A

PROJECT REPORT ON

“PERFORMANCE ANALYSIS OF BROKING FIRMS IN COMPARISON TO

INDIA INFOLINE LTD.”

FOR

INDIA INFOLINE LTD.

BY

SHAILESH AGRAWAL

PGP+PGDBA

2009-2011

UNDER THE GUIDANCE OF

PROF. ATUL KARAMPURWALA

SUBMITTED TO

INDIRA SCHOOL OF CAREER STUDIES

IN PARTIAL FULFILMENT OF THE REQUIREMENT FOR THE

AWARD OF DEGREE OF POST GRADUATE PROGRAME (PGP)

 ACKNOWLEDGEMENT

Summer training is one of the most vital and active part of the curriculum of management
students. Its basic idea behind this is to strengthen the student’s concept through practical
training and make them acquainted with actual method and procedures.

I did the work as a management trainee at INDIA INFOLINE LTD for a period of 60 days
starting from 3rd May, 2010.

I would like to extend my heartfelt gratitude to Mr. Khuzema Jinwala Team Leader (India
Infoline LTD), for his proper guidance throughout the project. Without his support and
cooperation I would have failed in my endeavors and targets in the summer training.

I emphatically express the regards and gratitude towards my speculative guide Prof. ATUL
KARAMPURWALA for her expert and invaluable guidance, constant encouragement, and
constructive criticism to accomplish such laborious and exhaustive work timely and perfectly.

I would also like to thank all the Staff of India Infoline Ltd, Pune for their
invaluable help and cooperation to complete my project successfully.

2
 EXECUTIVE SUMMARY

In India many traditional people are very risk averse. They are not aware of the investment
opportunities in the stock market. They consider stock market as a game of gambling. But the
original scenario is quite different. There is no doubt that there are speculators who try to hike
the price of a stock artificially. Investing in equities involves high risk and the return on it
totally depends on the company’s performance. But investing in the right stock at the right
price and holding for a longer time horizon would surely be a better investment.

The strategy of selecting stocks that trade for less than their intrinsic value is called
value investing. Value investors actively seek stocks of companies that they believe the
market has undervalued. They believe the market overreacts to good and bad news, causing
stock price movements that do not correspond with the company's long-term fundamentals.
The result is an opportunity for value investors to profit by buying when the price is deflated.
The very definition of value investing is subjective. Some value investors only look at present
assets/earnings and don't place any value on future growth. Other value investors base
strategies completely around the estimation of future growth and cash flows. Despite the
different methodologies, it all comes back to trying to buy something for less than its worth.
The purpose behind this project was to learn the mannerisms of the stock market trading and
analyzing a stock for a good investment opportunity.

The reason behind choosing this project is that it provides hands on experience with
what goes on in the stock market on a day to day basis. The field of equity research is very
vast and one has to look into various aspects of the functioning of the company to get to any
conclusion about the possible performance of the company in the market. Investors like
warren buffet made a fortune out of investments in the stock market, which is quiet
impossible without proper research about the companies. The field of equity research is full of
challenges.

The project is done with India Infoline Securities Limited a very well-known company
in the field of stock broking and capital market services sector. This project gave me a chance
to get valuable insights from a hoard of vastly experienced people in this field and to get
various approaches each one adopts to evaluate various companies. The duration of the
project was two months. These two months were not only limited to learning and devoting

3
time towards equity research but it also provided an insight on what various services such
broking houses provide and what efforts are required to manage such organizations.

CONTENTS

4
 Sl.No. Particulars Page numbers

1. Introduction 1-3

2. Industry / Company overview 4-11

3. Theoretical background 12-17

4. Objectives 18-19

5. Research Methodology 20-22

6. Analysis 23-61

7. Findings 62-64

8. Conclusion 65-66

9. Limitations 67-68

10. Recommendations 69-70

11. Bibliography 71-72

LIST OF FIGURES

Table No. Table Titles Page numbers

1. Financial Ratios of HDFC Securities 51

2. Financial Ratios of India Bulls 53

5
3. Financial Ratios of Motilal Oswal 55

4. Financial Ratios of India Infoline Ltd. 57

5. Comparative Analysis of Broking Firms 59

CERTIFICATE FROM THE COLLEGE

6
This is to certify that Mr. /Ms. ------------------------- is a bonafide student of Indira School of
career Studies, Pune and has successfully completed his project entitled
__(Title)___________ at ___(Company Name) ________ for partial fulfillment of their course Post
Graduate Program (Finance) from this institute.

Prof. Atul Karampurwala Prof. ___________

Internal Guide

COMPLETION CERTIFICATE FROM THE COMPANY (Company’s

Letterhead)

This is to certify that Mr./Ms. _______________________ student of Post Graduate Diploma

in Management from Indira School of career Studies has satisfactorily completed his/her
project work entitled _________________ in ___________Department of ________(name of
organization)_____ from _____to_______.

Authorized Signature

7
 **********************

COMPANY PROFILE

History

Company was founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an
independent business research and information provider. Company gradually evolved into a
one-stop financial services solutions provider. Our strong management team comprises
competent and dedicated professionals.

Company is a pan-India financial services organization across 1,361 business locations and a
presence in 428 cities. Our global footprint extends across geographies with offices in New
York, Singapore and Dubai. Companies are listed on the Bombay Stock Exchange (BSE) and
the National Stock Exchange (NSE).

Company offer a wide range of services and products comprising broking (retail and
institutional equities and commodities), wealth management, credit and finance, insurance,
asset management and investment banking.

Company are registered with the BSE and the NSE for securities trading, MCX, NCDEX and
DGCX for commodities trading, CDSL and NSDL as depository participants. Company are

8
registered as a

Category I merchant banker and are a SEBI registered portfolio manager. Company also
received the FII license in IIFL Inc. IIFL Securities Pte Ltd received approval from the
Monetary Authority of Singapore to carry out corporate advisory and dealing in securities
operations. Two subsidiaries – India Infoline Investment Services and Money line Credit
Limited – are registered with RBI as non-

Deposit taking non-banking financial services companies. India Infoline Housing Finance
Ltd, the housing finance arm, is registered with the National Housing Bank.

Milestones
1995

Incorporated as an equity research and consulting firm with a client base that included
leading FIIs, banks, consulting firms and corporates.

1999

Restructured the business model to embrace the internet; launched

archives.indiainfoline.com mobilized capital from reputed private equity investors.

2000

Commenced the distribution of personal financial products; launched online equity

trading; entered life insurance distribution as a corporate agent. Acknowledged by Forbes
as ‘Best of the Web’ and ‘...must read for investors’.

2004

Acquired commodities broking license; launched Portfolio Management Service.

2005

Listed on the Indian stock markets.

2006

Acquired membership of DGCX; launched investment banking services.

2007

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Launched a proprietary trading platform; inducted an institutional equities team; formed
a Singapore subsidiary; raised over USD 300 mn in the group; launched consumer
finance business under the ‘Money line’ brand.

2008

Launched wealth management services under the ‘IIFL Wealth’ brand; set up India
Infoline Private Equity fund; received the Insurance broking license from IRDA;
received the venture capital license; received inprinciple approval to sponsor a mutual
fund; received ‘Best broker- India’ award from Finance Asia; ‘Most Improved
Brokerage- India’ award from Asiamoney.

2009

Received registration for a housing finance company from the National Housing Bank;
received ‘Fastest growing Equity Broking House - Large firms’ in India by Dun &
Bradstreet.

10
 INTRODUCTION

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd
(NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in the
Indian financial services space. IIFL offers advice and execution platform for the entire range
of financial services covering products ranging from Equities and derivatives, Commodities,
Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment
Banking, GOI bonds and other small savings instruments.
IIFL recently received an in-principle approval for Securities Trading and Clearing
memberships from Singapore Exchange (SGX) paving the way for IIFL to become the first
Indian brokerage to get a membership of the SGX. IIFL also received membership of the
Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL owns
and manages the website, www.indiainfoline.com, which is one of India’s leading online
destinations for personal finance, stock markets, economy and business.
IIFL has been awarded the ‘Best Broker, India’ by Finance Asia and the ‘Most
improved brokerage, India’ in the Asia Money polls. India Infoline was also adjudged as
‘Fastest Growing Equity Broking House - Large firms’ by Dun & Bradstreet. A forerunner in
the field of equity research, IIFL’s research is acknowledged by none other than Forbes as
‘Best of the Web’ and ‘…a must read for investors in Asia’. Our research is available not just
over the Internet but also on international wire services like Bloomberg, Thomson First Call
and Internet Securities where it is amongst one of the most read Indian brokers. A network of
over 2,500 business locations spread over more than 500 cities and towns across India
facilitates the smooth acquisition and servicing of a large customer base. All our offices are
connected with the corporate office in Mumbai with cutting edge networking technology. The
group caters to a customer base of about a million customers, over a variety of mediums viz.
online, over the phone and at our branches.

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 India Infoline Group subsidiaries:

• India Infoline Media and Research Services Limited

• India Infoline Commodities Limited
• India Infoline Marketing & Services
• India Infoline Investment Services Limited
• IIFL (Asia) Pvt Limited

Shareholding Pattern
Foreign 75,123,070 26.3%
Domestic 62,278,950 21.8%
Non Promoter Corporate Holding 10,137,530 3.6%
Promoters 95,674,407 33.6%
Public & others 42,000,818 14.7%
Total 285,214,775 100.0%

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 PRODUCT INFORMATION

What is De-mat Account?

The term De-mat, in India, refers to a dematerialised account. For individual Indian citizens
to trade in listed stocks or debentures. The Securities Exchange Board of India (SEBI)
requires the investor to maintain a De-mat account. In a De-mat account shares and securities
are held in electronic form instead of taking actual possession of certificates. A De-mat
Account is opened by the investor while registering with an investment broker (or sub
broker). The De-mat account number which is quoted for all transactions to enable electronic
settlements of trades to take place.

Access to the De-mat account requires an internet password and a transaction password as
well as initiating and confirming transfers or purchases of securities. Purchases and sales of
securities on the De-mat account are automatically made once transactions are executed and
completed.

Advantages of De-mat Account

The De-mat account reduces brokerage charges, makes pledging/hypothecation of shares

easier, enables quick ownership of securities on settlement resulting in increased liquidity,
avoids confusion in the ownership title of securities, and provides easy receipt of public issue
allotments.

It also helps you avoid bad deliveries caused by signature mismatch, postal delays and loss of
certificates in transit. Further, it eliminates risks associated with forgery, counterfeiting and
loss due to fire, theft or mutilation. De-mat account holders can also avoid stamp duty (as
against 0.5 per cent payable on physical shares), avoid filling up of transfer deeds, and obtain
quick receipt of such benefits as stock splits and bonuses.

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Benefits of De-mat Account

The benefits are enumerated as follows:

• It’s a safe and convenient way to hold securities

• Immediate transfer of securities is there
• There is no stamp duty on transfer of securities
• Elimination of risks associated with physical certificates such as bad delivery, fake
securities, delays, thefts etc.
• There is a major reduction in paperwork involved in transfer of securities, reduction
in transaction cost etc.
• Change in address recorded with DP gets registered with all companies in which
investor holds securities electronically eliminating the need to correspond with
each of them separately;
• Transmission of securities is done by DP eliminating correspondence with
companies.
• Automatic credit into De-mat account of shares, arising out of
bonus/split/consolidation/merger etc.
• Holding investments in equity and debt instruments in a single account.

Benefit to the Company

The depository system helps in reducing the cost of new issues due to less printing and
distribution cost. It increases the efficiency of the registrars and transfer agents and the
Secretarial Department of the company. It provides better facilities for communication and
timely services with shareholders, investor etc.

Benefit to the Investor

The depository system reduces risks involved in holding physical certificated, e.g., loss, theft,
mutilation, forgery, etc. It ensures transfer settlements and reduces delay in registration of
shares. It ensures faster communication to investors. It helps avoid bad delivery problem due
to signature differences, etc. It ensures faster payment on sale of shares. No stamp duty is paid
on transfer of shares. It provides more acceptability and liquidity of securities.

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Benefits to Brokers

The depository system reduces risk of delayed settlement. It ensures greater profit due to
increase in volume of trading. It eliminates chances of forgery – bad delivery. It increases
overall of trading and profitability. It increases confidence in investors.

Opening an account

Steps involved in opening a De-mat account First an investor has to approach a DP and fill up
an account opening form. The account opening form must be supported by copies of any one
of the approved documents to serve as proof of identity (POI) and proof of address (POA) as
specified by SEBI. Besides, production of PAN card in original at the time of opening of
account has been made mandatory effective from April 1, 2006.

All applicants should carry original documents for verification by an authorized

official of the depository participant, under his signature. Further, the investor has to sign an
agreement with DP in a depository prescribed standard format, which details rights and duties
of investor and DP. DP should provide the investor with a copy of the agreement and
schedule of charges for their future reference. The DP will open the account in the system and
give an account number, which is also called BO ID (Beneficiary Owner Identification
number).

The DP may revise the charges by giving 30 days’ notice in advance. SEBI has
rationalised the cost structure for dematerialisation by removing account opening charges,
transaction charges for credit of securities, and custody charges vide circular dated January
28, 2005. Further, SEBI has vide circular dated November 9, 2005 advised that with effect
from January 9, 2006, no charges shall be levied by a depository on DP and consequently, by
a DP on a Beneficiary Owner (BO) when a BO transfers all the securities lying in his account
to another branch of the same DP or to another DP of the same depository or another
depository, provided the BO Account/s at transferee DP and at transferor DP are one and the
same, i.e. identical in all respects. In case the BO Account at transferor DP is a joint account,
the BO Account at transferee DP should also be a joint account in the same sequence of
ownership.

15
Disadvantages of De-mat

The disadvantages of dematerialization of securities can be summarised as

follows:

• Trading in securities may become uncontrolled in case of dematerialized securities.

• It is incumbent upon the capital market regulator to keep a close watch on the trading
in dematerialized securities and see to it that trading does not act as a detriment to
investors.
• The role of key market players in case of dematerialized securities, such as stock-
brokers, needs to be supervised as they have the capability of manipulating the market.
• Multiple regulatory frameworks have to be confirmed to, including the Depositories
Act, Regulations and the various By-Laws of various depositories.
• Additionally, agreements are entered at various levels in the process of
dematerialization. These may cause anxiety to the investor desirous of simplicity in
terms of transactions in dematerialized securities.

However, the advantages of dematerialization outweigh its disadvantages and the changes
ushered in by SEBI and the Central Government in terms of compulsory dematerialization of
securities is important for developing the securities market to a degree of advancement. Freely
traded securities are an essential component of such an advanced market and
dematerialization addresses such issues and is a step towards the advancement of the market.

Transfer of Shares between DPs

To transfer shares, we need to fill the Depository Instruction Slip Book (DIS). Firstly we need
to check, whether both De-mat account's Depository Participant is same or not (CDSL or
NSDL) If both of them are different, then we need an INTER Depository Slip (Inter DIS). If
they are same, then we need INTRA Depository Slip (Intra DIS).

For example: If we have one De-mat account with CDSL and other De-mat account with
NSDL, then we need an Inter DIS.

Generally, brokers issue Intra DIS, so do check with broker.

Once we identify the correct DIS, fill the relevant information like

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  scrip name
 INE number
 quantity in words and figures and

Submit that DIS for the transfer to the broker with signatures. The transferor broker shall
accept that DIS in duplicate and acknowledge receipt of DIS on duplicate copy.

Do try to submit that DIS when market is on. Accordingly, date of submission of DIS and
date of execution of DIS can be same or a difference of one day is also acceptable.

For transfer, you shall also pay the broker some charges.

Review of Literature/ Theoretical Background

A financial system, which is inherently strong, functionally diverse and displays
efficiency andflexibility, is critical to our national objectives of creating a market-driven,

17
productive andcompetitive economy. A mature system supports higher levels of investment
and promotesgrowth in the economy with its depth and coverage. The financial system in
India comprises offinancial institutions, financial markets, financial instruments and services.
The Indian financialsystem is characterized by its two major segments - an organized sector
and a traditional sectorthat is also known as informal credit market.
Financial intermediation in the organized sector isconducted by a large number of
financial institutions which business organizations are providingfinancial services to the
community. Financial institutions whose activities may be eitherspecialized or may overlap
are further classified as banking and non-banking entities. TheReserve Bank of India (RBI) as
the main regulator of credit is the apex institution in the financialsystem. Other important
financial institutions are the commercial banks (in the public and privatesector), cooperative
banks, regional rural banks and development banks. Non-bank financialinstitutions include
finance and leasing companies and other institutions like LIC, GIC, UTI, Mutual funds,
Provident Funds, Post Office Banks etc.

Financial System
The financial system of every economy consists of various constituents such as
1 Financial Institutions
2 Financial Companies
3 Financial Markets
4 Financial Instruments
5 Financial Services
6 Financial regulations
The financial market in India comprised of capital market and money market whereas
the financial system of the country comprised of institutions, which operate the
financial markets and the financial instruments with which the financial system is put
into operation.
Tax anomy of financial markets can be understood on functional, sectorial and
institutional basis. On a functional basis we can divide financial markets into
1 Money market (short term)
2 Capital market (long term)
The institutional classification can be made into
1 Organized financial market
2 Non-Organized financial market

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Capital Market Scenario
The stock market in India dates back to the 18th century when the East India Company
was ruling the roost in the country and was perhaps the most dominant and powerful
institution and its securities were traded. The securities trading were done in an unorganized
form at Bombay and Calcutta in early 19th century.
The decade of 90’s has witnessed several changes in reformation of capital market.
Automation, transparency, strict surveillance, depository system, on line trading, investor’s
protection, new rules and regulations, etc. are some of the activities which only reflect the
growth of Indian capital market. By any reckoning Indian corporate sector has grown very
significantly in the last couple of decades whether to look at it in terms of public and private
limited companies, their share capitalization, their sales turnover or their contribution to
capital formation with this came the legislation of SEBI to act as a regulatory body to protect
investors.

What is Capital Market?

A Capital Market deals in financial assets, excluding coins and currency. The financial assets
comprise of banking accounts, pension funds, provident fund, mutual fund, insurance policy,
shares, debentures, and other securities. If the stock exchanges are well regulated and function
smoothly, then it is an indication of healthy capital market. Stock exchange provides a good
leverage of the
Capital market and their relationship are directly proportional. India has multi-stock exchange
system with 24 stock exchanges functioning across the country. In our country, capital
markets are generally also known as security/stock market. The Indian capital market
currently provides excellent investment opportunities to domestic and foreign investors in
both equity and fixed income Segments.

The Indian Capital Markets can be broadly classified into three types of markets.
1 Money market
2 Primary market
3 Secondary market

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Money market
The money market is part of overall financial system and securities or capital market. It deals
in short term financial assets which can be readily converted into cash. Money market is a
place for trading in money and short tern financial assets that are as liquid as money. It
provides a platform for short term surplus funds of lenders or investors and short term
requirements of borrowers, the instruments can be traded at low cost and are highly liquid.

Primary market
Primary market is generally referred to the market of issues or market for new mobilization of
resources by the companies and the government undertakings, for new projects as also for
expansion, modernization, addition, and diversification and up gradation. Primary market
operations include
new issues of shares by new and existing companies, further and right issues to existing
shareholders, public offers, and issue of debt instruments such as debentures, bonds, etc.
Raising money from capital market is cheap for the company and involves a low servicing
cost. The investors’ benefit by way of dividend and or capital appreciation. The following are
the market intermediaries associated with the primary market
• Merchant banker/book building lead manager
• Registrar and transfer agent
• Underwriter/broker to the issue
• Advisor to the issue
• Banker to the issue
• Depository
• Depository participant

Defects in Indian Primary Market

• Aggressive pricing and over pricing.
• Price rigging before and during issues.
• Poor, wrong and vague disclosures in offer documents.

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 • Poor information accessibility.
• Misleading projections subject to vague assumptions.
• Delay in penal actions against the erring market intermediaries.
• SEBI not assuming any responsibility for disclosure/offer documents.
• Bunching of issues.
• Existence of grey or unofficial market.
• Lack of transparency
• Uninformed and uneducated investors.
• Delay in listing and trading permission.

Secondary Market
The secondary market is the market where scrips are traded. It is a market place, which
provides liquidity to the scrip’s issued in the primary market. Thus, the growth of secondary
market is dependent upon primary market. More the number of companies entering the
primary market, the greater is the volume at the secondary market. Trading activities in the
secondary market are done through recognized stock exchanges, which are 24 in number
including Over the Counter Exchange of India, National Stock Exchange of India, and Inter-
connected Stock Exchange of India. Secondary market operations involves buying and selling
of securities on the stock exchange through its members. The following intermediaries are
involved in the secondary marker.
• Broker/member of Stock Exchange- buyer broker and selling broker
• Portfolio manager
• Investment advisor
• Share transfer agent
• Depository
• Depository participant

OBJECTIVE OF THE PROJECT

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 Introduction to capital market.
 To get familiar with the working of a broking firm.
 To identify various risks involved in the broking firm.
 To identify various risk for the investors of the broking firm.

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 RESEARCH METHODLOGY

During my project, I collected data through various sources primary & secondary.
Primary source includes:-
• Discussion with branch manager
• Discussion with experts
• Discussion with investors of the firm.
• Live trading in the market
Secondary source includes:-
• Various books related to stock market
• Books related to Financial Management
• Web sites were used as the vital information source.

Data Analysis, Results and Interpretation

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 EDELWEISS CAPITAL

Balance Sheet:-

Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 37.73 37.47 37.54
Equity Share Capital 37.47 37.47 37.54
Share Application Money 0.60 1.28 1.90
Preference Share Capital 0.26 0.00 0.00
Reserves 1,312.03 1,317.36 1,270.70
Revaluation Reserves 0.00 0.00 0.00
Networth 1,350.36 1,356.11 1,310.14
Secured Loans 127.12 108.46 471.85
Unsecured Loans 975.81 400.72 981.56
Total Debt 1,102.93 509.18 1,453.41
Total Liabilities 2,453.29 1,865.29 2,763.55
Mar '08 Mar '09 Mar '10
12 mths 12 mths 12 mths
Application Of Funds
Gross Block 12.28 10.31 9.75
Less: Accum. Depreciation 4.60 5.71 6.65
Net Block 7.68 4.60 3.10
Capital Work in Progress 1.60 1.74 0.00
Investments 1,059.23 1,249.73 1,153.61
Inventories 0.00 0.00 0.00
Sundry Debtors 8.08 4.41 58.39
Cash and Bank Balance 3.42 18.39 1.18
Total Current Assets 11.50 22.80 59.57
Loans and Advances 1,341.42 656.50 1,696.39
Fixed Deposits 111.21 3.51 30.26
Total CA, Loans & Advances 1,464.13 682.81 1,786.22
Deffered Credit 0.00 0.00 0.00
Current Liabilities 61.18 34.22 98.68
Provisions 18.18 39.38 80.71
Total CL & Provisions 79.36 73.60 179.39
Net Current Assets 1,384.77 609.21 1,606.83
Miscellaneous Expenses 0.00 0.00 0.00
Total Assets 2,453.28 1,865.28 2,763.54
Contingent Liabilities 735.29 622.90 380.70
Book Value (Rs) 180.09 180.80 174.26

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KEY FINANCIAL RATIOS:

MARCH 2010 MARCH 2009 MARCH 2008

RONW (%) 2.6 2.0 3.2
EPS (Rs) 4.56 3.52 3.84
Dividend Yield 2.3 1.2 0.2
ROCE 7.8 6.0 7.6
Book Value Per Share 174.26 180.80 180.09
(Rs)
Debt-Equity Ratio .7 .6 .7

INTERPRETATION

The profit of the broking firm is not increasing much, which can be the reason which has
bought the return on net worth down. The other reason for RONW decreasing may be high
distribution of dividend. Increasing of the EPS must not be the reason for the shareholder to
worry because the EDELWEISS is being giving high rate of dividend which brings the profit
down and therefore the EPS increases.
The increasing book value shows that the EDELWEISS has collected a good sum for
the shareholders as reserves. The dividend payout ratio is growing which is good for the
holders who like to have some kind of cash flow from their investments. The ROCE of the
company shows a good sign for the company, but shows volatile.

25
 INDIABULLS

Balance Sheet:-
Rs. cr
Period & months 2010/03 2009/03 2008/03
SOURCES OF FUNDS
Owned Funds
Equity Share Capital 61.98 50.73 50.69
Share Application Money 0.00 0.00 0.00
Preferential Share Capital 0.00 156.87 156.87
Reserves & Surplus 3,992.22 2,999.41 2,886.14
Loan Funds
Secured Loans 3,613.87 4,062.56 3,559.57
Unsecured Loans 3,332.00 2,308.00 7,338.00
TOTAL 11,000.07 9,577.57 13,991.26
USES OF FUNDS
Fixed Assets
Gross Block 62.87 55.55 52.41
Accumulated Depreciation 22.88 15.70 9.31
Less: Revaluation Reserve 0.00 0.00 0.00
Net Block 39.99 39.86 43.10

Capital Work-in-progress 0.29 1.04 1.81

Investments 1,002.21 1,373.75 310.61

Current Assets
Current Assets, Loans & Advances 11,046.43 8,585.50 14,856.97

Less: Current Liabilities & Provisions 1,088.85 422.58 1,221.24

Total Net Current Assets 9,957.59 8,162.92 13,635.73

Miscellaneous Expenses not written off 0.00 0.00 0.00

TOTAL 11,000.07 9,577.57 13,991.26

Number of Equity shares outstanding (Cr.) 30.99 25.36 25.34

Bonus component in Equity Capital 15.39 15.39 15.39
Notes:
Book Value of Unquoted Investments 1,002.21 1,373.75 310.61

Market Value of Quoted Investments 0.00 0.00 0.00

Contingent liabilities 0.10 584.60 543.34

26
KEY FINANCIAL RATIOS:

MARCH 2010 MARCH 2009 MARCH 2008

RONW (%) 7.2 5.8 19
EPS (Rs) 8.27 6.88 14.71
Dividend Yield 5.1 2.2 2.1
ROCE 9 10.1 11.5
Book Value Per Share 130.82 120.26 115.88
(Rs)
Debt-Equity Ratio 1.8 2.7 2.7

INTERPRETATION

Percentage wise the net profit of the India bulls is going down. Because of this the
slowdown in return on net worth is also showing that the India bull is not in a position to
increase its share price. The decreasing profits are leading towards the decreasing of the EPS.
The price trend also shows that the share is not much volatile and also shows an upward trend.
Holders for long term are benefited from the capital appreciation.
The EPS showing a down trend may be because of the price not increasing to the
proportion of the profit. The growing book value indicates that the bank has huge reserves and
can be a potential for bonus.

27
 MOTI LAL OSWAL

BALANCE SHEET:-

Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths
Sources of Funds
Total Share Capital 14.20 14.20 14.32
Equity Share Capital 14.20 14.20 14.32
Share Application Money 0.00 0.10 0.00
Preference Share Capital 0.00 0.00 0.00
Reserves 385.72 419.16 459.17
Revaluation Reserves 0.00 0.00 0.00
Networth 399.92 433.46 473.49
Secured Loans 0.00 0.00 0.00
Unsecured Loans 0.00 0.00 59.32
Total Debt 0.00 0.00 59.32
Total Liabilities 399.92 433.46 532.81
Application of Funds Mar '08 Mar '09 Mar '10
Gross Block 0.01 0.01 15.84
Less: Accum. Depreciation 0.00 0.00 0.01
Net Block 0.01 0.01 15.83
Capital Work in Progress 0.00 0.00 87.48
Investments 135.40 31.35 58.24
Inventories 1.63 32.72 107.76
Sundry Debtors 0.00 0.00 0.00
Cash and Bank Balance 0.45 200.12 24.56
Total Current Assets 2.08 232.84 132.32
Loans and Advances 284.04 206.68 296.72
Fixed Deposits 0.62 1.12 0.50
Total CA, Loans & Advances 286.74 440.64 429.54
Deffered Credit 0.00 0.00 0.00
Current Liabilities 0.39 0.98 3.74
Provisions 21.83 37.61 54.55
Total CL & Provisions 22.22 38.59 58.29
Net Current Assets 264.52 402.05 371.25
Miscellaneous Expenses 0.00 0.08 0.00
Total Assets 399.93 433.49 532.80
Contingent Liabilities 4.70 4.70 42.00
Book Value (Rs) 140.80 30.51 33.07

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KEY FINANCIAL RATIOS:

MARCH 2010 MARCH 2009 MARCH 2008

RONW (%) 9.4 10.9 6.2
EPS (Rs) 2.96 3.19 6.09
Dividend Yield .7 1 .6
ROCE 12.5 16.4 10.4
Book Value Per Share 33.07 30.51 140.80
(Rs)
Debt-Equity Ratio .1 0 0

INTERPRETATION

The trends of profits are not leading the EPS; i.e. the profit has shown a
huge growth in the year 2008 – 09 and shows an increase in the year 2009 – 10 but the EPS is
not showing growing because of heavy interest and increase in no. of share. The dividend
Yield is highly volatile and the shareholders are enjoying the current inflow of cash.
The company with the help of the growing profit is retaining the profit which is not
supporting to the book value of the share because may be huge payment on Debt and
Dividend.
The investor must look over the return on net worth and the deviations of the share
price. Investor with low risk profile must be careful if they have this stock in their portfolio
and growth for the company is showing by increasing in profit and not any growth in EPS.

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 INDIA INFOLINE

Years Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths
Sources Of Funds
Total Share Capital 57.10 56.68 57.04
Equity Share Capital 57.10 56.68 57.04
Share Application Money 59.77 11.37 0.40
Preference Share Capital 0.00 0.00 0.00
Reserves 932.75 980.13 1,050.67
Revaluation Reserves 0.00 0.00 0.00
Net worth 1,049.62 1,048.18 1,108.11
Secured Loans 0.00 1.70 1.17
Unsecured Loans 130.57 0.10 496.58
Total Debt 130.57 1.80 497.75
Total Liabilities 1,180.19 1,049.98 1,605.86
Application Of Funds Mar '08 Mar '09 Mar '10
Gross Block 98.32 143.68 108.83
Less: Accum. Depreciation 35.08 44.94 60.63
Net Block 63.24 98.74 48.20
Capital Work in Progress 0.49 4.51 1.75
Investments 915.68 869.31 1,104.22
Inventories 1.31 0.56 53.76
Sundry Debtors 342.81 103.53 577.50
Cash and Bank Balance 61.62 264.10 309.86
Total Current Assets 405.74 368.19 941.12
Loans and Advances 313.89 244.41 516.71
Fixed Deposits 152.75 166.15 251.98
Total CA, Loans & Advances 872.38 778.75 1,709.81
Deffered Credit 0.00 0.00 0.00
Current Liabilities 514.85 552.68 1,025.81
Provisions 156.74 148.64 232.31
Total CL & Provisions 671.59 701.32 1,258.12
Net Current Assets 200.79 77.43 451.69
Miscellaneous Expenses 0.00 0.00 0.00
Total Assets 1,180.20 1,049.99 1,605.86
Contingent Liabilities 8.00 20.85 24.17
Book Value (Rs) 173.35 36.58 38.84

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KEY FINANCIAL RATIOS:

MARCH 2010 MARCH 2009 MARCH 2008

RONW 14.1 10.1 23.6
EPS (Rs) 5.33 3.73 27.62
Dividend Yield 2.6 4.8 0.8
ROCE 18.6 14.6 33.6
Book Value Per Share 38.84 36.58 173.35
(Rs)
Debt-Equity Ratio 0.2 0.1 0.2

INTERPRETATION

The profit for the India Infoline has volatile between 2008 to 2010 but the return on net worth
is showing a volatile trend in the following year. The issue of additional equity share may be
the reason for such a Trend. India Infoline is not giving good dividend to the shareholder.
The book value shows good reserves for the company and highly potential for bonus.
The dividend yield shows a huge uptrend in 2009 but again shows down in 2010. The share is
quite volatile. We can say this because the price has almost not shown any movement over the
period.

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 FINDINGS

COMPERATIVE ANANLYSIS OF THE FIRMS

Firm RONW EPS (Rs.) P/E Price as

on
Name 19/07/10

Change
Mar-08 Mar-10 (%) Mar-08 Mar-10 Change Mar-10

EDELWEISS 3.2 2.6 -25 4.56 30 --

3.84 18.75

INDIABULL 7.2 19 163.88 -44.18 28

S 14.71 8.27 13.1

MOTILAL 9.4 6.2 34.78 2.96 175

OSWAL 6.09 -51.39 60.3

INDIA 14.1 23.6 67.37 5.33 99

INFOLINE 27.62 -80.70 20.7

INTERPRETATION
On comparing the major players of the broking sector, we can see that INDIABULLS
is being greater increase in the return on net worth and EPS lower than the EDELWEISS. The
return on net worth is the highest for INDIABULLS. The profit of the broking firms is also
growing at quicker rate. The P/E is considered one of the important factors that attract the
buyer, but P/E ratio of other broking firms is less than MOTILAL OSWAL. The P/E ratio is
the lowest indicating that a multiple of 30 of price to earnings exhibits some potential for
capital appreciation in the case of EDELWEISS and its multiple of 21(approximately) for
INDIA INFOLINE. The price of the share is also average of INFOLINE so small and large
both investors are also attracted for investment.
The ratios considered above thus show that EDELWEISS and MOTILAL have generated
good profit over the years. The lower P/E multiple for INFOLINE shows that the stock is
undervalued and has a great potential to grow. With this evaluation we can see that
INFOLINE will have to face great competition with this firms in future and EDELWEISS and
INDIABULLS growing faster than others which is the nearest competitor of INFOLINE.

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 LIMITATIONS

Fundamental analysis has some limitation involved in it. This limitation can be explained
as under:
 Time Constrain:
Fundamental analysis may offer excellent insights, but it can be extraordinarily time-
consuming. Time-consuming models often produce valuations that are contradictory to the
current price prevailing on the exchange. Thisis not to say that there are not misunderstood
companies out there.
 Industry/Company Specific:
Valuation techniques vary depending on the industry group and specifics of each
company. For this reason, a different technique and model is required for different industries
and different companies. This can get quite time-consuming, which can limit the amount of
research that can be performed.
The sales and inventory ratio may be very important for the cement sector company
but these ratios are not very useful for the broking sector.
 Vastness Of Fundamental Analysis
Fundamental analysis is a very vast concept. It was difficult to analyse each and every
component involved in it. Here an attempt is made to learn the basic of Fundamental Analysis
because it is difficult to carry out the whole process of fundamental analysis with in two
months because of the vastness.

33
 CONCLUSION

Fundamental analysis holds that no investment decision should be without

processing and analyzing all relevant information. It strength lies in the fact the information
analyzed is real as opposed to hunches or assumptions. On the other hand, while fundamental
analysis deals with tangible fact, it does not tend to ignore the fact that human beings do not
always act rationally. Market prices do sometimes deviate from fundamentals. Prices rise or
fall due to insider trading, speculation, rumour, and a host of other factors.
This is true to an extent but strength of fundamental analysis is that an investment
decision is arrived at after analyzing information and making logical assumptions and
deductions. Furthermore, fundamental analysis ensures that one does not recklessly buy or
sell shares- especially buy.

Fundamental analysis can be valuable, but it should be approached with caution. If

you are reading research written by a sell-side analyst, it is important to be familiar with the
analyst behind the report. We all have personal biases, and every analyst has some sort of
bias. There is nothing wrong with this, and the research can still be of great value. Learn what
the ratings mean and the track record of an analyst before jumping off the deep end. Corporate
statements and press releases offer good information, but they should be read with a healthy
degree of skepticism to separate the facts from the spin. Press releases don't happen by
accident; they are an important PR tool for companies. Investors should become skilled
readers to weed out the important information and ignore the hype.

To conclude we can say that:

• The broking firms will see an upswing in the near future because there is a huge
amount of person sees the benefit in investment in share market. The broking industry
sees a bright future ahead. This industry has huge growth prospects.
• On comparing various broking firms with each other on the basis of the financials,
HDFC securities is leading competitor for IIFL.

34
 RECOMMANDATION

• Increase awareness about broking firms so that more people can invest in share
market.
• IIFL Company should reduce margin money; it can help in acquiring more customers.
• Relationship managers generally concentrate on higher margin money customer
because high brokerage is generated from them; they should focus on less margin
money customer so that customer base can be increased.
• Brokerage rate should be reduced as Religare, Motilal Oswal, India Bulls charges .
03% for intraday and .30% for Delivery whereas IIFL charges .05% for intraday and .
50% for Delivery (Negotiable for Higher Margin Money Customer).
• Company should increase exposure; it is a good tool to capture the market.

35
 BIBLIOGRAPHY:

 Websites:
www.moneycontrol.com
www.nseindia.com
www.indiainfoline.com
www.equitymaster.com
www.capitaline.com
www.wikipedia.com
 Magazines:
Dalal Street.
Capital Market
 Financial Daily:
Economic Times.

36
ANNEXURE

Formulae for Ratios:

Return on Equity:
Equity Earnings (Profit) / Equity (Net worth) * 100.

Earnings per Share:

Equity Earnings (Profit) / No. of Outstanding Shares.

Dividend Payout Ratio:

Equity Dividends / Equity Earnings (Profit).

Price/Earning Ratio:
Market Price per Share/ Earning Per Share

Book Value per Share:

Paid – up Equity Capital + Reserves and Surplus / No. of Outstanding Shares.

37