to further diversify into asset management business, with addition of AMC, wealth management, Private Equity and principal strategies group to its large spectrum of services. MOFS has a well established network of 1300 branches and franchisee, through which it serves a vast customer base of 6-lacs. The company lays higher thrust on a franchisee model, which is relatively cost effective and offers higher profitability39. Healthy capital market volume to aid top-line growth40 The Indian stock market has seen improvement in average traded volumes post a significant plunge in FY09 in the wake of global financial turmoil. MOFS's brokerage business (under is 100% subsidiary- Motilal Oswal Securities (MOS)), akin to other brokerage house, is expected to remain the key revenue contributor for MOFSL. MOS provides equity investment and advisory services to institutional and individual clients. We opine that, MOFS's vast and cost effective network of ~1300 branches and franchisee, which provides a pan-India presence to MOFSL; along with its strong research based investment advice, gives MOS a competitive edge over its peers. Post a subdued FY09, the equity brokerage business has witnessed a strong revival during FY10. We opine that this revenue stream will remain the key Ghanshyam Gurjar-Xcellon Institute School of Business Page 47
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contributor to the top-line going forward. Its brokerage revenue comprises of close to 74% of the total revenue and has grown by 32.5% yoy during FY10 in the wake of steady brokerage yield and improved stock market volumes. Going forward, buoyant capital market conditions are expected to boost investment banking and asset management business. We expect a 10% CAGR in its top-line over FY10-12, which will be largely driven by a strong growth fee based businesses- particularly asset management and investment banking. We are of the view that the diversification in to other businesses notwithstanding, brokerage will continue to be the key revenue contributor at ~70% over FY11-12.
Healthy growth in brokerage revenues; courtesy higher impetus on brokerage yields, while market share remains stable Market share of top 10 brokers as per NSE volumes stood at 28% (33% in FY09) for FY10. Secondary market volumes have improved during FY10 to Rs.973.9bn in FY10 as compared to Rs. 608.9bn in FY09. However it has remained almost stagnant over 3QFY10 (Rs. 954.9bn) and 4QFY10 (Rs.943.3bn). Going by the trend in the capital market volumes, coupled with increased competition, we opine that the market share of the leading players is likely to witness some pressure. MOFSL's market share has declined to 2.9% in FY10 from 4.2% in FY09. Since, high yield cash segment is MOFS's key focus area, lower cash segment delivery based volumes has impacted its market share during FY10. Ghanshyam Gurjar-Xcellon Institute School of Business Page 48
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While company remains relatively less active in the low yield F&O segment, which forms close to 77% of the total capital market volume. We are of the view that, with the company continuing to focus on high yield cash segment its brokerage yield are expected to remain steady going forward. We view this as one of MOFS's key strength area which will drive its broking related income going forward. We have factored in a 15% CAGR in capital market volumes in our model. Since, brokerage revenue stream contributes a sizeable 74% to its total revenue; we expect a moderate growth of 6% yoy and 5% yoy during FY11 and FY12, which we opine will be largely driven by steady brokerage yields. Going forward, we also believe that share of brokerage revenue to total income will decline gradually in the wake of increase in thrust on fee based income.
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Increased thrust on investment banking; improved fee-based income is expected to boost return ratios43 MOFS established its investment banking business in 2006 to offer financial advisory, capital raising and other related services to its corporate clients, financial sponsors and other institutions. It has a strong team of close to 28 experienced professional based out of Delhi, Mumbai, and Hyderabad. MOFS's investment banking business is in nascent stage with a team of close to 29 professionals and has concluded around 45 deals (including debt and ECM). Of the total 140 deals in equity and capital market (ECM) segment during FY10, MOFS has concluded around 5 deals, which accounts for close to 3.6% market share. Improved macroeconomic scenario over FY10 has led to a significant uptick in corporate fund raising activity in India. Investment banking business contributed close to 10% of its FY10 revenues to Rs.649mn, materially up by 43% yoy as compared to Rs 452mn in FY09. Going forward, we opine that the improvement in macroeconomic conditions and recovery in capital market activity will foster strong investment banking deal pipeline. Therefore we expect 25% CAGR in MOFS's revenue from investment banking vertical over FY11-12, and the share of these segments is likely to improve from 10% presently to close to 14% in FY12.
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Swiftly ramping up asset management businesses44 Personalized investment management service through wealth
management- MOFS commenced its wealth management business in 2002 to provide personalized portfolio management services to its high networth individuals and corporate clients. This included investment planning, advisory, execution and monitoring of various investment products. The company is looking forward to swiftly ramp up its wealth management business, with the launch of a dedicated private client group brand "Purple". It currently has a customer base of 3700 with an AUM base of ~ Rs. 17bn of which Rs9.8bn is in PMS. Contribution from asset management fee remained steady at around 6% of the total income during FY10 to Rs. 401mn. MOFS is laying higher focus on portfolio management services, and we expect a 20% CAGR over FY11-12 in MOFS's asset management fee. Asset Management Company- Motilal Oswal Asset Management Company has also received the final approval from SEBI to set up its mutual fund business. With a strong team in place, MOFS is expected to launch its first mutual fund scheme and target to swiftly ramp-up its AUM over FY11-12. With increased focus on scaling up asset management business MOFS's fee income is expected to witness steady improvement going forward. Private Equity- On the private equity (Motilal Oswal Private Equity - MOPE) front, MOFS's domestic real estate fund i.e. India Realty Excellence Fund ("IREF") has done its final closing at about Rs1.5 billion of commitments.
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MOPE has built a strong deal pipeline for IREF and is evaluating several investment opportunities.
Scaling up financing business - margin funding

MoFS provides ancillary services to its customers like loan against share and margin funding. The company had made a conscious effort to trim down its advances book during FY08 and FY09 following the global financial turmoil. Therefore, during FY09, to draw on the excess liquidity, MOFS incorporate Principal Strategies Group (PSG), which deployed the excess liquidity in risk free arbitrage strategies and aided its fund based revenue.
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Its interest income stood at Rs 6.5bn in FY10, a flattish growth over Rs 6.4bn in FY09. This forms close to ~10% of the MOFS's total income. Its fund based income also includes income from principal strategies group, which manage short term liquidity in the business. Going forward, MOFS is looking at scaling up its fund based business, for which, it will shift the funds deployed in low return principal strategy group to high yield margin funding and loan against share book, which we believe is materially positive and will boost its return ratios. During FY10 its margin funding book remained flattish at Rs 1.6bn as compared to Rs. 1.5bn in FY09. We expect loan book growth of
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Expanding distribution network for greater penetration- higher thrust on franchisee based model45
India has lower retail penetration level (reflective in household financial saving in capital markets). The share of household financial saving invested in private corporate business stood at 2.6% in FY2008-09 following de-growth in Mutual funds. MOFSL has enhanced its reach with a robust pan-India network at 1293 locations; of which 61 are owned branches, while 1232 are franchisee. MOFS is placing higher impetus on increasing its retail client base. Currently, it has presence in 581 cities through its vast network of branches and franchisees. MOFSL has strategic alliance with State Bank of India (SBI), IDBI Bank and Axis Bank to offer online broker services to their retail banking clients. MOFS's franchisee and sub-brokers network provides advantage of lower establishment expenses coupled with wider presence. This has also helped the company in maintain strong operating margins compared to its peers. However, we are of the view that with the revenue sharing being in favour of franchisee (generally a 60:40 ratio), is expected to impacts the cash inflows over the longer term.
4.1.3.3 Financials
Steady revenue growth likely, in line with strong over all capital market performance Institutional inflows from both - domestic and foreign - have remained relatively steady during FY10. FII have invested close to $20bn during FY10 as compared to a net outflow of $10bn during FY09. In additional to this, stock markets have also seen some revival in retail participation, which is evident from the NSE data and opening of new DP accounts with NSDL. Going forward in the wake of firm brokerage yields and improved fee based income, we expect healthy growth in MOFS's revenue over FY11 and FY12. Further, strong investment banking pipeline and a rapid fund mobilization in the asset management business will aid superior earnings growth. With revenue from brokerage contribution significant share of total revenue, we Ghanshyam Gurjar-Xcellon Institute School of Business Page 54
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expect a revenue growth of 9% yoy to Rs.6.8bn for FY11 and 11% yoy to Rs. 7.5bn during FY12.
Expect healthy growth in earnings; operating margins to remain stable

MOS's franchisee retail-distribution model helps keeping a check on its operating cost with all the franchisee operating expenses born by the partner. Its operating cost being largely linked to capital market performance is variable in nature and therefore, helps maintain steady margins. Operating margins during FY08 were impacted mainly due to change in the accounting norms for STT being treated as expenditure then set-off against income tax. Given the strong capital market performance and steady growth in the fee based income (investment banking and asset management), MOFS operating margins improved during FY10 to 41% in FY10 from 34% in FY09. Earnings growth is expected to remain healthy during FY11 and FY12; however we expect a flattish trend in operating (EBITDA) margins of 41% over FY11 and FY12. MOFS's net profit margins improved during FY10 to 27% as compared to 21% in FY09 We expect a similar trend in its net profit margins, PAT margins (%), which is expected at 27% over FY11 and FY12 respectively.
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4.1.4.1 Edelwelss Capital Ltd. (ECL)
Edelweiss Capital is one of the leading boutique investment banking and institutional brokerage company, which is now extending its equity broking services to individual investors with its acquisition of Anagram Capital. We expect ECL's brokerage yield to improve going forward from current levels of ~5bps to 6bps over FY11-12 with its foray into high brokerage yield individual broking business. I opine that an uptick in its low leverage financing book coupled with improving yield on advances will boost interest income going forward. Asset management fee income growth will remain steady following higher impetus on fund mobilization. ECL is looking forward to have an AUM of close to $500mn during FY11. I expect a CAGR of 15% in its revenues over FY10-12, with healthy operating Margin of 36% and net profit margin of 23% over FY11-12. I am valuing Edeweiss Capital Ltd at 14% discount to its Median P/ Ex,(15.0x) i.e. 13.5x its FY11 EPS of Rs.38.9; leading to a price target of Rs.525. I have assigned a discount to ECL's historic valuation to factor in shift of capital to newer businesses viz retail broking. Improved capital market outlook is expected to drive earnings growth. I am initiating coverage on Edelweiss capital with a price target of Rs. 525. However, at the current levels valuation appears rich and despite a positive business growth outlook we recommend accumulating the stock on declines given the limited upside of 4% from current levels Investment Rationale46. Trading at 13.0x FY11 EPS, valuations at current level appear rich; I recommend investors to accumulate the stock on declines with a price target of Rs. 525. At the current market price the stock is trading at one year forward P/Ex of 11.7x, which indicates significant discount to the benchmark index Sensex (trading at an median P/E of 19.9x). This is largely due to company's capital preservation strategy during FY09 and H1FY10, which led to a decline in income from its lading business and also lower yield on arbitrage and trading business. With ECL ramping up its entire business stream, we expect net profit growth of 26% yoy in FY10 and 20% yoy in FY11. We are valuing Edeweiss Capital Ltd at 14% discount to its Median P/Ex, i.e. 13.5x its FY11 EPS of Rs.38.9; leading to a price target of Rs.525. We have assigned a discount to ECL's historic valuation to factor in shift of capital to Ghanshyam Gurjar-Xcellon Institute School of Business Page 58
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newer businesses viz retail broking. Improved capital market outlook is expected to drive earnings growth. We are initiating coverage on Edelweiss capital with a price target of Rs. 525. However, at the current levels valuation appears rich and despite a positive business growth outlook we recommend accumulating the stock on declines given the limited upside of 4% from current levels.
4.1.4.1 Company background

Edelweiss Capital Ltd (ECL) commenced its business in 1995 as a boutique investment bank and has diversified into providing financial services varying from investment banking, institutional equities, private client broking, asset management and investment advisory services, wealth management, insurance broking and wholesale financing to corporate, institutional and high net worth individual clients.
ECL has endeavoured to remained ahead of competitors with its innovative product ideas e.g. indigenously developed derivatives trading model and techniques, liquidity management through arbitrage strategies, etc. With intent to enter into retail broking business, Edelweiss has recently acquired Anagram Capital, which has healthy branch network and client base. The company conducts its operations along with its subsidiaries and associates. With its proficient management and strong business model in place, we opine that Edelweiss is well placed to take advantage of the growing Indian capital market52. Business Model ECL has classified its business model into two segments- Agency business and Capital business. Its Agency business includes- Investment banking, brokerage services- Institutional and retail customers, asset management and financial product distribution, while its capital based business includes- Treasury, and Wholesale financing. Agency businesses Investment Banking- The investment banking business provides a broad range of services, including equity capital markets transaction execution, mergers and acquisitions advisory, structured finance advisory, private equity advisory, real estate advisory and infrastructure advisory.
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Institutional Equities-ECL's institutional equities business provides sales-trading, distribution and research to institutional investors, both FIIs and domestic institutional investors. For FY10, ECL had over 500 foreign and close to100 domestic institutional investors actively doing business with it. ECL has close to 145 professionals in its institutional equities business who serve these customers. Retail Equities Private Client Brokerage- ECL's private client brokerage services are targeted at high net worth and other individuals who actively invest and trade in equity markets and seek priority service with customized research and advisory support. As on December 2009, ECL provided private client brokerage services to more than 35,000 customers, and continues to add close to 3500-4000 customers a month. Acquisition of Anagram will further expand its customer base. Wealth Management-While it entered into serving high net worth individual in 200507, it added wealth management services to its bouquet in 2008-09. It provides investment advisory and planning and financial management services to high net worth individuals families, family offices or corporate. Asset management business- Edelweiss asset management business includes domestic asset management and alternative asset management businesses. During FY09, in line with the global financial crisis Edelweiss experienced erosion in its off shore assets under management. This was largely due to combined impact of a sharp decline in NAVs and material increase in redemptions from investors. ECL is now looking at ramping up this business at a steady pace. Insurance Brokerage-ECL provides brokerage services for non-life insurance products of major insurance companies in India. Its insurance brokerage professionals are experienced in distributing fire and fleet insurance products, particularly in niche areas of insurance such as transport fleet insurance. Capital Business- Edelweiss's capital based business largely includes lending business and treasury operations. It carries out its lending business through its fully capitalized NBFC ECL Finance, which is largely engaged in the business of promoter funding, ESOP funding, and loan against shares. The outstanding loan book stood at Rs. 6.3bn at the end of FY09 which increased to Rs 18bn in FY10. Treasury book operations- Over the period ECL's treasury operations have helped in generating superior return ratios. It helps ECL in managing surplus liquidity of the Ghanshyam Gurjar-Xcellon Institute School of Business Page 60
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group on a short-term basis. It follows a multi strategy approach with an aim to achieve absolute returns and optimise its yields. Nonetheless during FY09 the arbitrage opportunities reduced due to lower market volumes.

Strong market shares in the institutional broking; retail broking foray will aid stable market share, despite rising competition. Edelweiss has a strong presence in the institutional brokerage segment. Its client base has close to 500 active clients. The strong research support has facilitated in building a strong relationship with institutional clients. Its strong research team, which covers close to 160 stocks in 18, sectors coupled with excellent trade execution skill has provided ECL a competitive edge over its peers. ECL's market share (mainly in institutional segment) stood at 6.4% in FY09; however, change in stock market volume mix along with increased competition has impacted its market share, which is presently hovering in the range of 4.5- 4.8% (excluding Anagram Capital). Going ahead, we expect overall secondary market volumes to witness a CAGR of 15-17% and with ECL foraying into retail broking, we expect that it will be able to maintain steady overall market share at 4.8-5% (consolidating Anagram Capital over FY11-12). Since the retail segment forms a significant part of the total stock market volume ECL has forayed into retail broking business through inorganic route. It is also laying significant thrust on building its private client servicing business with addition of close to 3000 retail customers monthly.
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Brokerage yield likely to improve going forward - supported by retail foray53 ECL has faced pressure on its brokerage yield in the wake of increased competition. Brokerage yields were also impacted in the backdrop of lower cash segment delivery volumes and increased F&O trading volumes. ECL's average brokerage yield hovered around 6-7 bps during FY08-09, which was broadly in line with industry average of 7 bps. However, its brokerage yield slipped to 5.5 bps (0.055%) during 1QFY10, and remained steady at 5.5 bps during FY10. Going forward, we opine that with the inclusion of a ready retail client base along with healthy branch network following its acquisition of Anagram Ghanshyam Gurjar-Xcellon Institute School of Business Page 62
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Capital, brokerage yield is likely to improve to 0.06% (6bps) during FY11-12. Hence, we expect a healthy growth in earnings aided by improved brokerage yields.
New business ventures ECL has grown from an investment banking firm to a diversified financial services organization. Edelweiss continues to look to invest in long term business opportunities in adjacent markets in financial services. Of late, it has entered into two new business segments: - Alternate asset management business and Life insurance venture (ECL has formed a joint venture with Tokio Marine for a life insurance venture). These business are at nascent stage and do not contribute to top-line.
4.1.4.3 Financials
Strong balance sheet to augment business growth ECL has a strong balance sheet with a debt to equity ratio of 0.4 xs, which we believe will be significantly helpful in incubating new business expansion plans. We consider this as ECL's major strength as this will also help ECL in expanding its existing businesses, such as - executing larger orders for its institutional clients and meeting margin calls whenever needed. We opine that this will help ECL in garner significant share of institutional broking business, Steady operating performance With healthy growth across revenue streams, ECL has made serious efforts to check its operating cost and maintain greater operating efficiencies. ECL largely focuses on low cost operating structure to serve its customers and is laying higher emphasis on online trading platform. It also offers call and trade Ghanshyam Gurjar-Xcellon Institute School of Business Page 63
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services to its customers which is outsourced through call centres located at three key locations in India. The recently acquired Anagram Capital also largely operates through a sub-broker structure, which is relatively cost effective. Given the enhanced growth in ECL's revenue streams along with check on operating cost, it has one of the best operating ratios as compared to its peers. Going forward, we expect ECL to maintain stable EBITDA margins at 36% in FY11 and at 37% in FY12. Its net profit margin is also expected to remain firm at 23% (23% in FY10) over FY11 and FY12. In the wake of stable operating performance, we expect healthy growth in ECL's bottom-line at 28% yoy to Rs.2.8bn for FY11 and 17% yoy in FY12 to Rs.3.3bn. This translates to an EPS of Rs.39 and Rs 45 for FY11 and FY12 respectively
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Chapter-5
5.1 Task assigned

Telecalling We have to call to customers data given by company. I have learnt about how to understand customers behaviour and after that give information about company and product. And scheme. Some time people not give time to talk with you and our company give new offers so some people very excited because other company not give a 1 paisa per trade offers.And some people not aware the company and there product. First I have understood them and their product. Some very early response because other company not give 1 paisa per trade. And I have express and communicate the product in detail of the client. Some time I am not able to express product detail than I have transferred the call in mam or sir because some client ask very tuff question. I do not know this question. I have understood the offers of the client ABS and UTS first ABS offers This offers available of equity and commodities market .abs means advance brokerage scheme For example Client pay 1000 RS than We give brokerage of 40 paisa of delivery and 0.4 paisa of intraday. And client gives 2000 Rs than brokerage of 30 paisa of delivery and 0.3 paisa of intraday. So on you have increase a advance brokerage decrease the brokerage of delivery and intraday .second scheme is UTS .UTS means unlimited trade scheme this offers available only equity market and cash market client gives 7500 RS than we gives 1 paisa brokerage per trade not quantity or volume only one transaction and three month validity. For example I have buy ONGC share of 50 than I give only 1 paisa of buy ONGC share not a 50 share. Plus 10.3% tax and no account opening charges and give free online trading software. And client pays 15000 RS than we gives future and currency 1 paisa and option we take 1RS per trade and 10 times limits Plus 10.3% tax.
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Market watch Watch on market at opening and closing time. I learn that how to do online trading EXP.-stock market equity nifty silver gold and commodities. People behaviours are good because all the people help to me and understand their culture .culture is frank and no one is above 27 to 28 ages. And all the people have formal dress.Saturday formal not compulsory because Saturday market have closed. Marketing Go clients place with RM of company. I have learnt about customer behaviour and how to understand about company scheme and other facilities.
Reporting-Give report to Hetal madam at the end of the day Customer Awareness about companys offers I have spread awareness about companys offer like ABS and UTS. I meet the client in navrangpura post office with my friend and he has the talk person. I learn that how to talk and convince the client and how to give information about company product and services. I understand how to talk the customers. For example first ask the about customers trading equity or commodities customer say that equity that which company you have doing equity trading and how much brokerage you give after that understand the BMA UTS scheme. Customer says commodities than I will understand the ABS scheme.Because UTS scheme not allowed in commodities market.
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5.3 Learnings
I have called 1000 people which is my first time experience. I have seen the online trading and seen people Behaviours and their culture. I learn that how to do online trading EXP.-stock market equity nifty silver gold and commodities. People behaviours are good because they help to me and understand their culture .culture is frank and no one is above 27 to 28 ages. And all the people have formal dress. Saturday formal not compulsory because Saturday market have closed. I meet the branch manager and understood the basic concept of stock market, commodities market and demat account and other services. I learn that how to do open demat account and which are the scheme going on BMA Wealth Creators. I understood the company policy and equity market and commodities market policy. For example commodities market start of 10 am to 3 to 11 pm and man-day to Saturday. Saturday only 10 am to 3 pm open. Equity market starts 9:15 to 3 pm man-day to Friday and Saturday and Sunday close. And demat account require the pan card is compulsory residences proof and licence. I meet the client in navrangpura post office with my friend and he has the talk person. I learn that how to talk and convince the client and how to give information about company product and services. I understand how to talk the customers. For example first ask the about
customers trading equity or commodities customer say that equity that which company you have doing equity trading and how much brokerage you give after that understand the BMA UTS scheme. Customer says commodities than I will understand the ABS scheme. Because UTS scheme not allowed in commodities market. I have read the company broacher and know about company and major competitors. I have learnt company services and know about company. BMAWC company different product of other company because BMA take low brokerage and client supports and facilities. Others company take more brokerage.
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I have seen the online trading of commodities market. For a Example- Potato, Sugar and crude oil etc. I have learn that how to do commodities market and rules and company offers of commodities client. I have seen the equity and commodities schemes and learn about schemes. For example UTS and ABS. I have learnt UTS and ABS schemes and its term and condition. I have also learnt about how to do use. I have seen the NCX and MCX and how to work this sensex. I have learnt about National commodities exchange and multi commodities exchange. I have learnt all the thing is new because I am not do share market. Sensex one type of index it directly related to the national stock exchange and Bombay stock exchange it includes 50 stock. I have seen the Tele calling. I have learnt how to do telecalling and which time. I have learnt about how to understand customers behaviour and after that give information about company and product and scheme. Some time people not give time to talk with you and our company give new offers so some people very excited because other company not give a 1 paisa per trade offers. And some people not aware the company and there product. First I have understood them and their product. Some very early response because other company not give 1 paisa per trade. And I have express and
communicate the product in detail of the client. Some time I am not able to express product detail than I have transferred the call in mam or sir because some client ask very tuff question. I do not know this question. I have understood the offers of the client ABS and UTS first ABS offers This offers available of equity and commodities market .abs means advance brokerage scheme For example Client pay 1000 RS than We give brokerage of 40 paisa of delivery and 0.4 paisa of intraday. And client gives 2000 Rs than brokerage of 30 paisa of delivery and 0.3 paisa of intraday. So on you have increase a advance brokerage decrease the brokerage of delivery and intraday .second scheme is UTS .UTS means unlimited trade scheme this offers available only equity market and cash market client gives 7500 RS than we gives 1 paisa brokerage per trade not quantity or volume only one transaction and three month validity. For example I have buy ONGC share of 50 than I give only 1 paisa of buy ONGC share not a 50 share. Plus 10.3% tax and no account Ghanshyam Gurjar-Xcellon Institute School of Business Page 69
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opening charges and give free online trading software. And client pays 15000 RS than we gives future and currency 1 paisa and option we take 1RS per trade and 10 times limits. Plus 10.3% tax. I have study about company franchisee term and condition. I have learnt about company franchisee. Company offers franchisee of 50000RS and we take brokerage of 10000000 transaction on 1000 RS company take . I have study about company derivatives. I have learnt about futures option and currency I have study about company demat account forms. I have learnt demat account forms and how to open and which type of document requirement of company. For example pan card licence and residential proof. I have met the some customer. I have learnt about customer behaviour and how to understand about company scheme and other facilities. I understand BMA marketing strategy. First understand the customer business income and how much turnover they have done in per day and which facilities give of the others company. I have seen online trading and I have done the how to operate BMA nest trader software and what are the function of the nest trader and how its work for example buying and selling. I have learnt mutual fund scheme Growth fund.BAM wealth creators also registered in AMFI. Mutual fund means it is one type of collective fund in which many of the its different place type of investment I have learnt Growth fund and saving fund first growth fund the main objective of this scheme is to provide capital growth by investing equity and debt. Assets allocation pattern of the scheme is Equity and debt and normal allocation of (%) up to 100 is equity and up to 20 is debt. Debt includes securities debt and government securities. Plan and option this scheme is Dividend and growth. Benchmark index is BSE sensex. I have learnt Mutual fund saving scheme.This saving scheme main objective of the Generate income by investing in a quality short term debt security. And assets allocation pattern of the scheme is debt and mm up to 100.and plan and option is dividend and growth. Benchmark index is C Fund Lx.
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I have study of BSE and NSE Security transaction tax. Its national stock exchange of India and this is India largest stock exchange and world third largest stock exchange in term of transaction. It is located in Mumbai and was incorporated in November 1992 as taxpaying company I have also learnt that what security transaction tax is. Security transaction gives the investors. India prime minster p chindbram its annocence Its take equity mutual fund and other trading its depend on share. Its take government. I have also made the questionnaire and find out the investor behaviour. I have learnt that questionnaire fill up is very difficult because customer not give them to much time to fill up the questionnaire. I have meet 30 people and fill up the questionnaire. Some people not give the time.
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5.4 4ps of company
Product: Financial Services Company provides financial services as a product which includes many things as discussed earlier and main business is brokerage Price: According to clients turnover Company charged price of its product according to clients turnover Place: 1800 franchisees and 60 branches all over India Companys network has spread in major cities in India Promotion: Advertisement, Seminars every 3 months Company had started ads and organise seminars like MONEY YATRA every three months to promote its business.
5.5 PORTERS FIVE FORCES

Porter's five forces analysis is a framework for the industry analysis and business strategy development developed by Michael E. Porter of Harvard Business School in 1979. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition".
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Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competences, business model or network to achieve a profit above the industry average.
The five forces model relevant to the Indian brokerage industry The Bargaining Power of Customers Lack of Expertise Curtails Bargaining Power Retail investors often lack the knowledge and expertise in the financial sector that calls them to approach the broking houses. Low Product Differentiation Proves Beneficial the retail broking services provided by the various companies are homogeneous with very low product differentiation. This allows customers to enjoy a greater bargaining power. The Bargaining Power of Suppliers Increased Dependence on IPOs -There is a growing dependence of corporate on broking houses with the rising number of IPOs coming to the market. The Intensity of Competitive Rivalry
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Move towards consolidation-Lot of brokerage companies are moving towards consolidation with the smaller ones becoming either franchisees for the larger brokers or closing operations. Increased Focus of Banks in Retail Broking Various foreign banks like ABN Amro and others are planning to enter the Indian retail brokerage industry. Online Trading Competes with Traditional Brokerage There is an increasing demand for online trading due to consumers growing preference for internet as compared to approaching the brokers. Threat of New Entrants Entry of Foreign Players New forms of trading including T+2 settlement system, dematerialization etc are strengthening the retail brokerage market and attracting foreign companies to enter the Indian industry. The Threat of Substitute Products Alternative Investment Options Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. Now even various banks provide similar type of services. They also give the same service of portfolio management and wealth management.
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5.6 SWOT ANALYSIS
STRENGTHS Multiples engines of growth- an integrated financial services platform Well established and continuously expanding geographical footprints Unique, stable and scalable business model Adoption of technology -screen based trading, electronic matching, and paperless securities Centralized operations, effective risk management, and control on large interconnected operations spanning multiple locations, which is enabled by telecom connectivity and low costs Accessibility of capital increases and margin finance increases
WEAKNESSES Lack of visible goodwill among minor players Lack of trust on companies by customers Psyche of people in India is converging Companies are still running on selling concept Weak infrastructural facilities Compliance with strict rules and norms set by govt.
OPPORTUNITIES Structure of the industry, market size, and growth rates-huge potential in Indian market Government is continuously liberalizing the market Proactive and progressive nature of Indian brokerage industry(India ranks amongst top five globally in this segment) Economy is still growing at healthy rate leading to investment / capital requirement Huge market opportunity for wealth management service providers as Indian wealth management business is transforming from mere wealth safeguarding to growing wealth. Leveraging technology to enable best practices and processes Corporates looking at consolidation / acquisitions / restructuring opens out opportunities for the corporate advisory business. Ghanshyam Gurjar-Xcellon Institute School of Business Page 75
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THREATS High degree competition Fluctuations in government policies Political framework Developing Indian economy Companies must develop and implement physical, administrative and technical safeguards to achieve the following goals: Ensure the security and confidentiality of customer records and information Secure against any anticipated threats or hazards to the security or integrity of such information Secure against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer Corporate espionage
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5.7 Conclusion
From the all above information I conclude here the following points. From the all data I can say that most of the customers are invest their money in insurance because it secure the investors family future as well as it gives good returns in future. Equity market investors are investing in Equity to earn a good profit only. Some of the investors are invest in Real Estate which is very growing field in the market & which gives good return in future. The investors which do not want to take any risk invest their money in deposits which is the safest investment in Indian market. Most of the customers not aware about the commodity market. Some investors are there who invest their money to save tax. Mutual Fund is good option for investors who want to save their tax and safe their money. Equity is good for the investors who want to take high risk and high returns. Indian brokerage industry competition is very high so decline the brokerage rate.
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5.8 Bibliography
1. Www.nseindia.com 2. En.wikipedia.org/wiki/Bombay-stock-exchange 3. Www.Sharemarketbasic.com/ 4. www.nseindia.com 5. En.wikipedia.org/wiki/Bombay-stock-exchange 6. www.globaltestmarket.com 7. www.scrib.com/...../ 8. www.nseindia.com www.bseindia.com 9. www.nseindia.com 10. www.nseindia.com 11. NSE private client research 12. www.sebi.gov.in/ 13. www.amfiindia.com/ 14. www.rbi.org.in/ 15. www.nseindia.com www.bseindia.com 16. www.nseindia.com 17. www.nseindia.com www.rbi.org.in,MOSPI 18. www.nseindia.com 19. www.nseindia.com 20. Companies 21. www.bmawc.com/ 22. www.bmawc.com/ 23. www.bmawc.com/ 24. www.indiainfoline.com/ 25. www.indiainfoline.com/ 26. www.indiainfoline.com/ 27. www.indiainfoline.com/ 28. www.indiainfoline.com/ 29. www.indiainfoline.com/ 30. www.indiainfoline.com/ 31. www.indiainfoline.com/ 32. www.motilaloswal.com/ 33. www.motilaloswal.com/ 34. www.motilaloswal.com/ 35. www.motilaloswal.com/ 36. www.motilaloswal.com/ 37. www.motilaloswal.com/ 38. www.motilaloswal.com/ 39. www.motilaloswal.com/ 40. www.motilaloswal.com/ 41. www.motilaloswal.com/ 42. www.motilaloswal.com/ 43. www.motilaloswal.com/ 44. www.motilaloswal.com/ 45. www.motilaloswal.com/ 46. www.edelcap.com 47. www.edelcap.com 48. www.edelcap.com Ghanshyam Gurjar-Xcellon Institute School of Business Page 78
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49. www.edelcap.com 50. www.edelcap.com 51. www.edelcap.com 52. www.edelcap.com 53. www.edelcap.com 54. www.edelcap.com 55. www.edelcap.com 56. www.edelcap.com
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5.9 Annexure
5.9.1 Questionnaire
Personal Information Name:-___________________________________________________ Age:- Teenage Young age middle age old age Gender: - Male Female Marital Status:- Single Married Mobile no:-___________________________ Occupation:- Service Business Professional Student Others Income (Annually):- below 50,000 50,000 1, 00,000 1, 00,000 5, 00,000 More than 5, 00,000 Adress: - _______________________________________ 1. Since how many years have you been investing? Less than 1 year 1 3 year 3 5 year 5 years and more 2. What are the various investment plans you invest in? *(Select all that are applicable) Mutual Funds Commodities Equity market Insurance Real Estate Deposits Others -__________________________________________ 3. For how much period you would prefer to invest? a) Short term b) long term 4. What is the purpose behind investment? a) Returns b) liquidity c) wealth d) tax savings 5. Through whom you invest into equity market? ( ) Through online ( ) Through Relationship Manager ( ) Through Stock Broker ( ) Through Advisor 6. What percent of your salary/Income goes to savings in insurance, mutual funds & equity market? 10-20 % 21-30 % 31-40 % Above 40 % 7. Do you invest directly into equity? ( ) Yes ( ) No
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8. In what kind of stocks do you trade or invest in ? Large Caps Mid Caps Small Caps Depends 9. If you are a Investor what induces you to invest in a intraday trading? (Mark all that applies) Tips News Research Report Personal Homework 10. What is your pattern of investing or trading? repeatedly invest or trade in same set of stocks Invest or trade in variety of stocks Depends on other factors 11. What kind of investing or trading do you adopt? High Risk - High Return Low Risk - High Return Low Risk - Low Return Safe Investments 12. If you are a Investor what induces you to stay invested in a particular Stock? (Mark all that applies) Dividend Paying Organic Growth Inorganic Growth Future Prospects 13. The reason for your investment in Mutual Funds is (Select all that are applicable) For family Returns Tax Savings Pension Liquidity Others____________________________________________ 14. The reason for your investment in insurance is (Select all that are applicable) For family Returns Tax Savings Pension Liquidity Others______________________________________ 15. Who Influences you the most to invest in a particular option? Family Friends Relatives Newspapers/ Magazine Brokers
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16. Rate your awareness with respect to different investment Plans Not Aware Mutual Fund Insurance Equity Funds Commodities Real Estate 17. Rate the Equity plans with respect to the qualities *1 Being Lowest & 5 Being Highest 1 2 3 4 5 Returns Risk Tax Savings Accessibility Brand Equity Post Sales Service Little Aware Fully Aware
18. Rate the commodities plans with respect to the qualities *1 Being Lowest & 5 Being Highest 1 2 3 4 5 Returns Risk Tax Savings Accessibility Brand Equity Post Sales Service
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5.9.2 Log book
XCELLON INSTITUTE-SCHOOL OF BUSINESS PGPGM Batch 2009-2011 Student's Name: Ghanshyam Gujer SIP Company: BMA Wealth Creators Date: 30 may 2011 To 10 Jun 2011 S. No. ACTIVTY
REMARKS
I learn that how to do online trading EXP.-stock market equity nifty silver gold and commodities. People behaviours are good because all the people help to me and understand there culture .culture is frank and no one is above 27 to 28 age.and all the people have formal dress. Saturday formal not compulsory because Saturday market have closed.
1.
I have seen the online trading I have seen people Behaviours and there culture
2.
I meet the branch manager and understood the basic I learn that how to do open demat concept of stock market ,commodities market and demat account and which are the account and other services scheme going on BMA Wealth Creators. I understood the company policy and stock market .commodities market policy. For example commodities market start of 10 am to 3 to 11 pm and man-day to Saturday. Saturday only 10 am to 3 pm open. Equity market starts 9:15 to 3 pm man-day to Friday and Saturday and Sunday close. And demat account require the pan card is compulsory residences proof and licence.
4.
I meet the client in navrangpura post office with my friend I learn that how to talk and convince the and he has the talk person. client and how to give information about company product and services. I understand how to talk the customers.
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For example first ask the about customers trading equity or commodities customer say that equity that which company you have doing equity trading and how much brokerage you give after that understand the BMA UTS scheme. Customer says commodities than I will understand the ABS scheme. Because UTS scheme not allowed in commodities market I have read the company brosher and know about I have learn company services and company and major competitors know about company for our comanay different product of other company because our company take low brokerage and client supports and facilities. Others company take more brokerage and our major is indiabulls marwadi india infoline and reliance money etc I have seen the online trading of commodities market. For I have learn that how to do commodities a Example- Potato ,Sugar and crude oil etc. market and rules and company offers of commodities client. I have seen the equity and commodities schemes and learn I have learnt UTS and ABS schemes and about schemes. For example UTS and ABS. its term and condition. I have also learn about how to do use. I have seen the NCX and MCX and how to work this sensex I have learnt about National commodities exchange and multi commodities exchange.I have learn all the thing are new because I am not do share market. Sensex one type of index it directly related to the national stock exchange and Bombay stock exchange it includes 50 stock . I have seen the Tele calling. I have learnt how to do tele I have learnt about how to understand calling and which time. customers behaviour and after that give information about company and product and scheme. Some time people not give time to talk with you and our company give a new offers so some people very excited because other company not give a 1 paisa per trade offers. And some people not aware the company and there product. First I have understood them and there product. Some very early response because other company not give 1 paisa per trade. And I have express and communicate the product in detail of the client. Some time I am not able to express product detail than I have transferred the call in mam or sir
5.
6.
7.
8.
9.
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because some client ask very tuff question. I do not know this question. I have understood the offers of the client AbS and UTS frist ABS offers This offers available of equity and commodities market .abs means advance brokerage scheme For example Ce lient pay 1000 RS than We give brokerage of 40 paisa of delivery and 0.4 paisa of intraday. And client give 2000 Rs than brokerage of 30 paisa of delivery and 0.3 paisa of intra day. So on You have increase a advance brokerage decrease the brokerage of delivery and intraday .second scheme is UTS .UTS means unlimited trade scheme this offers available only equity market and cash market client gives 7500 RS than we gives 1 paisa brokerage per trade not quantity or volume only one transaction and three month validity. For example I have buy ongc share of 50 than I give only 1 paisa of buy ongc share not a 50 share. Plus 10.3% tax and no account opening charges and give free online trading software. And client pay 15000 RS than we gives future and currency 1 paisa and option we take 1RS per trade and 10 times limits. Plus 10.3% tax . term and I have learnt about company franchisee Company offers franchisee of 50000RS and we take brokerage of 10000000 transaction on 1000 RS company take . I have learnt about futures option and currency I have learnt demat account forms and how to open and which type of document requirement of company.For example pan card licence and residential proof. I have learnt about customer behaviour and how to understand about company scheme and other facilities. First understand the customer business income and how much turnover they have done in per day and which facilities gives of the others company.
10.
I have study about company franchisee condition
11. 12.
I have study about company derivatives. I have study about company demat account forms.
13.
I have meet the some customer.
14.
I understand BMA marketing strategy
Ghanshyam Gujer
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XCELLON INSTITUTE-SCHOOL OF BUSINESS PGPGM Batch 2009-2011 Student's Name: Ghanshyam Gujer SIP Company: BMA Wealth Creators Date: 10 June 2011 To 21 June 2011 S. N o.
1. 2. 4.
Date
11 June 12 June 13 June
ACTIVTY
REMARKS
I learn that Saturday market is closed. Only Not doing anything Because market is commodities market is open. Commodities market is closed. open is 11am to 3pm Sunday I have seen online trading and I have done the how to operate BMA nest trader software and what are the function of the nest trader and how its work for example buying and selling I have learn mutual fund scheme Growth fund.BAM wealth creators also registered in AMFI. For a example I have learn that + means Buying and means selling and enter the user password after that buy and sell. So many function their i nest trader software f1 to f10.
5.
14 June
6.
15 June
7.
16 June
Mutual fund means it is one type of collective fund in which many of the its different place type of investment I have learnt Growth fund and saving fund first growth fund the main objective of this scheme is to provide capital growth by investing equity and debt. Assets allocation pattern of the scheme is Equity and debt and normal allocation of (%) upto 100 is equity and upto 20 is debt. Debt includes securities debt and government securities. Plan and option this scheme is Dividend and growth. Benchmark index is BSE sensex. I have learnt Mutual fund saving This saving scheme main objective of the Generate scheme. income by investing in a quality short term debt security. And assets allocation pattern of the scheme is debt and mm up to 100.and plan and option is dividend and growth. Benchmark index is C Fund Lx. I have study of BSE and NSE Its national stock exchange of India and this is India Security transaction tax largest stock exchange and world third largest stock exchange in term of transaction. It is located in Mumbai and was incorporated in November 1992 as taxpaying company I have also learnt that what security transaction tax is. Security transaction gives the investors. India prime minster p chindbram its annocence Its take equity mutual fund and other trading its depend on share. Its take government. Ghanshyam Gurjar-Xcellon Institute School of Business Page 86
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8. 17 June I have also made the questionnaire I have learn that questionnaire fill up is very difficult and find out the investor behaviour. because customer not give them to much time to fillup the questionnaire. I have meet 30 people and fill up the questionnaire. Some people not give the time. I have seen the Tele calling. I have I have learn that how to do tele calling and I have learn learnt how to do tele calling and which that How to do talk money yatra customer and time. franchisees customer .Saturday market is closed only commodities market is open.
9.
18 June
10.
19 June 1 20 June 1 2 1 2 1 .
Sunday
Not doing anything
GhanshyamGujer
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BMA Wealth Creators A SUMMER INTERNSHIP PROJECT REPORT On INDIAN BROKERAGE INDUSTRY (STUDY OF EQUITY, COMMODITIES AND MUTUAL

SUBMITTED TO Xcellon Institute School OF Business, Ahmedabad Batch-2010-12

Mentor: Mr.Devang Patel (Faculty Incharge)

SUBMITTED BY: Mr. Ghanshyam Gurjar (M00095)

Ghanshyam Gurjar-Xcellon Institute School of Business

SUBMITTED TO Xcellon Institute School OF Business, Ahmedabad Batch-2010-12

SUBMITTED BY: Mr. Ghanshyam Gurjar (M00095)

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Date: ______________ Signature Of The Project Co-ordinator ( )

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

BMA Wealth Creators

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

16-19 16-17 17-18 18-19 20-26 20-22 22-22 23-26

BMA Wealth Creators

45-57 45-47 47-54 54-57 58-65 59-61 61-63 63-65

66-67 68-71 72-72 72-74

75-76 77-77 78-79

80-87 80-82 83-87

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

BMA Wealth Creators

1.2 Evolution of the Indian Brokerage Market

BMA Wealth Creators

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Chapter-2 2.1 Indian Brokerage Industry

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

2.1.3 Risk and concerns to our call

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

3.1 INDUSTRY OUTLOOK

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

3.1.1 Increase in FII participation

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

3.1.2 Increase in DII inflows

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators

BMA Wealth Creators

Ghanshyam Gurjar-Xcellon Institute School of Business

BMA Wealth Creators