Q.1 Rating methodology is used by the major Indian credit rating agencies.

Explain the main factors of that are analysed in detail by the credit rating agencies. Ans:- Rating Methodology Rating methodology used by the major Indian credit rating agencies is more or less the same. The rating methodology involves an assessment of all the aspects influencing the creditworthiness of an issuer company e.g. business, financial and industry features, operational competence, the ability to manage, competitive position of the issuer and dedication to new ventures among others. A thorough analysis of the past financial statements is made to evaluate the performance and to anticipate the future earnings. The ability of the company to fulfill the debt obligations over the term of the instrument being rated is also assessed. As a matter of fact, it is the capability of the issuer to fulfil obligations that determine the rating. While assessing the instrument, the following are the main factors that are analysed in detail by the credit rating agencies: (i) Business risk analysis (ii) Financial analysis (iii) Management evaluation (iv) Geographical analysis (v) Regulatory and competitive environment (vi) Fundamental analysis These are explained as follows: (i) Business risk analysis:-

Business risk analysis focuses on analysing the industry hazards, market position of the company, operating competence and legal position of the company. The industry risk by taking into consideration various factors like strength of the industry prospect, nature and basis of competition, demand and supply position, structure of industry, pattern of business cycle etc. How the industry players are competing with each other on the basis of price, product quality, distribution capabilities etc are also analysed. Industries with stable growth in demand and flexibility in the timing of capital outlays are in a stronger position and, therefore, enjoy better credit rating. For example, a seasonal business like hiring of vacation cottages or firms making winter clothesline. (ii) Financial analysis:-

Financial analysis aims at determining the financial strength of the issuer company through ratio analysis, cash flow analysis and study of the existing capital structure. The analytical framework involves the analysis of business risk, technology risk, operational risk, industry risk, market risk, financial risk and management risk. Business risk analysis covers industry analysis, operating efficiency, market position of the company whereas financial risk covers accounting quality, existing financial position, cash flows and financial flexibility. Under management risk analysis, an assessment is made of the competence and risk appetite of the management. The CRA might also look at the sufficiency of other means of servicing debt in case the primary cash flows are insufficient: for instance, in a securitized instrument, the credit enhancement and structure will be examined, while in case of a guaranteed bond the credit strength of the guarantor could drive the rating. (iii) Management evaluation:-

A companys performance is largely influenced by the aims and objectives of the management, its plans and policies, ability to prevail over adverse conditions, employees experience and skills, planning and control system among others. The managements strong points and weak points are evaluated for rating a debt instrument. For example, if the vision of the management is not clear about the big picture of the firm at least five to fifteen years down the line, then the companys focus may not be in proper place and the performance will not be as per the expected level. Any companys performance is significantly affected by the management goals, plans and strategies, capacity to overcome unfavourable conditions, staffs own experience and skills, planning and control system etc. Rating exercise requires evaluation of the management strengths and weaknesses. (iv) Geographical analysis:-

Geographical analysis facilitates in ascertaining the locational advantages enjoyed by the issuer company. An issuer company whose business covers a large geographical region avail the advantage of diversification and as a result, gets an improved credit rating. A company located in a backward area may avail subsidies from the government and, hence have the advantage of lower cost of operation. Smaller companies operations are limited in terms of product, geographical area and the number of customers. However, large companies enjoy the benefits of diversification owing to wide range of products and customers spread over larger geographical area. For example, a local shoe manufacturer has an exposure to a smaller market whereas a national level shoemaker has a wider reach to customer with better distribution system in place. (v) Regulatory and competitive environment:-

Credit rating agencies assess the composition and regulatory structure of the financial system in which it operates. CRAs have to assess the bearing of regulation/ deregulation on the issuer company, while allotting rating symbols. (vi) Fundamental analysis:-

Fundamental analysis includes an analysis of liquidity management, profitability and financial position, interest and tax rates sensitivity of the company. This includes an analysis of liquidity management, profitability and financial position, interest and tax rates sensitivity of the company. Fundamental analysis is undertaken for rating debt instruments of financial institutions, banks and non-banking finance companies. Q.2 Give the meaning of the concept of venture capital funds. Explain the feature of venture capital fund. Ans:- Concept of Venture Capital Funds:Venture capital is the money provided by investors to start firms and small businesses with long-term growth potential. This is a very important source of funding for start-ups that do not have access to capital markets. It typically entails high risk for the investor, but it has the potential for above-average returns. Venture capital can be defined as investment (long term) which is made in: Ventures that are promoted by persons who though they are qualified and technically sound but do not have any entrepreneurial experience. Projects which involves high degree of risk. The concept of venture capital financing is very old but todays changing business environment makes it more tempting for businesses. The reason being, venture capital companies give risky capital to the entrepreneur so that they can meet the minimum requirements of the promoters contribution. Venture capitalists not only provide the finance for risky business but also provide value- added services and business and managerial support. In situations where firms are not able to raise finance by conventional means, like public issue, etc., the importance of venture capital is greater. Thus, we can say that venture capital institutions are financial intermediaries between the entrepreneurs who need institutional capital (as they are not ready for public finance) and investors who are looking for higher returns. Features of a Venture Capital Fund:As venture capital is provided for businesses which involve higher risk and also a higher rate of return, it has some specific features. These are: (i) Long-term investment:

Venture capital is provided for the long term. This is generally provided to high-risk businesses (small and medium enterprises) who cannot arrange funds from other sources of finance. Venture capital is for that project which starts earning returns after some time. Due to all these reasons, venture capital is provided for the long term. (ii) Participation in equity capital:

Venture capital is always invested in equity capital (actual or potential). The reason for this is that the venture capitalist can sell his part of equity when they start earning profit from their equity holding. In the beginning, the equity capital of new ventures is risky but when they start earning profits and the market gains confidence in them, the venture capitalist can sell his portion of equity capital at a profit. (iii) High risk:

Venture capital signifies equity investment (ownership participation) in highly risky projects which have growth prospective and a projected high rate of return. Projects, in which markets have no earlier experience of earning profits, are the target of the venture capitalists. (iv) Management participation:

Venture capital funds not only provide equity capital to the firms or businesses but also provide them with various kinds of services like participation in management of the assisted business. Due to this reason they are different from bankers. They are not like other stock market investors who do not participate in the management of companies but invest and trade in shares in the stock market. In this way, venture capital is different from investors (equity) also. Moreover, it is the combination of bankers, stock market investors and entrepreneurs.

(v)

Liquid investment:

Investment made by venture capital fund is in equity portion of the company which makes it less liquid. Funds cannot demand its money back anytime during the life of the assisted business. They get their money back when the assisted business goes into liquidation. (vi) Fulfils its social objectives:

Unlike several state and central-level government organizations, venture capitalists provide finance with profit as their main objective. But venture capital funds help in generating new employment opportunities and also help in the balanced growth of the economy by the development of new and innovative business. (vii) Large scope of venture capital activities:

Venture capital is not merely a means for financing technology. It is beyond financing new technology- oriented companies and businesses. It extends to involve the financing of small and medium enterprises at their early stages of business and helps them establish in the market. So, it can be said that the scope of venture capital activities is big. Q.3 Hire purchase is one of the important concept There are certain features of hire purchase agreement so explain the points of it. Differentiate between hire purchase and leasing. Ans:- Concept of Hire Purchase In a hire purchase system, the buyer acquires the property by promising to pay in monthly, quarterly and half-yearly installments. The period of payment has to be fixed while signing the hire sale agreement. Though the buyer acquires the asset after signing the agreement, the title of ownership remains with the vendor until the buyer pays the entire liability. When the buyer pays the entire installment and any other obligation according to hire purchase agreement, only then the title of ownership of goods would be transferred to the hirer. If the hirer makes any default in the payment of any installment, the hire vendor has the right to re- posses the goods. In this case, the amount that is already paid so far by the hirer will be forfeited. The hire purchase price of goods is normally higher than the cash price of the good, because it includes interest on the balance payable amount charged by the vendor as well as the cash price. Under this system, the vendor is responsible to repair the goods which are in possession of buyer provided that the buyer takes the utmost proper care of the goods acquired. The risk is also borne by the vendor until the payment of last installment. The buyer has the right to return the goods to the vendor, if they are not according to the terms and condition of the hire purchase agreement. Generally, a higher purchase agreement has the following features: 1. The buyer (hirer) buys some goods from the hiree and the possession of the goods is immediately given to the buyer while the ownership rests with the merchant (vendor). 2. This payment for goods is made in installments and this must be completed in a specific period of time. In other words, we can say that hire purchase agreement is for a specific period of time. 3. The ownership of the asset transfer to the buyer when he pays the last instalment for it; till then ownership lies with the merchant or vendor. 4. In this agreement hiree charges interest on flat rate. 5. The hiree or vender has the right to repossess the asset in case there is default in the payment of installments from buyer side. 6. Each instalment paid by buyer includes the amount of interest as well as the repayment of the loan amount or principal amount. 7. The hire purchaser generally makes a down payment (initial payment) in signing the agreement and the balance of the amount along with the interest is paid in the installments at regular intervals. 8. The hire purchaser has the right to terminate the agreement at any time before the property so passes. The preceding discussion makes it clear that in the case of hire purchase, goods are immediately given to the buyer on the promise that he pays the cost of the goods (with interest) in instalments and he gets the ownership of the goods after the last payment of installment till then ownership lies with vendor. In hire purchase arrangement there are two parties: the buyer (hirer) and the vendor (hiree). Difference between Hire Purchase and Leasing

1. Ownership

2. Repayment amount 3. Advantage of tax deductibility 4. Depreciation 5. Realization of salvage value 6. Magnitude of funds involved

7. Nature of Expenditure 8. Components

In leasing ownership is never transfer to the lessee even after the payment of last lease rentals. But in hire purchase, after the payment of last installment ownership is transferred to the buyer of the goods. Generally in lease, repayment is called lease rentals and that in case of hire purchase is called installments. In lease financing lease rentals are tax deductible expenses. However, in hire purchase arrangement only the amount of interest is tax deductible not the full installment. Lessee cannot claim depreciation as he is not the owner of the asset. In hire purchase the buyer can have the claim of depreciation with other expenses. Lessee cannot realize salvage value of the leased asset after the end of the lease contract. The hirer can claim salvage value. In leasing, magnitude of funds involved is very large because these contracts are generally for capital goods such as plant and machinery, ships, among others. In the case of hire purchase, the magnitude of funds involved is low. Generally, these contracts are for the purchase of office equipments, automobiles, furniture among others. In lease, rentals paid by the lessee are entirely revenue expenditure of the lessee. But, only interest element included in the HP installment is revenue expenditure. Lease rental comprises two elements: (1) finance charge and (2) capital recovery. In case of Hire Purchase, HP installments comprise three elements (1) normal trading profit (2) finance charge and (3) recovery of cost goods/assets.

Q.4 Explain the concept of Depository receipt. Write down the difference between American Depository Receipts (ADR) and Global Depository Receipts (GDR) also mention the issue involved in ADR/GDR. Ans:- Depository Receipts Depository receipts are securities that are traded in foreign currency. These receipts are issued by the foreign bank or institution which acts as a depository of shares issued by a domestic company. Depository receipts can be classified into sponsored and unsponsored ones. 1. Sponsored depository receipts: It is created by a single depository which is appointed by the issuing company under rules provided in a deposit agreement. The issues of sponsored ADR/GDR require prior approval of the Ministry of Finance. 2. Unsponsored depository receipts: These are issued without any formal agreement between the issuing company and the depository, although the issuing company must consent to the creation of the ADR/GDR facility. How does the depository work? If an Indian company wants to raise funds from the investors in the United States it will have to list itself in the US Stock Exchange (NASDAQ). Since the shares are in the denomination of Indian rupees, these are not directly listed on the stock exchange of USA, hence, the depository works as an intermediary. Here the Indian company releases and deposits the new shares with the depository. The depository in turn issues the depository receipts to the investors in the US. A depository in the US generally will be an investment bank registered with the Securities and Exchange Commission (SEC). As Securities and Exchange Board of India (SEBI) is the capital market regulator in India, SEC is in the US. The depository will have a custodian in India where the new shares are deposited. The custodian can be the Indian arm of the depository or an independent company which provides the related services to the US-based depository. Depository receipts can be of two forms Global Depository Receipts (GDRs) and American Depository Receipts (ADRs). GDRs are usually listed on a European stock exchange and ADRs on the US stock exchange. In case of issue of a depository receipt by the Indian company, the dividend payment to the investor is made in terms of Indian rupee, which is converted into dollars by the international depository, after deduction of withholding tax. If a company wants to issue depository receipts, it has to conform to the following regulations: A resolution needs to be passed in the board meeting of the company for any such issue and file the same with the Registrar of Companies in Form No.23. Approval must be obtained from the Ministry of Finance. Ministry of Finance specifies the price range. Final price is determined only at the last stage. A red-herring prospectus is issued by the company without specifying the price (a blank column is left for the same). Underwriter of the issue takes care of the marketing of issue. The company issues the shares to the depository but these are delivered to the custodian.

Difference between ADRs and GDRs:The following are the main points of difference between ADRs and GDRs. (i) (ii) (iii) (iv) (v) The ADRs are issued by the companies to raise funds from the US markets and GDRs are issued by the companies to raise funds from international markets. Even though both are negotiable instruments, ADRs are negotiable in the US markets only and GDRs are negotiable in international markets. The GDRs can be used as a substitute of ADRs, but ADRs cannot be substituted for GDRs. Companies prefer to issue GDRs in comparison to ADRs due to wider scope to access the international markets by GDRs. ADRs are found in three forms from level-I to level-III, but GDRs are already called in high preference receipt of level-II and level-III.

Parties involved in ADR/GDR issues:ADR/GDR issue involves various parties who have some specific role to play in the global issue. These parties can be a single individual or a group of individuals and ingenuous endeavours are required from them to make a global issue successful. (I) Issuer company: A company, which wants to tap the foreign market by raising foreign funds by way of ADR/GDR issue is called issuer company. This company is responsible for making draft of the issue proposals as per the regulations applicable to them. Lead manager: Responsibility of marketing the issue lies with the lead manager. A lead manager: a) advise the issuer company about the type of securities which the former can issue in the global market. These securities can be equity, bonds, foreign currency convertible bonds (FCCBs); b) give suggestions about the rate of interest, price of the securities, market conditions, nature of investment conversion price etc to the issuer company. Co-managers/underwriters: Underwriters assists the lead managers to perform their duties with regard to the global issue to make it a successful effort. Depository: Depository is a bank authorized by the issuer company to raise funds by issuing ADRs/GDRs. Depository is the overseas agent of the issuer company who performs the function of issuing ADR/GDR to the investors to compensate for shares allotted to them. Depositorys name appears in the register of members of the issuer company, as he is the registered owner of the shares. Custodian: It is a banking company situated in India which acts as a custodian for the ordinary shares or FCCBs of an Indian company and is appointed by the issuer company. Custodian has physical possession of the shares (although its ownership rests with the investors) and it works in coordination with the depository. Legal advisors: Legal advisors actually help the issuer, lead manager, underwriters in giving legal advice in various documents published by them, viz., prospectus, various agreements etc. Auditors: Various information need to be verified to be included in the prospectus, therefore, auditors provide report of verified information about the issuer company. The auditors also participate in the meetings for due diligence and provide a report on that as well.

(II)

(III) (IV)

(V)

(VI) (VII)

Q.5 What is Online Trading? Explain the process of online trading. Ans:- Online Trading Online trading is one of the crucial financial services provided by financial institutions and merchant bankers. For example, Indiabulls Securities Limited is one of Indias foremost stock brokerage house having a pan India presence. The organization is a pioneer in providing online stock trading platform in India and currently has a customer base of seven lakh customers. Online trading is completed through Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). Market timings are 9 am to 4 pm and traders carry out trading in these markets. On a days trading, stock rise is dependent and fluctuations are linked to the trading on these exchanges. Online trading leads to smoother and quicker transaction on these exchanges. Some 5,000 companies were listed on the BSE and 1,650 companies were listed on the NSE till December 2011. The government recognized BSE in 1956. In 1995, in a span of fifty days BSE was converted into an electronic trading system from an open outcry floor trading exchange system. In the new electronic trading system, there is an automated screen-based trading platform which is known as BOLT (i.e. BSE online trading system) and at present it has an ability of eight million orders a day. This system enables an investor to trade from any part of the world. This system is the worlds first centralized exchan gebased internet trading system called BSEWEBx.co.in. NSE was established by the efforts of leading financial institutions, banks, insurance companies and few financial intermediaries on behalf of the government and was incorporated in November 1992. It was the first ever exchange with electronic limit order book (called LOB), which permits trading in securities, has investor grievance cell and investor

protection fund, supports gold ETFs, and uses satellite communication technology for trading (NEAT- National Exchange for Automatic Trading). These two exchanges are the backbone of the Indian economy and their functionaries are movement setters to numerous other stock exchanges across the country and the world. Both NSE and BSE have switched over to computerized online trading system from open outcry trading system. BSE has BOLT (BSE Online Trading) and NSE has NEAT (National Exchange Automated Trading). With these highly efficient online trading systems, efficiency and transparency of BSE and NSE have increased dramatically. Process of Online Trading:Online trading can be defined as the procedure through which transaction of financial securities, currencies and commodities takes place through the internet. Investors should use the right software made available by several brokers for making online transactions. Several leading online transaction portals are available in India besides the ones provided by NSE and BSE. The settlement cycle in India is T+2 days i.e. trade + 2 days. T+2 means the transactions done on the trade day, will be resolved by exchange of money and securities on the second business day (excluding Saturday, Sundays, bank and exchange trading holidays). Pay-in and pay-out for securities settlement is done on a T+2 basis. The trading and settlement process in India has been listed below: Orders are placed at the trading depots by investors. It is the responsibility of the broker houses to confirm the orders and then certify them to the exchange (BSE or NSE as pe r the clients choice). Order corresponding at the exchange. Trade confirmation information is provided by brokers to the investors. The clearing corporation obtains the particulars of trade from the exchange. The clearing corporation conveys the particulars of trade to clearing members/custodians who validate it. Bas ed on the validation, the clearing corporation decides the duties and responsibilities. Understanding of duties and responsibilities and pay-in advice of funds/ securities by the clearing corporation. The clearing corporation orders the clearing banks to make funds available by pay-in time. The clearing corporation orders the depositories to make securities available by pay-in-time. Pay-in of securities: The clearing corporation recommends the depository to debit pool account of custodians/clearing members and credit its (clearing corporations) account and depository does the same. Pay-in of funds: The clearing corporation recommends the clearing banks to debit account of custodians/clearing members and credit its account and clearing bank does the same. Hence, in online trading, orders are executed through online trading platforms presented by various brokers. Orders are straightaway placed at a brokers site by the investors. The broker is responsible for carrying out the orders on the stock exchange and also makes payments on behalf of the clients. Besides, brokers also provide clients with information related to current market trends, news and charts through their online portals. This helps the investor in taking correct decisions. In return for these services, brokers charge software usage fees and trading commissions for their services. An investor is able to trade in more than one product/market through the same account and software. Q.6 Write short notes on: Depository Participants Benefits of Depository Systems Ans:- (a) Depository Participants All the functions performed by depositories are actually executed by the depository participants (DPs). All activities related to recording of allotment of securities, transfer of securities etc. are executed through depository participants and no investor can directly open an account with a depository. A depository can enter into an agreement with various depository participants who would work as agents of the depository. Depository Participant works as an intermediary between the investor and depository and they are called as agents of the depository. The Depositories Act, 1996, and SEBI (Depository & Participants) Regulations, 1996, specify the relationship between a depository and depository participant. Any issue related to the governance of relationship between the depository and DPs will be in accordance with the Depositories Act and SEBI regulations. A depository participant is always registered with SEBI and is a legal entity. Once a depository participant obtains a certification of registration with SEBI after that it can start giving its depositories-related services. SEBI (Depository & Participants) Regulations, 1996, has prescribed a minimum net worth of `50 lakh for the applicants who are stockbrokers or Non-Banking Finance Companies (NBFCs), for granting a certificate of registration to act as a depository participant. For R&T agents, a minimum net worth of `10 crore is prescribed in addition to a grant of certificate of registration by SEBI.

 A stockbroker can act as a depository participant in more than one depository but in that case the stockbroker has to compl y with the criteria of each depository in order to maintain a specified net worth. Similarly some other specifications are given for the NBFCs when they work as depository participant on behalf of a person. For R&T agents, the specifications for net worth are different and given in SEBI (D&P) Regulations, 1996. Eligibility Criteria for becoming Depository Participants: The eligibility criteria to become DPs have been prescribed by the SEBI (Depository & Participants) Regulations, 1996, and the by-laws of depositories. The DPs have to comply with the by-laws of the respective depositories, for which membership is sought. (i) Basic Eligibility: Persons belonging to one of the following categories are eligible to become a DP: 1. A public financial institution as defined in Section 4A of the Companies Act. 2. A bank included for the time being in the Second Schedule to the Reserve Bank of India Act, 1934. 3. A foreign bank operating in India with the approval of the Reserve Bank of India. 4. A State Financial Corporation established under the provisions of Section 3 of the State Financial Corporations Act, 1951. 5. An institution engaged in providing financial services, promoted jointly or severally by any of the institutions mentioned in the four above- mentioned clauses. 6. An R&T agent who has been granted a certificate of registration by SEBI. (ii) Net worth: SEBI (Depositories & Participants) Regulations, 1996, prescribe a minimum net worth criteria for different kinds of applicants: For applicants who are stock brokers or non-banking finance companies, the net worth should be `50 lakh, for granting a certificate of registration to act as a DP. For R&T agents, a minimum net worth of `10 crore is prescribed in addition to a grant of certificate of registration by SEBI. If a stockbroker seeks to act as a DP in more than one depository, he should comply with the specified net worth criterion separately for each such depository. If an NBFC seeks to act as a DP on behalf of any other person, it needs to have a net worth of `50 crore in addition to the net worth specified by any other authority. Code of Conduct for Participants: The depository participants who have certificates shall abide by the following code of conduct issued by SEBI on 1 October 2003: 1. A participant shall make all efforts to protect the investors. 2. 2. A participant shall maintain high standards of integrity in all its dealings with its clients and other intermediaries, in the conduct of its business. 3. 3. A participant shall be prompt and diligent in opening of a beneficial owner account, dispatch of the dematerialization request form, rematerialization request form and execution of debit instruction slip, and in all other activities undertaken by him on behalf of the beneficial owners. 4. A participant shall endeavour to resolve all the complaints against it or in respect of the activities carried out by it as quickly as possible, and not later than one month of receipt. 5. A participant shall not increase charges/ fees for the services rendered without proper advance notice to the beneficial owners. 6. A participant shall not indulge in any unfair competition, which is likely to arm the interest of the other participant or investors or is likely to place such other participants in a weak position while competing for or executing any assignment. 7. A participant shall not make any exaggerated statement whether oral or written to the clients either about its qualification or capacity to render certain services or about its achievements with regard to services rendered to other clients. 8. A participant shall not divulge to other clients, press or any other person any information about its clients which has come to its knowledge except with the approval / authorization of the clients or when it is required to disclose the information under the requirements of any Act, Rules or Regulations. 9. A participant shall co-operate with the Board as and when required. 10. Stock Exchanges Benefits of a Depository System:In the depository system, the ownership and transfer of securities takes place by means of electronic book entries. At the outset, this system rids the capital market of the dangers related to handling of paper. NSDL provides numerous direct and indirect benefits like:

Removal of bad deliveries:- In the depository environment, once holdings of an investor are dematerialized, the question of bad delivery does not arise, i.e., they cannot be held under objection Removal of all hazards associated with physical certificates:- Dealing in physical securities have associated security risks of theft of stocks, mutilation of certificates, loss of certificates during movements through and from the registrars, thus exposing the investor to the cost of obtaining duplicate certificates, etc. This problem does not arise in the depository environment No stamp duty:- For transfer of any kind of securities in the depository. This waiver extends to equity shares, debt instruments and units of mutual funds Immediate transfer and registration of securities:- In the depository environment, once the securities are credited to the investors account on pay out, he becomes the legal owner of the securities. There is no further need to send it to the companys registrar for registration Speedy settlement cycle:- The settlement cycle follows rolling settlement on a T+2 basis, i.e., the settlement of trades will be on the second working day from the trade day. This will enable faster turnover of stock and more liquidity with the investor Faster pay-out of non cash corporate benefits like rights, bonus, etc.:- NSDL provides for direct credit of non-cash corporate entitlements to an investors account, thereby ensuring faster disbursement and avoiding risk of loss of certificates in transit Decrease in brokerage by many brokers for trading in dematerialized securities:- Brokers provide this benefit to investors as dealing in dematerialized securities reduces their back office cost of handling paper and also eliminates the risk of being the introducing broker Periodic status reports:- To investors on their holdings and transactions, leading to better controls Removal of problems related to change of address of investor:- In case of change of address, investors only have to inform their DP and submit the relevant documents and the required changes are effected in the database of all the companies, where the investors is a registered holder of securities Removal of problems related to transmission of demat shares:- In case of dematerialized holdings, the process of transmission is more convenient as the transmission formalities for all securities held in a demat account can be completed by submitting documents to the DP Removal of problems related to selling securities on behalf of a minor:- A natural guardian is not required to get court approval for selling demat securities on behalf of a minor.