Download - Depository Systems
CHAPTER-1
INTRODUCTION
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INTRODUCTION TO DEPOISITORY SYSTEM
Technology is revolutionizing every field of human endeavor and
activity. Indian capital market is barrow meter of Indian economy; one of
them is introduced technology into capital market. A major development in
the Indian capital market has been setting up of Depository system. The rapid
growth in number, volume and value of securities in the Indian capital market
exposed the limitations of handling and dealing securities in the physical /
paper mode; the short coming of the market became in the manifest in terms
of bad deliveries, delays in transfer and irregular settlement etc. depository
used as elixir, bringing solution for all those problems.
The main objective’s of depository systems are to accelerate scrip less
trading, to make trust in individual investors participation in depository
system and to create a competitive environment and be responsive to user’s
interest and concern.
A depository holds securities in electronics form and provides all
services related to transaction of shares/ debt instruments. A depository
interacts with clients through a depository participant with who the client has
to maintain a dmat account.
Thus an investor who wishes to avail of all depository services has to
open a dmat account. A depository participant is an agent of depository and is
authorized offer depository services to investors.
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MEANING OF DEPOSITORY
Depository means “one place where something is deposited for
safe keeping; one who receives a deposit money, securities, investments or
other property; a person to whom something is entrusted; a trustee; a person
or group entrusted with preservation or safe keeping of something”
The Act defines Depository as:
An organization where the securities of shareholders are held in
the form of electronic accounts in the same way as bank holds money. The
holds electronic custody of securities and also arranges for transfer of
ownership of securities on the settlement dates.
According to section-2(e) of Depository Act:
“Depository means a company formed and registered under the
companies act, 1956 and which has been granted a certificate of registration
under section-12(1a0 of Securities and Exchange Board of India act, 1992”.
A depository can not act as depository unless it obtains a
certificate of commence of business from the board (SEBI).
The objective of depository system is accelerate the growth of
scrip less trading and to make the individual investors participation in
depositories to create competitive environment and to enhance liquidity and
improving capital market efficiency.
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NEED OF THE STUDY
The rapid growth in number, volume and value of securities in Indian
Capital Market is taking place, large number of companies issuing shares
through IPO’s, which requires the services of the Depository system. It will
take much time of allotment, refund in physical form of transactions. To
reduce the delay in transactions and to eliminate malpractices Depository
system helps allot.
The present study provides the overview of Depository System in India.
There is a need to study what extent the depository services has benefits to
the investors.
OBJECTIVES OF THE STUDY
The objectives of the study are:
To analyze the services of depositories to investor through depository
participants.
To know the awareness of investors towards Depository system.
To present suggestions for improving efficiency
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SCOPE OF STUDY
It covers the depository system of India i.e. how the depository evolved in
India, functions and regulations of depositories various institution and
individuals which will be participated in the process
(DPS, CCS, R&T Agent, companies, Investors etc,)
The process of various activities and special services of depository and it
covers NSDL.
METHODOLOGY OF THE STUDY
In order to archive the above objectives both the primary and
secondary data one considered.
Primary data:
The primary data collected through a structured questionnaire from the
investors in Twin cities and through interviews with the employees .
Sample size: 100 investors
Sampling method: Random sampling method.
Secondary data:
The secondary data has been gathered from published books,
periodicals, journals, and annual reports and through Internet.
REFERENACE PERIOD
The scope of the study is limited for a particular period of time i.e. 45
days
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LIMITATIONS OF THE STUDY
1.. The study is confined to only depository participant’s services
through depositories and awareness of investors about depository system only
in twin cities.
1. By not considering the entire depository participants
implications relating to the pattern of trading may have been
missed in this stud
2. Some of the investors may show lack of interest in providing
the response which might lead to biased information.
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CHAPTER-2
REVIEW OF LITERATURE
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TOOLS AND TECHNIQUES
To analyze the data tables and graphs are used.
INTRODUCTION
India has a capital market, which is more than a century old; the paper
– based settlement of trades caused substantial problems like bad delivery
and delayed transfer of title and so on. Therefore, with the objective of
improving the market efficiency, enhancing transparency, checking unfair
trade practices and bring the India up to liberalize, regulate and to develop
the securities market was introduced in 1990s. The enhance of Depositories
Act in August- 1996 paved the way for establishment of Depositories in
India. NSDL was inaugurated as first Depository in India in November 1996.
Depositories are promoted by institutions of statute have been
responsible for economic development of the country. National infrastructure
of international standards that handles most of the trading and settlement in
dematerialized (scrip-less) from in Indian capital market has been
established.
Depository’s aims at ensuring safety and soundness of the Indian
market places by developing settlement solutions that maximize efficiency,
minimize risk and minimize cost as compared to the physical transfer.
Depositories are concerned with conversion of securities from physical
to electronic custody of securities. These are identical in all respects and are
thus tangible.
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In depository system ownership transfer of securities electronically by
book entry without making securities move from person to person. The Act
had made the securities of all public limited companies freely transferable,
restricting the company’s right to use discretion in effecting the transfer of
securities and the transfer deed and other procedural requirements under the
Companies Act have been dispensed with.
NEED FOR SETTING UP DEPOSITORY SYSTEM:
Indian securities market has grown exponentially during the last
decade. So the problems associated with the settlement of trade are also on
rise.
The technology has changed the face of Indian stock markets in the
post-liberalized era. Competition amongst the stock exchanges, increase in
the number of players and changes in the trading system led to a clearing
system proved to be inadequate due to operational in efficiency. Hence, there
emerged a need to replace the traditional system with a new system called the
“Depository System”.This need was realized in the 1990s due to various
reasons. The reasons are:
i. Large-scale irregularities in the securities scam of 1992 exposed
the imitations of the prevailing settlement system.
ii. A lot of time was consumed in the process of allotment and
transfer of shares, impending healthy growth of the capital
market.
iii. With the opening up of the Indian economy, there was a wide
spread equity cult which resulted in an increased volume of
transactions.
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iv. Mounting the fiscal deficit made the Government to realize the
foreign investment for the growth of the economy and that was
being restricted due to non-availability of Depositories.
v. There are various problems associated with dealing in physical
shares, such as…
a).Unwanted delay in transfer of shares.
b).Various problems such as theft, fake and/or forgery
transfer.
c).Paper work involved in buying selling and transfer
leading to costs of handling, storage, transportation and
other back office stocks.
All these problems served as barriers to the entry of investors
into the market. To overcome these problems the Government of India
programulated the Depository in sept-1995. Thus paying the way for setting
of the Depository system in the country.
OVERVIEW OF NSDL
Frame Work of NSDL:
NSDL:
NSDL is the first depository in India, established in August 1996
and promoted by institutions of national stature, responsible for economic
development of the country has since established a national infrastructure of
international standard that handles most of the trading and settlement in
dematerialized form in Indian capital market.
The Industrial Development Bank of India (IDBI), The Unit Trust of India
(UTI) and The National Stock Exchange (NSE) to provide electronic
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depository facilities for securities traded in equity and Debt market promoted
NSDL.
CDSL:
CDSL is the other Indian depository promoted by stock exchange, Mumbai
in association with Bank of India, Bank of Baroda, and State Bank of India
and HDFC Bank. The Central Depository Services Limited (CDSL)
commenced operations in the year 1999.
SERVICES OF NSDL :
NSDL carries out its operations through various functionaries
called Business Partners, NSDL electronically linked it’s Business Partners
viz., depository participants, Registrar and Transfer Agents, Clearing
Corporations / Clearing Houses. They are National Stock Clearing
Corporation Limited (NSCCL) and Bank of India Stock Limited (BOISL).
This is done on order to facilitate settlement of trades and to
perform a daily reconciliation of all account balances held with a
NSDL/CDSL. The entire system is called NEST (National Electronic
Settlement & Trading) system. Thus, a highly integrated set up for
maintenance of investor accounts have been developed and implemented.
Depositories and its Business Partners are regulated by SEBI
and
Governed by SEBI (Depositories & Participants) Regulations, 1996. The
functioning and operations of NSDL are governed by provisions of NSDL
/CDSL byelaws and business rules framed in accordance with the regulations.
Basic functions:
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The main functions of Depositories (NSDL) are:
Dematerialization
Re materialization
Dematerialization:
It is the process by which a client can get physical certificates
converted into electronic balances maintained in its account with the agent
called Depository Participant. In simple terms the conversion of holding from
physical to electronic form.
The securities held in dematerialized from are fungible. They do
not bear any distinguishable features like distinctive numbers, folio numbers
or certificate numbers.
Process of Dematerialization:
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INVESTORDEPOSITORYPARTICIPANT
R & TAGENT
NSDL/CDSL
PROCESS:
1. THE INVESTORS ARE SUBMITS THE Demat Request From
(DRF) duly filled to his Depository Participant along with
physical certificate.
2. The Depository Participant informs depository (NSDL) of the
investors request for dematerialization.
3. The Depository Participant sends the physical certificates to the
Registrars of the company.
4. The NSDL confirms the request to the Registrars.
5. After sufficient scrutiny, the Registrars accept the request by
giving electronic credit. This is conveyed to the NSDL.
(The Registrar updates to the NSDL of the Electronic credit)
6. The NSDL apprises of the credit to Depository Participant.
7. Subsequently, the investor is apprised of his credit in his
account.
Rematerialization:
Dematerialization is the exact reverse of dematerialization. It refers to the
process of issuing physical securities in the place of the securities held
electronically in book-entry form with a Depository. Under this process,
depository account of a beneficial owner is debited for the securities sought
to be rematerialized and physical certificates for the equitant number of
securities are issued.
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PROCESS:
1. The investors request for Rematerialized Request Form (RRF) to its
Depository Participant.
2. If RRF is found in order, the Depository Participant should accept RRF
and issue an acknowledgement to the client.
3. The Depository Participant in turn will also apprise the Registrar &
Transfer Agent.
4. The depository will appraise the Registrar/Transfer Agents.
5. The Issuer or its Registrar & Transfer Agent should verify that RRF
and after that printing the physical certificates will update the
Depository Participant.
6. The Issuer or its Registrar & Transfer Agent should then proceed to
issue the physical security certificates and dispatch them to the
Beneficial Owner.
7. The Depository Participant, on receiving conformation of debit entry in
DPM, should inform the client accordingly. This entire process takes a
maximum of 30 days.
Thus NSDL play a major role in this process. They also provide basic
services as follows
Account maintenance:
NSDL interfaces their investors through its agents called
Depository Participants. The investors are open a account with a
Depository Participant is similar to the opening of a bank
account.
Settlement of trades through market transfer:
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In India the stock exchanges have established electronic
connectivity with NSDL to facilitate settlement is respect of
dematerialized securities.
The NSDL provides investors to buy or sell their share in any of
the stock exchanges linked to NSDL through a broker of his
choice.
The NSDL includes the facilities like
Off market transfers
Inter depository transfer
Distribution of non – corporate actions
Nomination / transmission
DEPOSITORY PARTICIPANTS :
Depository services are extended through its agents called
Depository Participants (DPs). The Depository Participant is the link
between the shareholder, the Company and the Depository. Banks,
Financial Institutes, Custodians, Stock Brokers etc. can become DPs
subject to their meeting certain requirements prescribed by the
depositories and SEBI.
An investor can open his/her account with one or more
DPs as he/she likes. The procedure for opening an account with the
Depository Participant is similar to opening a saving bank account with
a bank. After having opened the account, an investor can hold shares of
many numbers of companies in his/her account, provided all such
companies have entered the depository system.
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ELIGIBILITY:
Persons belonging to one of the following categories are eligible to
become a Depository Participant.
A Public Financial Institute as defined as section 4A of the
Companies Act.
A Bank included for the time begin in the second schedule to the
Reserve Bank of India Act. 1934.
A Foreign Bank operating in India with approval of Reserve
Bank of India.
A State Financial Corporation established under the provisions
of section 3 of State Financial Corporation Act, 1951.
An Institution engaged in providing financial services promoted
jointly or ever by any of the institutions mentioned in the four
mentioned clauses.
A Non – banking Financing Company.
A Clearing Corporation or Clearing house of a stock exchange.
A stock broker who has been granted a certificate of registration
by SEBI.
Depository participant Services:
The depository participant is the link between the shareholder, the
company and NSDL and provides the following services.
Account Opening
To utilize the services offered by a depository, any person
having investment in any security or intending to invest in
securities needs to have a d-mat account with a Depository – DP.
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This holder of such d-mat account is called as “Beneficial
Owner (BO)”. A BO can maintain a d-mat account with zero
balance in such account. A BO can open more than one account
with the same or multiple Depository Participants, in the same
name/s and order, if he/she desires so. The investor can approach
any Depository Participant/s of his/her choice to open d-mat
account.
Dematerialization
Dematerialization is a process by which physical certificates (of
shares/debentures/other securities) are converted into electronic
balances. A BO has to submit the request for dematerialization
by submitting the d-mat request form (DRF) duly completed
along with the concerned physical certificates, to his/her
Depository Participant.
Processing Delivery & Receipt Instructions
To settle trades done on a stock exchange (on – market trades)
and trades, which are directly settled between tow BOs (off –
market trades), BOs submit duly completed delivery instructions
in the prescribed from to Depository Participant. For receipt of
securities into his/her account, a BO can give one time “standing
instruction” to depository participant. Once such a standing
instruction is given to the Depository Participant, there is no
need to submit separate instructions for receipt every time the
investor busy securities.
Account Statement
Generally a Depository Participant sends to the BO, a statement of his
account, monthly, if there is any transaction in the account or every
quarter if the account is not operated during that period.
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Rematerialization
Rematerialization is the process by which the electronic balances held I the d-
mat account can be converted back into physical certificates.
Pledging
If the BO decides to pledge any securities in his BO account, he can avail of
the same by submitting the pledge creation form duly complete, to his
Depository Participant.
Nomination
BO accounts also have a facility for nomination in favor of any person.
Transmission of securitie
NSDL offers a facility for transmission of balances held in BO
account/s (to other BO account/s) if so required due to death, lunacy,
bankruptcy, and insolvency or required due to operation of any law
Changes in Address
A BO who wishes to register his change in address submits his/her request in
writing to his/ her depository Participant. The changes entered by the
Depository Participant in the CDSL system will be automatically downloaded
to all the companies in which the BO is holding securities. This facility
offered by CDSL saves money, time and effort for the BO.
Bank Account Details
SEBI has made it mandatory for companies to print details of bank account of
the BOs on dividend/interest warrants etc. to prevent possibilities of misuse
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of the warrants. All BOs should submit a request in writing to the Depository
Participant if they wish to record/challenge their bank account details.
Role of Depository participants:
Depository participants are described as an agent of the depository. They are
the intermediaries between the depository and the investors. The relationship
between the depository participants and the depository is governed by an
agreement made between the two under the depositories act. In a strictly legal
sense a depository participant is an entity that is registered as such with SEBI
under the provisions of the SEBI Act. NSDL offers a host services to the
investors through its network of depository participants.
Issuer / R & T Agent:
Corporate / companies which issue any kind of security are known as
“Issuer” in the Depository System. Only those securities, which are admitted
into the depository system are available for dematerialization to the holders
of such securities or can be allotted in electronic record form by the Issuer.
It is necessary for the issuer to establish an electronic electivity with
NSDL either directly or through a Registrar and Transfer Agent, who was
already established connectivity with CDSL.
Role of Issuer / R & T Agent in Dematerialization of securities:
The depository electronically intimates on a daily basis all Dematerialization
requests to respective issuer or it’s R&T agency. The issuer are its R&T
Agent have to verify the validity of security certificates as well as the fact
that demat request has been made by the person recorded as member in its
registrar members. After such verification, issuer or its R&T agent intimates
NSDL & authorizes an electronic credit for that security in favor of the client.
In the event of an intimation being received by the depository from
issuer or R&T Agency to credit the account of the client with securities,
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which don’t match, with the details the client or depository participant, the
balance is held in suspense account
i. Role of Issuer/R&T Agent in Rematerialization of Securities:
A client may withdraw its security balances with NSDL at any
point of time by making an application for Rematerialization to NSDL
through its depository participant. When the investor submits the RRF ,
the issuer and/or its R&T agent.
ii. Role of Issuer/R&T Agent in Corporate benefits:
It’s the function of issuer/R&T agent inform NSDL about the
corporate action relating to prescribing dates for book closers, record
dates, and dates for redemption or maturity of security, dates of
conversion of debentures, warrants, call money dates and such other
action from time to time.
The Issuer/R&T agent may, if the benefits in the form of
securities, distributes such benefits clients through NSDL.
Clearing Corporation/Clearing House :
This term applies to any entity engaged in the activity of clearing and
settlement of trades on any recognized stock exchange may be admitted as
user on NSDL subject to its entering into an agreement as raid down in the
bye-laws of NSDL.
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A different agreement has to be drawn up if a clearing house of a
stock exchange is not a legal counter party to the trades on the exchange and
the trade/settlement guarantee fund is held and managed by the exchange. A
third kind of agreement has to be entered into if the members/dealers of the
exchange are not the clearing members of the clearing house.
Admission criteria:
i. The clearing corporation or a clearing house of stock exchange
has adequate hardware and software systems to interact with
NSDL as specified in the business rules.
ii. NSDL is satisfied that the clearing corporation or a clearing
house stock exchange operates in such manner that it ensures
payment against delivery or guarantee settlement.
iii. The clearing corporation or a clearing house of stock exchange
under takes to corporation at all times to redress the grievances
of clients & depository participants on respect of its operation
in relation to NSDL.
Clearing members/Brokers:
Clearing Members/Brokers are the members of the clearing
corporation/clearing houses, who facilitate settlement of trades done on stock
exchanges. They could be a broker or custodian registered with SEBI as such
is an important intermediary in the capital market and essential link in the
depository participant
Role of clearing members/Brokers:
Clearing members/ Brokers are continuously monitor the
deliveries received for pay – in or from pay – out for the subsequent
reconciliation of trade settlements very easily.
They subsequently reduce const of his operations for himself as well as
for his clients.
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Clearing members/Brokers are also offering one-stop services to clients in
respect of trading and Depository service, not only the increases his business
but also can effectively monitor client account position and insulate from
failure in settlement
Some features of Depository Ordinance are as follows:-
a) The depository is registered owner of share while the shareholders is the
beneficial owner (BO) retaining all the economic and voting rights arising out
of share ownership.
b) Shares in the Depository will be fungible.
c) Transfer pertaining to sale and purchase will be indemnified be the
depository.
d) If trades are routed through depository; there is no need to pay stamp
duty.
KEY FEATURES OF DEPOSITORY SYSTEM IN INDIA
Multi-Depository System:
The depository model adopted in India provides for a competitive multi-
Depository system. There can be various entitles providing depository
services.
DEMATERIALISATION AS AGAINST IMMOBILIZATION The model
adopted in India provides only for dematerialization of securities. This is a
significant step in the direction of achieving a complete paper-free securities
market. Many of the developed countries have opted for immobilization (e.g.
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Hong Kong) or both immobilization and dematerialization (e.g. Japan) of
securities.
Immobilization:
Immobilization of securities is done by sorting or lodging the
physical security certificates with one organization that acts as a custodian-a
securities depository. All subsequent transactions in such immobilized
securities take place book entries. The actual owners have right to with draw
the physical securities from custodial agent whenever required by them.
Dematerialization:
Dematerialization of securities occurs when securities issued
physical form are destroyed and equivalent number of securities are credited
into the beneficiary owner’s account. India has adopted dematerialization
route to depository.
In a Depository system the investors stand to gain by way of
efficient settlements, lower costs and lower risk of theft or forgery, etc. But
the implementation of the system has to secure and well governed. All the
players have to be conversant with rules and regulations as well as with the
technology for processing. The intermediaries in this system have to obey the
rules and regulations laid by the regulatory Authorities.
Depository Services through Depository Participants:
The Depository can provide their services to investors through
their agents called Depository participants. These agents are appointed
subject to the conditions prescribed under SEBI (Depository & participants)
regulations, 1996 and other applicable conditions.
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Fungibility:
In the Depository System, the securities dematerialized are not
identified by distinctive number or certificate numbers as in physical
environment. These all securities in the same class are identical and
interchangeable.
Registered owner / Beneficial Owner (BO):
In depository system, the ownership of securities dematerialized is bifurcated
registered Owner and Beneficial Owner. For the securities dematerialized,
NSDL is the Registered Owner in the books of the issuer, but ownership
rights and liabilities rest with Beneficial Owner. All the rights, duties and
liabilities underlying the securities are on the beneficial owner of the security.
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NSDL /CDSL ISSUER R & T AGENT
CLEARINGCORPORATION
CLEARINGMEMBER
DEPOSITORYPARTICIPANT
STOCKEXCHANGE
TRADINGMEMBER INVESTOR
Free Transferability of Shares:
Transfer of shares held in dematerialized form takes place freely through
electronic book – entry system.
DESIGN OF DEPOSITORY:
NSDL carries out its operations through various functionaries called Business
Partners. The depository interface with the interface and these business
partners represented above:
NSDL is electronically linked it’s business partners, viz., the Issue of
company and / or it’s Registers & Transfer agents and clearing corporations,
clearing house of the stock exchange. This is done on order to facilitate
settlement of trades and to perform a daily reconciliation of all the account
balances held with NSDL. The entire system is called NEST (National
Electronic Settlement & Transfer) system. Thus, a highly integrated setup for
maintenance of investor accounts has been developed and implemented.
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A Depository very much like a Bank in operations:
NSDL-BANK- AN Analogy
S.No. BANK NSDL
1.Holds funds in accounts Holds securities in accounts
2.Transfer funds between the
accounts
Transfer securities between
accounts
3.Transfer without holding cash
Transfer without handling
physical securities
4.Safe keeping of money Safe keeping of securities
NSDL – BANK – The Difference:
S.N
O.BANK NSDL
1. Either of holders can sign instruction All joint holders to sign
2. Minimum balance to be maintained No minimum balance required
3.
Entitled for interest
Interest can be earned only by
participating in stock leading
scheme
4.Uses balance in accounts
Does not move balances in account
holders authorization
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5.Nomination is kept confidential
Signature and photograph of
nominee to provide
FUNCTIONS OF DEPOSITORY:
Dematerialization:
One of the primary functions of the depository is to eliminate or
minimize the movement of physical securities in the market. This is achieved
through dematerialization of securities. Dematerialization is the process of
converting securities held in physical form into holding in book entry form.
Account Transfer:
The depository gives effect to all transfers resulting form the settlement of
trades and other transactions between various beneficial owners by recording
entries in the accounts of such beneficial owners.
Transfer and Registration:
A transfer is the legal change of ownership of security in the records of the
issuer. For affecting a transfer, certain legal steps have to be taken like
endorsement, execution of a transfer instrument and payment of stamp duty.
The depository accelerates the transfer process by registering the ownership
of entire issue in the name of the depository. Under a depository system,
transfer of security occurs merely be passing book entries in the records of
the depositories, on the instructions of the beneficial owners.
Corporate Actions:
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A depository may handle corporate actions in two ways. In the first case, it
merely provides information to the issuer about the persons entitled to receive
corporate benefits. In the other case, depository itself takes the responsibility
of distribution of corporate benefits.
Pledge and Hypothecation:
Depositories allow the securities place with them to be used as collateral to
secure loans and other credits. In a manual environment borrowers are
required to deliver ledged securities in physical form to the lender or its
custodian. These securities are verified for authenticity and often need to be
transferred in the same of lender. This has a time and money cost by way of
transfer fees or stamp duty. If the borrow wants to substitute the pledged
securities, these steps have to be repeated. Use of depository services for
pledging/hypothecating the securities make the process very simple and cost
effective. The securities pledged/hypothecated are transferred to a segregated
or collateral account through book entries in the records of the depository.
Linkage with clearing system:
The clearing system performs the functions of ascertaining the pay-in
(sell) or pay-out (buy) of brokers who have traded on the stock exchange.
Actual delivery of securities from the clearing system to the buying broker to
is done by the depository. To achieve this, depository and clearing system
should be electronically linked.
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CHAPTER-3
COMPANY PROFILE
29
COMPANY PROFILE:
In the world of financial services and India's financial multiplex, IL&FS
Invests mart Limited (IIL) is a premier financial service organization
providing individuals and corporates with customized financial management
solutions. IL & FS work towards understanding customer’s financial goals
and helping them to their goals. Our institutional expertise, combined with a
thorough understanding of the financial markets results in appropriate
investment solutions for investors. At IL&FS Investsmart, we recognize that
investors dreams, needs, aspirations, concerns and resources are unique. This
is reflected in the approaches of the company towards there investors. IL&FS
concentrates at having a deep appreciation for the value and building a long
term paticipant with their investors.
Divisions of IL&FS Investsmart Limited
o The Investment Advisory and Broking Division
o Merchant Banking Division
o The Project Syndication Division
o Institutional Equity Broking Division
o Institutional Debt Broking Division
The Investment Advisory and Broking Division (IAB)
30
The Investment Advisory and Broking Division (IAB) of IIL,
provides end to end personalized investment management services, which
includes planning, advisory, execution and monitoring. IAB has a presence
across asset classes – equities, fixed-income, mutual funds, derivatives, and
insurance, with offline as well as online equity execution capabilities. It is a
partners in planning its customer’s complete investment decisions towards
wealth generation, retirement planning and capital built up at different stages
of their life. IAB has pioneered the concept of life cycle investing though its
specialized life cycle investment advisory plans. It’s strong team of
Relationship Managers, Customer Service Executives, Advisory Managers
and Research Analysts, offers efficient execution backed by in-depth
research, knowledge and expertise to its customers across the country,
through its network of more than 150 outlets in over 61 cities and its content
rich transactional website www.investsmartindia.com.
The Investment Advisory and Broking Division (IAB) of IIL, provides
end to end personalized investment management services, which includes
planning, advisory, execution and monitoring. IAB has a presence across
asset classes – equities, fixed-income, mutual funds, derivatives, and
insurance, with offline as well as online equity execution capabilities. It
partners in planning its customer’s complete investment decisions towards
wealth generation, retirement planning and capital built up at different stages
of their life. IAB has pioneered the concept of life cycle investing though its
specialized life cycle investment advisory plans. It’s strong team of
Relationship Managers, Customer Service Executives, Advisory Managers
and Research Analysts, offers efficient execution backed by in-depth
research, knowledge and expertise to its customers across the country,
through its network of more than 150 outlets in over 61 cities and its content
rich transactional website www.investsmartindia.com
31
Merchant Banking Division
The Merchant Banking function of IL&FS Investsmart comprising of
the Equity Capital Market division, offers a complete range of services. This
includes management of IPO’s, rights issues, buy back offers, open offers,
and private placements of equity. Its extensive contact base and strong
relationships developed with Venture Capital Funds and Private Equity Funds
for equity placements contributes to an effective delivery platform for its
clients.
The Project Syndication Division:-
The Project Syndication Business of IL&FS Investsmart has been
inherited from IL&FS. The syndication desk has so far worked on Debt
Syndication of large Infrastructure Projects being implemented by IL&FS.
The mandate includes Debt structuring of highly complex and difficult
projects. Project Syndication focuses on the role of an Arranger of Project
and Structured loans. While fund mobilization services are provided across
various areas, infrastructure sectors remain key focus area for syndication
activity. The services under Project Syndication include project loan
syndication, structured debt syndication and debt restructuring. The
syndication business thrives on its extensive contact base and strong
relationships developed over the years with Banks and Financial Institutions.
Institutional Equity Broking Division:-
32
Institutional Equity Business of IL&FS Investsmart (IEB}thrives on
strong relationships it has built among domestic mutual funds, banks,
financial institutions, insurance companies and private sector funds over the
past few years. IEB also has well-developed relationships among corporates,
leveraged from its institutional pedigree. Efficient execution, quality research
and high degree of compliance with stock exchange regulations and ethical
business standards back IEB’s services to institutional investors through
IPO’s, Equities, Derivatives and Mutual Funds. IEB is well positioned to
offer support to the complete range of investment banking services to
corporates
Institutional Debt Broking division:-
The Debt division has an active presence in the secondary and primary
debt placement markets. It deals in various products including Govt.
Securities, Treasury Bills, Bonds and Debentures, State guaranteed papers
and Commercial papers. It has strong relationship with Institutional clients
like Banks, Primary Dealers, Mutual Funds, Provident Funds and Corporates.
Debts on Net address all Fixed Income participants with attendant advantages
of Speed, Transparency and lower costs in the primary Market. It also offers
one of its kinds, complex and robust investment valuation tools, in addition to
value research and information on the debt and money markets in India
PEDIGREE: IL&FS Limited
IL&FS Invest smart leverages on its pedigree of IL&FS, which has the
core competency of institutional and retail financial services. Infrastructure
Leasing and Financial Services Limited (IL&FS), the promoters of IL&FS
Investsmart Limited, is a multi-faceted organization providing a range of
33
fund and non-fund based financial services. IL&FS was incorporated in 1987
and is amongst the few Institutions in the country specifically mandated to
implement infrastructure projects on a commercial format.
Promoters and Shareholdings
IL&FS was promoted as a joint venture between Central Bank of India,
(CBI), Unit Trust of India, (UTI) and Housing and Development Finance
Corporation (HDFC) With the objective of extending its reach & resources &
the broad base its shareholding, IL&FS inducted reputed domestic & foreign
investors such as International Finance Corporation, Washington, ORIX
Corporation, Japan, Credit Commercials de France (CCF), State Bank of
India and the Government of Singapore as its shareholders. Within a short
span, IL&FS has grown into a multifaceted company with a net worth of over
Rs 6700 million and an asset base of over Rs 39000 million.
Activities of IL&FS
Broadly the activities of IL&FS include:
Financial Services including Investment Banking, Asset Financing.
Commercialization of Infrastructure Projects.
Asset Management Services to wide range of funds.
Capital Markets & Merchant Banking Services.
Securities brokerage including distribution of Financial
34
Securities & Investment
Management planning services.
PRODUCTS AND SERVICES
Not everybody is an investment professional there is always a need for
someone who can guide investors through the complex maze of investment
options with unbiased and expert advice. Someone, who can be a friend and
an expert who would understand the needs of the investor and help him
achieve his financial goals.
IL&FS Investsmart is one such financial service organization, catering to
requirements of individuals & institutions by providing a broad spectrum of
value added products and services for both of them.
Here is our range of financial solutions for both individuals as well as
institutions
Retail Offering Institutional Offering
Wealth Management Services
Portfolio Management Services
Securities Broking - Equities &
Derivatives
Depository & Custodial Services
Distribution of Financial
Merchant Banking
Product Syndication
Institutional Equity Broking
and Sales
Institutional debt Broking and
sales
35
Products
Investment Advisory and Wealth Management Services – Managing
your money:-
At IL&FS Investsmart, we believe in partnering your investments all
the way through. This distinguishing feature is implemented through
InvestSaathi, Wealth Management Solutions. Most of us require some
assistance in making selections appropriate to our individual needs. We need
sound advice from people who have the expertise to decipher the financial
jargon of investment options available today. InvestSaathi is like the Smart
Friend that you can rely on, who will help you maximize your investments
and reach your financial goals. Our relationship managers interact with you
on a periodic basis to discern your changing needs. In tune with the changing
environment. Accordingly, they will also help you review, re-evaluate and
restructure your existing portfolio, as and when needed.
Our experienced team’s customized plans are based on your investment objectives, your risk profile, time horizon
and financial needs. We assist you through the process of maximizing your wealth. Research is the fundamental basis of
all sound investment decisions and superior research allows us to deliver superior solutions. Our investment solutions are
backed by in-depth research generated by a top-drawer research
Portfolio Management Services:
Extending our expertise to personal financial advisory services, we also offer
portfolio management services to our investors. The primary focus of our
portfolio management services is to provide individualized portfolio
management through personalized portfolios, designed to fit your specific
investment parameters. You can choose your own securities, ensuring
36
transparency and flexibility in all operations. We have a range of portfolio
management services to suit your individual needs.
Securities Broking – Equities and Derivatives
Equity Trading:-
Personal, transparent, prompt and convenient, trading through IL&FS
Investsmart is simple and effective. Being member of the National Stock
Exchange (NSE), Bombay Stock Exchange (BSE) and an institutional
promoted broking house, we cater to your trading needs, through a network
of experienced dealers across the country & our comprehensive website
www.investsmartindia.com.
Derivatives Trading:-
We also offer you derivative trading in equities, in the NSE Futures
and Options segment, through specialist dealers in this division. Under
derivatives trading, we recommend trading on futures, strategies and options,
hedging with Nifty and other products and opportunities of risk less arbitrage
between various segments.
Depository & Custodial Services:-
IIL facilitates the entire process of “dematerializing” shares through its parent
company IL&FS. IL&FS DP provides personalized service with the highest
standards of efficiency. For your convenience you will continue to deal with
Investsmart.
We also arrange to open Custodial Accounts for the safe keeping of
your securities through our parent company IL&FS. This service keeps track
and takes care of all your shares related activities, ranging from: share
transfer, issues of dividends and interest payments, to monitoring
announcements of rights / bonus issues etc.
Distribution of Financial Products:-
37
Investsmart, with its expertise in delivering complete investment
solutions to its clients, offers various different financial products into
categories like Mutual Funds, Fixed Income Products, Home Loans,
Insurance etc.
Mutual Funds:-
Our experts help you to select the right scheme from over 500 offerings,
which will match your needs, goals and risks. In addition to this, they also
help you constantly monitor your MF portfolio, making changes to adapt to
your changing needs or the market scenario, in order to make your money
work for you more.
Fixed Income Products
A gamut of fixed deposits, bonds and debt instruments make up this section
of investments. Our managers evaluate these options thoroughly, to match
your individual liquidity requirements.
Home Loans
Our facilities also extend to Home Loans Consultancy, to help you
select the scheme that is best suited to your financial profile. Prompt and
convenient loan processing procedures help you realize your dreams later.
Insurance Advisory
Our Insurance team assesses your insurance needs and then advises you
on the choices that match your requirements. We offer a range of insurance
products, including pension plans through our subsidiary companies
Merchant Banking Services
The Merchant Banking function of IL&FS Investsmart comprising of the
Equity Capital Market division, offers a complete range of services. This
includes management of IPO’s, rights issues, buy back offers, open offers,
38
and private placements of equity. Its extensive contact base and strong
relationships developed with Venture Capital Funds and Private Equity Funds
for equity placements contributes to an effective delivery platform for its
clients.
The Project Syndication Services
The Project Syndication Business of IL&FS Investsmart has been inherited
from IL&FS. The syndication desk has so far worked on Debt Syndication of
large Infrastructure Projects being implemented by IL&FS. The mandate
includes Debt structuring of highly complex and difficult projects. Project
Syndication focuses on the role of an Arranger of Project and Structured
loans. While fund mobilization services are provided across various areas,
infrastructure sectors remain key focus area for syndication activity. The
services under Project Syndication include project loan syndication,
structured debt syndication and debt restructuring. The syndication business
thrives on its extensive contact base and strong relationships developed over
the years with Banks and Financial Institutions
Institutional Equity Broking and Sales
Institutional Equity Business of IL&FS Investsmart (IEB), thrives on
strong relationships it has built among domestic mutual funds, banks,
financial institutions, insurance companies and private sector funds over the
past few years. IEB also has well-developed relationships among corporates,
leveraged from its institutional pedigree. Efficient execution, quality research
and high degree of compliance with stock exchange regulations and ethical
business standards back IEB’s services to institutional investors through
IPO’s, Equities, Derivatives and Mutual Funds. IEB is well positioned to
39
offer support to the complete range of investment banking services to
corporates.
Institutional Debt Broking and Sales
The IL&FS Investsmart Institutional Debt division deals in primary
and secondary debt placement and distribution. DebtonNet, a part of the IIL
Institutional Debt division is an internet enabled platform, which has been
promoted as a transparent electronic marketplace for primary debt market
products, through its website, www.debtonnetindia.com. The website
addresses all issuers, investors and intermediaries with the attendant
advantages of speed, transparency and lower costs. It also offers one of its
kind, complex and robust investment valuation tools, in addition to value
research and information on the debt and money markets in India
PRESENCE & REACH
Investsmart currently caters to over 80,000 retail customers through
more than 200 outlets across 80 locations encompassing almost every Indian
state. Here is a view of our presence across the country.
40
CHAPTER-4
DATA ANALYSIS
&
INTERPRETATION
41
Awareness of share market TABLE-1
Options Yes No Total
Investors 84 16 100
Percentage 84.00 16.00 100
0102030405060708090
INVESTORS %
Yes No
OPINION
Investors
Percentage
Interpretatio n
The above table reveals that 84% of the investor’s are aware about the share
market and 16% of the investors are not aware about the share market.
42
Investor’s awareness of depository system TABLE 2
Options Yes No Total
Investors 72 12 84
Percentage 86.00 14.00 100
86%
14%
Yes
No
Interpretation
The above table reveals 86% of investors know about depository system
remaining 14% investors are not aware of depository system.
43
Participation in Depositories TABLE 3
Options Yes No Total
Investors 43 29 72
Percentage 60.00 40.00 100
0
50
100
150%
OF
INVESTO
RS
Yes No
OPINION
PercentageInvestors
Interpretation
In the table 60% of the investors are participants in depository system
remaining 40% of investors are not participants in depository system.
44
Above analysis present days most of the investors are look into
security and less time consume for trading of shares through electronic mode.
Motivational factors TABLE 4
Options Security Transparenc
y
Regulation Total
Investors 24 9 10 43
Percentage 56.00 21.00 23.00 100
0%
20%
40%
60%
80%
100%%
OF IN
VESTORS
Security Regulation
OPINION
PercentageInvestors
Interpretation
Above table shows that 56% of investors preferred depositories for security
reasons and 21% of investors interested for transparency remaining 23% are
preferred for regulation.
45
Above analysis most of the investors interested in security because
the benefit of security is elimination of bad deliveries and all risks associated
with physical certificates, such as loss, theft etc.,
Services offered by depository system TABLE 5
Options HSE IL & FS NSE TOTAL
Investors 19 12 12 43
Percentage 44.00 28.00 28.00 100
010203040506070%
OF IN
VESTOR
S
HSE IL & FS NSE
OPINION
Percentage
Investors
Interpretation
Above table observed that 44% investors are interest through HSE and
28% of investors are interest through IL & FS remaining 28% of investors are
interest through NSE.
46
According above table tells most of the investors are interest of trading
activities through HSE . NSE and IL & FS are equal importance of trading
activities with investors and depository participants.
Satisfaction of the investors in depository system TABLE 6
Options Yes No Total
Investors 38 5 43
Percentage 88.00 12.00 100
38
5
88
12
Yes No
Interpretation
Above table observed that 88% of investors are satisfaction of
depository system and 12% of the investors are not satisfaction of depository
system.
47
Above analysis most of the investors satisfied because in depository
system all tractions are made in electronic mode. When investors trade in
depository system shares, there is no more need for delivery and receipt of
scripts.
Instead, seller’s account is debited and the buyers account is credited.
Company of the depository participant TABLE 7
Options NSDL CDSL TOTAL
Investors 28 15 43
Percentage 65.00 35.00 100
020
4060
80100
%O
F INVESTO
RS
NSDL CDSL
OPINION
Percentage
Investors
Interpretation
In the above table reveals 65% of investors are investment in NSDL
Ltd and 35% of investors are interest in CDSL Ltd.
Above analysis most of the investors investment in NSDL Ltd because
they provide good services like Maintenance of beneficiary holdings through
Dps, dematerialization, settlement in dematerialized form and
rematerilisastion.
48
Satisfaction with company’s depository procedures TABLE 8
Options Yes No Total
Investors 23 5 28
Percentage 82.14 17.86 100
Investors
23
5
YesNo
Interpretation:-
Above table reveals that 82% of investors satisfied with company depository
procedures and 17.86% of investors are not satisfied with company
depository procedures.
49
Above analysis observed that investors are interest in dematerialization
means physical shares convert into electronic mode this is used for investors
in pledging and hypothecation facilities, freezing/locking of investors account
and stock lending and borrowing facilities.
Level of satisfaction of investors TABLE 9
Options Fully satisfied Partly satisfied Total
Investors 22 6 28
Percentage 79.00 21.00 100
0%
20%
40%
60%
80%
100%%
OF
INVESTO
RS
Fully satisfied Partly satisfied
OPINIONS
PercentageInvestors
Interpretation:-
Above analysis 79% of investors are fully satisfied with procedures of
the company and 21% of the investors are partly satisfied with procedure of
the company.
50
Most of the people are fully satisfied in company procedure because
company provides carries out settlement of trades not done on the stock
exchange, transfer securities and maintains investor holding in the electronic
form etc.,
Provide up-to-date information in depository system TABLE 10
Options Yes No Total
Investors 33 10 43
Percentage 76.74 23.26 100
0
20
40
60
80%
OF
INVESTO
RS
Yes No
OPINION
InvestorsPercentage
Interpretation:-
Above survey observed that 76% of investors are satisfied for
depository system provide up-to –date information and 24% of investors are
not satisfied regarding depository system not providing up-to-date
information.
51
Effective source of you are depository system TABLE 11
Particulars No of Investors Percentage
Magazines 05 12%
Brokers 04 9%
Friends 23 53%
Dp 11 26%
No of Investors
MagazinesBrokersFriendsDp
INTERPRETATION
It is found in the survey that 12% of the investors know about Depository
System through magazines and Depository Participants. 9% of investors
52
know about Depository System through brokers and 53% investors know
through friends remaining investors known through Dps.
It is the friends who are playing a major role in creating awareness
about Depository System among the investors.
Mode of communication between Dp and Investors TABLE 12
Particulars No. of investors Percentage
E-mail 18 42%
Post 22 51%
Personnel
information03 07%
05
10152025
E-mail Post PersonnelinformationOPINION
%O
F IN
VEST
OR
S
Percentage
No.of investors
INTERPRETATION
53
The above table reveals that 42% of Depository Participants are communicating
with the investors through E-Mail. 51% of investors are informed through post and 7% are
informed personally.
Above analysis most of the investors communicating with
company and depository participant through E-mail services.
Type of investment TABLE 13
No of investors
31
84
43
Equity
PreferencesharesDebentures
Total
Particular No of
investors
Percentage
Equity 31 72%
Preference
shares
8 19%
Debentures 4 09%
Total 43
54
INTERPRETATION
It is found in the survey that majority of the investors are investing in a
combination of instruments. The below table explains the pattern of
investments of investors.
Few of the investments are dealing with all the varieties of
instruments such as Equities, Debentures and Mutual Funds etc….
Above analysis most of the investors interested in dematerialized in equity.
CHAPTER -V
FINDINGS&
SUGGESTIONS
55
FINDINGS
In this study found that most of the investors investing in the share market,
most of them are aware about the depository system
The investors are managing their funds mostly through brokers and online
trading.
The study reveal that most of the investors are know about Depository
System through brokers and friends followed by the Depository Participants
and magazines.
The investors are opening the Depository Participant account because of
dmat and settlement of market trades and electronic form account.
The investor communicating their Depository Participant services mostly
through E-Mail and personal intimation as compare to post and others.
The investors are comfortable with their Depository Participant service and
these are accessible to the investors.
56
The awareness of the serves provided by NSDL is not reaching the investors
who are below 25 age group.
SUGGESTIONS
The minimum balance for opening an account maintenances charges should
be minimized to attract the great volumes of investors.
It is suggested to Depository Participant and other regulatory authorities
success SEBI to conduct awareness programs in rural area.
In the survey it was found that only high-income group investors are familiar
with Depositary system. it was succeed in attracting middle and lower
income group it will improve the inflow of funds.
Educating the investors about Depository Services that will creates awareness
about Depository Services. This will enhance the number of investors.
The Depository Participants are suggested to advertise in regional language,
it will facilitate the investors to understand easily.
Now the awareness is restricted to only above 25 years age.
Depository Participants have to concentrate on below 25 years age investors
57
BIBLIOGRAPHY
58
BIBLIOGRAPHY
WWW.BSE.COM
WWW.NSE.COM
WWW.NSDL.COM
WWW. ILFSINDIA.COM
MANAGEMENT ACCOUNTING & FINANCIAL ACCOUNTING
Sharma
59
APPENDECIES
60
QUESTIONNAIRE TO UNDERSTAND INVESTORS AWARENESS OF DEPOSITORY SYSTEM
NAME :
AGE : -
QUALIFICATION :
PROFESSION :
ANNUAL INCOME :
1). Are you aware of share market?
a) Yes b) No
2). If yes do you know about depository system?
a) Yes b) No
61
3). Are you client of any depository participant?
a) Yes b) No
4). If yes what motivated you to opt for depository system?
a) Security b) Transparency c) Regulations
5). In which company you are the depository participant?
a) HSE b) IL & FS
6). Are you satisfied with the services provided by depository system?
a) Yes b) No
7). In which company you are the depository participant?
a) NSDL b) CDSL
8). Are you satisfied with the company’s depository procedure?
a) Yes b) No
62
9). If yes what is your level of satisfaction?
a) Fully satisfied b) Partly satisfied
10). Does your Depository system provide up to date information
regarding the changes in your depositary account?
a) Yes b) No
11). By which source you came to know about your depository system?
a) Magazine b) Brokers
c) Friends d) Depository participants
12). what is the medium of communication between
Depository participants & Investors?
a) E-mail b) Post c) Personal Information
13). which of these you want to investment in dematerialized form?
a) Equity b) preference shares c) Debentures
14). If no please give suggestions
63
___________________________________________________________________
____________________________________________________________________
_
64