A Major Project Study Reporton TITLED “CORPORATE GOVERNANCE” Submitted in partial fulfillment for the Award of degree of Master of Business Administration SESSION :-2008-2010 Supervised By: DR. (Mrs) Meenu Maheshwari ASSISTANT PROFESSOR Submitted by: Monika Nagori Enrolment No.08/18791 “COMMERECE & MANAGEMENT DEPARTMENT” (University Of Kota,Kota) PREFACE As an essential and obligatory part of my course undergone 15 DAYS, complete training at India’s No.1 Private Broking Firm “India Infoline”. This training helped me in getting practical knowledge in to the business environment. I got a practical knowledge about India infolines ltd.. how the work is done in the company.. In this Project Report I gave all the information about the corporate governance. In this Project Report I gave all the information which not only serve the comprehensive knowledge base but also helps the reader in understanding the fundamentals related to the subject. DECLARATION I hearby declare that major project report entitled “CORPORATE GOVERNANCE OF INDIA INFOLINE” is based on my original & genuine work and indebtedness to other work duplication have been duly acknowledgment at relevant place. Date: Place: Kota Submitted by: Monika Nagori ACKNOWLEDGEMENT I take the opportunity with great pleasure to plot the circle of warm compliment deep sense of gratitude & profound thanks to all those who have spared their valuable time and giving me their cooperation to make this project complete. I am greatly obliged to DIRECTOR MR.DEVENDRA, INDIA INFOLINE, for providing me the right kind of opportunity and facilities to complete this venture. I would like to express my sincere thanks to RAHUL GUPTA, the Cluster Manager in India Infoline for providing facilities & extending full support to the training & project work and helped a lot during this training for giving precious time, giving encouragement time to time. Finally, I would also like to thank all my dear friends for their kind cooperation, advice and encouragement during the long and arduous task of preparing this report and carrying out the project. I would be failing in my duty if I do not express my heartiest thanks to Lecturer and coordinator Department for giving all possible support, suggestion and is valuable time in preparing this project. (Monika Nagori) TABLE OF CONTENT CHAPTER NO. NAME 1 2 3 4 5 6 7 8 9 10 11 12 13 Meaning of Corporate Governance Introduction Of Company Profile Basic Concepts & Principles Control & Management Research Methodology Learnings Finding overall inferences drawn from the survey Swot analysis of India Infolines ltd. Recommendations Conclusion Annexure Questionaire Bibliography 1.1 Introduction Of Corporate Governance Corporate governance is the new buzzword or rather a concept in corporate management that is yet to catch up in India but that has the potential to significantly improve corporate performance. In the case of corporate governance shareholders is considered as god. Corporate governance has assumed significance in India because it has been given importance by institutions like, World Bank. The focus on improving corporate governance and enhancing shareholder wealth is relatively new in India. Earlier, the managements were least concerned with how the shareholders were benefited from the company’s performance. The role of company was to pay dividends and hold annual general meeting. There was minimum communication between company management and shareholders. Investors had to depend on news reports to get information about their companies. But all these have changed now. Corporate governance has succeeded in attracting a good deal of public interest because of its apparent importance for the economic health of corporations and society in general. However, the concept of corporate governance is poorly defined because it potentially covers a large number of distinct economic phenomenon. As a result different people have come up with different definitions that basically reflect their special interest in the field. It is hard to see that this 'disorder' will be any different in the future so the best way to define the concept is perhaps to list a few of the different definitions rather than just mentioning one definition. 1.2 The New Philosophy Of Business Governance is that separate process or certain part of management or leadership processes that make decisions that define expectations, grant power, or verify performance. Corporate Governance is the system, set of processes, customs, policies, and laws by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board of directors, management, shareholders and other stakeholders (include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large) and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set and the means of attaining those objectives and monitoring performance. 1.3 Attention To Corporate Governance Corporate Governance issues are receiving greater attention in both developed and developing countries as a result of the increasing recognition that a firm's corporate governance affects both its economic performance and its ability to access long-term, low-cost investment capital. Numerous high-profile cases of corporate governance failure have focused the minds of governments, companies and the general public on this issue. Moreover, the whole issue of corporate governance became a matter of concern especially because of major shifts in public opinion and societal change on an international scale, together with the strategic requirements of newly emergent forms of business structure, new technologies, globalization and new forms of competition and particularly the investment by the foreign financial institutions in the emerging markets. In other words, when investments take place across national borders, the investors want to be sure that not only is their capital handled effectively and adds to the creation of wealth, but the business decisions are also taken in a manner which is not illegal or involving moral hazard. Corporate governance therefore calls for four factors: a) To build up an environment of trust and confidence amongst those having competing and conflicting interest b) Transparency in decision-making c) Accountability which follows from transparency because responsibilities could be fixed easily for actions taken or not taken, and d) The accountability is for the safeguarding the interests of the stakeholders and the investors in the organization. Thus, Corporate Governance is a set of rules stipulated for according due weight-age to foster ethical behavior which would help in enhancing the reputation. Thus the code of Governance is as applicable to individuals; the same is also applicable to Corporate. 1.4 Definition Of Corporate Governance Corporate governance is the set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many stakeholders involved and the goals for which the corporation is governed. The principal stakeholders are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large. Corporate governance is a multi-faceted subject. An important theme of corporate governance is to ensure the accountability of certain individuals in an organization through mechanisms that try to reduce or eliminate the principalagent problem. A related but separate thread of discussions focus on the impact of a corporate governance system in economic efficiency, with a strong emphasis on shareholders welfare. There are yet other aspects to the corporate governance subject, such as the stakeholder view and the corporate governance models around the world In A Board Culture of Corporate Governance business author Gabrielle O'Donovan defines corporate governance as 'an internal system encompassing policies, processes and people, which serves the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external marketplace commitment and legislation, plus a healthy board culture which safeguards policies and processes'. O'Donovan goes on to say that 'the perceived quality of a company's corporate governance can influence its share price as well as the cost of raising capital. Quality is determined by the financial markets, legislation and other external market forces plus the international organizational environment; how policies and processes are implemented and how people are led. External forces are, to a large extent, outside the circle of control of any board. The internal environment is quite a different matter, and offers companies the opportunity to differentiate from competitors through their board culture. To date, too much of corporate governance debate has centered on legislative policy, to deter fraudulent activities and transparency policy which misleads executives to treat the symptoms and not the cause. It is a system of structuring, operating and controlling a company with a view to achieve long term strategic goals to satisfy shareholders, creditors, employees, customers and suppliers, and complying with the legal and regulatory requirements, apart from meeting environmental and local community needs. Report of SEBI committee (India) on Corporate Governance defines corporate governance as the acceptance by management of the inalienable rights of shareholders as the true owners of the corporation and of their own role as trustees on behalf of the shareholders. It is about commitment to values, conduct and about making a distinction between personal & corporate funds in the management of a company.” The definition is drawn from the Gandhian principle of trusteeship and the Directive Principles of the Indian Constitution. Corporate Governance is viewed as ethics and a moral duty. Some other definition :- "Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return", , Mathiesen 1. “Corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment”, The Journal of Finance, Shleifer and Vishny "Corporate governance is the system by which business corporations are directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as, the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance", OECD. 2. "Corporate governance - which can be defined narrowly as the relationship of a company to its shareholders or, more broadly, as its relationship to society ….", from an article in Financial Times 3. "Corporate governance is about promoting corporate fairness, transparency and accountability" J. Wolfensohn, president of the Word bank, as quoted by an article in Financial Times,. 4. “Some commentators take too narrow a view, and say it (corporate governance) is the fancy term for the way in which directors and auditors handle their responsibilities towards shareholders. Others use the expression as if it were synonymous with shareholder democracy. Corporate governance is a topic recently conceived, as yet ill-defined, and consequently blurred at the edges…corporate governance as a subject, as an objective, or as a regime to be followed for the good of shareholders, employees, customers, bankers and indeed for the reputation and of our nation and its economy” Maw et al. 1.5 History In the 19th century, state corporation lawless enhanced the rights of corporate boards to govern without unanimous consent of shareholders in exchange for statutory benefits like appraisal rights, to make corporate governance more efficient. Since that time, and because most large publicly traded corporations in the US are incorporated under corporate administration friendly Delaware law, and because the US's wealth has been increasingly securitized into various corporate entities and institutions, the rights of individual owners and shareholders have become increasingly derivative and dissipated. The concerns of shareholders over administration pay and stock losses periodically has led to more frequent calls for corporate governance reforms. In the 20th century in the immediate aftermath of the Wall Street Crash of 1929 legal scholars such as Adolf Augustus Berle, Edwin Dodd, and Gardiner C. Means pondered on the changing role of the modern corporation in society. Berle and Means' monograph "The Modern Corporation and Private Property" (1932, Macmillan) continues to have a profound influence on the conception of corporate governance in scholarly debates today. From the Chicago school of economics, Ronald Coase's "Nature of the Firm" (1937) introduced the notion of transaction costs into the understanding of why firms are founded and how they continue to behave. Fifty years later, Eugene Fama and Michael Jensen's "The Separation of Ownership and Control" (1983, Journal of Law and Economics) firmly established agency theory as a way of understanding corporate governance: the firm is seen as a series of contracts. Agency theory's dominance was highlighted in a 1989 article by Kathleen Eisenhardt (Academy of Management Review). US expansion after World War II through the emergence of multinational corporations saw the establishment of the managerial class. Accordingly, the following Harvard Business School management professors published influential monographs studying their prominence: Myles Mace (entrepreneurship), Alfred D. Chandler, Jr. (business history), Jay Lorsch (organizational behavior) and Elizabeth MacIver (organizational behavior). According to Lorsch and MacIver "many large corporations have dominant control over business affairs without sufficient accountability or monitoring by their board of directors." Since the late 1970’s, corporate governance has been the subject of significant debate in the U.S. and around the globe. Bold, broad efforts to reform corporate governance have been driven, in part, by the needs and desires of shareowners to exercise their rights of corporate ownership and to increase the value of their shares and, therefore, wealth. Over the past three decades, corporate directors’ duties have expanded greatly beyond their traditional legal responsibility of duty of loyalty to the corporation and its shareowners. In the first half of the 1990s, the issue of corporate governance in the U.S. received considerable press attention due to the wave of CEO dismissals (e.g.: IBM, Kodak, Honeywell) by their boards. CALPERS led a wave of institutional shareholder activism (something only very rarely seen before), as a way of ensuring that corporate value would not be destroyed by the now traditionally cozy relationships between the CEO and the board of directors (e.g., by the unrestrained issuance of stock options, not infrequently back dated). In 1997, the East Asian Financial Crisis saw the economies of Thailand, Indonesia, South Korea, Malaysia and The Philippines severely affected by the exit of foreign capital after property assets collapsed. The lack of corporate governance mechanisms in these countries highlighted the weaknesses of the institutions in their economies. In the early 2000s, the massive bankruptcies (and criminal malfeasance) of Enron and WorldCom, as well as lesser corporate debacles, such as Adelphia Communications, AOL, Arthur Andersen, Global Crossing, Tyco, and, more recently, Fannie Mae and Freddie Mac, led to increased shareholder and governmental interest in corporate governance. This culminated in the passage of the Sarbanes-Oxley Act of 2002. But, since then, the stock market has greatly recovered, and shareholder zeal has waned accordingly. 2.1 INTRODUCTION OF COMPANY PROFILE It’s not the Big that beats the SMALL …. It’s the FAST that beats the SLOW That’s the title of Jason Jennings book that emphasizes the necessity to maintain competitive advantage and talks about the need for speed while doing business. E-broking is all about speed of execution, classy service and above all simplicity. E-broking is offering broking services through the Internet. SEBI, the regulatory authority for capital markets, has recently framed the guidelines pertaining to Internet based trading. Brokers who offer trade services through the Internet are called E-brokers. In this fast moving world you have run like rabbit and mot move like a tortoise or else you will be left behind and the world will move forward. Overview Internet scheme is successful because web proposals are built that influence their offline brand value, customer lists and distribution channels. This involves designing and evolving electronic value propositions. In India, the guidelines for electronic trading were formed in January 2000. The Securities and Exchange Board of India (SEBI) has framed the guidelines for Internet trading in January 2000. SEBI registered brokers can introduce the service after obtaining permission from respective Stock Exchanges and clearance from SEBI. Exchanges while giving permission require to ensure minimum conditions specified in the report that is available on the SEBI’s web site (www.sebi.com) The two major stock exchanges in India (National Stock Exchange of India Ltd. & The Bombay Stock Exchange) accounting for 90% of the trading activity have already implemented the system for Internet trading. With the successful implementation of depository system in India and larger volume of securities getting converted to electronic form, e-broking is expected to be successful e-commerce in India and is growing with a fast pace. It is growing day after day and may reach the echelons of the capital markets. 2.2 COMPANY OVERVIEW Vision Our vision is to be the most respected company in the financial services space. India Infoline Group The India Infoline group, comprising the holding company, India Infoline Limited and its wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging from Equity research, Equities and derivatives trading, Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits, GoIe bonds and other small savings instruments to loan products and Investment banking. India Infoline also owns and manages the websites www.indiainfoline.com and www.5paisa.com The company has a network of 758 business locations (branches and subbrokers) spread across 346 cities and towns. It has more than 800,000 customers. India Infoline Ltd. India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a one-stop solution for clients trading in the equities market. It has recently launched its Investment banking and Institutional Broking business. A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These services are offered to clients as different schemes, which are based on differing investment strategies made to reflect the varied risk-return preferences of clients. India Infoline Media and Research Services Limited. The content services represent a strong support that drives the broking, commodities, mutual fund and portfolio management services businesses. Revenue generation is through the sale of content to financial and media houses, Indian as well as global. It undertakes equities research which is acknowledged by none other than Forbes as 'Best of the Web' and '…a must read for investors in Asia'. India Infoline's research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst the most read Indian brokers. India Infoline Commodities Limited. India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. Our experience in securities broking empowered us with the requisite skills and technologies to allow us offer commodities broking as a contra-cyclical alternative to equities broking. We enjoy memberships with the MCX and NCDEX, two leading Indian commodities exchanges, and recently acquired membership of DGCX. We have a multi-channel delivery model, making it among the select few to offer online as well as offline trading facilities. India Infoline Marketing & Services India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited. (a) India Infoline Insurance Services Limited is a registered Corporate Agent with the Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Limited, which is India's largest private Life Insurance Company. India Infoline was the first corporate agent to get licensed by IRDA in early 2001. (b) India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is a newly formed subsidiary which will carry out the business of Insurance broking. We have applied to IRDA for the insurance broking license and the clearance for the same is awaited. Post the grant of license, we propose to also commence the general insurance distribution business. India Infoline Investment Services Limited Consolidated shareholdings of all the subsidiary companies engaged in loans and financing activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help focused expansion and capital raising in the said subsidiaries for various lending businesses like loans against securities, SME financing, distribution of retail loan products, consumer finance business and housing finance business. India Infoline Investment Services Private Limited consists of the following step-down subsidiaries. (a) India Infoline Distribution Company Limited (Distribution of Retail Loan Products) (b) Money line Credit Limited (Consumer Finance) (c) India Infoline Housing Finance Limited (Housing Finance) IIFL (Asia) Pte Limited IIFL (Asia) Pte Limited is wholly owned subsidiary which has been incorporated in Singapore to pursue financial sector activities in other Asian markets. Further to obtaining the necessary regulatory approvals, the company has been initially capitalized at 1 million Singapore dollars. Products and Services We are a one-stop financial services shop, most respected for quality of its advice, personalized service and cutting-edge technology. Equities India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline. India Infoline leveraged technology to bring the convenience of trading to the investor’s location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. PMS Our Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. We at India Infoline invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio. Research Sound investment decisions depend upon reliable fundamental data and stock selection techniques. India Infoline Equity Research is proud of its reputation for, and we want you to find the facts that you need. Equity investment professionals routinely use our research and models as integral tools in their work. Commodities India Infoline’s extension into commodities trading reconciles its strategic intent to emerge as a one-stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Company’s commodities business provides a contra-cyclical alternative to equities broking. The Company was among the first to offer the facility of commodities trading in India’s young commodities market (the MCX commenced operations only in 2003). Average monthly turnover on the commodity exchanges increased from Rs. 0.34 bn to Rs 20.02 bn. The commodities market has several products with different and non-correlated cycles. On the whole, the business is fairly insulated against cyclical gyrations in the business. Mortgages During the year under review, India Infoline acquired a 75% stake in Money tree Consultancy Services to mark its foray into the business of mortgages and other loan products distribution. The business is still in the investing phase and at the time of the acquisition was present only in the cities of Mumbai and Pune. The Company brings on board expertise in the loans business coupled with existing relationships across a number of principals in the mortgage and personal loans businesses. India Infoline now has plans to roll the business out across its panIndian network to provide it with a truly national scale in operations. Home Loans Get expert advice that suits your needs Loan against residential and commercial property Expert recommendations Easy documentation Quick processing and disbursal No guarantor requirement Personal Loans Freedom to choose from 4 flexible options to repay Expert recommendations Easy documentation Quick processing and disbursal No guarantor requirement Invest Online India Infoline has made investing in Mutual funds and primary market so effortless. All you have to do is register with us and that’s all. No paperwork no queues and No registration charges. INVEST IN MF India Infoline offers you a host of mutual fund choices under one roof, backed by in-depth research and advice from research house and tools configured as investor friendly. APPLY IN IPO’s You could also invest in Initial Public Offers (IPO’s) online without going through the hassles of filling ANY application form/ paperwork. SMS Stay connected to the market The trader of today, you are constantly on the move. But how do you stay connected to the market while on the move? Simple, subscribe to India Infoline's Stock Messaging Service and get Market on your Mobile! There are three products under SMS Service: Market on the move. Best of the lot. VAS (Value Added Service Insurance An entry into this segment helped complete the client’s product basket; concurrently, it graduated the Company into a one-stop retail financial solutions provider. To ensure maximum reach to customers across India, we have employed a multi pronged approach and reach out to customers via our Network, Direct and Affiliate channels. Following the opening of the sector in 1999-2000, a number of private sector insurance service providers commenced operations aggressively and helped grow the market. The Company’s entry into the insurance sector derisked the Company from a predominant dependence on broking and equity-linked revenues. The annuity based income generated from insurance intermediation result in solid core revenues across the tenure of the policy. Wealth Management Service Imagine a financial firm with the heart and soul of a two-person organization. A world-leading wealth management company that sits down with you to understand your needs and goals. We offer you a dedicated group for giving you the most personal attention at every level. Newsletters The Daily Market Strategy is your morning dose on the health of the markets. Five intra-day ideas, unless the markets are really choppy coupled with a brief on the global markets and any other cues, which could impact the market. Occasionally an investment idea from the research team and a crisp round up of the previous day's top stories. That's not all. As a subscriber to the Daily Market Strategy, you even get research reports of India Infoline research team on a priority basis. The India Infoline Weekly Newsletter is your flashback for the week gone by. A weekly outlook coupled with the best of the web stories from India Infoline and links to important Investment ideas, Leader Speak and features are delivered in your inbox every Friday evening. Equities India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline leveraged technology to bring the convenience of trading to the investor’s location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time. Over the last five years, India Infoline sharpened its competitive edge through the following initiatives: Multi-channel delivery model: The Company is among the few financial intermediaries in India to offer a complement of online and offline broking. The Company’s network of branches also allows customers to place orders on phone or visit our branches for trading. Integrated middle and back office: The customer can trade on the BSE and NSE, in the cash as well as the derivatives segment all through the available multiple options of Internet, phone or branch presence. Multiple-trading options: The Company harnessed technology to offer services at among the lowest rates in the business. Membership: The Company widened client reach in trading on the domestic and international exchanges. Technology: The Company provides a prudent mix of proprietary and outsourced technologies, which facilitate business growth without a corresponding increase in costs. Content: The Company has leveraged its research capability to provide regular updates and investment picks across the short and long-term. Service: Clients can access the customer service team through various media like tollfree lines, emails and Internet- messenger chat for instant query resolution. The Company’s customer service executives proactively contact customers to inform them of key changes and initiatives taken by the Company. Business World rated the Company’s customer service as ‘Best’ in their survey of online trading sites carried out in December 2003. *Key features Membership on the Bombay Stock Exchange Limited and the National Stock Exchange Registered with the NSDL as well as CDSL as a depository participant, providing a one-stop solution for clients trading in the equities market Broking services in cash and derivative segments, online as well as offline under the brand of 5paisa.com Presence across 19 states through a 177 strong branch network, with 75,000 online registered users Provision of free and world-class research to all clients. Portfolio Management Services You get recessions. You have stock market declines. If you don't understand that's going to happen, then you're not ready; you won't do well in the markets. No need to worry. We at India Infoline would take care of all issues related to managing your hard earned money. Our Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. We at India Infoline invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio. It is all about your money, being managed by the experts, while you continue with your routine life. Isn't it simple and totally hassle free. What's more, you can keep track of your dividends / bonus / rights issues with paperless tracking. So you always know how fast your investment is growing. It basically means assigning the right job to the right person. Salient Features of India Infoline PMS: • • • Expert team of Research Analysts Stock Picking done by the Investment Committee Dedicated Relationship Manager Technology: The Company has extended the trading terminal to the investor’s home/workplace reinforced with real-time commodity information and ledger position. Rates: The Company harnessed technology to offer services at among the lowest rates in the business. Membership: The Company widened client reach in trading on the domestic and international exchanges. *Key Features Enjoys memberships with the MCX and NCDEX, two leading Indian commodities exchanges. Recently acquired membership of the DGCX. Multi-channel delivery model, making it among the select few to offer online as well as offline trading facilities. Extended commodity trading to retail investors, among the few Indian financial intermediaries to do so. Online business at 80% of revenues dominates commodities trading revenues. Provides regular commodity updates pertaining to the Indian and international environment. 2.3 LITERATURE REVIEW EBROKING – The Answer to the fast changing world To start with, we have to ask ourselves the question-Why Ecommerce? Changing profile of customers: -Today’s generation is more literate, more technology savvy. -The ratio of earning members in each family is on the increase. -The use of the internet for various needs is on the increase. -New customer segments are evolving; those that were practically non- existent some years back. -Purchasing power/spending power of families have increase owing to better salaries, booming Economy. Above all, the factor that is revolutionizing all the rules of business is, one wordThe Internet. E broking-Down Memory Lane 1494 - The origin of the stock market when the Amsterdam Stock Exchange was set up. 18th Century-East India Company was a dominant Institution in India. Stock Markets traces its infancy in India 1875-The Bombay Stock Exchange" (BSE) was founded 1992-The National Stock Exchange of India Ltd. was incorporated 2000-Internet based trading commences at NSE in 2000 Why Does Internet Broking have a Future in India? Turkey Poland Netherlands Taiwan Australia Top 20 Countries with Highest Number of Mexico Spain Indonesia Canada Russia Brazil France Italy Korea (South) United Kingdom Germany I N D I A India Japan Users China United States 250,000,000 200,000,000 1 50,000,000 1 00,000,000 50,000,000 0 Inter The Net Addiction The no of internet users has risen tremendously from 14 lakhs in 1998 to 5 crores in 2005.The Percentage penetration has increased from 0.1% in 1998 to 4.5% in 2006. This by itself is an indication that a huge population is just waiting to be tapped. Successful Internet Business Models Post the 1999-2000 dotcom bust the first question that popped up was-Why choose the Net? The answer lies in two words: Internet negates two barriers namely 1) Time and 2) Distance The key factors required to succeed in an Internet based model are: Develop a unique website Control the product line Introduce new products on a regular basis Ensure easy and reliable payment methods Provide Customer Friendly service On-time delivery Develop a clever marketing strategy Successful Internet Business Models I Transformed the conventional auctions from garages and flea markets to e-market places Sells just about anything from antiques and jewelry to auto insurance. Buy coffee from Brazil, Porcelain coffee cup from China and have a simmering cup of coffee at your home in India. That’s Internet for you. As of March 2007 registered user base is 157 million, up 40% from March 2005. The first quarter earning in 2007 was 250+ million dollars Successful Internet Business Models II One of the greatest success stories of recent times, Google was started by two Stanford graduates Larry Page and Sergey Brin in 1998 as privately held company. Its IPO in 2007 raised $1.87 billion making it a $35 billion company. Which other company has grown that fast? What started as a simple search engine company is today a mammoth in the Internet space. Today Google has companies like Orkut(Social networking), Blogger, You tube etc in its fold Ask yourself this question-Whom does Wal-Mart, the world’s largest retailer think as its biggest competition in business? The answer is Google since it has the power of information to let people know about competitive prices What is E-broking? To put it very simply, it is the facility to place trades in the stock markets using the internet, be it from your office, home or your flight back home. Offline Vs Online Broking (E-broking) E-broking is where a customer places orders to buy/sell using the internet as a medium In offline broking the client can either go the Broker’s office or physically instruct him to execute orders for him or place a phone call to execute orders E-broking is all about convenience. Login. Select the scrip. Place Orders. That’s it. Offline broking requires cheques to be signed, Delivery Instruction slips and other forms to process transactions E-broking requires no form fill ups after account has been opened. Everything happens on the net. Money transfer happens through Payment Gateways. Research calls in offline broking happens through phone calls and physical reports E-broking facilitates checking Research reports, calls, trade reports , portfolio statements online Contract notes are given out as physical certificates in conventional offline broking. Digital ContractOnline sent to the client in E-broking notes are Offline More Scalable More Transperent System Driven Less Personalise Fund transfer anytime , anywhere Market Updates online More Secure Less Scalable Less Transperent People driven More Personalise Restricted Via E mail / Phone / Fax Phone verification E-broking In India • • • E-broking is India is still in its early stages The E-broking space primarily has 4-5 major players with some big names still slated to make their presence felt In India, around 12-15% of the total volumes in cash market are done Online whereas in the West around 50% of the cash market trades are done online • • • Unlike Offline broking, online broking works on a more defined slab based system based on type of account that a customer opts. The E commerce market is supposedly around Rs.23 billion of which Ebroking is a very small percentage The population trading in stock markets in India is just about 1%. Online industry in India Globally online trading volumes constitutes to 30-40%. 85% of the volume comes from top 5-6 players. No. of online customer have reached to approx. 7 lakh. Derivative volume has surpassed cash volume. Considered the most scalable model Perfect tool for Positional / Day trader. Major players – ICICI Direct, SSKI, India Bulls & Kotak. All these companies have entered the online ring and promises exciting times ahead. As E- Brokers the following issues are crucial in competition such as: ⇒ Brokerage: The starting point for individual investors examining the various online trading schemes is obviously the brokerage rate. In a competitive marketplace brokerage is a key differentiator among different schemes offered by e-brokers. Evidence on brokerage rates seems to suggest that this differentiator may be of limited value to most investors. ICICIDirect.com, the first entrant into e-broking, charges the highest brokerage. However, late entrants such as 5Paisa.com, Sharekhan and Kotakstreet.com all charge comparatively less amount. Icicidirect.com as the first entrant has made itself the first integrated ebroking service provider in the market and is the biggest competitor of Motilal Oswal Securities Limited. ⇒ Players such as SSKI's Sharekhan, which launched their scheme in July 2000, have tried to steal a march over icicidirect.com by introducing a flat fee product of Rs.1000 per month. This trade-as-much-as-you-want scheme was an innovation targeted mainly at frenzied day-traders. But even this innovation gave Sharekhan only a small head start over its peers. Kotakstreet.com, which launched its e-broking services in August, not only halved the flat fee from Rs.1000 to Rs.500, but also allowed short sales and offered clients the option of trading against securities up to three times sales marked for delivery. Clearly, innovation offers limited scope for it is a matter of time before almost all the schemes offer more or less identical features. ⇒ The pedigree of the e-broker: The pedigree of the e-broker is important, as that is likely to identify the serious players. Going forward, consolidation is inevitable even in this industry and when that happens, online trading sites such as icicidirect.com, Invest smart, Kotakstreet.com as well as Motilal Oswal Securities Limited with a good pedigree have a much better chance of survival than the stand-alone sites such as 5paisa.com and Indiabulls. ⇒ Technology and back-.office infrastructure: In these early months, online trading is likely to attract a host of entrants as India has already seen so far. But the key differentiator will be the investment in technology and back-office infrastructure. Even if small-time e-broking outfits make the initial investments in technology, the recurring expenses, which would also be high, may prove to a burden in the long run. For investors looking at online trading from a medium-to-long-term perspective, sites with deep pockets and a pedigree will be a good choice. ⇒ Quality of service and security: As the industry quickly consolidates and technology gets standardized, the quality of service will be the key differentiator. From an investor's perspective, in the initial stages holding at least two online trading accounts with two different outfits will be prudent in the long run. Basically, this will help the investor evaluate the quality of service and ``security-related issues'' (say, in terms of 128-bit encryption or privacy/confidentiality in access), between two outfits. In the long run, depending on the service levels, the investor can switch to the better player. ⇒ Integrated package: Currently, only icicidirect.com offers a seamless 3in-1 package of broking, banking and demat accounts. This effectively means that through the click of a mouse, an investor can buy and sell shares, and forget about the paperwork involved in settlements and transfer of shares or money. The rest of the players are also putting such an integrated package in place, but icicidirect.com has a head start, as the others may be able to offer a seamless online trading experience only after an independent payment gateway (which provides connectivity between different banks for online banking) is firmly in place. Understanding the Process I Understanding the System II EXCHANGES ORDER ROUTING SERVER RISK MANAGEMENT SERVER ORDER MANAGEMENT SERVER AUTHENTICATION SERVER TRADING SITE INTERNET Client Terminal Client Terminal Advantages of E-broking • • • • • • • • No necessity of paperwork once initial account Opening form is opened. Flexibility to invest from the convenience of home/office/cyber café-just about any place with a net connection No waiting for cheques to get realized for you to start investing-Online payment gateways make instant transfers possible Facility to avail of research through online reports, recommendations during live market hours Viewing of portfolio performance made available online. Facility to get digital contract notes emailed at the end of day. Facility of seeing the Live market rates as streaming prices Security of transactions is very high considering SSL connections. So how far is E-broking truly online? Online is no more a pure click model, it’s a combination of both click n brick. Some call it Call & Trade, other calls it Dial & Trade. But in essence, and it’s about the phone buzzing non stop in the Customer care department. The team consists of executers and not just an advisor, hence one person can handle min 100 clients No tension of RMS, everything is online on the basis of funds Mostly customers have accounts with more than one online player, hence calling helps in greater recall rate What started as an additional service has now turned out to be a revenue generator Over-View Of E- broking Industry Existing players are competing for a piece of the market share that seems to be getting aggressive by the day New players slated to make their presence felt in the near future are R-Trade (Reliance Money), ABN (Amro Broking), SBI Cap, Citibank (Smith Barney), Standard Chartered, etc are few others to start operations. International brokerage houses like Charles Schwab will make an entry very soon. New customer segments have evolved-e.g. housewives, fresh management graduates, first timers to stock market, etc. Increasing trend of alliance tie ups between brokers and banks This space is poised for a growth of 100% in volume YOY There are some ten dotcom players, such as: Icicidirect.com Invest smart 5paisa.com / India Infoline.com Indiabulls Kotakstreet Sharekhan Securities Motilal Oswal Securities Indiabulls-creating a world of smarter investors The ad basically talks about how Indiabulls empowers customers with Knowledge thereby making them smart investors. The ad has a Sardar ji asking questions on the markets. Kotaksecurities.com-online investing made simple The ad takes about simplifying the stock markets for you without complicating matters. General perception is that the markets are tough to understand and choices are umpteen but with Kotak Securities, it’s about simplicity Icicidirect.com - Strangely enough they don’t have a tvc for icicidirect.com and HDFC securities. But owing to the fact that their banks, mutual funds and insurance business have a name for themselves, people seldom notice since brand awareness of ICICI/HDFC as a group is high. Motilal Oswal-Solid Research. Solid Advice As the tag line goes, the positioning is centered on Research and advice. The ad shows a man who is very skeptical when it comes to making even the most mundane decisions but when it comes to Motilal Oswal, he trusts them too well to worry about investments Sharekhan-Simplifying the stock market The stock markets are like a jungle .And to be the king, you need simple and understandable solutions which is what they claim to offer. Their first steps program is aimed at educating the novice investor .The ad shows a man who enters a mall and is looking for the Flush button. He doesn’t know what to do until he tries to open the door and ultimately ends up clicking the flush button. The ad says that stock markets can be like a jungle but with Sharekhan, you can rest assured. IDBI Paisa Builder tag line -Wealth is waiting Tracking Competition/Focus For I direct it has always been nos., every person is a prospect, now with 11 lakh accounts their focus is customer acquisition For Indiabulls, every marketing guy is a revenue generator, target is to achieve rev of 5 times salary in first three months else exit. (acquire and retain) For kotaksecurities.com its no of accounts and margin money, rest will be taken care of by 100 customer service agents sitting at one place For sharekhan its nos., clear differentiation between speed trade and classic account and focus is only on acquiring customer. 5 paisa, Angel, and other players are also have dedicated team focusing only on acquisition Client Acquisition strategy Keeping in mind, our twin fold objectives of providing quality service and acquiring and retaining customers, the E-broking wing has been clearly divided into the following streams: Direct customers • • • E-franchisee Customers Franchisee Customers Alliance customers The Future of E-broking After the Net, the Mobile revolution has already begun. India is all set to become the world’s second largest Mobile phone Market by 2008 according to Data comm. Research Company Customers will buy/sell/check their portfolio on mobile, just the way they check messages All you will have to do is enter the stock name and click on Quote The client, after checking the price can choose to Buy Shares and also view his portfolio When client clicks on Buy shares, he will be asked to login and then in a matter of minutes, he will be able to trade in the stock markets. What does the Future Hold ⇒ Online Broking will witness a sea change in the way the business will function. Newer products, stiff competition and improved trading engines will characterize the industry ⇒ The industry will shift gradually to a fixed broking charge, following in the foot steps of the West. One paisa campaign marked the beginning of this phase in India along with Kotak Flat charge. ⇒ Alliances will hold a significant key to customer acquisition. The trend has already begun with major Banks getting into the act. E-z trade@ SBI was again a trendsetter owing to the sheer size of the tie up. ⇒ Housewives and College students will emerge as new target segments that will over a period of time become revenue earners. ⇒ Cross selling multiple products will be a key area of focus. The concept of financial planners will gain immensely. ⇒ The Future looks Bright. It will happen at the click of a button. That will in essence be Business @ the speed of thought Basic Concept And Principle 3.1 Corporate Governance Framework The Board of Directors is responsible for management oversight, supervising the business execution functions of the Management Council, an executive organ under its authority. The Management Council deliberates upon fundamental policies and strategy regarding business management, as well as makes decisions on important matters regarding operational execution. Issues discussed by the Management Council and a summary of its discussions are reported to the Board of Directors, which makes decisions on items of particular importance. In principle, the Management Council meets three times a month, but meetings may be convened whenever necessary. The auditing function is carried out by statutory auditors (Board of Statutory Auditors), who review the Board of Directors as well as operational execution functions, and attend important meetings, including meetings of the Board of Directors as well as the Management Council. The auditing function is carried out by statutory auditors (Board of Statutory Auditors), who review the Board of Directors as well as operational execution functions, and attend important meetings, including meetings of the Board of Directors as well as the Management Council. . Figure 2-1 corporate governance framework 3.2 Requirement Of Good Corporate Governance According to the Australian standard on corporate governance (AS8000, 2003), it requires a structural component requiring identification of requirements, requirements of laws, codes, best practice, links to risk-requirement, and reporting, so as to create a functioning series of systems and a maintenance component requiring education and training, communications monitoring, assessment, review, liaison and accountability. But, note that corporate governance has neither a static, nor a prescribed form. The Australian standard says, "there is no single model of corporate governance" (AS8000, 2003). The OECD principles of corporate governance (OECD, 2004) says "To remain competitive in changing world, corporations must innovate and adapt their corporate governance practices so that they can meet new demands and grasp new opportunities. The Nation Archives of Australia is a leader in developing records management procedures, particularly in e-records. One that is of particular interest deals with source records that have been copied converted or migrated. This policy allows Commonwealth agencies to dispose of source records that have been copied or converted if proper processes are in place. But the procedure also requires, importantly, that the policy can be put in place only. If it has been implemented with the "explicit agreement" of the head of the agency. This means that the agency head must be satisfied of the integrity of the IT and administrative systems in place for the copying of the source records before the policy is adopted and source records are destroyed. Boards and other governing bodies for records management throughout an organization should also undertake such high –level sign –off on records management policies. So requirement of good corporate governance may be summarized as follows: due process – doing things in an agreed, documented, controlled and appropriate way. transparency- doing things in a way which is open to appropriate way. Accountability- having to answer for the things one does. compliance- having systems to ensure that things are done properly. laws- meeting applicable legal obligations. Security- having systems to ensure protection of information 3.3Purpose Of Corporate Governance 1. Protecting shareholders’ wealth. 2. Enhancing the wealth through proper utilization of assets. 3. Maintenance of that wealth and not frittering away in unconnected and non profitable venture. 4. through expropriation, and above all safeguarding he interests of the shareholders. The main objective behind corporate governance is to protect long term share holder value along with the other stakeholders. It is the foundation to build market confidence and encouraging stable and long term investment flows. Corporate institutions should have a sound frame work for their operation to achieve their objective and creating wealth for the welfare of the society as a whole. Corporate governance is very wide term, which covers a wide range of activities that relate to the way business organization is directed and governed. It deals with the policies and practices that directly impact on the organization’s performance, stewardship sand its capacity to be accountable to its various stakeholders. Over all objectives of corporate governance are as follows : 1. Enhancement of shareholder value, keeping in view the interest of other stakeholder. 2. follow provisions of the companies Act, FEMA factory Act and other statutes . 3. deloy the funds of the company in attaining institutional goal as enshrined in the memorandum. 4. utilize funds taken from financial institutions and the capital market for the purposes for which they were intended. 5. develop core competence to effectively manage its diversifications. 6. manage and check the diversification of funds by the way of loans, advances or investment to subsidiary or investment companies. 7. control over the bad practices . 8. conduct ethical and fair practices towards its share holders, customers, suppliers, employees and the public at large. 9. provide complete information to the directors on the working of the company. 10.motivate institutional and non executive directors to play active role in the functioning of the company. 11.make internal control sound and powerful. 12. adopt transparent financial reporting and audit practices and the accounting practices. Business Goal & Corporate Governance Corporate governance is also related to corporate financial goals. It is a naïve assumption that such goals are culture free. Wimer (1995) interviewed Dutch, German, and U.S business executives. Besides making profits, the Dutch talked about assets, the German about independence from banks and the American about shareholder value. This reflects the institutional differences among the countries but also the prevailing ideologies. Some people assume that globalization and acquisition of companies across borders will wipe out such differences and thus business leaders will become like the Americans. Others argue that these differences are rooted in national cultures that have centuries old roots, which make such convergence unlikely. The studies here were based on a comparison of institutions across countries. Another approach is to focus on the persons of the business leaders and to compare the goals they are seen to pursue. Corporate governance practices have become an essential prerequisite for the ability to acquire and retain financial resources necessary for restructuring longterm investment and sustainable growth. 3.4 Principles Of Corporate Governance Key elements of good corporate governance principles include honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization. Of importance is how directors and management develop a model of governance that aligns the values of the corporate participants and then evaluate this model periodically for its effectiveness. In particular, senior executives should conduct themselves honestly and ethically, especially concerning actual or apparent conflicts of interest, and disclosure in financial reports. Commonly accepted principles of corporate governance include • Rights and equitable treatment of shareholders: Organizations should respect the rights of shareholders and help shareholders to exercise those rights. They can help shareholders exercise their rights by effectively communicating information that is understandable and accessible and encouraging shareholders to participate in general meetings. • Interests of other stakeholders: Organizations should recognize that they have legal and other obligations to all legitimate stakeholders. • Role and responsibilities of the board: The board needs a range of skills and understanding to be able to deal with various business issues and have the ability to review and challenge management performance. It needs to be of sufficient size and have an appropriate level of commitment to fulfill its responsibilities and duties. There are issues about the appropriate mix of executive and non-executive directors. • Integrity and ethical behavior: Ethical and responsible decision making is not only important for public relations, but it is also a necessary element in risk management and avoiding lawsuits. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision making. It is important to understand, though, that reliance by a company on the integrity and ethics of individuals is bound to eventual failure. Because of this, many organizations establish compliance and ethics programs to minimize the risk that the firm steps outside of ethical and legal boundaries. • Disclosure and transparency: Organizations should clarify and make publicly known the roles and responsibilities of board and management to provide shareholders with a level of accountability. They should also implement procedures to independently verify and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely and balanced to ensure that all investors have access to clear, factual information. • TRANSPARENCY-: This means accurate, adequate and timely disclosure of relevant information to the stakeholders. It is not at all possible to make any progress towards better governance without transparency. But it is seen that information sharing is hindered under the excuse of confidentiality. There is need to move towards international standards in terms of disclosure of information by the corporate sector and through this the companies develop a high level of public confidence in business. The scenario at international level makes transparency and disclosure the key pillars of corporate governance. Issues involving corporate governance principles include • • • oversight of the preparation of the entity's financial statements internal controls and the independence of the entity's auditors review of the compensation arrangements for the chief executive officer and other senior executives the way in which individuals are nominated for positions on the board the resources made available to directors in carrying out their duties • • • • oversight and management of risk dividend policy. 3.5 Importance Of Corporate Governance * Corporate governance has succeeded in attracting a good deal of public interest because of its apparent importance for the economic health of corporations and society in general. * Corporate governance provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. * Corporate governance provides proper incentives for the board and management to pursue objectives that are in the interests of the company and shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently * Corporate governance is used to monitor whether outcomes are in accordance with plans and to motivate the organization to be more fully informed in order to maintain or alter organizational activity. Corporate governance is the mechanism by which individuals are motivated to align their actual behaviors with the overall participants. * Corporate governance is a tool for competitive advantage. Normally when we look at the issue of competitive advantage from a managerial point of view, we can look at those factors, which are within the control of the enterprise. This relates to the focus on quality, productivity as well as innovation, which are the basic requirements, in a highly competitive environment. This is needed for getting the competitive edge in a market where the customer is king. * The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. * The corporate governance framework recognizes the rights of stakeholders as established by law and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises. * The corporate governance framework ensures the timely and accurate disclosure of all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. A strong disclosure regime can help to attract capital and maintain confidence in the capital markets. Disclosure also helps improve public understanding of the structure and activities of enterprises, corporate policies and performance with respect to environmental and ethical standards, and companies' relationships with the communities in which they operate. 3.6 Corporate Values In recent years, There is a explosion of interest in corporate values like share holder value , stakeholder value customer value , business ethics Corporate social responsibility by and large, new value systems have been marketed as general solutions applicable to all kinds of business. These values are building blocks of corporate image. Corporate values are based on high ethical standards of managers and other employees. The firm values must ultimately be derived from the preferences or values of its stakeholders. In other words, corporate values are created when companies internalize the values of salient stakeholders. Stakeholders can influence a company directly through market transactions and contracts without imposing their values on the company, but transactional costs and information problems set a limit to use of contractual mechanisms. Internalization of stakeholder preference takes place in a hypothetical three-stage process as follows: 1. Allocation of ownership rights. 2. Board of composition. 3. The influence of important stakeholders 3.7 Related Parties To Corporate Governance Parties involved in corporate governance include the regulatory body (e.g. the Chief Executive Officer, the board of directors, management and shareholders). Other stakeholders who take part include suppliers, employees, creditors, customers and the community at large. A Board of Directors often plays a key role in corporate governance. It is their responsibility to endorse the organization's strategy, develop directional policy, appoint, supervise and remunerate senior executives and to ensure accountability of the organization to its owners and authorities. All parties to corporate governance have an interest, whether direct or indirect, in the effective performance of the organization. Directors, workers and management receive salaries, benefits and reputation, while shareholders receive capital return. Customers receive goods and services; suppliers receive compensation for their goods or services. In return these individuals provide value in the form of natural, human, social and other forms of capital. 3.8 Players In Corporate Governance Corporate governance systems vary across countries and these differences directly affect both the process for developing global strategies that can be adopted. Global strategic decision poses a very tough test for the effectiveness of corporate governance system. They seek maximize profit and global competitiveness. There are five critical stakeholder players that affect the company's decision. They are (1) (3) Employees Shareholders (2) The management teams (4) Board of directors (5) Government Employees: The main variable differentiates employees as a collective group across countries. The country's labour market will influence the flexibility and mobility of employees. Country such as the U.S that have employment at will where by a contract can be terminated at any time are likely to have flexible labour market and short term labour commitment. In more rigid labour markets such as Germany and Japan companies invest a great deal in bespoke in house training that tends to result in more highly skilled labour forces and company specific skills. These in turns are less transferable from one company to another. For example in France, the union rights are extended to all employees regardless of union affiliation. Here unionization will have greater influence on corporate decision making than in U.S or U.K where only union members benefits from collective bargaining agreements. Japanese companies tend to have enterprise unionism, which leads to collective bargaining at company level, and grant a strong voice to employees. In 2004 for example employee opposition to job losses prevented the restructuring via. Merger with a foreign partner of France who is financially troubled Alston, a major producer of ships and trains. In the same year Volkswagen despite suffering from very high labour cost had to promise its Western Germany employees job security until 2011 in exchange for a wage freeze until 2007 and more flexible working hours. The company workers wield considerable power partly through co-determination rights that require employees to be consulted on corporate decision. Top Management Teams: Managers in U.S and U.K tend to have professional background and strong functional background in finance or marketing. This is not the case in Germany where managers are more technical oriented. There is also variation in the international experience and background of managers. Managerial career mobility tends to be very fluid in U.S and U.K due to open labour markets. In Japan and France managers tend to remain with a company for a long period of time. There is also wide acceptance of leaders from across boarders in the U.K Shareholders: Countries vary in their mix types of shareholders. At one extreme the U.S and U.K have mostly arms length, natural shareholders who are focused on shareholder value maximization. Employee shareholders typically use their ownership to block the global relocation of jobs. This applies even in the U.S where united Airlines provide a rare example of a large public company with majority ownership (55 percent owned by an employee stock ownership plan). This employee stake and hence control have greatly constrained the ability of the Airline to relocate job overseas. Government: Government intervention is usually in the form of market regulation. A representative measure for government intervention in the economy is regulation around takeovers. In countries such as France, Germany, Italy and Japan government intervention often provide strong takeover barrier such as golden shares, which bestow on the holder veto power over changes to the company's charter. The variation hindrance to hostile takeovers in many continental European countries continues to make it difficult for foreign companies to make acquisition across border in Europe. In 2001 plans for a European takeover code, which would guarantee the right of shareholder to be consulted during bids were shelved following objection from German government. The previous year Vodafone, the U.K telecoms company made a successful hostile bid for Mannesmann, a German telecoms company and the German government was worried that other local companies might fall into foreign land. For example Volkswagen is protected from takeover by special law. Sweden, which fall in the continental governance model that use multiple voting rights to help and prevent its companies from becoming vulnerable to takeover. France is also particularly active in preserving national ownership of major companies. In 2004 the French government brokered the takeover of Aventis a French Germany pharmaceutical company by France's Sanofi-synth and Laboratories. Control And Management 4.1 Mechanisms and controls Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. For example, to monitor managers' behavior, an independent third party attests the accuracy of information provided by management to investors. An ideal control system should regulate both motivation and ability. Internal corporate governance controls Internal corporate governance controls monitor activities and then take corrective action to accomplish organizational goals. Examples include: • Monitoring by the board of directors: The board of directors, with its legal authority to hire, fire and compensate top management, safeguards invested capital. Regular board meetings allow potential problems to be identified, discussed and avoided. Whilst non-executive directors are thought to be more independent, they may not always result in more effective corporate governance and may not increase performance. Different board structures are optimal for different firms. Moreover, the ability of the board to monitor the firm's executives is a function of its access to information. Executive directors possess superior knowledge of the decision-making process and therefore evaluate top management on the basis of the quality of its decisions that lead to financial performance outcomes, ex ante. It could be argued, therefore, that executive directors look beyond the financial criteria. • Remuneration: Performance-based remuneration is designed to relate some proportion of salary to individual performance. It may be in the form of cash or non-cash payments such as shares and share options, superannuation or other benefits. Such incentive schemes, however, are reactive in the sense that they provide no mechanism for preventing mistakes or opportunistic behaviour, and can elicit myopic behaviour. External corporate governance controls External corporate governance controls encompass the controls external stakeholders exercise over the organization. Examples include: • demand for and assessment of performance information (especially financial statements) debt covenants government regulations media pressure takeovers competition managerial labour market telephone tapping • • • • • • • 4.2 Role Of The Accountant Financial reporting is a crucial element necessary for the corporate governance system to function effectively. Accountants and auditors are the primary providers of information to capital market participants. The directors of the company should be entitled to expect that management prepare the financial information in compliance with statutory and ethical obligations, and rely on auditors' competence. Current accounting practice allows a degree of choice of method in determining the method of measurement, criteria for recognition, and even the definition of the accounting entity. The exercise of this choice to improve apparent performance imposes extra information costs on users. In the extreme, it can involve non-disclosure of information. One area of concern is whether the accounting firm acts as both the independent auditor and management consultant to the firm they are auditing. This may result in a conflict of interest which places the integrity of financial reports in doubt due to client pressure to appease management. The power of the corporate client to initiate and terminate management consulting services and, more fundamentally, to select and dismiss accounting firms contradicts the concept of an independent auditor. Changes enacted in the United States in the form of the Sarbanes-Oxley Act (in response to the Enron situation as noted below) prohibit accounting firms from providing both auditing and management consulting services. Similar provisions are in place under clause 49 of SEBI Act in India. The Enron collapse is an example of misleading financial reporting. Enron concealed huge losses by creating illusions that a third party was contractually obliged to pay the amount of any losses. However, the third party was an entity in which Enron had a substantial economic stake. In discussions of accounting practices with Arthur Andersen, the partner in charge of auditing, views inevitably led to the client prevailing. However, good financial reporting is not a sufficient condition for the effectiveness of corporate governance if users don't process it, or if the informed user is unable to exercise a monitoring role due to high costs. 4.3 Role Of Institutional Investors Many years ago, worldwide, buyers and sellers of corporation stocks were individual investors, such as wealthy businessmen or families, who often had a vested, personal and emotional interest in the corporations whose shares they owned. Over time, markets have become largely institutionalized buyers and sellers are largely institutions The rise of the institutional investor has brought with it some increase of professional diligence which has tended to improve regulation of the stock market (but not necessarily in the interest of the small investor or even of the naïve institutions, of which there are many). Note that this process occurred simultaneously with the direct growth of individuals investing indirectly in the market (for example individuals have twice as much money in mutual funds as they do in bank accounts). However this growth occurred primarily by way of individuals turning over their funds to 'professionals' to manage, such as in mutual funds. In this way, the majority of investment now is described as "institutional investment" even though the vast majority of the funds are for the benefit of individual investors.] Unfortunately, there has been a concurrent lapse in the oversight of large corporations, which are now almost all owned by large institutions. The Board of Directors of large corporations used to be chosen by the principal shareholders, who usually had an emotional as well as monetary investment in the company (think Ford), and the Board diligently kept an eye on the company and its principal executives (they usually hired and fired the President, or Chief executive officer— CEO). 4.4 Management & Corporate Governance Top managers need to recognize that they are not in sole charge. Global strategy is an equilibrium game among corporate governance players. Managers need to work on building coalition and aligning interest behind a common approach. In the continental system managers have to align trade off and meet other stakeholders' interest halfway. They have to craft their language and rhetoric to meet the other players' expectations. The main things here are consensus and social cohesion. In the extended (Japanese) system companies have generally capitalized in their export oriented model and high innovation driven employees loyalty. But because of rigid of their corporate governance system, they have not exploited as much as they could different dimension of global strategy. So the system must be open in term of the diversity of the top management team and more flexible in their governance by introducing leaner boards as well as allowing greater levels of shareholder activism. If government care to sustain national competitiveness and to help their companies to globalize, then they should assess the degree to which the players in their corporate governance system are aligned with each other and with their intended global strategy. Government policies should become less inimical to foreign owners and use such capital to provide the much needed global knowledge. This can only be accomplished if the right mechanisms are in place to give a voice to these foreign owners. The government has the responsibility as well as the policy tools to gear the country's corporate governance system so that it enhances national competitiveness. Functions of the Management 1. The management comprises the Chief Executive, Executive-directors and the key managers of the company, involved in day-to-day activities of the company. 2. The Committee believes that the management should carry out the following functions: Assisting the board in its decision making process in respect of the company’s strategy, policies, code of conduct and performance targets, by providing necessary inputs. Implementing the policies and code of conduct of the board. Managing the day to day affairs of the company to best achieve the targets and goals set by the board, to maximize the shareholder value. Providing timely, accurate, substantive and material information, including financial matters and exceptions, to the board, board-committees and the shareholders. Ensuring compliance of all regulations and laws. Ensuring timely and efficient service to the shareholders and to protect shareholder’s rights and interests. Setting up and implementing an effective internal control systems, commensurate with the business requirements. Implementing and comply with the Code of Conduct as laid down by the board. Co-operating and facilitating efficient working of board committees. 3. As a part of the disclosure related to Management, the Committee recommends that as part of the directors’ report or as an addition there to, a Management Discussion and Analysis report should form part of the annual report to the shareholders. This Management Discussion & Analysis should include discussion on the following matters within the limits set by the company’s competitive position: Industry structure and developments. Opportunities and Threats Segment-wise or product-wise performance. Outlook. Risks and concerns Internal control systems and their adequacy. Discussion on financial performance with respect to operational performance. Material developments in Human Resources /Industrial Relations front, including number of people employed. This is a mandatory recommendation 4. Good corporate governance casts an obligation on the management in respect of disclosures. The Committee therefore recommends that disclosures must be made by the management to the board relating to all material financial and commercial transactions, where they have personal interest, that may have a potential conflict with the interest of the company at large (for e.g. dealing in company shares, commercial dealings with bodies, which have shareholding of management and their relatives etc.) Shareholders The shareholders are the owners of the company and as such they have certain rights and responsibilities. But in reality companies cannot be managed by shareholder referendum. The shareholders are not expected to assume responsibility for the management of corporate affairs. A company’s management must be able to take business decisions rapidly. The shareholders have therefore to necessarily delegate many of their responsibilities as owners of the company to the directors who then become responsible for corporate strategy and operations. The implementation of this strategy is done by a management team. This relationship therefore brings in the accountability of the boards and the management to the shareholders of the company. A good corporate framework is one that provides adequate avenues to the shareholders for effective contribution in the governance of the company while insisting on a high standard of corporate behaviour without getting involved in the day to day functioning of the company. Responsibilities of shareholders 1. The Committee believes that the General Body Meetings provide an opportunity to the shareholders to address their concerns to the board of directors and comment on and demand any explanation on the annual report or on the overall functioning of the company. It is important that the shareholders use the forum of general body meetings for ensuring that the company is being properly stewarded for maximizing the interests of the shareholders. This is important especially in the Indian context. It follows from the above, that for effective participation shareholders must maintain decorum during the General Body Meetings. 2. The effectiveness of the board is determined by the quality of the directors and the quality of the financial information is dependent to an extent on the efficiency with which the auditors carry on their duties. The shareholders must therefore show a greater degree of interest and involvement in the appointment of the directors and the auditors. Indeed, they should demand complete information about the directors before approving their directorship. 3. The Committee recommends that in case of the appointment of a new director or re-appointment of a director the shareholders must be provided with the following information: A brief resume of the director; Nature of his expertise in specific functional areas; and Names of companies in which the person also holds the directorship and the membership of Committees of the board. Shareholders’ rights 1. The basic rights of the shareholders include right to transfer and registration of shares, obtaining relevant information on the company on a timely and regular basis, participating and voting in shareholder meetings, electing members of the board and sharing in the residual profits of the corporation. 2. The Committee therefore recommends that as shareholders have a right to participate in, and be sufficiently informed on decisions concerning fundamental corporate changes, they should not only be provided information as under the Companies Act, but also in respect of other decisions relating to material changes such as takeovers, sale of assets or divisions of the company and changes in capital structure which will lead to change in control or may result in certain shareholders obtaining control disproportionate to the equity ownership. 3. The Committee recommends that information like quarterly results, presentation made by companies to analysts may be put on company’s web-site or may be sent in such a form so as to enable the stock exchange on which the company is listed to put it on its own web-site. 4. The Committee recommends that the half-yearly declaration of financial performance including summary of the significant events in last six-months, should be sent to each household of shareholders. 5. A company must have appropriate systems in place which will enable the shareholders to participate effectively and vote in the shareholders’ meetings. The company should also keep the shareholders informed of the rules and voting procedures, which govern the general shareholder meetings. 6. The annual general meetings of the company should not be deliberately held at venues or the timing should not be such which makes it difficult for most of the shareholders to attend. The company must also ensure that it is not inconvenient or expensive for shareholders to cast their vote. 7. Currently, although the formality of holding the general meeting is gone through,in actual practice only a small fraction of the shareholders of that company do or can really participate therein. This virtually makes the concept of corporate democracy illusory. It is imperative that this situation which has lasted too long needs an early correction. In this context, for shareholders who are unable to attend the meetings, there should be a requirement which will enable them to vote by postal ballot for key decisions. This would require changes in the Companies Act. The Committee was informed that SEBI has already made recommendations in this regard to the Department of Company Affairs. 8. The Committee recommends that a board committee under the chairmanship of a non-executive director should be formed to specifically look into the redressing of shareholder complaints like transfer of shares, non-receipt of balance sheet, non-receipt of declared dividends etc. The Committee believes that the formation of such a committee will help focus the attention of the company on shareholders’ grievances and sensitize the management to redressed of their grievances. 9. The Committee further recommends that to expedite the process of share transfers the board of the company should delegate the power of share transfer to an officer, or a committee or to the registrar and share transfer agents. The delegated authority should attend to share transfer formalities at least once in a fortnight. Institutional shareholders 1. Institutional shareholders have acquired large stakes in the equity share capital of listed Indian companies. They have or are in the process of becoming majority shareholders in many listed companies and own shares largely on behalf of the retail investors. They thus have a special responsibility given the weight age of their votes and have a bigger role to play in corporate governance as retail investors look upon them for positive use of their voting rights. 2. Given the weight of their votes, the institutional shareholders can effectively use their powers to influence the standards of corporate governance. Practices elsewhere in the world have indicated that institutional shareholders can sufficiently influence because of their collective stake, the policies of the company so as to ensure that the company they have invested in, complies with the corporate governance code in order to maximize shareholder value. What is important in the view of the Committee is that, the institutional shareholders put to good use their voting power 3. The Committee is of the view that the institutional shareholders Take active interest in the composition of the Board of Directors Be vigilant Maintain regular and systematic contact at senior level for exchange of views on management, strategy, performance and the quality of management. Ensure that voting intentions are translated into practice Evaluate the corporate governance performance of company. 5. RESEARCH METHODOLOGY Objective: • • To know more about E- Broking Services offered by the retail brokerage firms. A Competitive Analysis on the E-Broking services offered by the companies in Jaipur. Hypothesis: All Portfolio Management firms provide very good services. Sample: The sample consists of the following: Sharekhan Securities India Infoline Kotak Securities Unicorn Securities Pvt. Ltd. ICICI Direct India Bulls Motilal Oswal Securities Limited 5.1. RESEARCH ANALYSIS Company Synopsis Company Name India Infoline Product Name TTADV Kotak Gateway Kotak Value Kotak Privilege circle Kotak Freeway Kotak High Trader Kotak Assist (Asset allocator & advisory) Classic Speed trade Speed trade Plus Idirect Power Indiabulls Product offerings Margin funding Research Yes Yes Yes Yes Yes Yes Yes Yes No Yes No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes, but charged Advice Yes No No Yes No No Yes Yes Yes Yes No Yes Target All types Retail Retail HNI Trader HeavyTrader HNI All Investors Traders Heavy Traders All Investors All Investors Kotak Sharekhan ICICI Indiabulls All companies target different customers depending on different schemes that they offer some schemes target only HNI whereas some target retail. Almost all the companies provide margin funding to their customers Most of the schemes provide research and advice too. Kotak provides the highest amount of schemes giving the customers a much wider option to choose they scheme according to their convince. M a rk eAt D T O u s t A cAqc tiv e C A v tg G .B ro k T e a m S t re n g th C us S h a re F irm s in c r T ill d a te P e r d a y P e r d a y O n P a y ro C o n s u lta n t lls USP I C I C I D ire 2c 5 % 6 0 0 1 1 la k h 1 .2 5 la k h 1 .2 5 c r 6 0 0 t 5000 A g g r e s s iv e m a rk e tin g I n d ia B u lls2 0 % 8 5 0 3 la k h 2 5 - 4 0 K 1 c r 5000 A g g r e s s iv e p ric in g S h a re k h a1n0 - 1 2 %2 5 0 1 .5 la k h 1 0 - 1 2 K 1 0 - 1 2 L a k h 4 5 0 2000 B ra n d v is ib ility K o t a k 1 2 - 1 5 %3 5 0 1 la k h 6 - 8 K 1 5 - 1 8 la k h 5 0 0 1 5 0 0 - 1 7 5 K o ta k A s s is t - o n lin e P M S 0 M O S L 3 .5 0 % 1 0 0 2 2 k 1 .8 k 4 la k h 100 1 4 0 C u s to m is e d T ra d in g S o lu tio n ICICI Direct has the highest market share when compared to the others as they were the first ones to enter the market. Even in terms of collecting brokerage per day ICICI Direct exceeds when compared to the other firms. IndiaBulls even though entered late in the market has still acquired good amount of customer base. Sales Activity FIRM ACTIVITY Cold calls Tele calling Client references Company MOSL KOTAK not so often yes yes yes ICICI DIRECT not so not so often often yes yes yes yes not so often yes INDIA INFOLINE SHAREKHAN INDIABULLS yes yes yes yes yes yes not so often yes yes yes yes not so often yes yes yes yes yes yes Website Enquiry/ walk-in yes Personal leads not so of employees often yes yes not so not so often often Account opening charges C o m p a n y P ro d . N a m e P ro d . T y p e SSKI C la s s ic A /c S p e e d T ra d e K o ta k : G a te w a y V a lu e P r iv ile g e C ir c le F re e w a y H ig h T r a d e & A s s is t I C I C I D ir e c t I n d ia b u lls I n v e rs tm a rt S m a rt In ve s t S m a r t o n lin e S m a rt T ra d e W eb A p p lic a tio n W eb A p p lic a tio n A /c o p e n in g c h a r g e sin . B r o k . C o m m it m e n t M 500 750 500 n il n il 500 500 750 > 3 0 ,0 0 0 p . m 750 750 1500 750 No 1500 No No 1000 1500 No No No No No S p e e d T r a d e P lu s A p p lic a tio n W e b & A p p lic a tio n W eb A p p lic a tio n W eb I n d ia I n f o lin e T r a d e r s T e r m inW l e b , A p p lic a tio n & O fflin e5 5 5 a India Infoline has only web which is more preferred and which gives application and offline facility too. ICICI Direct has the highest minimum brokerage per month as compared to the others. Kotak and Investsmart have the highest number of products offered to the customers. MOSL has the highest brokerage compared to the others but very personalized service too. 6.LEARNINGS 1.Analyze the movement of market. 2. Designing questionnaire. 3. Taking feedback from existing franchises. 4. Converting other franchises, by negotiating over brokerage and commission. 5.Analyzing portfolio of HNI’s. 6. Regular presentation over topics assigned. 7. To find out the grey areas of the organization. 8. How to analyze equity. 9.How to analyze index value :- current market capitalization X base value. Base market capitalization 10. How to calculate net asset value:Sum of market value of shares + Liquid assets + Dividends/interest accrued - amount due on unpaid assets - Expenses accrued but not paid No. of shares outstanding 11. CLEARING MECHANISM OF STOCK EXCHANGE. 7.FACT&FINDINGS 1. According to the survey most of the customers of “Infoline Ltd” says that it is pocket friendly. 2. Coming to faith 70% say IndiaInfoline Ltd is better than others stock brokers due to customers satisfaction. 3. Lack of promotional activities undertaken by IndiaInfoline securities Ltd. in Pune Region. 4. Main purposes of investments are returns & liquidity. 5. Investors take risk as well as returns into their mind while making the investment. 6. Businessmen are more interested in the stock market than the others. 7. Commodity market is less preferred by the investors, might because of less awareness about commodity market. 8. People want to invest their money in the security market but they have not the proper knowledge. 9. People pay more emphasis on brokerage than service provided by brokerage houses. 10. 3 elements affects the economy of any country:1) GOLD, 2) CRUDE OIL, 3) U.S DOLLAR 8.SWOT ANALYSIS Strengths: 1.Price competitiveness ( E.g.: No brokerage is charged, Annual maintenance charges are least) 2.India Infoline is able to respond very quickly as we have no red tape, no need for higher management approval, etc. 3.India Infoline is able to give really good customer care, as the current small amount of work means we have plenty of time to devote to customers 4.Their lead consultant has strong reputation within the market 5.They change direction quickly if our approach isn’t working 6.Management philosophy and commitment to maximize shareholders returns of India Infoline. 7.Ongoing activities of the company to support up gradation of operational Performance. . 8.Team of talented and committed professionals available to improve company’s performance. Weaknesses 1. New entrant in the market which is dominated by big brand names like ICICI, Reliance Money etc. 2.Company has a small staff with a shallow skills base in many areas. Opportunities 1. The share trading sector is expanding, with many future opportunities for success. 2. The competitors may be slow to adopt new technologies. Threats 1. Developments in technology will change the share market beyond the ability to adapt. 2.A small change in focus of a large competitor is a threat for the market position. 3.Constant pressure to be cost competitive to meet customer expectations. 4.Relentless pressure to maintain profitability due to rising input/raw material prices. 9. RECOMMENDATIONS According to me all the companies are good in their own respective way. Some are good at their brokerage whereas some are good at their services; some have good products whereas some offer cheap products. All the companies are fighting competition in different ways: • For I direct it is the market share as they were the first ones to enter this business. They had a plus point there as they were the first ones to start it but again they don’t have a service where the can take orders on the phone and book it. They don’t get a screen to watch. • For Indiabulls it is their aggressive marketing which counts for them the most and them customer acquisition and then retaining them. India bulls in a very short time have got in a lot more than expected and the very less brokerage that they offer attracts customers. • • • For Kotak it’s their name and which counts and their services to their customers which they have been providing since a very long time. For India Infoline it’s their terminal which is the best. They provide with excellent features and a lot of options for their different type of customers. Angel, Religare and other players are also are also providing with excellent features but still not in the bull run till now. No one company can be recommended as they all are good in their own way and all are competitive in their own way. All the companies are good at providing their services in their own way. The companies are very competitive, if one company takes a step the other company takes two steps and all the benefits go the customer towards the end. Therefore the only benefit that someone achieves is the customers who gain from these competitive firms in terms of service provided by them as well as in cost terms. 10. CONCLUSION “Competition today is at a mouse click.” Today with the growing competition it is very important to be intact. E –Broking in India is going to flourish as today we have a large number of people using the internet, we have will flourished infrastructure, more and more people are getting educated due to which there will be a boom in the E – Broking service. But then there are also factors which may have a negative effect on E- Broking like the market conditions etc. ignoring the risks involved, one might be drowned while sailing the in the ocean. But then it is more convenient for the people. The customers are getting a lot of comfort level and their work gets much simpler and online broking is much cheaper to than going to a broker to get your trades booked. And the most important thing is the increase and penetration of online use in the India which has increased the potential market size for online broking on an annual basis. A large share of the expected growth in Internet can be attributed to the increase in the online population and thus online trading too. Internet-based stock trading, while still in its infancy in the country, has the potential to really benefit the investor, with its ability to offer greater speed and transparency at a much lower cost. The essential component of Internet-based trading is the interface between broker, bank and depository participant, and as Net-based trading becomes a reality this interface will develop. The advent of Internet-based trading in the country will change the face of the Indian capital market very soon in terms of the volume of transactions, the nature and settlement of trade, and the profile of market participants. I personally don’t think many of our colleagues in the business have really understood the impact the Net can have on the broking business. The growth of Internet-based trading as a mass trading technique in the country is unstoppable, going by the indicators available and the signals for the future. When it ultimately gathers momentum, the biggest beneficiary will be the investor, who will be able to trade with greater speed and transparency, and at lower costs. 11. ANNEXURE 11.1 TRANSCRIPTS: RESPONDENT 1: Mr. Vikas Lodha Company Name: Motilal Oswal Securities Limited Email:
[email protected] Designation: Senior Manager Phone no.: 9322985125 1. What is the market share the online broking of your company? It is approximately 3.5% to 4% 2. What are the registration charges? No charges 3. What are Demat account-opening charges? Free for first Year 2nd Year onwards - Rs400 per annum Zero Transaction Charges (if executed online) 4. What are the Interface provided by you? Banking: Demat: 5. Features of the accounts: • • • • • • • • Live intra day /positional / and delivery calls on your terminal helps you take informed decision. Multiple market watch, with NSE/BSE cash and derivatives on single screen. Execution through Exe/Web based trading platform. Online transfer of funds through multiple banks. Technical Charts: Intra day/ Daily/ Weekly/ Monthly/ Quarterly/ Yearly View live NSE cash / derivatives and BSE cash on the same screen. Research reports, daily market diary, pivot points and Derivatives diary. Advisor helps you evaluate & restructure your portfolio continuously. You can get a detailed perspective on the markets, sectors & individual companies from your advisor (Selected customers) • Dealer/advisor support during trading hours 6. What are the types of accounts and the brokerage that the company provides? 1. Freedom Account Ideally for Intra day Traders/ Speculators. No Access to Research, however the client will get intraday flash calls, pop ups, positional calls, technical recommendation on trading screen. Application Money: Rs.500000 (Cash or Scrip Margin) Monthly Brokerage Commitment Rs.500 Brokerage: ⇒ Delivery Based = 0.02 % ⇒ Intra day = 0.15% ⇒ F&O = 0.02% Brokerage is exclusive of Service Tax, STT. 2. Value Investing Account Ideally for HNIs/ MNIs. Access to world class Research & Advice. Dedicated Relationship Manager for advice, client portfolio maintenance and personalized services. Application Money: Rs300000.00 (Scrip Margin Rs.600000) Monthly Brokerage Commitment Rs.500 Brokerage: ⇒ Delivery Based = 0.02 % ⇒ Intra day = 0.15% ⇒ F&O = 0.02% Brokerage is exclusive of Service Tax, STT. 3. Easy Account Ideal for Retail Investor. Monthly Brokerage Commitment Rs500.00 No Access to Research, however the client will get Intra day flash calls, pop ups, positional calls, technical recommendation on trading screen. Application Money: Rs.5000.00 Brokerage: ⇒ Delivery Based = 0.20 % ⇒ Intra day = 0.15% ⇒ F&O = 0.02% Brokerage is exclusive of Service Tax, STT. RESPONDENT 2: Mr.Varun Singhal Company Name: ShareKhan Email:
[email protected] Designation: Co – Head Advisory E-Broking Phone no.: 9819200501 What is the market share of the company? It is approximately 10-12% What according to you is the USP of the company? Franchisees all over (launched an all-out effort to spread their reach across the country) Timely and qualitative investment service through a combination of online and offline facilities Name of the company What are the account opening charges and the brokerage? The account opening charges are Rs.750/- for any of the two accounts and can trade from both the two without paying anything extra. Demat opening charges: Nil Brokerage: Equity Delivery = 50p on every Rs.100 Intra day = 10p per Rs.100 (negotiable) Derivatives Delivery = 10p for buying and 10p for selling. Intra day = 10p for buying and 2p for selling. What is the Interface you have? ⇒ Banking – HDFC ⇒ Demat – SSKI What are the types of accounts provided by you and their feature? 1. CLASSIC ACCOUNT “Invest effortlessly” Features: One can have an Online trading account for investing in Equities as well as Derivatives They have Integrated Banking, demat and digital contracts There is an instant cash transfer facility for the purchase & sale of shares The clients can make IPO bookings One can get Instant order and trade confirmations by e-mail The client gets Personalized Market Scan with customized stock ticker Single screen interface for cash and derivatives Every client has a very own Portfolio Tracker 2. SPEED TRADE ACCOUNT “Trade effortlessly” Features: Instant order Execution & Confirmation Single screen trading terminal Real-time streaming quotes, tic-by-tic charts Market summary (most traded scrip, highest value and lots of other relevant statistics) Hot keys similar to a brokers terminal Alerts and reminders Back-up facility to place trades on Direct Phone lines Single screen interface for cash and derivatives RESPONDENT 3: Mr. Jugal Maheshwari Company Name: India Infoline Email:
[email protected] Designation: Relationship Manager Phone no.: 9784842850 What is the USP of the company? Paisa sense: Lowest Brokerage on the face of the earth Personalized service: The highest level of personalized customer service using call centers, dedicated staff and e-mail. Protection: Investment in technology to ensure protection against fraud and hacking. They use encryption, firewalls and two level password protections to ensure this. Pedigree: High research quality, investment ideas and news scoops What is the brokerage offered by the company? Product Brokerage Securities Handling Charges Finance Charges Total Trading Delivery 0.05% NIL NIL 0.05% 0.25% NIL NIL 0.25% What are the margin norms provided by the company? ⇒ ⇒ Delivery – 2 times, (if deposit Rs.2000, then can trade only for Trading – 10 times, (if Rs2000 is deposited as margin, you will be Rs.4000/-) allowed an exposure of up to Rs.20000). \What are the Account opening charges: 555/Demat opening charges: Nil What’s the company’s interface? ⇒ Banking – HDFC, AXIS BANK.CITY BANK & ICICI BANK ⇒ Demat – IIT Corporation What are products offered by the company and their features and the brokerage of the company? 1. 5Paisa Trader Terminal Features: Live streaming quotes and margin, position, marked to market profit & loss report. Price watch on any number of scripts. Intra day charts, updated live, tick-by-tick. Live margin, position, marked to market profit & loss report. Set any number of price alerts on any number of scripts. Flexibility to customize screen layout and setting. Market depth, i.e. Best 5 bids and offers, updated live for all scripts Instant trade confirmation. Online access to both accounts and DP. Live updated Order and Trade Book. Facility to place orders on the phone in all major cities. Facility to place after market orders Online fund transfer facility from leading Banks Online intra-day technical calls. Exhaustive database of over 5000 companies Historical charts and technical analysis tools. Brokerage ⇒ Intra day trading = 0.05% ⇒ Delivery = 0.25% 2. 5Paisa Investor Terminal Investors, who invest quite often, churn their portfolios regularly and keep a close watch on the market. They need to watch live quotes and live charts. Active stock market traders with medium volumes Students and researchers who need live streaming quotes and intra day charts Corporate treasury people Brokerage ⇒ Intra day trading = 0.05% ⇒ Delivery = 0.25% Registration fees - NIL Margin norms – maintain a margin of Rs.2555/- RESPONDENT 4: Mr.Chintan Kotak Company Name: Kotak Securities Email:
[email protected] Designation: Marketing Manager Online Broking Phone no.: 9920103588 What is the market share of the company? The market share: 12-15% What’s your company’s interface? ⇒ Banking – Citibank ⇒ Demat – Kotak Securities What is the USP of the company? Solid research team that gives good fundamental calls which Site is very organized and has great links Higher batting average mostly hit the mark. What are the types of products that the company offers and their features and the brokerage offered by each? 1. Kotak Gateway Account Features: One can invest in IPO and earn higher returns. They provide Research Reports on the economy. Low brokerage rates They even provide research advice via SMS Free news and market updates. Exposure of up to 15 times the initial margin on select stocks with super multiple Margin norms: any amount Rs.20000/-to Rs.500000/- has to be maintained 2. Kotak Value Account The Kotak Securities Value Account is specially equipped to make investing simpler for the clients. The brokerage of this is similar to that of Kotak gateway account. Margin norms: any amount between Rs.500000/- and Rs.1000000/3. Kotak Privilege Circle Account In this the clients enjoy premier and top-line trading services. Brokerage same as kotak gateway account. Features: Independent market expertise and support through a dedicated relationship manager. In this they provide unlimited call & trade facility & SMS alert free of cost. They provide 6 times exposure on the margin and exposure up to 15 times the initial margin on select stocks with Super Multiple Margin finance at attractive rates. Lowest delayed payment interest. Access to K.E.A.T Premium free of cost. A discount of 50 % to 100% on the DP charges. Margin norms: any amount more than Rs.1000000/- 4. Kotak High Trader Account Features: They provide 6 times exposure on the margin. Brokerage charged is low as 0.023%*. Access to K.E.A.T Desktop, KEAT Premium, research reports, intra day calls (nominal charges), SMS alerts. They even provide free news and market updates. Brokerages and charges Derivative = the minimum brokerage for Daily Square up is 0.07% negotiable to 0.023% depending on the size of the portfolio Delivery and cash the brokerage is the same as other accounts. Margin norms: any amount less than Rs500000/- as margin, by way of cash or stock. 5. Kotak Freeway Account Kotak Securities Freeway enables the clients to trade as many times as they like - at a fixed brokerage. They just have to pay a fixed brokerage of Rs.999/- Features They provide 4 times exposure on the margin. In this they provide access to K.E.A.T Desktop, intra day calls (nominal fee), research reports, SMS alerts Free news and market updates. Brokerages and charges Flat brokerage = 999 charged every month Minimum brokerage ⇒ ⇒ Cash segment = 0.4% and 0.1% Derivative segment = 0.3% Margin norms: Rs.125000/- by way of cash or stock. 6. NRI Account Online delivery based trading through NRI- Trinity Account. They provide top class research report. They also have the facility to trade on both- NSE and BSE. Account opening charge: Rs1500 Average Quarterly Maintenance: Rs25000/- in Savings account Brokerage: - 1% on 10lakhs and decreases according to the value of trading 7. Assist Account: Provides assistance to the clients to make the right decisions at the right time and also gives them assistance as to where to invest and when. Features India's finest Research Analysts - working towards the client’s objectives Complete account transparency and portfolio tracker with the facility to view ledgers and reports online. As an ASSIST client, they also get to enjoy the benefits of a dedicated customer service which will address their queries on Account status, transaction details, fund status and Order details. Margin norms: 5-10lakhs margins in Cash component. Margin to be above 10lakhs, a minimum of 5Lakhs or 25% margin (whichever is higher) would have to be in cash. Brokerages: Delivery = 0.50% which increases to 1.25% when the margin increases to Rs5lakhs and for squaring off. Derivatives = 0.07% on both sides. Exposure is provided up to 4 times, which the amount has to be paid within T+2 days failing which they would charge an interest up to 20.24% in delivery. RESPONDENT 5: Mr.Mihir Shah Company Name: ICICI Direct Email:
[email protected] Designation: Senior Relationship Manager Phone no.: 9819616622 How many online clients do you have? More than 300000 customers What is the market share of the company? The market share of the company is 25% approximately. What is the USP of the company? Brand name Integrated products (banking, trading and demat) and therefore secure and safe so there is no need to worry about credit/debit of shares or the amount. 128-bit encryption enabled Secure Socket Layer (SSL) to ensure that the information transmitted across the Internet is safe and cannot be accessed by a third party Invest online in IPOs, Mutual Funds, GOI Bonds, and Postal Savings Schemes all from one place. One can also get insurance through ICICI Lombard General Insurance. Account opening fees – Rs.750/Annual Service Charges - Rs.300/- payable in the month of April each year What the company’s Interface: Banking – ICICI Demat – ICICI Transaction Charges: a) Market Buy - 0.03% of the transaction value subject to a min. of Rs.25/per transaction b) Market Sell - 0.04% of the transaction value subject to a min. of Rs.25/per transaction c) Rejection/fails - Rs.25/- per entry (within 24 hours) Extra late payment charge of 0.10% subject to a min. of Rs.50/- per transaction. Demat Charges – a) No demats charges for ICICI and ICICI Bank shares. b) For other securities, Rs.2/-per certificate subject to a minimum of Rs.35/per DRF. Remat Charges – 0.10% of the value of the securities rematerialized subject to a minimum of Rs.25/- per request Pledge Creation - 0.02% of the transaction value subject to a minimum of Rs.25/- per ISIN and per request. Invocation/ Revocation - 0.03% of the transaction value subject to a minimum of Rs.25/- per ISIN (International Securities Identifying Number) and per request. Minimum value of the trade - Rs.1000/Minimum commission - Rs25/- per trade inclusive of service taxes, postage of contract note and demat market transaction charges. RESPONDENT 6: Mr. Vicky Shroff Company Name: IndiaBulls Email:
[email protected] Designation: Relationship Manager Phone no.: 989203439 What is the market share of the company? The market share of the company is 20% approximately What are the opening Account and Demat Charges? It is Rs.700/- with both the accounts Terminal charges – Rs.750 Margin exposure: 4 times (which the clients have to pay within 5 days failing which they are charged up to16% of interest) Margin funding: 2 times, (which the clients have to pay in 3 days failing which they are charged interest up to 16-20%) What is the company’s interface? ⇒ Banking – HDFC Demat – Indiabulls What is the USP of the company? Fast in implementation of orders and real time quotes. Good rate of brokerage Good Relationship Manager Responsiveness What is the brokerage of the company? ⇒ Delivery - 0.30% ⇒ Intraday - 0.20% Services: Live news about economy, corporate, market reports, industry, board meetings, market commentary’s etc. Indiabulls equity analysis report – gives objective guidance to the clients to buy or sell. 1. Indian Bulls Signature Account Enjoy priority telephone access that gives the clients direct access to the Relationship Manager. Benefit from full access to India bulls Equity Analysis their objective, factbased approach to rating stocks. Stay on the top of the investments with a snapshot of Account Statements. Get access to Portfolio statement and access to digital contract notes. 2. Power India Bulls Fast Order Entry Tic by Tic Live Charts Technical Analysis Live News and Alerts Extensive Reports for Real-time Accounting 3. Indiabulls NRI Trading Account Provides access to comprehensive trading tools for independent NRI investors They have a seamlessly integrated with Indiabulls Depository Account and with the HDFC NRE/NRO Bank Account. RESPONDENT 7 : Mr.Piyush Pandey Company Name: Unicorn Securities Pvt. Ltd. Email:
[email protected] Designation: Team Leader Phone no.: 988745096 What are the products that are provided by your company? Products offered are: • • • • • UNI PLUS UNI SWIFT UNI FLEX Insurance Real State What is the company’s interface? The company’s interfaces are Axis Bank, ICICI Bank, HDFC Bank and IDBI Bank so that they can build up on their clients What is the brokerage of the company? ⇒ Delivery - 0.03% ⇒ Intraday - 0.30% What is the USP of the company? • A single platform for trading/investments in multiple markets (equity, commodity, etc.) • • • • Aggressive pricing (transaction wise brokerage waived – only monthly fee for security token) Franchisees all over (launched an all-out effort to spread their reach across the country) Timely and qualitative investment service through a combination of online and offline facilities Name of the company 11.2 RESPONSE SHEETS Response Sheet No: 1 1.1. Questionnaire: Preparing a rough draft of the questionnaire to get a proper format Type of questions, which should be asked. The flow of the questions 1.2. Date when the Guide was consulted: 24th July 2008 1.3. The outcome of the discussion: Mr.Sanjay Bindal helped me change my questionnaire. There still has to be some changes made and we are working on this. This is not the copy of the final questionnaire. I have already appointments fixed up for the next week and the following week. We even listed down all the companies which we will be covering. 1.4. The Progress of the Thesis: I have started calling all the companies for appointments. I have also started working on the literature part of my thesis. Response Sheet No: 2 2.1. Questionnaire: Questionnaire is prepared and approved. 2.2. Date when the Guide was consulted: 28th may 2010 2.3. The outcome of the discussion: We have discussed how the format of the thesis should be and over and above that he has given me some references, which will help me carry my thesis further. We have discussed in brief the objective and the methodology of the research. I have also got information from a few companies who render online ebroking services. 2.4. The Progress of the Thesis: I have a good idea now about how I am going to make the layout of my thesis and I have already started the theory part of my thesis. Response Sheet No: 3 3.1. Questionnaire: With the interview pattern being qualitative, the basic questionnaire keeps getting modified and customized for each interview. 3.2. Date when the Guide was consulted: 12th August 2008 3.3. The outcome of the discussion: I have completed my entire survey expect for two to three more companies. The theory part of the thesis is almost done. Only the interviews have to be put down in the written format. I m still trying my best to get in few more companies if I can 3.4. The Progress of the Thesis: Thesis is almost complete expect for a few things. A few companies’ interviews are pending. Response Sheet No: 4 4.1. Questionnaire: With the interview pattern being qualitative, the basic questionnaire keeps getting modified and customized for each interview. 4.2. Date when the Guide was consulted: 14th may 2010 4.3. The outcome of the discussion: Discussed the outcome of the interviews taken and tried to analyze them, out of which just one interview is remaining which will be taken by this week. 4.4. Progress of the thesis Follow up with one company is left and then just their interviews have to be typed and compared with the other firms. Response Sheet No: 5 5.1. Questionnaire: With the interview pattern being qualitative, the basic questionnaire keeps getting modified and customized for each interview. 5.2. Date when the Guide was consulted: 18thAugust 2008 5.3. The outcome of the discussion: How to go about finishing the remaining interview and the one’s we already finished, we discussed how to analyze them and put in the report. 5.4. Progress of the thesis As of now the thesis introduction and the annexure part is ready, just waiting for the interviews to get over so that we can finalize the analysis and the conclusion part. Discussed the outcome of the interviews taken and tried to analyze them, out of which just one interview is remaining which will be taken by this week. Follow up with one company is left and then just their interviews have to be typed and compared with the other firms. Response Sheet No: 6 6.1. Questionnaire: Done with all the interviews 6.2. Date when the Guide was consulted: Very often since the last week 6.3. The outcome of the discussion: The final copy was read by the external guide and he asked me to make a few corrections in the report. 6.4. Progress of the thesis Almost complete except for a few things to be changed and the final touches are left. 12.APPENDIX Questionnaire Dear Sir/Madam, We are doing a survey on the different kinds of Internet Trading Services offered by the Leading Brokerage companies of India We would appreciate if you could participate in the same and contribute your valuable insights OFFICE - RECORD Name of Respondent: Designation: Email-ID: Phone No.: ============================================================= ==================================== 1. Name of the Firm? 2. What are the different Segments in which your company operates or have future plans? Capital Market Futures and Options Commodities Forex Mutual Funds IPO’s Margin Financing PMS 3. What are the types of online products your company offers? 4. Does your company have the following features? Calls and trade New alerts Technical tools Research report SMS service –Trade Confirmations/Ledger Balances/Research Calls Contract Notes-Physical/Digital 5. What extra features do the products have? 6. What Value Added Features make you different from the competitors? One thing that sets you apart from the competition! 7 What are your account opening charges? 8. What are the different Brokerage rates charged by your company? 9. How are u handling the competition who charge flat fees viz; Reliance Money 10. Margin funding offered by your company? 11. What’s the company’s interface? Banking Demat Offline Interface MOU Signed with bank etc 12. What is company’s market share? Online Offline 13. No Of Customers using your internet trading service Thank you for your participation! 13. BIBLIOGRAPHY Firms Contacted: My colleagues at India Infoline Limited and my thesis guide and colleague Mr. Jugal Maheshwari helped me out and used their contacts to get these Broking firms to participate in the interview. Books & magazines: I have read & collected some matter from the books of my syllabus. I have got some knowledge about the meaning of corporate governance from magazines of Institute Of Charted Accountance which is provided by my supervisor & guide Dr. (Mrs.) Meenu Maheshwari. Websites: www.indiainfoline.com www.sharekhan.com www.financialexpress.com/fe_full_story.php?content_id=147783 www.en.wikipedia.org/wiki/India www.censusindia.net/results/provindia3.html www.sify.com/sifyimagine/fullstory.php?id=13213758 www.sify.com/sifyimagine/fullstory.php?id=13213758 www.forbes.com/facesinthenews/2005/04/21/0421autofacescan02.html www.thehindubusinessline.com/iw/2006/10/08/stories/2006100800591300.htm www.kotaksecurities.com www.moneypore.com www.icicidirect.com www.hinduonnet.com/businessline/iw/2000/09/03/stories/0703g051.htm A Major Project Study Report of TITLED “CORPORATE GOVERNANCE” Submitted in partial fulfillment for the Award of degree of Master of Business Administration SESSION :-2008-2010 Submitt ed By: Monika Nagori M.B.A. Part 2, IV Sem. Submitted To: DIRECTOR Dr. (Mr.) K.C. Goyal “COMMERECE & MANAGEMENT DEPARTMENT” (University Of Kota,Kota)