FACTORS AFFECTING INVESTMENT DECISIONS AND COMPETITIVE ADVANTAGES OF INDIABULLS

2012SHIKHA SINHAINDIABULLS SECURITIES IBS HYDERABAD 5/26/2012

FACTORS AFFECTING INVESTMENT DECISIONS AND COMPETITIVE ADVANTAGES OF INDIABULLS

A REPORT ON

FACTORS AFFECTING INVESTMENT DECISIONS AND COMPETITIVE ANALYSIS OF INDIABULLS

SUBMITTED BY: SHIKHA SINHA11BSPHH010767

A report submitted in the partial fulfillment ofMBA Program of IBS Hyderabad

Submitted to:FACULTY GUIDE COMPANY GUIDEDR. P SHASHIKALA MR. ATISH GUPTAIBS HYDERABAD V.P., INDIABULLS

Date of submission:

AUTHORIZATION

I, Dr. P Shashikala, hereby authorize the submission of the project work titled, Factors affecting investment decision and competitive advantage of Indiabulls, undertaken by Ms. Shikha Sinha (Enrollment no. 11BSPHH010767) as partial fulfillment of MBA Program of IBS Hyderabad. This project work was executed under my guidance and no part of this project has been submitted for any degree or recognition before.

Sincerely,Dr. P Shashikala(Faculty Guide, IBS Hyderabad)Dated:

ACKNOWLEDGEMENT

I hereby take this opportunity to thank INDIABULLS SECURITIES, for providing me a corporate exposure through the course of my summer internship.I would like to express my sincere gratitude towards my company guide Mr. Atish Gupta, for providing me great insights about stock markets, real estate, home loans and various other ventures, for guiding me all throughout and for being a great support.I would also like to thank Dr. P Shashikala, my faculty guide for instructing me and giving me her valuable advice on my project.I am also like to thank Mr. Ashish Yadav, Mr. Ankit Gupta, Mr. Jadish Yadav, Mr. Naveen and all members of Indiabulls family who were a great co-operation and help all throughout.I would like to extend my gratitude to IBS Hyderabad, for providing me such a platform. Last but not the least all my friends and family for their support and co-operation.

Thanking You,Shikha Sinha, 11BSPHH010767

EXECUTIVE SUMMARY

The increasing trend towards globalization and industrialization has increased the trend of competition in the financial market, intensified by the coming of Non Banking Financial Company (NBFC), like Indiabulls Securities, and so has the need for the marketing of financial instruments has intensified.NBFCs are financial institutions are ones which provide banking services without meeting the legal definition of a bank, i.e. one which does not hold a license. They are not allowed to take deposits from public. Nonetheless all the operations of these institutions are covered under banking regulations. This project is completely focused to identify some of the demand drivers, rather factors that make people invest in such institutions and in this regard what are the various differentiating factors that provide Indiabulls a competitive edge over other players in the market.There has been an emphasis on the various businesses and of Indiabulls that make it standout in this league, rather than being a me too product. In words of Al Ries and Jack Trout, differentiate or die.

TABLE OF CONTENTSSL NO.CONTENTSPAGE NO.

01Authorization3

02Acknowledgement4

03Executive summary5

04-aIntroduction- Background and Literature review9

bObjective of project10

cMethodology11-12

dScope and Limitations of study13

05-aFinancial industry overview14-15

bIntroduction to brokerage industry 16-18

cPorters 5 factor model of industry19-21

dDemand drivers of the industry22

eSupply drivers of the economy23

fDomestic economic conditions24-25

gGlobal economic conditions26

hCritical success factors of the industry27

iMeasures taken by Indian government28

jPESTEL analysis of industry29-30

kFiscal and monetary policies (legal issues)31-32

06-aCompany overview-History33-34

bBusiness life cycle35-37

cIndiabulls group of companies38

dCompany financials39-40

eMission and vision 41

fStrategies and focus41

gMarketing mix of Indiabulls42-46

hSWOT of Indiabulls47-48

iBCG of Indiabulls49-50

jPorters 5 factor model of Indiabulls51-54

kIndiabulls in News55

lRecent CSR done by Indiabulls56-57

mCustomer relationship58

nAffect of market dynamics59

07-aFactors affecting investment decisions60-62

bFactor Analysis and interpretation63-68

08-aComparison of Indiabulls brokerage services69-71

bDifferent charges in the industry72-81

cSWOT analysis of different firms82

dCompetition in real estate industry83

eCompetition in home loans84

fCompetitive advantage85

09Conclusion and recommendation86

10Outcome and contribution87

11Learning from SIP88

12References89

13Appendix (Questionnaire)90-91

LIST OF FIGURES AND TABLESSl. NO.CONTENTPg.NO.

01Research Methodology11

02Methodology12

03Products of financial market14

04Classification of financial market 15

05Brokerage terminals in various areas17

06Percentage of branches in each region18

07 Percentage of sub brokers in various regions19

08Analysis of Porters 5 factor model of the industry24

09Indian economys growth factors26

10Stable and robust growth in face of global challenges27

11Critical success factors of the industry28

12Various measures taken by Indian Government29

13PESTEL analysis 30

14PESTEL analysis of the industry33

15 Indiabulls at glance35

16Business life cycle37

17Journey of Indiabulls38

18Indiabulls group of companies39

19Indiabulls a leading finance company40

20Asset growth of Indiabulls41

21Products of Indiabulls42

22Places of Indiabulls44

23Promotion of Indiabulls45

24SWOT of Indiabulls47-48

25BCG of Indiabulls49

26Competition in the industry51-52

27Suppliers of Indiabulls Power53

28Indiabulls in news55

29KMO and Bartletts test63

30Variables used in the test64

31Communalities65

32Total variance explained66

33Rotated component matrix67

34Condensed/final factors68

35Different brokerage charges in the industry69

36Comparison of various rates70

37Price comparison chart71

38SWOT of Sharekhan72-73

39SWOT of India Infoline74-75

40SWOT of ICICI Direct76-77

41SWOT of Motilal Oswal78-79

42SWOT of Angel Broking Firm80-81

43Competition in real estate82

44Competition in home loans83

45Housing Finance Companies competition83

BACKGROUND AND LITERATURE REVIEW The Securities Brokerage Industry is cyclical and comprised of two distinct types of businesses. Brokerages, also known as financial services companies, strive to meet the investing needs of their clients, and exchanges facilitate securities trading. Net profits correlate to the performance of the broader equity market. In this market with less differentiated products and many players, there exists an oligopoly (saying in book terms), characterized by tough competition, entry and exit barriers and many more.

1. Al Ries and Jack Trout, in his work said differentiate or die, too many less differentiated products creates a kind of information overload, and in this clutter of too much information, products which are not properly differentiated or advertised just end up becoming a me too product. To avoid it every marketer needs to position his/ her products in a way that makes a specific image in the minds of consumers.

2. Jack Miller, in his work published on June 03, 2010, talked about how investors make investment decisions. He broke the process of decision making in pulling the buy or sell trigger. According to him investors made the investment decisions in the ways like simple screening, then lateral recommendation, followed by piggy bank investing.

3. According to U.S. Securities and Exchange Commissions, one of the articles: investors first evaluate their current financial roadmap, and then they evaluate their comfort zone in taking on risk. Consider an appropriate mix of investments, create and maintain an emergency fund, consider dollar averaging, consider rebalancing portfolio occasionally, and in the process also try to avoid the circumstances that can lead to fraud.OBJECTIVE OF THE PROJECTAn increasing trend has been observed in demand for the services of Non Banking Financial Institutions nowadays. This project is aimed to find out factors affecting investment decisions in these firms. There has also been emphasis to find out the plus points of Indiabulls or the differentiating factors that give Indiabulls a competitive edge. In short: To find out the factors affecting investment decisions in a NBFC. To find out various competitive advantages that makes Indiabulls of the largest stock broking companies.

METHODOLOGYThis is a two dimensional project focusing on two aspects, as already mentioned (objectives). For my project work I have focused on both primary and secondary data as well.Basically any research work proceeds as:

Fig: 1 For this project my challenge was to find out the factors and the competitive advantages. For which I conducted a descriptive research. I have collected primary data through questionnaire and survey. For secondary data, company records, some reviews in economic times, data on moneycontrol site, some online research works have been referred. I have taken 11 factors in my survey so my population size is of 66. I have targeted only investors, who were customers, general investors and company employees. A factor analysis has been run on the data to find the most influential factor. For rest my own analytical skill is used.

Fig: 2

SCOPE OF THE PROJECT

This project has been a great insight for me as I came to know about stock market, demat accounts, buying and selling of dematerialized securities, who are brokers, how to make investment and how to track portfolio of investments.The project is aimed to cover maximum factors affecting the demand drivers and competitiveness.Nowadays even the government is taking up steps to find such factors to give a boost to the Indian financial system.

LIMITATIONS OF STUDY

The population size is limited to Hyderabad area. There may be interviewer bias or judgmental bias. There may be redundancy of data or area surveyed. Due to time and resource constraints some important segment of population might have been missed out.

INDUSTRY OVERVIEWThe Financial MarketThe financial industry or financial services industry includes a wide range of companies and institutions involved with money management, lending, investing, insuring and securities insurance and trading services. The following institutions are a part of the industry: Banks Credit card issuers Investment companies Investment bankers Securities traders Financial planners Security exchangesProducts of the financial market:

Fig: 3The major crises that have shaped the modern financial industry are: The Great Depression(1929) Black Monday(1987) Asian Financial Crisis(1990) Stock Market Downturn(2002) Sub-prime Crisis(2007)

The Classification of financial market in India

Fig: 4

THE BROKERAGE INDUSTRYThe brokerage industry is currently characterized by a large number of companies (private or unorganized). In effect it is a fragmented industry with a large number of participants. The industry thus has monopolistic competition, i.e. a large number of firms selling a slightly differentiated product.Indian stock broking industry is the oldest trading industry that has been around even before the establishment of BSE in 1875. Despite passing through a number of changes in post liberalization period, the industry has found its way towards sustainable growth. With the purpose of gaining deeper understanding about the role of Indian stock broking industry, in the countrys economy, here are some data gleaned from analysis of secondary research. On the basis of recent research: On the basis of geographical concentration, Western region has maximum of 52%, around 24% are located in the North, 13% in South, and 10% in the East. 3% of firms started broking operations before 1950, 65% between 1950-1995, and 32% post 1995. On the basis of terminals 40% are located in Mumbai, 12% in Delhi, 8% in Ahmadabad, 7% in Kolkata, 4% in Chennai, and 29% in other cities. From the study it was found that 36% of firms trade in cash, 27% in derivatives, and 20% in cash, derivatives and commodities. In the cash market, 34% trade in NSE, 14% in BSE, 45% in both. Whereas in debt market, 31% trade in NSE, 26% trades in BSE, and 43% in both. Majority branches are located in North, i.e. 40%, 31% in West, 24% in South, and 5% in East. In terms of sub-brokers, around 55% are located in South, 29% in West, 11% in North, and 4% in East. Trading, IPOs and Mutual Funds are the top three products offered by 90% of firms offering trading, 67% IPOs, and 53% offering Mutual Fund transaction. In terms of various areas of growth, 84% of firms have shown their interest in expanding their institutional clients, 66% firms intend to increase FIIs, and 34% are interested in setting up Joint Ventures in India and abroad. In terms of IT penetration 62% firms provide their website, and 90% have email facility.

Brokerage terminals in various regions:Almost 52% of the terminals in the sample are based in the Western region of India, followed by 25% in the North, 13% in the South and 10% in the East. Mumbai has got the maximum representation from the West, Chennai from the South, New Delhi from the North and Kolkata from the East.Mumbai also has got the maximum representation in having the highest number of terminals. 40% terminals are located in Mumbai while 12% are from Delhi, 8% from Ahmadabad, 7% from Kolkata, 4% from Chennai and 29% are from other cities in India.

Fig: 5Branches and sub-brokers in various regions:The maximum concentration of branches is in the North, with as many as 40% of all branches located there, followed by the Western region, with 31% branches. Around 24% branches are located in the South and East constitutes for 5% of the total branches of the total sample.In case of sub-brokers, almost 55% of them are based in the South. West and North follow, with 30% and 11% sub-brokers respectively, whereas East has around 4% of total sub-brokers.

Fig: 6 Fig: 7

Analysis of brokerage industry based on Michael Porters 5 factor model

Fig: 8 CompetitionThe industry is now in a fairly high growth phase. However the brokerage industry is very cyclical and is impacted by activity levels in the markets. During the downturns such as 2008-2009 periods, the smaller players were squeezed out of the business. As a result there is a contrast consolidation happening in the industry. Potential of new entrantsA new entrant in addition to the above also needs a reasonable level of capital to fund the working requirements of the business (finance to customers, deposits with exchanges, etc).The scale requirements are increasing constantly and as a result a new entrant will require higher levels of investments in the future to enter the business. As pointed out, it is likely to see many entrants in the industry. On the contrary, it is likely that the smaller players will exit by selling out or closing. Power of the supplierNot much relevant in most segments except investment banking, where employees control client relationships and hence have to be highly compensated. Power of the buyers/customersThis is important in the institutional brokerage business which involves high volume and low brokerage charges. The extent of buyer power is very low to non-existent in all kinds of retail segments. Threat of substitutesThe products offered by all firms in this industry are more or less differentiated. Investing rather saving in the bank rather than investing in a brokerage firm can be one option; else this is not applicable for this industry.

In a summary the industry has a moderate to low level of competitive advantage. There is low level of customer lock-in and customer will move his or her business if the brokerage rates are not competitive with rest of the industry. The only competitive advantage for companies in this sector comes from size and scale which enables them to leverage their size to reduce average costs and thus make a profit on low brokerage margins.In addition to high fixed costs, the industry has very low margin cost. As a result the cost of adding an additional customer is low and per transaction costs are limited. Due to this reason, we are seeing a constant pressure on the brokerage rates has intensified the competition in the industry and is resulting in consolidation with the top players.The basic brokerage business is now sometimes a loss leader to enable the brokerage firm to acquire customers and sell other products such as wealth management services, or third party mutual funds. This segment will provide adequate returns in the future for a company with scale.

DEMAND AND SUPPLY DRIVERS OF THE INDUSTRY

Demands for financial products are driven by risk-reward assessment, which considers: Potential yieldThe expectation of financial incentives or return on investment is a great demand driver which tempts people to invest or engage into transactions of the financial markets. Risk RatingHigher risks assumes higher profits and vice versa. Risk ratings are a vital point when making a decision to park ones resources into this industry. LiquidityTo maintain strong and flexible liquidity position people tend to invest in financial markets, in order to meet their contingencies. Availability of informationThe more disclosure, the more is information symmetry, and so will be visibility and access to returns and so will be the expectation from this market increase along with investment. Access to alternativesMore the disclosure in the market more will be the competition with more profits, so more will be the choices and access to alternatives to park ones resources.

The major supply drivers are: Money supplyThe supply of money has a big role to play in this industry, the more the supply of money in this industry; more will be the availability of financial services and products. Interest ratesInterest rate determines the terms of trade, fluctuations in interest rates can entirely fluctuate this industry. Higher interest rate= will give higher returns, with great supply no doubt but borrowing or ascertaining the real market value may become difficult. InflationValue of a currency appreciates and depreciates with the rates of inflation. Inflation thus serves as a great supply driver in this market. As in high inflation with higher supply of money there will be higher supply and vice versa. Economic conditionsRates of inflation, the upsurge or downturn in the domestic and global economy is another supply driver which is beyond the control of any business firm. Government RegulationsThe attitude of the government towards the trade policies and various other financial firms and industry matters a lot. Various restrictions or duties or taxes may restrict the supply and may hinder the growth of this industry. And will flourish with the ease of trade.

GLOBAL AND DOMESTIC ECONOMIC ENVIRONMENT OF The financial industryAccording to global 2000 (annual report by Forbes), seven of the top 10 companies belonged to the financial industry. These included the Citygroup, Bank of America, HSBC Holdings, and JPMorgan Chase. Their combined revenue in 2007 was worth $647 billion, down from 2006 high of $785 billion.According to Fortune 500 rankings, in 2006 financial services generated $257 billion in profits, a third of total Fortune 500 profits. In 2008, however, they lost a staggering $213 billion, a total swing of $470 billion. Big players on the list, such as Citygroup and Bank of America, may only be alive today just because of government money.The financial industry is an industry in itself as well as an ancillary that supports other industries. Trade and commerce across the world would come to standstill if there was no means to fund, pay and protect the transactions.

The Brokerage industryDomestic Economic EnvironmentIn 1991, Manmohan Singh, as Finance Minister in Narasimha Raos government, embarked on a programme of liberalization prompted by an acute balance-of-payment crisis.

Fig: 9 (Indian economy growth factors)Indian Brokerage Industry-Pre 2000 Post liberalization period. Business restricted to friends and relatives. Settlement T+15 days. Low trade volumes- No derivatives trading allowed. Lack of investment in technology- No front or back office software.

Indian Brokerage Industry 2000-2008 Venture capital funding for brokerage businesses. Investment in technology- Front end and back end. National presence. Integrated risk management system. Significant increase in trade volumes- Derivatives trades play a major role. Margin funding for the retail clients.

Indian Brokerage Industry 2009 onwards Paradigm shift from transaction oriented to research/ portfolio based advisory. Focus on franchisee based business model. Dematerialized accounts access for international trade. Access to international stock exchange. Trading on hand held platform (mobile phones etc) allowed.

Current Global Economic Environment

The global economy is slowly recovering from a deep recession, with significant risks remaining. Countries are looking for ways to achieve sustainable economic growth and job creation. Competitiveness has become more important than ever-Globalization will continue and strong international competitors are emerging.-Companies are re-examining everything in terms of how and where they operate. India has achieved a long-term competitive transformation, but the next stage of development will be more challenging.

Stable and robust growth in face of global challenges

Fig: 10

Critical Success Factors of the Industry

Fig: 11Seeing the overall brokerage as a single unit, the key success factors or the winning strategy of Indian Brokerage Industry is a mixture of: People Process TechnologyThere are the three ingredients that together create value for both international and domestic customers.By people it indicates to the service providers or the employees of the various firms of this industry, who day in and day out interact with the customers and provide them services and satisfy them.Transparency of the process followed and disclosure method is yet another success factor. The settlement of transactions is generally done in a process of T+2 days. And the government support even still plays a very vital role in forming the rules and norms of such processes.Technology enables to stay competitive and on edge with the competitors; facilitating the ease of processes and speed and to maintain and be up to date. This serves as a great success of the brokerage industry. All these factors together help create value to the customer.VARIOUS MEASURES TAKEN BY INDIAN GOVERNMT TO IMPROVE THE SITUTATION OF INDIAN STOCK MARKETMEASURESOBJECTIVES

Allow foreign institutional investors to invest in equity and debt markets.

Liberalization of stock market to attract foreign investment in order to boost economic growth.

Expanding the product range offered by the stock exchanges.

Bring Indian market at par with the international standards and diversify product portfolio.

Allowing Indian companies to issues ADRS and GDRS.

Allowing Indian companies to invest abroad.

Facilitate market integration and give freedom to the companies. Access to more funds for investment.

Divestment of government ownership

Facilitate growth through privatization

Strengthening of institutional framework in primary and secondary markets Demutualization

To ensure transparency. Investor protection. Provide a standard framework for operations. Deregulation. Reduces the conflict of interest.

BSE and NSE to set up and maintain corporate bond reporting platforms

To capture all information relating to trading. Investor protection

Making PAN compulsory

Strengthening KYC (Know Your Client)

Fig: 12

PESTEL ANALYSIS OF BROKERAGE INDUSTRY

PESTEL analysis stands for "Political, Economic, Social, Technological, Environmental and Legal analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.

Fig: 13

Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality and lead to innovation. Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

Fig: 14LEGAL ISSUES WITH A BROKERAGE FIRMSecurities Exchange Act of 1934 (Exchange Act)In contrast to the Securities Act, the Exchange Act primarily regulates transactions of securities in the secondary market - that is, sales that take place after a security is initially offered by a company (the issuer). These transactions often take place between parties other than the issuer, such as trades that retail investors execute through brokerage firms. The Exchange Act operates somewhat differently from the Securities Act. To protect investors, Congress crafted a mandatory disclosure process that is designed to force companies to make public information that investors would find pertinent to making investment decision. In addition, the Exchange Act provides for direct regulation of the markets on which securities are sold (the securities (stock) exchanges) and the participants in those markets (industry associations, brokers, and issuers).Monetary and Fiscal PoliciesIn the securities industry there exist regulators who have established a set of rules and regulations that administer the entire industry. Financial markets, depositors, clearing houses, and vendors work together to regulate the investment in the industry.The 3 major US government agencies that govern the securities industry and frame monetary and fiscal policy, they are: the Federal Reserve System, the Securities Exchange Commission (SEC), and the Office of Comptroller of the Currency. Federal Reserve SystemThe Federal Reserve System is a government institution created to administer nations credit and monetary policies and to oversee the banking industry as well as certain aspects of the broker activity, such as credit. The Fed is responsible for establishing and enforcing monetary policy and for regulating the amount of credit outstanding. The fed does this by establishing the bank discount rates and the rules for credit. The markets response to the Feds determination to control inflation by raising and lowering the discount rate affects long term interest rates, which have a significant impact on the securities market. Securities Exchange CommissionThe Securities Exchange Commission (SEC) is the primary regulatory agency that oversees the securities industry. The SEC is an independent bipartisan, quasi-judicial agency of the government. The laws administered by SEC deal with securities and finance and seek to provide protection for investors in their securities transactions. Office of the Comptroller of the CurrencyThe Office of the Comptroller of the Currencys (OCC) principal function is supervising the national banking system. The OCC must approve the establishment of new national banks, bank mergers involving national banks, and the liquidations of national banks.

COMPANY OVERVIEW

Fig: 15History of Indiabulls In middle of 1999, when e-commerce was just about starting in India, Sameer Gehlaut and his close IIT Delhi friend Rajiv Rattan got together and bought a defunct securities company with a NSE membership and started offering brokerage services. A Few months later, their friend Saurabh Mittal also joined them. By December 1999, the company embarked on its journey to build one of the first online platforms in India for offering internet brokerage services. In January 2000, the 3 founders incorporated Indiabulls Financial Services and made it as the flagship company. In mid 2000, Indiabulls Financial Services received venture capital funding from Mr. L.N. Mittal & Mr. Harish Fabani. In late 2000, Indiabulls Securities, a subsidiary of Indiabulls Financial Services started offering online brokerage services and simultaneously opened physical offices across India. By 2003, Indiabulls securities had established a strong pan India presence and client base through its offices and on the internet. In September 2004, Indiabulls Financial Services went public with an IPO at Rs 19 a share. In late 2004, Indiabulls Financial Services started its financing business with consumer loans. In March 2005, Indiabulls Properties Private Ltd, a subsidiary of Indiabulls Financial Services, participated in government auction of Jupiter Mills, a defunct 11 acre textile mill owned by NTC in Lower Parel, Mumbai. Indiabulls Properties private Ltd won the mill in auction and that purchase started Indiabulls real estate business. A few months later, Indiabulls Real Estate company Pvt. ltd bought Elphinstone mill in Lower Parel, another textile mill auctioned by NTC.With real estate business gaining size, Indiabulls Financial Services demerged the real estate business under Indiabulls Real Estate and each shareholder of Indiabulls Financial Services received additional share of Indiabulls Real Estate through the demerger. Subsequently, Indiabulls Financial Services also demerged Indiabulls Securities and each shareholder of Indiabulls Financial Services also received a share of Indiabulls Securities. In year 2007, Indiabulls Real Estate incorporated a 100% subsidiary, Indiabulls Power, to build power plants and started work on building Nasik & Amravati thermal power plants. Indiabulls Power went public in September 2009. Today, Indiabulls Group has a net worth of Rs 16,796 Crores & has a strong presence in important sectors like financial services, power & real estate through independently listed companies and Indiabulls Group continues its journey of building businesses with strong cash flows.

BUSINESS LIFE CYCLE OF INDIABULLS

Fig: 16The business life cycle is a model that enables businessmen to identify the level of performance at which their business is operating and to determine exactly what needs to be done to move to the next level.The various levels of a business life cycle are: Start up Rapid Growth Maturity Decline Re-birth/ deathThe startup of IndiabullsIndiabulls was in start up phase in the year 1999. Sameer Gehlaut, Rajiv Rattan and bought a defunct securities company with NSE membership and started brokerage services. Saurabh Mittal joined the founders. -The founders were usually involved in running the business. -The primary emphasis was on generating and selling offline brokerage services.-There was less staff with modest pay in the industry, which provided personalized services.The rapid growth stageIndiabulls success geared up quite early, within one year of its inception in 2000. -Indiabulls Financial Services received venture capital funding from Mr. L. N. Mittal and Mr. Harish Fabani and started online brokerage services.-It opened many physical offices all across the country thereon and made pan India presence.- Went public in 2004 (IPO was Rs. 19 per share) and also started providing customer loan in the same year.-Became a private ltd. in the year 2005. Participated in government auction and bought Jupiter mills to start its real estate business, and so on.-In 2007, started Power Indiabulls.Indiabulls by this time had a huge customer base, with wide number of physical offices. Its sales and demand increased and it made its presence greatly visible in the financial and other markets.

Maturity stageIndiabulls is still in the process of reaching the maturity stage. Its financial services and signature account services are in their boom phase and are expected to reach there the earliest. With its current pace of developments, expanded and loyal customer base, constant research and development, and other initiatives Indiabulls is sure to reach the maturity stage as a market leader very soon. And so will increase its profitability and side by side will its competition in the market.Decline/Re-birthWith an upsurge in demand for financial services. NBFCs like Indiabulls have a great opportunity to develop and expand in the market with its current potentials and probably will never reach this stage unless it gives up to its competitors in the maturity stage.

JOURNEY OF INDIABULLSFig: 17INDIABULLS GROUP OF COMPANIES

Fig: 18

COMPANY FINANCIALS Total group net worth: Rs.16,844 Crs Total group PAT for FY 10-11: Rs 944 Crs Total group capital expenditure: Rs 6,200 CRs (US $ 1.4 bn) capex in financial year 10-11. Planned capex of 29000 (us $ 6.5 bn) in the FY 2014-2015. Focus on execution and on the ground results translating into profits. For its ongoing projects Indiabulls groups customers 385 MTs of steel, 550 MTs of cement, and 1700 CUM of RMC on daily basis. Creating value for shareholders: Dividend payout of 232 Crs in FY 10-11.

INDIABULLS IS A LEADING FINANCE COMPANY

Fig: 19

ASSET GROWTH

Fig: 20 Assets have grown at a quarterly average of Rs. 2000 Crs, over last 9 quarters with a decrease in non-performing assets. Long duration mortgage loans have lead to steady asset growth and increase in Net Asset Income. Company continues to grow its branch networks and now has 170 branches across the country. Company has well trained in house direct sales team, over 1300 people to promptly attend to prospective customers.

MISSION AND VISION

MISSION:Rapidly increase the number of client relationships by providing a broad array of products offering to emerge as a clear market leader. VISION:To be the largest and most profitable financial services organization in Indian market and become one stop shop for all non banking financial products and services for the retail customers.

STRATEGIES AND FOCUS

CONSOLIDATIONAim to be among the top 3 players in existing products within next 3 years. NO NEW PRODUCTSFocus on gaining size and scale in existing core products. NO CAPITAL MARKET FUND RAISINGAll businesses are well funded to achieve growth and size. Avoiding excessive debt from the capital market. GOALFY 2013/2014, target of US $ 1.4 bn in cash generation from 3 companies (real estate, finance and power).

MARKETING MIX OF INDIABULLSBeing a service industry Indiabulls will have 7Ps rather than 4, they are:PRODUCTS Fig: 21a) Power India bulls (PIB)PIB is the advanced online trading platform from Indiabulls Securities Limited. PIB provides the best in the class internet trading features and delivers a seamless and rich online trading experience for its users. PIB comes with a whole host of online features for the internet trading users ranging from real-time stock prices, to live trading reports, charting, News Room. PIB provides an integrated online trading platform for the internet trading community to invest in equity, F&O, Online IPOs and base their decision on sound fundamental research and technical analysis. It also provides various kinds of trading reports, each developed to cater to internet trading users distinct needs. b) Indiabulls Signature account

Indiabulls Signature account caters to remain on top of your investments. It provides you the platform to trade in Equity and Derivatives. With an unmatched service and nationwide presence, the Indiabulls Signature account comes bundled with a variety of exclusive features.c) Depository ServicesIndiabulls is a depository participant with the National Securities Depository Limited and Central Depository Services (India) Limited for trading and settlement of dematerialized shares. Indiabulls performs clearing services for all securities transactions through its accounts. We offer depository services to create a seamless transaction platform execute trades through Indiabulls Securities and settle these transactions through the Indiabulls Depository Services. Indiabulls Depository Services is part of our value added services for our clients that create multiple interfaces with the client and provide for a solution that takes care of all your needs. d) Currency DerivativesIndiabulls offers trading in the Currency Derivatives Segment in NSE.Currency Derivatives are similar in nature to Stock Futures & Option contracts. Currency Derivatives Contracts (USD-INR, EUR-INR, GBP-INR and JPY-INR) at exchange rate as the underlying are available for trading with a monthly expiry. At any given time, Currency Derivatives Contracts are available for trading for the next 12 months expiry for futures whereas 3 months expiry and 1 quarterly expiry for options.

The Mark-to-Market for Currency Derivatives is settled on a daily basis in a manner similar to Equity Futures & Options.The market for Currency Derivatives is open from 9 A.M to 5 P.M (Monday to Friday).

PRICEIndiabulls has various models at different price ranges targeted at a particular market segment. It caters to both the service and enterprise segment of customers. Indiabulls charges Rs. 1350 for opening a demat account (900 account opening charges + 450 DP charges + 750 for software (optional)). It charges brokerage of: 0.3% to 0.2% (delivery) and 0.2% (intraday). The brokerage ranges from 1paise to 20paise or 3paise to 30paise.Indiabulls provides home loans @ 10.75 (fluctuating) to salaried people and 12% (fluctuating) to non-salaried professionals.The price of real estate fluctuates from location to location, and according to the size of the flat, residential or commercial plots.PLACEIndiabulls has its offices at all major cities, namely Delhi, Mumbai, Bangalore, Ahmadabad, Chennai, Kolkata, Hyderabad, Nasik and many other Indian cities.

Fig: 22

PROMOTIONIndiabulls does its promotion through news papers, magazines, through websites and television ads.

Fig: 23PEOPLEThis includes the employees of the organization. The employees of Indiabulls have expertise in the field and are well versed in all the tricks of the trade. The employees are given importance in the organization because a satisfied employee creates a satisfied customer. They provide excellent and time to time services.PROCESSA hierarchical process is followed for execution of all services. First the sales lead is generated by the employees and sales calling is done on that database. The employees then approach interested customers, negotiation of sales is done, and the customers are explained the norms and sale is closed. Continuous services and assistance is provided to existing customers, they are made aware of new beneficial offers from time to time.PHYSICAL EVIDENCEDifferent branches of Indiabulls have a very professional and formal atmosphere. The work environment is very good. This may be one of the reasons why the employees like to spend time in office and generate high productivity.

SWOT ANALYSIS OF INDIABULLSThis is a strategic planning method to evaluate the Strength, Weaknesses (limitations), Opportunities and Threats involved in a project or business venture. It involves specifying the objectives of the business venture or project and identifying internal and external factors that are favorable or unfavorable to achieve it. This technique is credited to Albert Humphrey of Stanford University.

Fig: 24

BCG MATRIX OF INDIABULLSCompanies that are large enough to be organized as strategic business units face the challenge of allocating resources among these units. In the early 1970s Boston Consultancy Group developed a model to manage the portfolio of these business units (or major product lines). The BCG growth share matrix displays different business units on a graph of market growth rate vs. market share relative to competitors.

BCG MATRIX OF INDIABULLS Fig: 25 Question Marks

Indiabulls Retail and Indiabulls Securities

Indiabulls Retail (Now known as Store One) can be classified as question mark as it is new to the market and need to compete with established retailers like Future Group and K Raheja Group to gain market share. Indiabulls Securities also comes in this category due to pertinent competitors like Sharekhan, Karvy Stock Broking and others. Though broking industry is expanding by 12-15% annually, Indiabulls Securities is not able to cope with this high pace.

Stars

Indiabulls Real Estate and Indiabulls Financial Services

Indiabulls Real Estate can be considered to be in the Star category. It is considered star as it has a high market growth rate and enjoys a high market share as well. Real Estate sector in India is growing at 34% annually (www.sethassociates.com/Real_estate_sector_in_india.php) while growth of Indiabulls Real Estate has surged to 97%. Its profit rose to Rs. 201.32 Crores in 2010-2011 from 6.75 Crores in the preceding year. (www.indiabulls.com/ibgroup/media.htm). Financial services sector in India grew at 8 % last year but had a steady growth rate of 15% for the last few years. For FY 2011, net profits of Indiabulls Financial more than doubled to Rs. 743 Crores. Cash Cows

None of the companies of Indiabulls comes in this category.

Dogs

None of the companies of Indiabulls comes in this categoryPORTERs 5 FACTOR MODEL OF INDIABULLSNamed after Michel E. Porter, this model identifies and analyses 5 competitive forces that shape every industry and determines industrys weaknesses and strength. They are:

Competition in the industryIndiabulls faces competition from various firms like:

Fig: 26

Potential of new entrantsThe market for Non Banking Financial Companies or rather broking houses are flourishing. This new trend poses for new threats also; this may be either the entry of local players who can provide lower rates or a very big player who can enter into a price war. Threat of new entry is high when: Capital requirements to start the business are less Few economies of scale are in place Customers can easily switch (low switching cost) Your key technology is not hard to acquire or isnt protected well Your product is not differentiated

Power of suppliersIndiabulls Group has very high profile corporate suppliers, who for obvious reasons have great bargaining power and offers from competitors also. The operations largely depend on these supplies.Some of suppliers of Indiabulls Group (PIB) are:

Fig: 27Bargaining Power of supplier means how strong is the position of a seller. Suppliers are more powerful when:

Suppliers are concentrated and well organized Few substitutes available to suppliers Their product is most effective or unique Switching cost, from one suppliers to another, is high You are not an important customer to Supplier

Power of customersCustomer is the king of the market. They have a lot of options while planning to purchase products. Products offered by Indiabulls are unsought in nature and are industry dependent. The threats which lies here are:

Too many goods chasing too few consumers. Buyer purchases in bulk quantities and are mostly corporate clients. Product is not much differentiated. Buyers cost of switching to a competitors product is low. Shopping cost is low. Credible Threat of integration.

Threat of substitutesIndiabulls poses great threat of substitutes like people of low risk appetite would like to invest in bank rather than in share market, real estate, commodities, etc. Its products can very well be substituted by substitutes offered by competitors.INDIABULLS IN NEWS

Fig: 28RECENT CORPORATE SOCIAL RESPONSIBILITY BY INDIABULLSTHE NOA PROGRAMIndiabulls CSR Initiative - Drug Access Program for cancer patients in partnership with NovartisAs a part of its deep commitment to social causes, Indiabulls has taken up this noble project named Novartis Oncology Access, in partnership with Novartis (drug manufacturing company) and Max Foundation (NGO). Indiabulls as financial partner is helping them access actual income of the patient and their families, and based on the accessed income; recommend the drug donation slabs as per approved guidelines.Novartis are the developers & makers of Glivec- a medication for the treatment of Ph+ chronic myeloid leukemia (CML) in chronic phase, accelerated phase and blast crisis for both pediatric and adult patients. This drug is also indicated for adult patients with specific conditions.NOA program:The NOA program is a drug access program for to help patients who have been prescribed Glivec and Tasigna but cannot afford to pay for the entire treatment cost. This program is run by Novartis along with its partner Physicians- enrolls patient under this program after diagnosis, The MAX Foundation- independent NGO Assist patientthroughout the program in completing formalities & procurement of medicines, Indiabulls Financial Services - independent body for financial evaluation of patient, collection & safekeeping the submitted documents with confidentiality and outlets Independent pharmacist, dispenses drugs to patients & manage drug inventory.

Indiabulls Financial Services: As a NOA partner Indiabulls are performing task of the local credit evaluation agency which works as an independent and unbiased body for the financial analysis and assessment of the patient and family members earning capacity to afford medical expenses on critical disease. The analysis bases on income levels assessment by way of financial evaluation, field verification, living standard, personal discussion with patient/ care taker & guidelines as per standard operating procedure (SOP) which is prepared by Novartis based on the WHO guidelines for drug donation programs using Business for Social Responsibilitys (BSR) cost of living index, a well-established international guide often used as eligibility criteria for determining access to drug assistance programs. Based on the family composite Income a suitable donation decision is given.

ACCORDING TO 12th ANNUAL REPORT OF MARCH 2011-12 DIRECTORS REPORT IN ECONOMIC TIMES

- Indiabulls Foundation plans to set up a hospital for the poor, for treatment of life threatening diseases. The foundation also aims to work at a district level on transformation projects specifically in the areas of education and healthcare infrastructure.

- The Company will actively support Indiabulls Foundation. In FY2010-11, the Company has contributed Rs. 8.8 Cr to Indiabulls Foundation.

- Other CSR Initiatives: the Company has partnered with Novartis to launch a "Drug Access Programme" for Cancer Patients. Indiabulls lends its expertise by assessing the financial status of the patients to approve access to Free Drugs under the programme.

CUSTOMER RELATIONSHIP With a great team of highly motivated staff, Indiabulls maintains a great customer. Customer retention being of great importance in such market where margin is usually low and profit mainly comes due to scale of operations. The dedicated workforce is always at the service of the customer at the very first call. There are always schemes, discounts and exemptions to existing customers.Also if there is any new product or scheme old customer is always called before sales call is made to the new ones. There is guidance at each step.Not only customer retention important but clients new to the market are also given great importance. Relationship managers are always there to take care of all such affairs. Continuous follow ups call are made time to time to remind customers for any kind of dates or investments is to be made.

MARKET DYNAMICSThe pricing signals that are created as a result of changing supply and demand level in a given market. Market dynamics describe the dynamic, or changing, price signals that result from the continual changes in both supply and demand of any particular product or group of products. Market dynamics is a fundamental concept in supply, demand and pricing economic models.There is great shift in the Indian consumption pattern that is being observed like: 69% of the population is less than 35 years of age and has spurred consumption demand. 54% of the population is in the working group. High savings and investment rate (over 35% of GDP). Indias manufacturing growth is amongst the fastest in the world. Indias manufacturing base is the fourth largest globally. The growth potential of the services sector in India is enormous at $200 billion offering employment to 40 million people. The confidence of a robust growth in the services sector is the highest in India among the 4 BRIC countries including Brazil, Russia, China and India service sector. Among 60% of firms there expect a rise in activity whileThe above factors along with many other factors are some of those market dynamics which greatly affect this market.

FACTORS AFFECTING INVESTMENT DECISIONSThere are a numerous reasons that affect investment decisions here are some of them: Risk ToleranceRisk refers to the volatility of portfolios value. The amount of risk the investor is willing to take on is an extremely important factor. While some people do become more risk averse as they get older; a conservative investor remains risk averse over his life-cycle. An aggressive investor generally dares to take risk throughout his life. If an investor is risk averse and he takes too much risk, he usually panic when confronted with unexpected losses and abandon their investment plans mid-stream and suffers huge losses. Return NeedsThis refers to whether the investor needs to emphasize growth or income. Younger investors who are accumulating savings will want returns that tend to emphasize growth and higher total returns, which primarily are provided by equity shares. Retirees who depend on their investment portfolio for part of their annual income will want consistent annual payouts, such as those from bonds and dividend-paying stocks. Of course, many individuals may want a blending of the two some current income, but also some growth. Investment Time HorizonThe time horizon starts when the investment portfolio is implemented and ends when the investor will need to take the money out. The length of time you will be investing is important because it can directly affect your ability to reduce risk. Longer time horizons allow you to take on greater risks with a greater total return potential because some of that risk can be reduced by investing across different market environments. If the time horizon is short, the investor hasgreater liquidity needs some attractive opportunities of earning higher return has to be sacrificed and the result is reduced in return. Tax ExposureInvestors in higher tax brackets prefer such investments where the return is tax exempt, others will have no such preference. Management Outlooklf the management is progressive and has an aggressively marketing and growth outlook, it will encourage innovation and favor capital proposals which ensure better productivity on quality or both. In some industries where the product being manufactured is a simple standardized one, innovation is difficult and management would be extremely cost conscious. In contrast, in industries such as chemicals and electronics, a firm cannot survive, if it follows a policy of 'make-do' with its existing equipment. The management has to be progressive and innovation must be encouraged in such cases. Competitors StrategyCompetitors' strategy regarding capital investment exerts significant influence on the investment decision of a company. If competitors continue to install more equipment and succeed in turning out better products, the existence of the company not following suit would be seriously threatened. This reaction to a rival's policy regarding capital investment often forces decision on a company'. Opportunity created by technological changeTechnological changes create new equipment which may represent a major change in process, so that there emerges the need for re-evaluation of existing capital equipment in a company. Some changes may justify new investments. Sometimes the old equipment which has to be replaced by new equipment as a result of technical innovation may be downgraded to some other applications, A proper evaluation of this aspect is necessary, but is often not given due consideration. In this connection, we may note that the cost of new equipment is a major factor in investment decisions.

Market ForecastBoth short and long run market forecasts are influential factors in capital investment decisions. In order to participate in long-run forecast for market potential critical decisions on capital investment have to be taken. Fiscal IncentivesTax concessions either on new investment incomes or investment allowance allowed on new investment decisions, the method for allowing depreciation deduction allowance also influence new investment decisions. Cash Flow BudgetsThe analysis of cash-flow budget which shows the flow of funds into and out of the company may affect capital investment decision in two ways. 'First, the analysis may indicate that a company may acquire necessary cash to purchase the equipment not immediately but after say, one year, or it may show that the purchase of capital assets now may generate the demand for major capital additions after two years and such expenditure might clash with anticipated other expenditures which cannot be postponed. Secondly, the cash flow budget shows the timing of cash flows for alternative investments and thus helps management in selecting the desired investment project. Non-economic FactorsNew equipment may make the workshop a pleasant place and permit more socializing on the job. The effect would be reduced absenteeism and increased productivity. It may be difficult to evaluate the benefits in monetary terms and as such we call this as non-economic factor. Let us take one more example. Suppose the installation of a new machine ensures greater safety in operation. It is difficult to measure the resulting monetary saving through avoidance of an unknown number of injuries. Even then, these factors give tangible results and do influence investment decisions.FACTOR ANALYSIS BASED ON FACTORS AFFECTING INVESTMENT DECISIONSFactor analysis is a data reduction/summarization technique. Generally in market research there are many factors/variables which are correlated which needs to be reduced to manageable levels.Generally factor analysis is used where multi co-linearity exists. For factor analysis to run the null is that the correlation matrix is an identity matrix.KMO and Bartletts testKaiser-Mayer-Olkin (KMO) test is to test the appropriateness of the factor analysis, if the value is between 0.5 to 1, the test is considered to be significant. Bartletts TestUsing Bartletts test of sphericity we test the null hypothesis, if the significant value is opinion en.wikipedia.org/wiki/marketing_research www.quickmba.com/strategy/matrix/bcg www.smallbusiness.wa.gav.au/business-life-cycle www.valueline.com/stock/industry en.wikipedia.org/wiki/porters-five-factor

Books: Kotler Philip et al, 2009. Marketing Management. A South Asian Perspective. New Delhi: Dorling Kindersley (India) Pvt Ltd. Pearson Education Al Ries and Jack trout, 1972. Principles of Marketing Management.

APPENDIXQuestionnaire for factors affecting investment decision1. Do you invest?Yes: No:

2. If yes, what is your investment portfolio? Or How much do you invest?

3. Where do you put your money?Stocks:Commodities:Currencies:Derivatives:Others (specify):

4. More than one of the above?--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5. Why do you invest?

6. What are the factors that affect your investment decisions?

Income:Market situation:Company:Risk appetite:Management outlook:Market forecast:Fiscal incentives:Cash flow budgets:Non-economic factors:Age factor:Others (specify):

7. Do you invest in more than one of the above?

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8. Name:

9. Salaried/ Non-salaried

10. Occupation:

11. Any suggestions/ Comments:

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