A

Major Project Study Report

on

TITLED
“CORPORATE GOVERNANCE”

Submitted in partial fulfillment for the Award of degree of

Master of Business Administration

SESSION :-2008-2010

Supervised By: Submitted by:

DR. (Mrs) Meenu Maheshwari Monika Nagori

ASSISTANT PROFESSOR 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: Submitted by:

Place: Kota 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 co-
operation 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 Meaning of Corporate Governance

2 Introduction Of Company Profile

3 Basic Concepts & Principles

4 Control & Management

5 Research Methodology

6 Learnings

7 Finding overall inferences drawn

from the survey
8 Swot analysis of India Infolines ltd.

9 Recommendations

10 Conclusion

11 Annexure

12 Questionaire

13 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 principal-
agent 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 sub-
brokers) 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 pan-
Indian network to provide it with a truly national scale in operations.

Home Loans
Get expert advice that suits Personal Loans
your needs Freedom to choose from 4
flexible options to repay
Loan against residential
and commercial property Expert recommendations
Expert recommendations Easy documentation
Easy documentation Quick processing and
Quick processing and disbursal
disbursal No guarantor requirement
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 toll-
free 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 word-
The 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

N
D

A
India

I
Japan

Users
China
United States

0
250,000,000

200,000,000

150,000,000

100,000,000

50,000,000
 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 Offline
notes are sent to the client in E-broking

More Scalable Less Scalable

More Transperent Less Transperent
System Driven People driven
Less Personalise More Personalise
Fund transfer anytime , anywhere Restricted
Market Updates online Via E mail / Phone / Fax
More Secure 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 E-
broking 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 e-
broking 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 3-
in-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 TRADING SITE

SERVER

INTERNET

Client
Client Terminal
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 long-
term 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) Employees (2) The management teams

(3) Shareholders (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.
C
 o-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
Product offerings
Company Name Product Name Target
Margin funding Research Advice
India Infoline TTADV Yes Yes Yes All types
Kotak Gateway Yes Yes No Retail
Kotak Value Yes Yes No Retail
Kotak Privilege circle Yes Yes Yes HNI
Kotak Kotak Freeway No Yes No Trader
Kotak High Trader No Yes No HeavyTrader
Kotak Assist (Asset
Yes Yes Yes HNI
allocator & advisory)
Classic Yes Yes Yes All Investors
Sharekhan Speed trade Yes Yes Yes Traders
Speed trade Plus Yes Yes Yes Heavy Traders
ICICI Idirect Yes Yes No All Investors
Indiabulls Power Indiabulls Yes Yes, but charged Yes All Investors

 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 OC u s t A cAqc tiv e C Au vs tg G .B ro k T e a m S t re n g th

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 Clls o n s u lta n t USP
I C I C I D ire 2c 5t % 6 0 0 1 1 la k h 1 .2 5 la k h 1 .2 5 c r 6 0 0 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 K0 o ta k A s s is t - o n lin e P M S
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 INDIA
ACTIVITY MOSL KOTAK ICICI INFOLINE SHAREKHAN INDIABULLS
DIRECT
Cold calls not so not so not so often yes not so often yes
often often
Tele calling yes yes yes yes yes yes
Client yes yes not so often yes yes yes
references
Company yes yes yes yes yes yes
Website
Enquiry/ walk-in yes yes yes yes yes yes
Personal leads not so not so not so often yes not so often yes
of employees 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 A /c o p e n in g c h a r gMe sin . B r o k . C o m m it m e n t
SSKI C la s s ic A /c W eb 500 No
S p e e d T ra d e A p p lic a tio n 750 1000
S p e e d T r a d e P lu s A p p lic a tio n 1500
K o ta k : G a te w a y 500 No
V a lu e n il No
P r iv ile g e C ir c le n il No
F re e w a y 500 No
H ig h T r a d e & A s s is t 500 No
I C I C I D ir e c t W eb 750
A p p lic a tio n > 3 0 ,0 0 0 p . m
I n d ia b u lls W e b & A p p lic a tio n 750 No
I n v e rs tm a rt S m a rt In ve s t W eb 750
S m a r t o n lin e A p p lic a tio n 1500 1500
S m a rt T ra d e W eb 750
I n d ia I n f o lin e T r a d e r s T e r m inWa l e b , A p p lic a tio n & O fflin e5 5 5 No
 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: vikaslodha@motilaloswal.com
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: varunsinghal@sharekhan.com
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: jugal@indiainfoline.com
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 0.05% NIL NIL 0.05%

Delivery 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
Rs.4000/-)
⇒ Trading – 10 times, (if Rs2000 is deposited as margin, you will be
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: chintankotak@kotak.com
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

mostly hit the mark.
 Site is very organized and has great links
 Higher batting average

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: mihirshah@icicidirect.com
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: vickyshroff@indiabulls.com
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, fact-
based 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: piyush_utsahi@yahoo.co.in
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 e-
broking 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: Submitted To:

Monika Nagori DIRECTOR

Dr. (Mr.) K.C. Goyal
M.B.A. Part 2, IV Sem.

“COMMERECE & MANAGEMENT DEPARTMENT”

(University Of Kota,Kota)