M in is t r y o f C o r p o r a te A ff a ir s G o v e r n m e n t o f In d ia

INVESTORS GUIDE TO THE CAPITAL MARKET

Editor Prithvi Haldea PRIME Database

Under the aegis of

Invest r Ed!"ati n and Pr te"ti n #!nd June, 2010

M in is t r y o f C o r p o r a te A ff a ir s G o v e r n m e n t o f In d ia

INVESTORS GUIDE TO THE CAPITAL MARKET

Editor Prithvi Haldea PRIME Database

Under the aegis of

Invest r Ed!"ati n and Pr te"ti n #!nd June, 2010

Salman Khurshid Minister of State (Independent Charge) Ministry of Corporate Affairs, Government of India

MESSAGE
The Indian economy has expanded at a rapid rate during the current decade and the corporate sector has emerged as the biggest contributors in this gro th story! "ot on#y has India itnessed #arge inf#o of foreign investments during this period but has a#so seen the emergence of Indian mu#tinationa#s on the g#oba# corporate scene! The capita# mar$et and its expansion has been an important factor in giving a boost to the gro th of the corporate sector during the current decade! %ith this gro th of the capita# mar$et, some of the Indian companies are no mar$et capita#i'ations and are amongst the top companies in the (o ever, re#ative#y #o en&oying or#d! ho#e

participation of retai# investors in the corporate economy

continues to be a cause of concern! It has been ascertained that the tota# number of retai# investors is much #ess than )* of the tota# Indian popu#ation! %hi#e on one hand, the number of retai# investors is #o , on the other hand substantia# amount of househo#d savings are avai#ab#e hich can be channe#i'ed in the corporate economy through various investment schemes! This can enab#e the common peop#e to derive higher returns from their investments and #in$ the gro th of corporate sector to the gro th of income of these househo#ds! This re+uires an effective outreach initiative to the common peop#e educated as corporate economy in order to get higher returns! Ta$ing note of this, the Ministry of Corporate Affairs has decided to mainstream the investor a areness program as a nationa# agenda during the current year! ,or this purpose, e have partnered ith a number of institutions ho i## be organi'ing more than -,... investor programmes throughout the country this year! %e are a#so organi'ing the /India Investor %ee$0 during 1u#y 2.). Informed Investor an Asset to Corporate India! ith the theme here they can be e## as encouraged to ta$e informed investment decisions in the

The Ministry is bringing out a comprehensive investor guide on this occasion hich i## he#p the /aam aadmi0 desirous of ma$ing investments to understand e## as various investment instruments a#ong i## he#p in their rights and responsibi#ities as

ith their associated ris$s and returns! I am sure that the pub#ication of this 3oo$ i## be a significant step in spreading a areness on investor issues and integrating the common man into the corporate economy of the country!

Sa#man 4hurshid

R.Band opadh a Secretary Ministry of Corporate Affairs, Government of India

FOREWORD
3uoyant and participative financia# and capita# mar$ets are not on#y one of the most important re+uirements for gro th of corporate economy, but are a#so an important instrument of financia# inc#usion! The buoyancy in these mar$ets is as much dependent on the performance of the corporate sector as is on the participation of informed investors in the mar$et operations! ob&ectives to bring more peop#e into the corporate economy by %ith the t in ay of investment

of their surp#us incomes and to ma$e them informed investors, the Ministry of Corporate Affairs has underta$en various initiatives under the aegis of Investor 5ducation and 6rotection ,und! These inc#ude media campaigns and organi'ing investor a areness programmes the institutions ith the he#p of investor associations and some of or$ing in this fie#d! As a part of this initiative, the Ministry has

a#so made avai#ab#e educationa# content in different regiona# #anguages at its ebsite! ,or redressa# of the investor grievances, the Ministry has made avai#ab#e the services through an investor he#p#ine! %ith a vie a big to convert the investor education and a areness programme of

the Ministry into a mass movement, it has been decided to upsca#e this initiative in ay and to bring a number of organi'ations as partners in this area! I am ith the 7eserve 3an$ of India, S53I happy to announce that the three professiona# institutes, the ma&or trade and industry chambers, the stoc$ exchanges a#ong and 8epartment of 6ub#ic 5nterprises have come together to ta$e up a very #arge number of investor a areness programmes throughout the country! %e expect the number of these programmes to go beyond -,... during the current financia# year! In order to educate the investors for ta$ing informed investment decisions, the Ministry has decided to bring out an easy to understand boo$ that provides #ucid

information on various investment instruments and the rights and responsibi#ities associated ith each one of them! This Investor0s Guide has been edited by Shri 6rithvi (a#dea, a noted expert on the sub&ect! 9a#uab#e materia# has a#so been provided by S53I, 73I, Stoc$ 5xchanges and the 6rofessiona# Institutes in this regard! The pub#ication of this boo$, #anguages, hich i## a#so be avai#ab#e short#y in other i## be a sma## contribution by the i## benefit i## he#p in encouraging a much #arger number of common peop#e to

participate in the corporate economy! This

Ministry of Corporate Affairs to ards the nationa# agenda of inc#usive gro th and I am sure that a #arge number of investors : existing and potentia# : from the contents of this 3oo$! The Ministry appreciates the contribution made by Shri 6rithvi (a#dea and the organi'ations that have partnered bui#ding and hopes that the investors ith the Ministry in this initiative of nation i## be encouraged for greater participation ise manner!

in the capita# mar$et in an informed and

7!3andyopadhyay

EDITORS NOTE
Investments by households in India have in reasingly moved either to ris!"free, fi#ed"return, lo$" yielding instruments or to non"finan ial assets% &o$ !no$ledge among households of finan ial on e'ts and 'rodu ts has a dire t im'a t on utili(ation by households of the finan ial mar!ets% )inan ial litera y also 'lays a signifi ant role in effi ient allo ation of household savings and the ability of individuals to meet their finan ial goals% Investors tend to use thumb rules or see! advi e from friends and relatives, $hi h are often 'oor a''ro#imations om'ared to those that follo$ from a s ientifi analysis% *hey $ill tend to ma!e bad hoi es, ontribute insuffi iently, begin saving late, stay a$ay from modern finan e, or fall 'rey to fraud or mis"selling% If they get bad advi e, the out omes $ill be 'oor, and they $ill lose faith in the system% +istory sho$s that most investors allo$ others to destroy their $ealth% ,mall investors have al$ays 'layed a ru ial role in the a'ital mar!et% *here is, ho$ever, an in reasing need for their larger role% &ess than 1 - of our 'o'ulation invests dire tly in the mar!et $ith another 2 to . - oming through the mutual funds% /orse, less than 2 'er ent of the household savings go to the a'ital mar!et% Every earner is a 'otential saver0 every saver is a 'otential investor0 and every investor ought to be finan ially literate% Unless the ommon 'erson be omes a $iser investor, and is 'rote ted from $rongdoings, $ealth reation for the investor $ill remain a distant dream% /e need to onvert a nation of savers into a nation of investors% Individuals need to be em'o$ered so that they an ma!e informed de isions% Im'arting finan ial !no$ledge to 'eo'le is a 'ubli good% *he government, regulators and the finan ial servi es industry need to ome together to initiate a tion to im'rove finan ial litera y and deliver a urate information in sim'le formats% *his Investors1 2uide is a humble beginning in this dire tion% *he three institutions"I34I, I3,I and I3/4I had 're'ared Investors1 +andboo!s% +o$ever, these had different overage and fo us% *his 'resent Investors1 2uide to the 3a'ital Mar!et is a om'ilation of the best materials a''earing in these handboo!s, u'dating the various se tions $ith the hanges in the mar!et5la$s5guidelines, re$riting several se tions to ma!e them investor"friendly and adding a large number of ne$ se tions% *he format of 'resentation has also been made more a''ealing% *he Editor $ould li!e to a''re iate the ommitment of ,hri ,alman 6hurshid, Minister of ,tate 7Inde'endent 3harge8 ,Ministry of 3or'orate 4ffairs and ,hri R%9andyo'adhyay, ,e retary, Ministry of 3or'orate 4ffairs to em'o$er the investors and $ould li!e to than! them for 'roviding the o''ortunity of $riting this 2uide% Prithvi +aldea 1st June, 2010

INVESTORS GUIDE TO THE CAPITAL MARKET

TA$LE O# CONTENTS
Cha%ter 1 2 . B S!&'e"t I:;E,*<R EDU34*I<: 4:D PR<*E3*I<: )U:D EDI*<R1, 20 M4:*R4, RI2+*, <) I:;E,*<R, D<1, 4:D D<:1*, Pa(e N ) 1=> ?=@ A 10 = 1>

> ? E @ A 10

Primary Mar!et ,e ondary Mar!et Dealing $ith 9ro!ers C ,ub"bro!ers Mutual )unds 9uyba ! of ,e urities <'en <ffers 7under *a!eover Regulations8 3olle tive Investment , hemes 1? = 1E 1@ 1A = 2. 2B = .2 .. = .@ .A = ?2

Derivatives /+< RE2U&4*E, /+I3+ *DPE <) E:*I*D R<&E <) 34PI*4& M4R6E* I:*R<DU3*I<: *< *+E 34PI*4& M4R6E* I:;E,*ME:* 3+<I3E, I: *+E 34PI*4& M4R6E* I:;E,*ME:* P&4::I:2 PRIM4RD M4R6E*

11 12

*y'es of Issues Entry :orms for 3om'anies ,E9I1s Role in an Issue <ffer Do uments5 Pros'e tus5 &etters of <ffer Understanding the <ffer Do ument IP< 2rading 3ategories of Investors Pri ing of an Issue Understanding 9oo! 9uilding Issue Pro ess 4''li ations ,u''orted 9y 9lo !ed 4mount 74,948 Ele troni 3learing , heme 7 E3,8 )or Refunds Intermediaries Involved in the Issue Pro ess ?. ?B = E2

- ,ome *erms and 3on e'ts P,U IP<s 7 DI,I:;E,*ME:*,8 DEP<,I*<RD 433<U:* *he De'ository Infrastru ture

1.

Demateriali(ation <'ening a Demat 4 ount De'ository 3harges 9uying and ,elling Demat ,e urities Pledging5&ending5 9orro$ing of ,e urities :omination and *ransmission E. = @E

- Remateriali(ation ,E3<:D4RD M4R6E* Introdu tion Indi es Dealing in ,e urities

1B 1>

- *ransfer of ,e urities in Physi al Mode 3<:*I:UI:2 DI,3&<,URE, 9D &I,*ED 3<MP4:IE, MU*U4& )U:D, Introdu tion Mutual )und , hemes &oads5E#'enses Investing in a Mutual )und

@@ @A = AA

1? 1E 1@ 1A 20 21 22 2. 2B 2> 2? 2E &I,* 1 &I,* 2 &I,* .

- Mutual )und Performan e I:DI4: DEP<,I*<RD RE3EIP*, 7IDRs8 3<&&E3*I;E I:;E,*ME:* ,3+EME, P<R*)<&I< M4:42ER, DE&I,*I:2 9UD9436 DERI;4*I;E, 3URRE:3D DERI;4*I;E, I:*ERE,* R4*E )U*URE, I:;E,*<R 4,,<3I4*I<:, I:;E,*<R 2RIE;4:3E REDRE,,4& ,<ME U,E)U& /E9,I*E, 499RE;I4*I<:, RE2U&4*<RD 9<DIE,
MU*U4& )U:D, I: I:DI4 :2<s5;<&U:*4RD 42E:3IE, RE2I,*ERED /I*+ IEP) C I:;E,*<R 4,,<3I4*I<:, RE2I,*ERED /I*+ ,E9I 436:</&ED2EME:*, C DI,3&4IMER

100 = 101 102 = 10B 10> = 10E 10@ = 10A 110 = 112 11. = 12. 12B = 12> 12? = 1.0 1.1 1.2 = 1.E 1.@ 1.A = 1B0 1B1 = 1B> 1B? = 1BA 1>0 " 1>?

Cha%ter *

INVESTOR EDUCATION AND PROTECTION #UND

A& !t IEP# Investor Edu ation and Prote tion )und 7IEP)8 has been established under ,e tion 20>3 of the 3om'anies 4 t, 1A>? by $ay 3om'anies 74mendment8 4 t, 1AAA for 'romotion of investors1 a$areness and 'rote tion of the interests of investors% A"tivities !nderta+en &, IEP# Investor Edu ation and Prote tion )und 74$areness and Prote tion of Investors8 Rules, 2001 sti'ulate the a tivities related to investors1 edu ation, a$areness and 'rote tion for $hi h the finan ial san tion IEP)% 7i8 4 tivities sti'ulated under Rules Edu ation 'rogramme through Media <rgani(ing seminars and sym'osia )unding 'ro'osals for registration of ;oluntary 4sso iations and Institutions or other organi(ations Edu ation and engaged in Investor a tivities )unding 'ro'osals for 'roFe ts for Investors1 Edu ation and Prote tion in luding resear h a tivities 3oordinating $ith institutions engaged in Investor Edu ation, 4$areness and Prote tion a tivities Prote tion an be 'rovided under 7ii8 4 tivities underta!en by the IEP)

Edu ating and

reating a$areness among

investors through ;oluntary asso iations or organi(ations registered under IEP)0 100 asso iations have been registered so far%

Edu ating

investors

through

Media,

3ondu ted 'anel dis ussions on DD 7Delhi, Mumbai, 6ol!ata, 3hennai and 4hmedabad8, *ele ast of *; ;ideo s'ots on DD C 'rivate hannels, 'rint advertisement in national as $ell as regional ne$s'a'ers% 4ll these 'rogrammes have been underta!en in +indi, English and regional languages%

<rgani(ing seminars and $or!sho's through asso iations registered under IEP)0 )inan ing resear h 'roFe ts 'ertaining to investor edu ation and a$areness0 3oordinating $ith institutions engaged in investor edu ation and a$areness Indian Institute of 3a'ital Mar!ets 7II3M8 has been engaged on for ondu ting dividend, resear h5study un laimed

interest et % and also ondu ting G*raining of *rainersH 'rogramme%

INVESTOR RELATED -E$SITES O# IEP# ie%.)( v)in

introdu e several investor"friendly servi es li!e online hel' des!s, $eb asts, investment 'lanning $or!sheets, retirement 'lanning, ta# guides, Kui( ontests, $or!ing $ith finan ial advisors and investor alerts%

Created and Maintained by PRIME Database 7PR4II,8 infoJie'f%gov%in

)inan ial litera y allo$s the investors to fully a''re iate o''ortunities and asso iated ris!s, ta!e informed de isions and 'arti i'ate a tively in the e onomi gro$th story of the ountry by onverting savings into investments% 4s a ste' to$ards a hieving this obFe tive, the M34 laun hed a $ebsite ///)ie%.)( v)in in ,e'tember, 200E) 9esides 'roviding information about IEP) and the various a tivities that have been underta!en5 funded by it, this $ebsite fulfils the need for an information resour e for small investors on all as'e ts of the language% *his $ebsite 'resently overs information on a'ital mar!et and do it in the small investors1

Created and Maintained by Prime Investors Prote tion 4sso iation and &eague infoJ$at houtinvestors% om

Missi n *o 'revent uns ru'ulous entities from harming investors and, in the 'ro ess hel' build 'ubli onfiden e in the finan ial system, thereby enabling flo$ of 'ubli investment to the right avenues% A .ree %!&li" servi"e))) *he best defense against frauds is self"defense% *his first"of"its"!ind"in"the"$orld, free 'ubli servi e arms the investors $ith a self"defense tool to 'rote t themselves from fraudulent5non" om'liant om'anies, intermediaries and individuals% *his $ebsite is no$ a national $eb" based registry of su h entities% -h, sh !ld invest rs !se this /e&site2 $at houtinvestors% om enables investors to do a fast, effi ient and user"friendly sear h and 'rovides them $ith the information on su h entities5'ersons $hi h they an useL

IP< Investing, Mutual )und Investing, ,to ! *rading, De'ository 4 ount, Debt Mar!et, Derivatives, Indi es, Indi es 73omi 7,to ! E# hanges8, Investor ,tri'8, C Inde# )unds, Investor 2rievan es C 4rbitration Rights <bligations, Dos and Don1ts et % This /e&site is n / availa&le in Hindi as /ell as *0 1a' r re(i nal lan(!a(es) 2oing for$ard, the Ministry of 3or'orate 4ffairs intends to $ebsite li!e over many other areas on this lifetime investment strategy,

on

before

ma!ing

any

ne$

investments $ith su h entities for ontinuously revie$ing their e#isting 'ortfolio vis"M"vis su h entities% for getting automati email alerts om'anies in their 'ortfolio for ne$ a tions 7my$at hout8% 2

insuran e, 'lantation om'anies, fi#ed de'osits, small savings and ban!ing% It is also 'ro'osed to

$hen dealing $ith su h entities in any manner

<n the $hole, investors feel heated and hel'less, and have be ome over" autious% 4s a result, the a'ital mar!et and the e onomy are suffering%

-h, this /e&site2 3onsider the follo$ingL

The "reati n . the /e&site <ver the the investors years, thousands bro!en of the $at houtinvestors% om has been reated to 'rovide information to the investors in res'e t of uns ru'ulous entities $ho have ommitted frauds or $ho have not been om'lying $ith the e onomi la$s of the land% Many of these entities !ee' rea''earing to harm the investors again, Investors have lost mar!et misha's% In many ases, though 'enal regulatory a tion has been ta!en against su h entities, the information about su h a tions lies s attered and is in a diffi ult"to"a ess, diffi ult"to"use format% Defaulters !ee' rea''earing to harm the investors again, often $ith hanged om'any names or by floating ne$ om'anies5 s hemes, en ouraged and indi ted as they are by inadeKuate deterrents% Unregistered suffer at their hands% Regulatory a tion is rea tive and rarely om'ensates the investors% 4bsen e of any organi(ed database 'revents regulators and investors from ta!ing any 're"em'tive a tion% :RIs are a further disadvantaged lot, far as they are from the mar!et and the regulators% intermediaries abound, and investors *hough 'enal regulatory a tion has been ta!en against many of su h entities, information about su h a tions $as s attered and $as in a diffi ult" to"a ess, diffi ult"to"use format a ross a large number of sour es i%e% $ebsites, databases, 'ubli ations, notifi ations and orders of the government and of other organi(ations, agen ies, ourts of la$, tribunals and ommissions% It $as almost im'ossible for an investor to lo ate an indi ted entity at any regulator1s $ebsite and $orse, the absen e of a ombined database of a tions ta!en by all regulators 'revented the investors from assessing the e#tent of defaults by a given entity% <ver several years, $at houtinvestors% om has underta!en the huge Fob of ollating, value adding, leaning, standardi(ing, reformatting and tabulating information on all regulatory a tions of the 'ast fe$ years and re"'resented on this $ebsite in a form and manner that a essed in a user friendly manner% an be onseKuent onfiden e in the to a series of often $ith a ne$ om'any or hanged om'any names or by floating ne$ s hemes, ta!ing advantage of short 'ubli memory and e#'loiting greed%

uns ru'ulous entities have defrauded or have e onomi la$s of the land% *he 'ra ti e ontinues%

In fa t, this $ebsite is easier to sear h and navigate than the offi ial $ebsites of the very regulatory agen ies $hose a tions have been tra !ed and listed by it%

Si1%le sear"h res!lts 4ll regulatory harges and a tions are re$ritten in sim'le English, and standardi(ed% *he sear h results are 'rovided in a sim'le

Over *3453444 entities are alread, listed n this /e&site 4s of .1st May,2010, the $ebsite had listed over 1,0?,000 entities overingL 3om'anies5)irms L E2,>1E Individuals L ..,ABE

tabular format% )or ea h entry, the reason for the a tion and the a tion ta!en by the regulatory body is 'rovided in a summary form% )or ea h entry, the sour e do ument is atta hed, $herever available or identified to enable verifi ation and full details%

Re(!lat rs " vered *he $ebsite overs the orders 'assed by several regulatory bodies, in luding the follo$ingL De isions of the higher a''ellate authorities are also in luded% C 1%an, na1e "han(es data&ase *he $ebsite also allo$s investors to he ! for dubious name hanges of thousands of om'anies% )und In"reasin( !sa(e $at houtinvestors% om is being used by la!hs of Regulatory C investors 7over 2E la!hs as on .1 st May, 20108% *he $ebsite is also hel'ing investors indire tly by in reasing usage by regulators, investment ban!ers, sto ! e# hanges and la$ firms%

&td%

9ombay ,to ! E# hange &td% 3entral 7India8 &td% 3om'any &a$ 9oard Debt Re overy *ribunals Em'loyees1 <rgani(ation Insuran e Develo'ment 4uthority Ministry of 3or'orate 4ffairs, Registrars <f 3om'anies :ational +ousing 9an! :ational ,e urities De'ository Provident De'ository ,ervi es

&td%

:ational ,to ! E# hange of India

Created and Maintained by Midas *ou h Investors 4sso iation midasJinvestorhel'line%in

India

Reserve 9an! of India ,e urities and E# hange 9oard of

Invest r Hel%line6 A n vel " n"e%t

Dail, !%dati n *he $ebsite is u'dated on a daily basis%

tra !ing

4 free of harge, dedi ated 'ortal to handle investor grievan es% Right from filing grievan es to status, the intera tion $ith

administrator has been made online to ma!e it user friendly%

<ffer for Rights Issue :on"Re ei't of Investments and returns thereon on 3olle tive Investment , hemes5 Plantation 3om'anies

,'e ifi ty'es of 2rievan es%

)orms for Different

GRIEVANCE T7PES

:on"Re ei't of 4nnual Re'ort 5 42M :oti e 5 Pro#y )orm

ertifi ates

:on Re ei't of Refund <rder5 4llotment 4dvise related :on"Re ei't of Dividend :on"Re ei't 5 Units after of ,hare 5

:on"Registration of 3hange in 4ddress of Investor :on"Re ei't of )i#ed 5 Publi De'osits related amounts Demat related 2rievan es 2eneral )orm

allotment

transfer5 9onus *ransmission et %

4mount

:on"Re ei't of Debentures 5 9ond 3ertifi ate or Interest 5 Redem'tion

>

Cha%ter 0

EDITORS 04 MANTRAS
Save %r!dentl,8 Invest even 1 re /isel, Investin( Investing is om'ulsory% Dou have to invest other$ise your savings $ill de're iate in value5'ur hasing 'o$er% +o$ever, mindless or re !less investing is ha(ardous to $ealth% Mantra 9 # ll / li.e:","le investin( Dou an afford to ta!e greater ris!s $hen you are young% 4s you ross >0, start getting out of ris!y instruments% 9y >>5?0, you should be totally out of eKuity% 7Dou an1t afford to lose your a'ital $hen you have sto''ed earning ne$ money8% *here are better things in life at that age than $at h the 'ri e ti !er on *;N Mantra * Invest nl, in .!nda1entall, str n( " 1%anies Do not go for momentum or 'enny sto !s% Invest only in om'anies $ith strong fundamentals0 these are the ones that $ill $ithstand mar!et 'ressures, and 'erform $ell in the long term% EKuity investments annot be sold ba ! to the om'any5'romoters% ,trong sto !s are also liKuid sto !s% During bull runs, almost all IP<s 'rovide 'ositive, and in many ases huge, returns on the listing day% If an investor does not boo! 'rofit, he is either greedy or ta!es a $rong all on the om'any5 industry5 mar!et% +e should then not fault the IP< 'ri e% Remember thatO IP<s have to be bought0 these are not for ed u'on the investors% *he 'roblem is that $e 'ut IP<s on a 'edestal and e#'e t them to 'erform forever% 4n IP< be omes a listed sto ! on the listing date% It $ill then behave li!e that% De ide $hether you are investing in an IP< or in a om'any% If as an IP<, then e#it on listing date% If as a om'any, then remain invested as you $ould in a listed sto !% In any ase, invest only if the PI9 Mantra ; Invest in IPOs IP<s are a good entry 'oint%

04 Mantras t -ise Investin(

Mantra 0 Read "are.!ll, Do not gamble a$ay your hard earned money% Due diligen e is a must% Read about the offer% *his is an advi e diffi ult to 'ra ti e $ith offer do uments no$ running into more than 1000 'ages0 abridged 'ros'e tus too is diffi ult to read% Det, read you must, at least se tions on ris! fa tors, litigations, 'romoters, finan ial data% om'any history, 'roFe t, obFe ts of the issue and !ey

oversubs ri'tion is healthy%

And use the ASBA process to invest.

?

 Mantra < S!rel, invest in ever, PSU IPO IP<s are only from very good and 'rofitable P,Us0 also very little ris! of fraud% *here $ould al$ays be a dis ount for the retail investors% Don1t get bothered by the listing 'ri e0 stay invested% Mantra5 Invest in 1!t!al .!nds3 &!t sele"t the ri(ht .!nd and s"he1e In India, mutual funds are dominated by or'orate money, and have little fo us on the small investors% ,till, mutual funds are a better vehi le for a small investor% *here are too many mutual funds, too many s hemes0 sele t the right one% Mantra = Learn t sell Most investors buy and then Fust hold on 7Most advi e by e#'erts on the media is also to buy or hold, rarely to sell8% Profit is 'rofit only $hen it is in your ban! 7and not in your register or E# el sheet8% Remember, you annot ma#imi(e the mar!et1s 'rofits so don1t be greedy% ,et a 'rofit target, and sell%

Dealing $ith registered intermediaries is safer and allo$s re ourse to regulatory a tion%

Mantra ? Let n t (reed 1a+e , ! an eas, %re,@ Many s amsters are roaming around, to e#'loit your greed% Most s ams rob small investors% 9e areful about the entity see!ing your money% Mantra *4 $e/are . the 1edia3 es%e"iall, the st "+: s%e"i.i" advi"e n ele"tr ni" 1edia *oo many GsaintsH in the offering free advi eN In reality, many of these advisors have vested interests% 4lso be$are of the get"ri h s hemes being sold through ,M, and emails% Mantra ** D nt (et ta+en in &, advertise1ents *he Fob of an advertisement is to ma!e you feel"good% Don1t get arried a$ay by attra tive at hy headlines, messages% Mantra *0 $e/are . .iAedB(!aranteed ret!rns s"he1es 4ny one $ho is offering a return mu h greater than the ban! lending rate is sus'i ious% Remember 'lantation om'anies"'romised huge returns 7in some ases >0- on Day 18N a''ealing visuals, a'ital mar!et

Mantra > Deal nl, /ith re(istered inter1ediaries Many unauthori(ed o'erators in the mar!et $ho $ill lure you $ith 'romises of high returns, and then vanish $ith your money%

Mantra *9 $e/are . the (re, 1ar+et %re1ia *hese are artifi ial and normally reated by the 'romoter himself%

Do not hase 'ri e, hase value% Pri e an be lo$ be ause the om'any in fa t is not doing $ell 7but hy'e over the om'any5se tor may indu e you8%

/orse, the 'ri e an be lo$ be ause the fa e value has been s'lit 7over >00 om'anies have s'lit their shares8%

Mantra *; D nt (et ver/hel1ed &, se"t ral .renCies *he 'resent se toral fren(y is around &ogisti s and Infrastru ture% Remember, all om'anies in a se tor are not good% Ea h se tor $ill have some very good om'anies, some reasonably good

" " " "

Rationale givenL ma!e shares affordable to small investors :ot valid as in demat, one an buy even one share Real 'ur'oseL to ma!e shares a''ear G hea'H 3om'anies $ith a share 'ri e of Rs%>0 have s'lit 1L10N

om'anies and many bad om'anies% 9e also $ary about om'anies that hange their names to refle t the urrent se toral fan y% Mantra *< D nt ver:de%end !% n D" 1. rt .a"t rs li+e IP< 2rading Inde'endent Dire tors

Mantra *> $e /ar, . " 1%anies /here %r 1 ters iss!e sharesB/arrants t the1selves Preferential allotments to 'romoters are almost al$ays made for the benefit of the 'romoters only% 7*he fair route should be rights issue8% Mantra *? D nt &e . led &, C r% rate G vernan"e A/ardsBCSR *here is a high in iden e of fraudulent om'anies u''ing their 32 and 3,R a tivities% The last Mantra 04

Mantra *5 D nt &lindl, ta+e de"isi ns &ased a"" !nts '!st &e"a!se these are a!dited +igh in iden e of fraudulent a ounts and of mis"advertising Kualifi ations of finan ial notes results% to the ,atyam ase is a $a!e u' all% Read and a ounts% &oo! out es'e ially for unusual entries" related 'arty transa tions, sundry debtors, subsidiaries1 a ounts% Mantra *= Chea% shares are n t ne"essaril, / rth &!,in( n

$e h nest 9e honest to yourself as only then you an demand honesty% /e are very $ea! investors5no strong investor asso iations5ta!e every thing lying do$n% :eed to form5Foin strong investor asso iations and fight for our rights% :eed to demand disgorgement% @

Cha%ter 9

RIGHTS O# INVESTORS
,hareholders are the real o$ners of a om'any% *hey benefit, through dividends and a'ital a''re iation, $hen the om'any 'erforms $ell% <n the other hand, they arry the ris! of losing 'art or fully their investment if the om'any 'erforms badly% 4s an o$ner of the om'any, a shareholder has some fundamental rights% 4t the same time, he should 'erform his role res'onsibly% Ri(hts as a shareh lder *o re eive the shares on allotment or 'ur hase $ithin the sti'ulated time% *o re eive o'ies of the 4nnual Re'ort ontaining 9alan e ,heet, Profit C &oss 4 ount and 4uditor1s Re'ort% *o re eive dividends in due time on e a''roved in general meetings% *o re eive or'orate benefits li!e rights, bonus, et % on e a''roved% *o re eive offer in delisting or buyba !% *o 'arti i'ate5vote in general meetings either 'ersonally or through 'ro#y% *o ins'e t the statutory registers at the registered offi e of the om'any% *o ins'e t the minute boo!s of the general meetings and to re eive o'ies thereof% *o 'ro eed against the om'any, if in default, by $ay of 'ro eedings% *o re eive the residual 'ro eeds in ase of $inding u'% Ri(hts as a de&ent!reh lder *o re eive interest5redem'tion in the sti'ulated time% As an invest r3 , !r res% nsi&ilit, is *o be s'e ifi % *o remain informed% *o be vigilant% ivil or riminal Ri(hts . r redressal a(ainst ase of ta!eover, O&li(ati ns as a &!,erBseller . se"!rities - Enter into 'ro'er agreements $ith the bro!er, de'ository et % *o re eive a o'y of the trust deed on reKuest% *o a''ly before the 3&9 in ase of default in redem'tion of debentures on the date of maturity% *o a''ly for $inding u' of the om'any if the om'any fails to 'ay its debt *o a''roa h the Debenture *rustee for grievan es% Ri(hts as a &!,erBseller . se"!rities t (et - *he best 'ri e

Proof of 'ri e 5 bro!erage harged Money5shares on time ,tatement of a ounts from the bro!er, de'ository et %

"

Possess a valid ontra t note *o ma!e 'ayment on time *o deliver shares on time *o engage in fair 'ra ti es

- )raudulent 'ri es - Unfair bro!erage " Delays in re ei't of money or shares )raudulent om'anies and investor unfriendly

*o e#er ise your rights on your o$n or as a grou'%

Cha%ter ;

DOS AND DONTS

Pri1ar, Mar+et
DOs Read the Pros'e tus5 4bridged Pros'e tus arefully, $ith s'e ial attention toL Ris! fa tors 9a !ground of 'romoters 3om'any history <utstanding defaults )inan ial statements <bFe t of the issue 9asis of Issue 'ri e Instru tions a''li ation In ase of any doubts5'roblems, onta t the om'lian e offi er named in the offer do ument% for ma!ing an litigations and DONTs Don1t be influen ed by any im'li it5e#'li it 'romise made by the issuer or any one else% Don1t invest only based on the 'revailing bull run of the mar!et inde# or of s ri's of other om'anies in the same industry or s ri's of the issuer om'any5grou' om'anies% Don1t e#'e t the 'ri e of the shares of the issuer om'any to ne essarily go u' u'on listing, and forever% In ase you do not re eive, $ithin due 'eriod, the redit to demat a ount or refund of om'laint $ith a''li ation money, lodge a

the om'lian e offi er of the issuer om'any and $ith the 'ost"issue lead manager%

Se" ndar, Mar+et

DOs 9efore investing, 'lease he ! about the redentials of the om'any, its management, fundamentals and re ent announ ements made by them and other dis losures made under various regulations% *he sour es of information vendors, 4do't are the $ebsites ne$s'a'ers of the and e# hanges and om'anies, databases of data business maga(ines et % trading5investment $ith your strategies ris!"bearing ommensurate the degree of $hi h varies a ording to the investment strategy ado'ted% 4ssess as'e ts de ision% *ransa t only through ,E9I"re ogni(ed sto ! e# hanges% Deal Read bro!er only through ,E9I"registered bro!ers5sub"bro!ers% arefully and 73lient om'lete all reKuired 3lient"*rade formalities for o'ening an a ount $ith the registration, Member agreement et 8% 10 the ris!"return 'rofile of the investment as $ell as the liKuidity and safety before ma!ing your investment

a'a ity as all investments arry some ris!,

 ,ign the G6no$ Dour 3lientH 4greement% 2ive lear and unambiguous instru tions to your bro!er5sub"bro!er5DP% Insist on a ontra t note for ea h transa tion and verify details in the immediately on re ei't% ontra t note, If in doubt,

Don1t invest on the basis of hearsays, rumors and ti's% Don1t be influen ed into buying into

fundamentally unsound volumes or 'ri es

om'anies 7'enny or favourable

sto !s8 based on sudden s'urts in trading arti les5stories in the media% Don1t follo$ the herd and don1t 'lay on momentum% Don1t blindly follo$ investment advi e given on *; hannels5$ebsites5,M,% Don1t invest under 'eer 'ressure or blindly imitate investment de isions of others $ho may have 'rofited from their investment de isions% Don1t try to time the mar!et% DonQt get misled by om'anies sho$ing a''rovals 5 registrations from 2overnment agen ies as the a''rovals ould be for ertain other 'ur'oses% DonQt get arried a$ay $ith advertisements about DonQt the blindly finan ial follo$ 'erforman e media of om'anies% re'orts on or'orate develo'ments, as some of these ould be misleading% DonQt get misled by guarantees of re'ayment of your investments 7and returns8 through 'ost"dated heKues% Don1t hesitate to a''roa h authorities for redressal doubts5grievan es% Don1t leave signed blan! Delivery Instru tion ,li's 7DI,8 of your demat a ount in the o'en% Don1t give signed blan! DI, to your DP or to your bro!er% the 'ro'er of your

ross he ! details of your trade available $ith the details on the e# hange1s $ebsite% Pay the reKuired margins in the 'res ribed time% Deliver the shares5de'ository sli' in ase of sale and 'ay the money in ase of 'ur hase $ithin the 'res ribed time% Pay the bro!erage5 'ayments5 margins et % to an authori(ed 'erson only% <btain re ei't for ollateral de'osited to$ards margin% , rutini(e both the transa tions and the holding statements that you re eive from your DP% +andle Delivery Instru tion ,li's 7DI,8 9oo! issued by the DP arefully% Insist that the DI, numbers are 're"'rinted and your a ount number 73lient ID8 is 're"stam'ed% In ase you are not transa ting freKuently, ma!e use of the free(ing fa ility 'rovided for in your demat a ount% 6ee' o'ies of all investment do uments% lear your 4s! all relevant Kuestions and doubts before transa ting% DONTs Don1t forget to ta!e a ount of the 'otential ris!s that are involved in any investment% Don1t underta!e off"mar!et transa tions% Don1t deal $ith unregistered intermediaries% Don1t fall 'rey to 'romises of unrealisti returns or guaranteed returns%

11

Dealin( /ith $r +ers E S!&:&r +ers

DOS Deal only $ith ,E9I registered bro!ers5sub" bro!ers and verify that the bro!er5sub" bro!er has a valid ,E9I registration ertifi ate% ,tate learly $ho $ill be 'la ing orders on your behalf and give lear and unambiguous instru tions to your bro!er5 sub"bro!er% Insist on o'erations% Enter into an agreement $ith your bro!er5 sub"bro!er setting out terms and onditions learly% Ensure that you read the agreement and ris! dis losure signing% Ma!e sure that you sign on all the 'ages of the agreement and ensure that the bro!er or an authori(ed re'resentative, signs on all the 'ages of the agreement% 4lso the agreement should be signed by the $itnesses by giving their name and address% Insist on a valid ontra t note5 onfirmation memo for trades done $ithin 2B hours of the transa tion% ,ign the du'li ate ontra t note5 onfirmation memo to be !e't $ith the bro!er on e you re eive the original% Insist on a bill for every settlement% Ensure that the bro!er1s name, trade time and number, transa tion 'ri e and DONTS DonQt deal $ith unregistered bro!ers 5 sub " bro!ers or other unregistered intermediaries% DonQt e#e ute any do ument $ith any intermediary $ithout fully understanding its terms and onditions% DonQt leave the bro!er5sub"bro!er% DonQt forgo obtaining all do uments of transa tions even if the bro!er5sub"bro!er is $ell !no$n to you% ustody of your Demat *ransa tion ,li' boo! in the hands of any do ument arefully before lient registration form to be ommen ing signed by the bro!er before bro!erage are sho$n distin tly on the ontra t note% Insist on 'eriodi al statement of a ounts% Issue heKues5drafts only in the trade name of the bro!er% Ensure re ei't of 'ayment5 deliveries $ithin B@ hours of 'ayout% In ase of dis'utes, file $ritten om'laint to intermediary5 sto ! e# hange5,E9I $ithin a reasonable time% In ase of dis'utes $ith the sub"bro!er, yourself $ith the rules, inform the main bro!er immediately% )amiliari(e regulations and e# hanges 5,E9I% 6ee' tra ! of your 'ortfolio in your demat a ount on a regular basis% Ensure that you have money before you buy% Ensure that you are holding se urities before you sell% ir ulars issued by sto !

12

M!t!al #!nds
DOs Read the offer do ument investing% :ote that investments in mutual funds may be ris!y, and do not ne essarily result in gains% Invest in a s heme de'ending u'on your investment obFe tive and ris! a''etite% :ote that 'ast 'erforman e of a s heme or a fund is not indi ative of the s heme1s or the fund1s future 'erforman e% Past 'erforman e may or may not be sustained in the future% 6ee' regular tra ! of the :4; of the s hemes in $hi h you have invested% Ensure that you re eive an a ount statement for your investments5redem'tions% arefully before DONTs Don1t invest in a s heme Fust be ause somebody is offering you a ommission or some other in entive, gift et % Don1t get arried a$ay by the name of the s heme5mutual fund% Don1t be guided solely by the 'ast 'erforman e of a s heme5fund or be ta!en in by 'romises of future returns% Don1t forget to ta!e note of the ris!s involved in the investment% Don1t hesitate to a''roa h the 'ro'er authorities for redressal of your doubts5grievan es% Don1t deal $ith any agent5bro!er dealer $ho is not registered $ith 4M)I%

$!,&a"+
DOs Read the s'e ial resolution regarding the 'ro'osed buyba ! in detail and then vote for it% 3om'are the 'ri e offered in the buyba ! $ith the mar!et 'ri e during last fe$ months as also $ith the om'any1s Earning 'er ,hare, 9oo! ;alue et % and then determine $hether the 'ri e offered is reasonable% Read the instru tions for ma!ing the a''li ation for tendering of shares arefully% Ensure that your a''li ation rea hes the olle tion entre $ithin the 'res ribed time% )urnish all the do uments as!ed for in the letter of offer% DONTs Don1t submit multi'le a''li ations% Don1t forget to fill u' the a''li ation legibly% Don1t mutilate the a''li ation form% 1. ,end a''li ation through the mode 7'ost5 ourier5hand delivery5 ordinary 'ost et %8 s'e ified in the letter of offer% 3onta t the Mer hant 9an!er if no res'onse is re eived from the om'any regarding onsideration for the tendered shares% 3onta t the 3om'lian e <ffi er mentioned in the letter of offer in ase of any grievan e% 3onta t the Registrar of 3om'anies in ase 3om'anies 4 t has been violated%

Don1t send the a''li ation form to a $rong address% Don1t send the a''li ation form after the losure of the offer%

Don1t forget to give om'lete information in the a''li ation form% Don1t forget to sign the a''li ation form% Don1t give $rong5 ontradi tory information in the a''li ation form%

O%en O..ers F!nder Ta+e ver Re(!lati nsG

DOs Ensure that you are a$are of all om'etitive offers and revision of offer5offer 'ri e before de iding on a e'ting the offer% Refer to national dailies5 ,E9I $ebsite for details of om'etitive offers or revisions of offers% :ote that the offer is subFe t to statutory a''rovals as mentioned in the letter of offer% 3he ! $hether the offer $ill result in delisting of the om'any% In ase of demat shares, ensure redit is re eived to the ,'e ial De'ository 4 ount before the losure of the <ffer% 3arefully note the timings5days for hand delivery of the do uments mentioned in the letter of offer% /ait till the last date for <ffer Revision 7i%e% E $or!ing days 'rior to date of losing of offer8 before tendering your a e'tan e% DONTs Don1t $ait for the last date of the offer for tendering your a e'tan e% Don1t fill in the details of the buyer5transferee in the transfer deed to be sent% Don1t file an in om'lete a''li ation form5invalid do uments% ,ubmit the )orm of /ithdra$al a om'anying the letter of offer at any s'e ified olle tion enter u' to . $or!ing days before date of losing of the offer in ase you $ant to $ithdra$ the shares tendered% Ensure that signatures on the )orm of 4 e'tan e, *ransfer Deed, De'ository Instru tion and )orm of /ithdra$al are the same and in the same order as those lodged $ith the om'any% In ase of non re ei't of the <ffer Do ument, you an tender or $ithdra$ from the <ffer by ma!ing an a''li ation on a 'lain 'a'er giving the ne essary details%

C lle"tive Invest1ent S"he1es

DOs Ensure that the entity is registered $ith ,E9I% Read the offer do ument arefully% Read the a''raisal re'ort of the s heme% 3he ! the viability of the 'roFe t% 3he ! the ba !ground5e#'ertise of the 'romoters% Ensure Ensure lear and mar!etable title of the that the 3olle tive Investment 'ro'erty5assets of the entity% Management 3om'any 73IM38 has the ne essary resour es for im'lementation of the s heme% 3he ! the redit rating5tenure of the s heme% 3he ! for the 'romise vis--vis 'erforman e of the earlier s hemes, if any% 1B

 Ensure that the 3IM3 sends you a o'y of its 4nnual Re'ort $ithin t$o months from losure of ea h finan ial year% Remember that ,E9I does not guarantee returns or underta!e re'ayment of money to the investors%

DONTs Don1t invest in a 3I, entity not registered $ith ,E9I% Don1t get arried a$ay by indi ative or 'romised returns or by mar!et rumours5 advertisements%

Derivatives
DOS 2o through all rules, regulations, bye"la$s and dis losures made by the e# hanges% *rade only through a *rading Member 7*M8 registered $ith ,E9I or authori(ed 'erson of the *M registered $ith the e# hange% /hile dealing $ith an authori(ed 'erson, ensure that the ontra t note has been issued by the *M or the authori(ed 'erson only% Pay the bro!erage5'ayments5margins et % to the *M only% Ensure that for every trade you re eive duly signed ontra t note from your *M% <btain re ei't for ollateral de'osited $ith the *M to$ards margin% DONTS Don1t start trading before reading and understanding Do uments% Don1t trade on any 'rodu t $ithout !no$ing the ris! and re$ards asso iated $ith it% the Ris! Dis losure 2o through details of the 3lient"*M 4greement% 6no$ your rights and duties vis"M"vis those of the *M% 9e a$are of the ris! asso iated $ith your 'ositions in the mar!et5margin alls% 3olle t5'ay mar! to mar!et margins on your futures 'osition on a daily basis from5to *M%

1>

Cha%ter <

-HO REGULATES -HICH T7PE O# ENTIT7

2iven belo$ is a list of ty'es of om'anies5 bodies are given in the se ond the end of this 2uide% olumn% *he intermediaries5servi e 'roviders in the finan ial mar!et% *he names of the relevant regulatory T,%e . Entit, 4dvertising 4gen ies 4uditors 9an!s 9an!s " Issue 3olle tion 3hit )unds 3olle tive Investment , hemes 3om'anies " 4ll 3om'anies " &isted 3om'any ,e retaries 3o"<'erative 9an!s 3ost 4 ountants 3redit Rating 4gen ies 3ustodial ,ervi es Debenture *rustees De'ositories De'ository Parti i'ants )inan ial C Investment 3onsultants )inan ial Institutions )oreign 9ro!ers )oreign Debt )unds )oreign Investment Institutions +ousing )inan e 3om'anies Insuran e 9ro!ers5 4gents Insuran e 3om'anies Investment 9an!ers 7Mer hant 9an!ers8 Investor 4sso iations Mutual )unds C 4sset Management 3om'anies Mutual )und 9ro!ers5 4gents :e$s'a'ers C Maga(ines :on"9an!ing )inan ial 3om'anies 7:9)3s8 :idhi 3om'anies Plantation 3om'anies Portfolio Managers Primary Dealers Radio Registrars C ,hare *ransfer 4gents ,oli itors C &egal 4dvisors ,to ! 9ro!er 4sso iations ,to ! 9ro!ers ,to ! E# hanges ,ub"9ro!ers *; 3hannels ;enture 3a'ital )unds addresses of these bodies are 'rovided in &ist 1 at

Re(!lat r, & d,

I:, I34I5342 R9I ,E9I RE2I,*R4R <) 3+I* )U:D, ,E9I M345R<3 M345R<35,E9I5,E I3,I R9I I3/4I ,E9I ,E9I ,E9I ,E9I ,E9I5:,D&53D,& " M<) ,E9I ,E9I ,E9I :+9 IRD4 IRD4 ,E9I ,E9I ,E9I 4M)I5,E9I P3I R9I M34 ,E9I ,E9I R9I MI9 ,E9I 93I " ,E9I5,E ,E9I ,E9I MI9 ,E9I

1?

Cha%ter 5

ROLE O# CAPITAL MARKET

3a'ital mar!et 'lays an e#tremely im'ortant role in 'romoting and sustaining the gro$th of an e onomy% It is an im'ortant and effi ient onduit to hannel and mobili(e funds to enter'rises, and 'rovide an effe tive sour e of investment in the e onomy% It 'lays a riti al role in mobili(ing savings for investment in 'rodu tive assets, $ith a vie$ to enhan ing a ountry1s long"term gro$th 'ros'e ts% It thus a ts as a maFor atalyst in transforming the )or a long time, the Indian mar!et $as onsidered too small to $arrant mu h attention% +o$ever, this vie$ has hanged ra'idly as vast In addition to resour e allo ation, a'ital amounts of international investment have 'oured into our mar!ets over the last de ade% *he Indian mar!et is no longer vie$ed as a stati universe but as a onstantly evolving mar!et 'roviding attra tive o''ortunities to the global investing ommunity% mar!ets also 'rovide a medium for ris! management by allo$ing diversifi ation of ris! in the e onomy% 4 $ell"fun tioning a'ital mar!et also tends to im'rove information Kuality as it 'lays a maFor role in en ouraging the ado'tion of stronger or'orate governan e 'rin i'les, thus su''orting a trading environment, $hi h is founded on integrity% 3a'ital mar!et has 'layed a e onomi develo'ment ru ial role in history% e onomy into a more effi ient, innovative and om'etitive mar!et'la e $ithin the global arena% *he e#isten e of dee' and broad a'ital mar!et is absolutely ru ial and riti al in s'urring the gro$th of our ountry% 4n essential im'erative for India has been to develo' its a'ital mar!et to 'rovide alternative sour es of funding for om'anies and in doing so, a hieve more effe tive mobili(ation of investors1 savings% 3a'ital mar!et also 'rovides a valuable sour e of e#ternal finan e%

su''orting 'eriods of te hnologi al 'rogress and throughout 4mong other things, liKuid mar!ets ma!e it 'ossible to obtain finan ing for a'ital"intensive 'roFe ts $ith long gestation 'eriods% *his ertainly held true during the industrial revolution in the 1@th entury and ontinues to a''ly even as $e have moved to$ards the so" alled G:e$ E onomyH%

1E

Cha%ter =

INTRODUCTION TO THE CAPITAL MARKET

4 a'ital mar!et is a mar!et for se urities *he finan ial in'uts, among other sour es, emanate from the a'ital mar!et system% *he a'ital mar!et thrives $ith investors1 onfiden e based u'on their return on investment as $ell as from anti i'ated a'ital a''re iation from their investment% Investors are a heterogeneous grou'0 they om'rise $ealthy and middle lass, edu ated and illiterate, young and old, e#'ert and lay man% +o$ever, all investors need 'rote tion0 not 'rote tion 3a'ital mar!et an be lassified into 'rimary mar!et and se ondary mar!et% In the 'rimary mar!et, ne$ sto !s and bonds are sold by om'anies to investors% In the se ondary mar!et, the e#isting issued se urities are sold and bought among investors or traders through a sto ! e# hange% 3a'ital mar!et develo'ment is essential for the e onomi develo'ment of a ountry% *he obFe tive of e onomi a tivity in any ountry is to 'romote the $ell"being and standard of living of its 'eo'le, $hi h de'ends u'on the distribution of in ome in terms of goods and servi es in the e onomy% )or the gro$th 'ro ess in the e onomy, 'rodu tion 'lays a vital role% Produ tion of out'ut de'ends u'on material in'uts, human in'uts, and finan ial in'uts% Material in'uts are in the form of ra$ materials0 'lant, and ma hinery et %, +uman in'uts are in the form of intelle tual, managerial and labour man'o$er% )inan ial in'uts are in the sha'e of a'ital, ash, redit et % *he 'ro'er availability and utili(ation of these in'uts 'romotes the e onomi gro$th of a ountry% *he $atershed event in this dire tion $as in 1AA2 $hen the 3a'ital Issues 3ontrol 4 t $as re'la ed by the ,e urities and E# hange 9oard of India 4 t, 1AA2% *his 4 t 'rovides 1@ In the Indian s enario, efforts $ere made right sin e Inde'enden e, to effi ient a'ital mar!et reate a healthy and through legislative for assured gro$th of their investments but 'rote tion from mal'ra ti es and frauds% 4n investor ty'i ally has three obFe tivesL safety of the invested money, liKuidity of the invested money and returns on the investments% *here an often be onfli ts in the obFe tive of allo$ing raising of a'ital for e onomi develo'ment on one hand and 'rote tion of investors on the other% +o$ever, it is beyond debate that unless the interests of investors are 'rote ted, raising of a'ital $ould be diffi ult% 4n effi ient a'ital mar!et should, therefore, 'rovide a me hanism for effi ient raising a'ital as $ell as have adeKuate safeguards to 'rote t the interests of the investors% 7eKuity and debt8, $here business enter'rises 7 om'anies8 and governments an raise long" term funds% It is defined as a mar!et in $hi h money is 'rovided for 'eriods longer than a year 7raising of short"term funds ta!es 'la e on other mar!ets li!e the money mar!et8% )inan ial regulators, su h as ,E9I and R9I regulate and oversee the a'ital mar!et in their designated Furisdi tions to ensure an orderly develo'ment of the mar!et and 'rote tion of investors%

measures% *he 3a'ital Issues 73ontrol8 4 t, 1ABE $as the first 'ie e of legislation 'assed in India to ontrol the a'ital mar!et% ,ubseKuently, *he 3om'anies 4 t $as ena ted in 1A>?%

for the establishment of a Board to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental thereto. ,E9I has given 'riority to both the develo'ment, 'romotion and regulation of the a'ital mar!et and to investor 'rote tion% Its greater fo us on investor 'rote tion has earned it the name of the /at hdog of the a'ital mar!et% ,E9I strongly believes that investors are the ba !bone of the a'ital mar!et as they are the 'roviders of the a'ital for the e onomi gro$th of the ountry and also are the ful rum around $hi h the trading in se urities ta!es 'la e% ,E9I has laid do$n guidelines for almost all onstituents of the a'ital mar!et"from issuers on one hand to sto ! e# hanges on the other hand and all other intermediaries li!e sto ! bro!ers, mer hant ban!ers and under$riters% It also regulates the intermediary fund managers li!e mutual funds, 'ortfolio managers and olle tive investment s hemes% 4lert to the hanging mar!ets"both domesti

!no$ledge

to

ta!e

informed

investment

de isions% Many of them are not a$are of the ris!" return 'rofiles of various investment 'rodu ts% 4 large number of investors are not fully a$are of the 're autions they should ta!e $hile dealing $ith the mar!et intermediaries% Many are not familiar $ith the mar!et me hanisms and 'ra ti es as $ell as $ith their rights and obligations% In the last de ade, far"rea hing develo'ments have ta!en 'la e in the a'ital mar!et% *hese have im'a ted the issuers, the intermediaries as $ell as the investors% *he 'resent a'ital mar!et is signifi antly different from $hat it used to be even in the nineties, leave aside the 'eriod 'rior to that% +o$ever, ne$ hallenges emerge almost on a daily basis% *hese are substantially fuelled by the huge re$ards that the a'ital mar!et has the 'otential to offer om'ared to any other form of investment% 4t the same time, $rong investment de isions an lead to huge losses too% 4s su h, this mar!et reKuires onsiderable s!ill and e#'ertise, and a higher"than"normal ris! 'rofile Different se urities arry different ris!"return arry higher

and international, ,E9I ontinuously revises its various guidelines and regulations% In the 'rimary mar!et, the fo us is on regulation through dis losures% and ,tarting of $ith the Dis losure Investor Prote tion 7DIP8

'rofiles% 2enerally, higher ris!s

returns and vi e"versa% *he ris!s may be in the form of redit ris! 7 ounter 'arty may default on 'ayment8, return ris! 7the returns from the investment de'ends u'on several onvert the se urities into ounter 'arty ris! has ontingent fa tors8 and liKuidity ris! 7it may be diffi ult to ashR% /hile the been signifi antly

2uidelines, ,E9I has re ently onverted these guidelines into the Issue of 3a'ital and Dis losure ReKuirements8 Regulations8 7I3DR8% *hese Regulations 'res ribe detailed norms and dire tions on dis losures%

mitigated by the regulator, the other t$o ris!s are mar!et"related ris!s% ;arious investment o'tions are available in the a'ital mar!et and an investor should hoose the

+o$ever, many investors, es'e ially small investors, do not 'ossess adeKuate e#'ertise5

right 'rodu ts based u'on his life y le stage and u'on various 'arameters li!e liKuidity, safety, 1A

returns and ta#es, +e of ourse needs to de ide $hether he has the s!ills and time for a tive management of his investments or $ould he rather 'ass on this res'onsibility to a mutual fund or a 'ortfolio manager% Investors do not have any ontrol over the day to day a tivities of any om'any% Investor annot guide the fate or destiny of the money invested% 4n investor to that e#tent is Kuite fragile% /orse, he is e#'osed to additional ris!s if the 'romoters of the om'any si'hon off or misutili(e his money% *here are, no doubt, la$s some of $hi h are adeKuate to 'rote t the interests of investors, but inadeKua ies of ertain legislative measures have ome to light $herein inno ent investors have been de'rived of their hard earned money% GInvestor 'rote tionH is a very 'o'ular 'hrase $hi h all those on erned $ith regulation of the a'ital mar!et use these days, be it ,E9I, sto ! e# hanges, investors asso iations, and even the om'anies themselves% *he term GInvestor Prote tionH is a $ide term en om'assing various measures designed to 'rote t the investors from mal'ra ti es of om'anies, mer hant ban!ers, de'ository intermediaries% 'arti i'ants and other

usually less than one year, for e#am'le, the mar!et for A0"days treasury bills% *his mar!et en om'asses the issuan e and trading of short term non"eKuity debt instruments in luding treasury bills, ommer ial 'a'ers, ban!ers1 a e'tan e, ertifi ates of de'osits, et % Ca%ital Mar+etL 3a'ital mar!et is a mar!et for long"term debt and eKuity shares% In this mar!et, the a'ital funds om'rising of both eKuity and debt are issued and traded% *his in ludes both 'rivate 'la ement sour es of debt and eKuity as $ell as organi(ed mar!ets li!e sto ! e# hanges% 3a'ital mar!et an be further divided into the 'rimary mar!et and the se ondary mar!et% In the %ri1ar, 1ar+et3 se urities are offered to the 'ubli for subs ri'tion, for the 'ur'ose of raising a'ital or funds or dilution of the 'romoter1s holding for the 'ur'oses of listing% Se" ndar, 1ar+et refers to a mar!et $here se urities, both eKuity and debt, are traded after being initially offered to the 'ubli in the 'rimary mar!et and5or listed at the sto ! e# hanges% MaFority of the trading is done in the se ondary mar!et% )or an investor, the se ondary mar!et 'rovides

GInvestors 9e$areH should be the $at h$ord of all 'rograms for mobili(ation of savings for investment% 4s all investments have some ris! element, this should be borne in mind by the investors% If aution is thro$n to the $inds, they have only to blame themselves%

an effi ient 'latform for trading of his se urities% )or the management of the om'any, se ondary eKuity mar!ets serve as a monitoring and ontrol onduitSby fa ilitating value"enhan ing ontrol a tivities, enabling im'lementation of in entive" based management ontra ts, and aggregating information 7via 'ri e dis overy8 that guides the

Understandin( #inan"ial Mar+ets

*he finan ial mar!ets an broadly be divided into money mar!et and a'ital mar!et% M ne, Mar+et6 Money mar!et is a mar!et for debt se urities that 'ay off in the short term

management de isions%

COMPONENTS O# THE CAPITAL MARKET

20

*he fo us of the a'ital mar!et is the investor% *he other om'onents of the mar!et $hi h in lude the government, regulators, issuers, e# hanges and various ty'es of intermediaries, all of $hom $or! for the investor% RE2U&4*<R,

,ome of the mar!et

om'onents $or! as

regulators, some as mediators, some as issuers and some as investors% *hese areL

Ministry of 3or'orate 4ffairs 7M348, Ministry of )inan e 7,to ! E# hange Division8, ,e urities and E# hange 9oard of India 7,E9I8 and ,to ! E# hanges% Parti i'ants in the Indian a'ital mar!et 7,E9I" regulated8L ,to !bro!ers, sub"bro!ers, share transfer agents, ban!ers to an issue, trustees, registrars to an issue, mer hant ban!ers, under$riters, 'ortfolio managers, investment advisers, and other su h intermediaries0 De'ositories, 'arti i'ants, ustodians of se urities, )IIs, redit rating agen ies,

I:*ERMEDI4RIE,

I,,UER,

and other su h intermediaries 3or'orate 7Primary C ,e ondary Mar!et8, venture a'ital funds and olle tive investment s hemes, in luding mutual funds%

RISKS ASSOCIATED -ITH THE MARKET 3a'ital mar!et ris! usually defines the ris! involved in the investments% *he star! 'otential of e#'erien ing losses follo$ing a flu tuation in the se urity 'ri es is the reason behind the a'ital mar!et ris!% 3a'ital mar!et ris! annot be diversified% It an also be referred to as a'ital mar!et systemati ris!% /hile an individual is investing in a se urity, ris! and return annot be se'arated% Ris! is an integrated 'art of the investment% +igher the 'otential of return, higher is the ris! asso iated $ith it% E#amination of the ris!s involved in the a'ital mar!et investment is one of the 'rime as'e ts of investing% *he element of ris! is $hat distinguishes an investment from savings% ,ystemati ris! is ommon to the entire lass of liabilities or assets% De'ending on e onomi hanges, the value of investments an fall

enormously% *here may be some other finan ial events also im'a ting the investment mar!ets% In order to he ! a'ital mar!et ris!, asset allo ation an be fruitful% 4ny investment in sto !s or bonds omes $ith the follo$ing ty'es of ris!s% Mar!et Ris! Industry Ris! Regulatory Ris! 9usiness Ris!

Mar!et Ris! is the overall ris! involved in a'ital mar!et investments% *he sto ! mar!et rises and falls de'ending on a number of fa tors% *he olle tive vie$ of the investors to invest in a 'arti ular sto ! or bond 'lays a signifi ant role in the sto ! mar!et rise and fall% Even if the om'any is going through a bad 'hase, the sto ! 21

'ri e may go u' due to a rising sto ! mar!et $hile onversely, the sto ! 'ri e may fall be ause the mar!et is not steady even if the om'any is doing $ell% Industry Ris! are ris!s emanating from the mar!et for es and regulations relating to a given industry% *hus, all sto !s $ithin an industry $ould be affe ted by industry related fa tors%

management, strategies, mar!et share and labor for e% It is im'ortant for investors to reali(e that returns on eKuities an be y li al and that the mar!et $ill move in both dire tions% %

Regulatory Ris! are ris!s arising out of hanges in regulations and la$s, either s'e ifi to the om'any5industry or the ountry as a $hole% 9usiness Ris! may affe t the investors if the om'any goes through some hanges in 22

Cha%ter >

INVESTMENT CHOICES IN THE CAPITAL MARKET

4mong all investment o'tions available, Different se urities arry different ris!"return arry higher se urities are onsidered the most hallenging as $ell as re$arding% 9ut investment in se urities reKuires onsiderable s!ill and e#'ertise and arries the ris! of loss if the hoi e of se urities is not right or they are not bought 5 sold at right time% *here are a large variety of instruments referred to as se urities in in ludeL 7i8 shares, s ri's, sto !s, bonds, debentures, debenture sto ! or other mar!etable se urities of a li!e nature in or of any in or'orated or'orate0 7ii8 7iii8 derivative0 units or any other instrument issued by any olle tive investment s heme to the investors in su h s hemes0 7iv8 7v8 se urity re ei'ts0 units or any other su h instrument issued to the investors under any mutual fund s heme0 7vi8 any ertifi ate or instrument issued to *here are investment o''ortunities that are high on ris! and there are investment o''ortunities that are lo$ on ris!% Ea h is alled an asset lass% 4n investor allo ates his savings to one or more asset lasses de'ending u'on his ir umstan es% *his de ision is the most alled the asset allo ation de ision essen e in of the asset de ision% 4sset allo ation de ision is 'erha's im'ortant 'ro ess% *he investment investor by any issuer being a s'e ial 'ur'ose distin t entity $hi h 'ossesses any debt or re eivable in luding mortgaged debt assigned to su h entity and a !no$ledging benefi ial interest of su h investor in su h debt or re eivable in luding mortgage debt as the ase may be0 7vii8 government se urities0 7viii8 su h other instruments as may be de lared by the entral government to be se urities0 7i#8 rights or interest in se urities% +o$ mu h ris! an investor an ta!e de'ends on his finan ial ir umstan es and the mental ma!e" u'% Every investor must !no$ his o$n uniKue ris! 2. It is not al$ays 'ossible to meet all finan ial goals $ith available savings% If savings are limited but the needs are substantial, then the savings should be invested in avenues that $ould offer high returns% 9ut usually, high return also means high ris!% 4ll investors are not in a 'osition to ta!e high ris!s% om'any or other body ommon 'arlan e% *hese Investment de isions are based u'on the investors1 life y le stages and other fa tors su h as liKuidity, safety, return on investments, ta# savings, a tive involvement reKuired to manage the investment, and minimum amount reKuirement for sele ting the instruments% 'rofiles% 2enerally, higher ris!s

returns and vi e"versa% *he ris! ould be in the form of redit ris! 7 ounter 'arty may default 'ayment as it may not have integrity8, return ris! 7the return from the investment may de'end on several ontingent fa tors8 and liKuidity ris! 7it may be diffi ult to onvert se urity into ash8%

allo ation lies in the fa t that, over time, it an determine u' to A0- of the 'ortfolio1s return%

'rofile and then ma!e the investment de isions% 4s su h, the Kuestions he should as! himself areL

More than >0-

Dour earnings in the future $ill /hat !ind of investor am IT 4m I 're'ared to ta!e high ris!sT 4m I averse to ta!ing ris!sT methods by $hi h an /hen the 'ri e of the share you have 'ur hased dro's stee'ly you $ould ,ell your investment ,ell 'art of your investment Do nothing 9uy more of the same investment the follo$ing set of *here are s ientifi investor e#am'le, 'rofileL Dour age is 9et$een 2>".> 9et$een .>">0 9et$een >0"?> 4bove ?> Ea h of the above Kuestions $ould im'a t the ris! 'rofile of an investor% )or e#am'le, lo$er the age, greater is the e#'e ted $illingness to ta!e ris!s% *his is be ause younger 'eo'le have a lifetime of Dour 'osition is best des ribed by Dou are self"de'endent and do not su''ort anybody Dou have de'endent7s8 :earing retirement Retired 4t the very basi level, there are three asset lasses from $hi h to hoose from based u'on an +o$ mu h of the follo$ing needs have been ta!en are ofT 7)ully, 'artially, not at all8 Insuran e Retirement 3hildren1s edu ation +ousing urrent e#'enses is investors1 ris! 'rofile% *hey are eKuity, debt and ash% EKuity is ris!y, debt has lo$ ris! and ash has even lo$er ris!% /ithin ea h of the above asset lasses, the investor has to sele t s'e ifi instruments for investment% )inan ial ir umstan es and the investor 'rofile di tate the investment avenues for an investor% /hat 'ro'ortion of your funded from investmentsT :il U' to 1>9et$een 1>- and .09et$een .0- and >0)inan ial instruments vary in terms of the liKuidity, safety, and returns they offer% *he hallenge in ma!ing the investment de ision is to hoose the right investor 'rofile% ombination of instruments !ee'ing in mind the finan ial situation and earnings ahead of them and thus an afford to ta!e higher ris!s $ith their 'resent savings% ,imilarly, in ase a 'erson does not have any de'endents, he an ta!e more ris!% ans$ering an understand his ris! 'rofile% )or far e# eed inflation be marginally ahead of inflation !ee' 'a e $ith inflation not !ee' 'a e $ith inflation

Kuestions ould give him an idea about his ris!

2B

Ea h investment o'tion has some advantages and some limitations% )or e#am'le, $hile ban! savings a ount $ould be highly liKuid 7you an $ithdra$ $henever you li!e8, investment in Publi Provident )und $ould be diffi ult to $ithdra$% Ris!s are generally 'ositively orrelated $ith

&iKuidity ,afety Returns *a# savings 4 tive involvement reKuired to manage the investment Minimum amount that an be invested

'robability of returns% )or e#am'le, returns in eKuity shares an be high, but the asso iated ris!s are also relatively higher than other o'tions% Ris!s an be lassified into unsystemati and systemati % Unsystemati ris!s are those that an be minimi(ed by diversifying one1s 'ortfolio% )or e#am'le, instead of investing in the shares of steel om'anies alone, one ould invest into other se tors li!e Pharma euti als and ,oft$are% In this situation, your 'ortfolio may not be terribly affe ted even if the steel se tor $ere to register a medio re 'erforman e% <n the other hand, systemati ris!s are those that annot be minimi(ed through 'ortfolio diversifi ation% )or e#am'le, a 6orean investor ould not 'ossibly have minimi(ed or eliminated his loss due to the urren y risis in ,outh East 4sia, through a strategy of diversifi ation of his 'ortfolio% *he hara ter of the investor is also im'ortant% ,ome investors have the time and the !no$ledge to study their investment 'ortfolios arefully" these ould be alled as Ua tive1 investors% <thers do not intend to $at h their investments regularly, due to la ! of time or !no$ledge or in lination, and are loo!ing for essentially safer avenues for 'ar!ing their funds% Pri1ar, Mar+et6 Primary mar!et refers to issue of se urities by om'anies5entities to the 'ubli % are 4'art from shares, other instruments ommonly issued in the 'rimary mar!et debentures, onvertible debentures, shares $ith atta hed o'tions li!e $arrants et % Se" ndar, Mar+et6 ,e ondary mar!et refers to the sto ! e# hanges $here an investor an buy 7or sell8 shares $hi h are listed on them% 4s a result of signifi ant 'arti ularly investors are hanges in the re ent 'ast, om'uteri(ation, dealing $ith online a trading, more

EH!it, Shares
4n eKuity share, of the ommonly referred to as ordinary share re'resents a fra tional o$nershi' om'any in $hi h a shareholder, as a fra tional o$ner, underta!es the entre'reneurial ris!s and re$ards asso iated $ith a business venture% *he holders of su h shares are members of the om'any and have voting rights% EKuity ,hares an be 'ur hased in the Primary and ,e ondary Mar!ets%

demateriali(ation and de'ository 'arti i'ation, mu h trans'arent and effi ient se ondary mar!et% EKuity ,hares yield returns in t$o $aysL one, dividends de lared by om'anies usually at the end of a year 7and sometimes during the ourse of the year8 and, t$o, a'ital gains on selling%

INVESTMENT OPTIONS
;arious o'tions available are des ribed in the follo$ing 'aragra'hs and evaluated broadly on riteria su h as

2>

&iKuidity of investments in eKuity shares de'ends u'on the trading volumes of the share% If the share is a tively traded, an investor an easily sell the shares and reali(e the sale 'ro eeds% +o$ever, if the share is not traded 7or is delisted8, then liKuidity is a onstraint% *e hni ally, it is 'ossible to buy even one share in the demateriali(ed se urities regime% EKuity is a volatile instrument% It is an a''ro'riate investment avenue for an investor $ho is 're'ared to ta!e ris!s in order to generate higher returns% <ver the long term, returns from eKuity shares at aggregated levels have been histori ally higher than most other avenues% +o$ever, individual investors ould gain or lose de'ending on the shares they invest in and $hen they buy and sell% 4n investor needs to be a$are of the om'anies in $hi h he invests and ontinuously monitor their 'erforman e% )or this, he should have some basi !no$ledge of finan e and of the mar!et 'ro esses% *he trends in eKuity mar!et are refle ted in the movement of the eKuity indi es and the volume of the trading a tivity%

C!1!lative Pre.eren"e Shares6 4 ty'e of 'referen e share on $hi h dividend a umulates if it remains un'aid% 4ll arrears of 'referen e dividend have to be 'aid out before 'aying dividend on eKuity shares%

C!1!lative C nverti&le Pre.eren"e Shares6 4 ty'e of 'referen e shares $here the dividend 'ayable on the same a umulates, if not 'aid% 4fter a s'e ified date, these shares $ill be onverted into eKuity a'ital of the om'any%

Parti"i%atin( Pre.eren"e Share6 *he right of ertain 'referen e shareholders to 'arti i'ate in 'rofits after a s'e ified fi#ed dividend ontra ted for, is 'aid% Parti i'ation right is lin!ed $ith the Kuantum of dividend 'aid on the eKuity shares over and above a 'arti ular s'e ified level%

Se"!rit, Re"ei%ts
,e urity re ei't means a re ei't or other se urity, issued by a se uriti(ation om'any buyer to 'ursuant to om'any any a or re onstru tion institutional Kualified s heme,

Pre.eren"e Shares
Pre.erred St "+ B Pre.eren"e Shares6 <$ners of these !inds of shares are entitled to a fi#ed dividend or dividend al ulated at a fi#ed rate to be 'aid regularly before a dividend an be 'aid in res'e t of eKuity share% *hese also enFoy 'riority over eKuity shareholders in 'ayment of sur'lus% +o$ever, in the event of liKuidation, their laims ran! belo$ the laims of the om'any1s reditors, bondholders5 debenture holders%

eviden ing the 'ur hase or a Kuisition by the holder thereof, of an undivided right, title or interest in the finan ial asset involved in se uriti(ation%

De&t Instr!1ents
Debt instruments re'resent ontra ts $here one 'arty is the lender 7investor8 and the other 'arty is the borro$er 7issuer8% *he debt ontra t s'e ifies the rate of interest, time of interest 'ayment, re'ayment of 'rin i'al, et % In India, the term GbondH is used to re'resent the debt instrument issued by the entral and state governments and P,Us% *he term GdebentureH is

2?

used for debt issues from the 'rivate or'orate se tor%

*he

se ondary

mar!et

a tivity

for

debt

instruments ta!es 'la e in the debt segment of the e# hange% *he trends in the debt mar!et are refle ted in the debt indi es and the turnover

*he 'rin i'al features of a debt instrument areL Maturity 3ou'on Prin i'al

data% In India, the debt mar!et a tivity is dominated by ban!s and institutions% $ nds 4 9ond is a loan given by the buyer to the issuer of the instrument% 9onds may be issued by om'anies, finan ial institutions or the government% <ver and above the s heduled interest 'ayments, the holder of a bond is entitled to re eive the redem'tion value of the instrument at the s'e ified maturity date% In sim'le terms, a bond investor lends money to the issuer and in e# hange, the issuer 'romises to re'ay the loan amount on a s'e ified maturity date and usually 'ay the 'eriodi interest 'ayments over the life of the loan% )e$ more 'o'ular ty'es of 9onds are as follo$sL

Maturity refers to the date on $hi h the 'rin i'al $ould be re'aid% 3ou'on is the rate at $hi h interest is al ulated $ith referen e to the fa e value% )or e#am'le, a 10- 2010 bond refers to fa e value of Rs% 100, ou'on rate of 10- '%a%, and re'ayment of the fa e value in the year 2010% *he ou'on rate may be fi#ed for the entire

'eriod or may be related to a ben hmar! rate% In the latter ase, the ou'on rate hanges as the ben hmar! rate hanges% *his instrument is alled a floating rate debt instrument% *here are debt instruments that ome $ith

Vero 3ou'on 9ondsL 9onds issued at a dis ount and re'aid at a fa e value% :o 'eriodi interest is 'aid% *he differen e bet$een the issue 'ri e and redem'tion 'ri e re'resents the return to the holder% *he buyer of these bonds re eives only one 'ayment at the maturity of the bond% *hese are also sometimes referred to as dee'"dis ount bonds%

o'tions to redeem the 'rin i'al earlier than the maturity date% If the o'tion rests $ith the issuer, it is a bond that is allable% If the o'tion to redeem rests $ith the investor, it is 'uttable% *here are many different P,Us 73entral ty'es and or of debt " )inan ial ,tate8 "

instruments in India% *hese areL 9onds 7from Institutions8 2overnment ,e urities *reasury 9ills 3om'any Debentures 3ommer ial Pa'er 3ertifi ates of De'osit

3onvertible 9ondsL 9onds giving the investor the o'tion to onvert the bond into eKuity at a fi#ed onversion 'ri e% *a#",aving 9ondsL *a#",aving 9onds offer ta# e#em'tion u' to a s'e ified amount of investment%

"

Regular In ome 9ondsL Regular"In ome 9onds, as the name suggests, are meant to 'rovide a stable sour e of in ome at regular, 're"determined intervals%

2E

,imilar instruments issued by

om'anies are

alled debentures% 9onds are usually not suitable to a hieve a'ital a''re iation% ,ometimes, an investor buys bonds at a lo$er 'ri e Fust before a de line in interest rates, and the subseKuent dro' in the interest rates leads to an in rease in the 'ri e of the bond, thereby fa ilitating a'ital a''re iation% 9onds are suitable for regular in ome 'ur'oses% De'ending on the ty'e of bond, an investor may re eive interest semi"annually or even monthly, as is the ase $ith monthly"in ome bonds% 9ond 'ri es are de'endent on the fa e value of these instruments% *he most ommon fa e value is Rs% 100% Minimum amount of investment is generally around Rs% >,000% 4n investor need not be a tively involved in investment management% Publi ,e tor Underta!ings and )inan ial Treas!r, $ills ,hort"term 7u' to A1 day8 bearer dis ount se urities issued by the 2overnment as a means of finan ing its ash reKuirements% C 1%an, De&ent!res Instruments issued by a om'any bearing a fi#ed rate of interest usually 'ayable half yearly on s'e ifi dates $ith the 'rin i'al amount harged from re'ayable on a 'arti ular date on redem'tion% Debentures are normally se ured 5 debenture holder% 3om'anies borro$ against the assets of the om'any in favour of the debenture"holders and generally offer a fi#ed rate G vern1ent Se"!rities FG:Se"sG *hese are sovereign 7 redit ris!"free8 ou'on bearing instruments $hi h are issued by the Reserve 9an! of India on behalf of the 2overnment of India, in lieu of the 3entral 2overnment1s mar!et borro$ing 'rogramme% *hese se urities have a fi#ed ou'on that is 'aid on s'e ifi dates on half"yearly basis% *hese se urities are available in a $ide range of maturity dates, from short dated 7less than one year8 to long dated 7u' to t$enty years8% Investors an subs ribe to 'ubli issue of debentures by om'anies or buy debentures from the se ondary mar!et% In vie$ of the fi#ed returns from these se urities, 'ri es of debentures are generally mu h less volatile relative to shares% Investors earn interest and a'ital gains 2@ of interest to su h investors% Most debentures are redeemed after a s'e ified 'eriod% *he 'eriod ould be short 7less than 1@ months8 or long de'ending on the terms of issue% In some ases, om'anies also 'ay a 'remium on maturity% as $ell as R9I *a# free bonds are very safe as they ome from the ountry1s entral ban!% Returns from the bonds are steady and an be as ertained learly in advan e based on the D*M% R9I *a# )ree 9ondsL R9I *a# )ree 9onds are s'e ial bonds issued by the R9I offering ta#"free fa ility% *he rate of interest in su h bonds is generally lo$er than regular bonds and hen e these attra t only high ta#'ayers% *hese bonds tend to be long"term instruments%

Institutions 9ondsL ;arious bonds are floated from time to time by Publi ,e tor Underta!ings Develo'ment )inan ial Institutions% Most su h bonds offer attra tive s hemes li!e monthly interest, Kuarterly interest, various redem'tion o'tions, dee' dis ount bond o'tions et %

7differen e bet$een the 'ur hase 'ri e and the sale 'ri e or if held till redem'tion, the differen e bet$een 'ur hase 'ri e and the redem'tion 'ri e8% Dields on debentures ould be higher or lo$er than the s'e ified rate of interest de'ending on the orrelation bet$een fa e value and mar!et value% )or e#am'le, assume that a Rs% 100 debenture arrying 1>- interest is bought for Rs% A0% *he 'ri e 'aid is Rs% A0 $hereas the interest earned is Rs% 1>% *his $ould translate to a yield of 1?%?E-% In the above e#am'le, the investor $ould get ba ! Rs% 100 from the om'any 7fa e value8 if he holds the debentures u' to maturity% +en e, a'art from the interest yield of 1?%?E-, he $ould also gain Rs% 10 by $ay of a'ital gain% /hen this a'ital gain is also onsidered for om'uting the yield, it is termed as Dield to Maturity 7D*M8%

Returns from high Kuality debentures are steady and an be as ertained in advan e based on the D*M% *hese returns $ould vary only if the om'any $ere to renege on its 'ayment obligations% 4n investor need not be a tively involved in investment management, e# e't to the e#tent of !ee'ing basi tra ! of om'anies, $hi h might be 'erforming badly and ould fail to fulfill their interest or re'ayment obligations% C 11er"ial Pa%er 4 short term 'romise to re'ay a fi#ed amount that is 'la ed on the mar!et either dire tly or through a s'e iali(ed intermediary% It is usually issued by om'anies $ith a high redit standing in the form of a 'romissory note redeemable at 'ar to the holder on maturity and therefore, doesn1t reKuire any guarantee% 3ommer ial 'a'er is a money mar!et instrument issued normally for a tenure of A0 days% Certi.i"ate . De% sit

Most debt issues are reKuired to be rated by redit rating agen ies% Rating indi ates the Kuality of the instrument% 4n indi ation of redit rating is given belo$L Credit Ratin( S,1& ls and -hat The, Mean +igh Investment 2rades 444 +ighest ,afety 44 Investment 2rades 4 999 ,'e ulative 2rades 99 9 3 D InadeKuate ,afety +igh Ris! ,ubstantial Ris! In Default +igh ,afety 4deKuate ,afety Moderate ,afety

4 time de'osit $ith a ban!% 3Ds are generally issued by ommer ial ban!s but they an be bought through bro!erages% *hey bear a s'e ifi maturity date, a s'e ified interest rate, and an be issued in any denomination, mu h li!e bonds% &i!e all time de'osits, the funds may not be $ithdra$n on demand%

M!t!al #!nd S"he1es

Mutual )unds are entities $hi h and and invest into various eKuity olle t funds and debt )unds from small investors, 'ool these funds together instruments 7or even money mar!et instruments government se urities8% Mutual em'loy individual om'etent finan e 'rofessionals $ho investor )urther, might these not su essfully are ta!en

resear h the mar!ets effe tively, $hi h an manage% entities

Different rating agen ies might have different symbols than the ones given above%

seriously by a om'any1s management in vie$ of their large fund base% 2A

EH!it,: riented 1!t!al .!nds Mutual fund s hemes an be o'en"ended or *hese funds invest in eKuities and generate a'ital a''re iation% Redem'tions are effe ted $ithin 2". days in most su h mutual fund s hemes% ,afety levels are lo$ though slightly better than dire t investment in shares by investors, as most funds invest in a bas!et of eKuities thus hedging their individual ris!s 'artly through the bas!et In ase of lose"ended mutual funds, liKuidity de'ends on the availability of buyers and sellers in the sto ! e# hange $here these units are listed% *hus, liKuidity is similar to that of listed shares% 3lose"ended s hemes may be listed on sto ! e# hanges and traded at listed 'ri es% If it is not listed, regular re'ur hase fa ility $ill be 'rovided by the mutual )unds% *hese 'ri es ould vary substantially from the :4; due to investor 'er e'tions, demand and su''ly situations et % :4; is a ommon e#'ression in the mutual fund industry and denotes :et 4sset ;alue% :4; 'er Unit is eKual to the Mar!et value of the assets of the s heme less liabilities divided by number of units outstanding% Mutual 'attern% )und 4 , hemes are floated s heme $ith $ould In vie$ of the nature of the fund1s investments, safety levels are relatively high in debt"oriented funds% 4n investor need not be a tively involved in investment management% +o$ever, the obFe tives that determine their investment gro$th"oriented 'redominantly invest in eKuities and $ould see! a'ital a''re iation as its maFor obFe tive% 4 debt"oriented s heme $ould 'redominantly invest in debt instruments and $ould see! regular in ome as its maFor obFe tive% 4 balan ed s heme $ould invest 'artially in eKuity and rest in debt and $ould balan e the obFe tives of gro$th and in ome% *a# ,aving , hemes are designed to 'rovide ta# shelter to the investors% Mutual )unds also float innovative s hemes li!e inde# funds, s'e ifi se tor funds, money mar!et funds, gilt funds, et % Inde# funds see! to invest in inde# sto !s 7e%g% only those sto !s $hi h are used to determine the ,ense#, :ifty et %8% ,'e ifi se tor funds see! to invest into s'e ified se tors li!e Pharma euti als or ,oft$are% Money mar!et investor should be $at hful about the :4; movements% /hile generally the returns from debt funds are e#'e ted to be steady, there ould be :4; volatility if the interest ranges hange% De&t: riented 1!t!al .!nds *hese funds see! to 'rovide a regular return to investors and $ould invest in debt instruments $here ris! levels are lo$er 7relative to eKuity8, and $ould generate regular returns for the fund and onseKuently for its investors% a''roa h% Returns in eKuity funds are volatile and $ould de'end on the mar!et movement in general and investment e#'ertise of the mutual fund in 'arti ular% 4n investor need not be a tively involved in investment management% +o$ever, the investor should $at h the :4; and the load% lose"ended% <'en"ended s hemes do not have a fi#ed maturity% Investors an buy5sell units of su h s hemes from5to the fund itself at 'ri es determined by the :et 4sset ;alue 7:4;8 'lus or minus a load, a''lied either at the 'oint of 'ur hase or sales by the fund% &iKuidity in o'en" ended mutual funds is very high%

.0

and gilt funds see! to invest into those mar!ets alone% TaA Savin( S"he1es . M!t!al #!nds and #inan"ial Instit!ti ns *hese s hemes are floated by mutual funds and finan ial institutions after obtaining government a''roval for offering s'e ified ta# benefits to investors% 4n investor thus gets an additional s$eetener% <ther features of these investment o'tions are on 'ar $ith the regular features of mutual funds and finan ial institutional o'tions%

4 for$ard ontra t is a ustomi(ed ontra t $here the settlement ta!es 'la e at a future date but at 'ri es agreed on the date the ontra t is $ritten% 4 futures ontra t is similar to a for$ard e# e't that it is standardi(ed and traded on the derivative e# hange% 4n o'tion gives the right and not obligation to the buyer to buy5sell an asset at a future date but at a 'ri e agreed on the date of $riting the ontra t% 4 buyer of an o'tion 'ays a 'ri e alled 'remium% 4n o'tion that gives the right to buy an asset is a all o'tion% /hen the right given is a right to sell the asset, it is a 'ut o'tion% /arrants are long dated all o'tions on eKuity shares%

Derivative Pr d!"ts
)utures, o'tions, for$ards and s$a's are alled derivative 'rodu ts% *hey derive their value from another asset, inde# or referen e rate%

SUMMAR7 O# OPTIONS AVAILA$LE

Invest1ent O%ti n LiH!idit, Sa.et, A"tive Inv lve1ent EH!it, Shares C 1%an, De&ent!res P!&li" Se"t r and #I $ nds R$I TaA #ree $ nds De&t riented M!t!al #!nds EH!it, riented M!t!al #!nds +igh &o$ :o 2ood &o$ Moderate +igh +igh Moderate :o :o Moderate +igh :o Moderate to +igh &o$ &o$ Moderate ReH!ired2 2enerally Des 2enerally :o TaA Savin(s &ong *erm &o$ *a# Refer *a# 3ha'ter Refer *a# 3ha'ter *a# Moderate &o$ &o$ &o$ A1 !nt ReH!ired Medium Medium

*he above table is indi ative% 4ttra tiveness of ea h o'tion hanges 'ra ti ally every day de'ending on e onomi onditions, government 'oli ies and other fa tors%

.1

Cha%ter ?

INVESTMENT PLANNING
-h, is investin( i1% rtant2 <ne needs to invest to ma#imi(e returns on one1s savings and also to be able to generate ash flo$s for meeting several finan ial needs of the future% <ne must, ho$ever, invest $ith !no$ledge and full are in order to not only 'rote t one1s hard"earned generate good returns% -hat sh !ld &'e"tives2 *here are normally three obFe tivesL safety, return and liKuidity% *his means that one $ould li!e an investment to be absolutely safe, $hile it generates handsome returns and 'rovides high liKuidity% +o$ever, it is diffi ult to ma#imi(e all three obFe tives simultaneously% *y'i ally, one obFe tive trades"off against another% )or e#am'le, if one $ants high returns, one may have to ta!e some ris!s, or if one $ants high liKuidity, one may have to om'romise on returns% )or 'eo'le $ho have a regular in ome, gro$th"oriented investments, $ith some ris!s, are ideal% S%e"i.i"ati n . the .inan"ial ( als Investments are made $ith ertain finan ial obFe tives% *hese obFe tives should be defined *he first ste' for an investor is to learly $rite do$n the finan ial needs% *he finan ial needs $ould be e#'ressed in terms of the amount reKuired and the future date on $hi h reKuired% In the above three e#am'les, $e $ould $riteL 1% *o retire at age >> $ith an annual in ome of Rs%.,00,000% I am no$ .> years of age 2% *o om'letely 'ayoff the housing loan by the time I retire 20 years later% .% *o 'ay for my five year old daughter1s ollege edu ation that $ould ost me Rs% 1,>0,000 'er year for B years% &e the invest1ent a'ital but also 4n investor saves today, to meet ertain finan ial needs tomorro$% Unless the investor is lear about the 'ur'ose of saving, his efforts $ould not result in the desired benefits% 4n investor should therefore first identify his finan ial needs% )or e#am'le, an investor may have one or more of the follo$ing finan ial needsL learly and be measurable in money terms% )or e#am'le, it is not enough to say GI $ant to retire omfortablyH% ,u h an obFe tive should be stated, as GI $ant to retire $ith the ability to s'end Rs% 2,00,000 annually, adFusted for inflationH%

EAa1%le 1 2 .

A1 !nt reH!ired Rs% .,00,000 '%a% Rs% >000 '%m% Rs% 1,>0,000 '%a%

-hen reH!ired N!1&er Ea h year beginning from the 20th year from no$ )or the ne#t 20 years 9eginning from 12th year from no$ till 1?th year%

Every investor should ta!e out time and 're'are su h a statement of finan ial goals overing as many reKuirements as 'ossible% *his is the basis

on $hi h the finan ial 'lan $ould be 're'ared% If the finan ial a'ability is found to be inadeKuate

.2

to meet all these goals then they have to be 'rioriti(ed% *he investors1 finan ial needs de'end on the age, stage in the areer 'ath, si(e of the family, needs of the other family members et % ,ome of the needs an be identified $ith 're ision $hile others an only be tentatively determined% *here may be unanti i'ated needs as $ell for $hi h 'rovisions have to be made% ,ometimes finan ial needs hange $ith investor1s hanging ir umstan es% In order to 're'are a finan ial 'lan, these goals have to be stated in lear and determinable terms of age, amounts and time frame% *he finan ial 'lanning 'ro ess is merely an e#er ise of allo ation of today1s money to meet tomorro$1s needs% *he finan ial 'lan is not

stati % It has to be revie$ed from time to time to a ount for the hanging ir umstan es% Assessin( the .inan"ial "a%a"it, 4n investor sets aside some money today to reali(e the finan ial goals stated in the finan ial 'lan% +o$ mu h money an be set aside no$ de'ends on the 'resent ir umstan es% *his an be understood by understanding the in ome, assets and liabilities of the individual investor% *he balan e sheet lists the investor1s assets and liabilities% +o'efully, the assets e# eed the liabilities and this e# ess is the net $orth% 4ll assets and liabilities should be valued at the urrent mar!et value instead of any ost basis% )or e#am'le, if you o$n an eKuity share bought at Rs% 1,000 and it is $orth Rs%>,000 no$, your balan e sheet should refle t Rs%>,000%

$alan"e Sheet . Mr) A as at 9*st Mar"h 04*4 Assets 3ash Investments +ouse 3ar &ife insuran e surrender value *otal @0,000 B,00,000 @,00,000 2,00,000 B,00,000 1@,@0,000 Lia&ilities +ouse loan outstanding 3ar loan outstanding :et $orth ?,00,000 1,00,000 **3>43444

*otal

1@,@0,000

4n investor should live $ithin his means% Means is the in ome% <ut of this in ome, routine e#'enses are met% *he remaining amount is available for savings% 4n investor should 're'are a statement of in ome and e#'ense% It is alled G3ash )lo$ ,tatementH% *he sour es of in ome are salary, dividends, interest, self"em'loyment earnings et % 4fter identifying the in ome, an investor should identify the e#'enses% E#'enses are generally

grou'ed into living e#'enses, 'ayments already ommitted and ta#es% *he e# ess of in ome over e#'enses in ea h year is the amount available to save% *he investor tries to a hieve his finan ial goals subFe t to his saving a'a ity% *he 3ash )lo$ ,tatement is 're'ared under different s enarios% *hese are death, disability and retirement%

..

Cash #l / State1ent . Mr) A . r the %eri d *);)044? t 9*)9)04*4 EA%e"ted Alternate s"enari s

.B

Disa&ilit, In ome 9usiness in ome net5,alary Dividends, interest re eived <thers E#'ense T tal )amily living e#'enses Insuran e 'remia &oan installments Pension ontribution *a#es T tal EA"ess FDe.i"itG -hat is invest1ent %lannin(2 *he balan e sheet sho$s $hat the investor o$ns and $hat he o$es% *he sho$s the money ash flo$ statement for ma!ing >% available .0,000 1,>0 000 ;39<3444 5<3444 .0,000 .0,000 9035<3444 F035<3444G 20,000 .>,000 20,000 .>,000 0 <3443444 2,00,000 0 *3443444 2,>0,000 1,00,000 1,00,000 B,00,000 0

Death 0 1,00,000 0 *344344 1,>0,000 20,000 .>,000 0 .0,000 039<3444 F*39<3444G

Retire1ent 0 1,00,000 0 *3443444 2,00,000 20,000 .>,000 0 .0,000 03><3444 F*3><3444G

B% )ind out the

osts and benefits asso iated

$ith the investment 4ssess ris!"return 'rofile of the investment investment E% 4s ertain if the 'rodu t is a''ro'riate for your s'e ifi goals @% 3om'are the 'rodu t $ith other investments o''ortunities available A% E#amine if it fits $ith other investments you are onsidering or you have already made, 10% Deal only through registered intermediaries 11% ,ee! all larifi ations about the intermediary and the investment, 12% E#'lore the o'tions available to you should something go $rong, and then, if satisfied, ma!e the investment% ?% 6no$ the liKuidity and safety as'e ts of the

investments% *ogether, these t$o statements tell the investor1s finan ial ir umstan es and the saving 'otential% )inan ial 'lanning is the 'ro ess of meeting as many of the investor1s finan ial needs as 'ossible $ith his saving 'otential% *0 ste%s t investin( 9efore ma!ing any investment, you must ensure that youL 1, <btain $ritten do uments e#'laining the investment 2% Read and understand su h do uments .% ;erify the legitima y of the investment

PROCESS O# INVESTING

.>

4s investors, $e $ould all li!e to beat the mar!et and $e $ould all li!e to 'i ! WgreatW investments on instin t% +o$ever, $hile intuition is undoubtedly a 'art of the 'ro ess of investing, it is Fust 'art of the 'ro ess% 4s investors, it is not sur'rising that $e fo us so mu h of our energy and efforts on investment 'hiloso'hies and strategies, and so little on the investment 'ro ess% It is far more interesting to read about ho$ Peter &yn h 'i !s sto !s and $hat ma!es /arren 9uffett a valuable investor, than it is to tal! about the ste's involved in reating a 'ortfolio or in e#e uting trades% *hough it does not get suffi ient attention, understanding the investment 'ro ess is riti al for every investor for several reasonsL 1% *he investment 'ro ess outlines the ste's in reating a 'ortfolio, and em'hasi(es the seKuen e to asset of a tions involved from to understanding the investors ris! 'referen es allo ation and sele tion

$hi h an investor an reate his or her o$n 'ortfolio or a 'ortfolio for someone else% 2% *he investment 'ro ess 'rovides a stru ture that allo$s investors to see the sour e of different investment strategies and 'hiloso'hies% 9y doing so, it allo$s investors to ta!e the hundreds of strategies that they see des ribed in the ommon 'ress and in investment ne$sletters and to tra e them to their ommon roots% .% *he investment 'ro ess em'hasi(es the different om'onents that are needed for an investment strategy to be su essful, and by so doing e#'lain $hy so many strategies that loo! good on 'a'er never $or! for those $ho use them% Investing $ell has a se ret formula = having the right information, 'lanning and ma!ing good hoi es% *he Investment Pro ess is gra'hi ally de'i ted on the ne#t 'age%

'erforman e evaluation% 9y em'hasi(ing the seKuen e, it 'rovides for an orderly $ay in

.?

.E

PURCHASING PROCESS
#r 1 /here t %!r"hase the %r d!"ts2 9ro!ersL 9ro!ers offer several servi es li!e 'ur hase5sale of eKuity, debt and derivative 'rodu ts, mutual fund units, IP<s et % 9an!sL Many ban!s offer fa ilities for 'ur hase5sale of eKuity, debt and derivative 'rodu ts, mutual fund units, IP<s et % 'hysi ally as $ell as through their $ebsites Mutual )undsL 4lmost all Mutual )unds fa ilitate online and 'hysi al buying5selling of mutual funds% ,to ! E# hangesL 3lose ended mutual funds are traded on sto ! e# hanges and an be brought through bro!ers% <'en ended mutual funds an also be bought5sold on the sto ! e# hange 'latform% Ste%s inv lved . r &e" 1in( a "a%ital 1ar+et invest r *he first reKuirement is a P4: 3ard% *his is mandatory for all investors% *he other reKuirements are a ban! a ount and a demat a ount% *he demat a ount is normally lin!ed to a ban! a ount in order to fa ilitate 'aying in and out of funds and se urities% *he ne#t ste' is to sele t a bro!er and fill a 6D3 form and enter into a bro!er" lient agreement% *he bro!er then allo ates a uniKue lient ID, $hi h a ts as the identifi ation% Dou are no$ ready to buy5sell se urities%

.@

Cha%ter *4

PRIMAR7 MARKET
Primary mar!et is the mar!et $here ne$ se urities are issued by a om'any to the investors or $here the e#isting o$ners dilute their shareholding in favour of ne$ investors% 2. lassified as Publi , .% " <ffer for ,ale 7b8 )urther Publi om'anies8 " )resh Issue " <ffer for ,ale RI2+*, I,,UE, PRI;4*E P&43EME:*, " Private Pla ement 7by unlisted om'anies8 " Preferential om'anies8 " Pualified Institutions Pla ement 7by listed om'anies8 B% 9<:U, I,,UE, " 9onus om'anies8 *he lassifi ation of issues is illustrated belo$L Issues 7by unlisted Issue 7by listed <ffering 7by listed

T7PES O# ISSUES
Primarily, issues an be Rights or Preferential Issues 7also !no$n as 'rivate 'la ements8% In addition, om'anies also ma!e bonus issues% /hile 'ubli and rights issues involve a detailed 'ro edure, 'referential issues and bonus issues are relatively sim'le% ISSUES 1. PU9&I3 I,,UE, 7a8 Initial Publi <ffering 7by unlisted om'anies8 " )resh Issue

.A

P!&li" Iss!e Publi issues an be further lassified into Initial Publi <fferings 7IP<s8 and )urther Publi <fferings 7)P<s8 or )ollo$"on Publi <fferings% In a 'ubli offering, an issuer ma!es an offer to ne$ investors to Foin its shareholding family 7e#isting shareholders an also 'arti i'ate in a )P<8% *o do so, the issuer om'any is reKuired to ma!e detailed dis losures as 'er ,E9I1s I3DR Regulations in its offer do ument released o the 'ubli % *he signifi ant features of the t$o ty'es of 'ubli issue are illustrated belo$L Initial Public Offering (IPO) is $hen a hitherto unlisted om'any ma!es either a fresh issue of se urities or some of its e#isting shareholders ma!e an offer for sale of 'art of their shareholding, or both, for the first time to the 'ubli through an offer do ument% *his

either sell their shares through the IP< or liKuidate these in the mar!et on e the shares are listed, or in some ases, $here the 'romoters themselves $ant to onvert some of their shares into ash% *he other obFe tive ould be to obtain valuations for their validated valuations om'anies, as mar!et" onvert shares into a

urren y, $hi h an also be used, for e#am'le for 'ledging or for a Kuisitions% In an offer for sale, the 'ro eeds of the share sales go to the selling shareholders and not to the issuing om'any% Further Public Offering (FPO) is $hen an already listed om'any ma!es either a fresh issue of se urities to the 'ubli or the e#isting 'romoters ma!e an offer for sale to the 'ubli through an offer do ument% 4n offer for sale under )P< is allo$ed only if it is made to satisfy the ontinuous listing obligations% 4n )P<, $here fresh se urities are issued, is ty'i ally made by a om'any $hen it needs money for gro$th"e#'ansion or diversifi ation or a Kuisitions or even to meet its in reasing $or!ing a'ital reKuirements% 4n )P< is also the 'referred route 7over a rights issue8 $hen the om'any $ants to bring in ne$ investors"both institutional as $ell as retail% 4n )P<, $here an offer for sale is being made by the e#isting shareholders, is ty'i ally made to om'ly $ith the listing guidelines $hi h reKuire a minimum level of 'ubli shareholding% It may be 'ointed out that the )P< route is also being utili(ed e#tensively by the 2overnment for the P,Us for the 'ur'ose of disinvestment of government1s holdings and use the 'ro eeds for the so ial5other 'ur'oses% ,E9I Regulations also allo$ both unlisted and listed om'anies to ma!e 'ubli issue of bonds%

'aves the $ay for the listing and trading of the issuer1s se urities% 4n IP<, $here fresh se urities are issued, is ty'i ally made by a om'any $hen it needs money for gro$th"e#'ansion or diversifi ation or a Kuisitions or even to meet its in reasing $or!ing a'ital reKuirements% 3om'anies also go in for IP<s mainly for the 'ur'ose of obtaining valuations for their om'anies, as mar!et"validated valuations onvert shares into a urren y, $hi h an also be used, for e#am'le for 'ledging or for a Kuisitions% In a fresh se urities sale, the 'ro eeds of the share sales go to the issuing om'any% 4n IP<, $here an offer for sale is being made by the e#isting shareholders, is ty'i ally made either be ause some of the e#isting shareholders"ty'i ally venture a'ital5'rivate

eKuity funds, $ant an e#it route $here they an B0

Ri(hts Iss!e
ights !ssue is $hen a listed om'any issues fresh se urities to its e#isting shareholders in a 'arti ular ratio to the number of se urities held 'rior to the issue as on a re ord date% *his route is normally used by a om'any $ho $ould li!e to raise a'ital $ithout diluting the sta!e of its e#isting shareholders, as in a rights issue the sta!e held by ea h shareholder remains the same even after the issue% 7*here ould be some instan es $here the 'romoter may not li!e to bring in his money and therefore allo$ dilution of his sta!e by giving u' on his rights entitlement8% Rights issues are ty'i ally made at a dis ount to the 'revailing mar!et 'ri e, and hen e are seen as a re$ard to the shareholders% $ n!s Iss!e 4 Bonus !ssue is $hen a om'any ma!es an issue of se urities to its e#isting shareholders in a 'arti ular ratio to the number of se urities held on a re ord date, $ithout any 'ayment for the same% *he shares are issued out of the om'any1s free reserves or from the share 'remium a ount% 9onus issues are ty'i ally seen as a re$ard to the shareholders% Private Pla"e1ent 4 private placement is an issue of se urities by a om'any to a sele t grou' of 'ersons, $hi h is neither a 'ubli issue nor a rights issue, $ith the ondition that the number of investors should not e# eed BA% *his is a faster and e onomi al $ay for a om'any to raise a'ital%

Private Pla ements by a listed om'any an be of t$o ty'es 7Private Pla ements by unlisted om'anies are not regulated by ,E9I8L Pre.erential All t1ent 4 'rivate 'la ement of se urities is generally !no$n as a 'referential allotment% *he issuing om'any is reKuired to follo$ an elaborate set of guidelines 'res ribed under the ,E9I I3DR Regulations on issue 'ri ing, dis losures, lo !"in et % Preferential allotments are ty'i ally made to the 'romoters, ;35PE firms, ollaborators and other strategi 5finan ial investors, and are done 'rimarily to raise funds reKuired by the om'any% I!ali.ied Instit!ti nal Pla"e1ent 4 Pualified Institutional Pla ement 7PIP8 is a 'rivate 'la ement of se urities only to the Pualified Institutional 9uyers% *he issuing om'any is reKuired to follo$ an elaborate set of guidelines 'res ribed under the ,E9I I3DR Regulations on issue 'ri ing, dis losures, et % PIPs are ty'i ally made to raise funds reKuired by the om'any, and also for meeting the listing reKuirements on minimum 'ubli holding% THE INDIAN PRIMAR7 MARKET *he Indian IP< mar!et has $itnessed a signifi ant amount of a tivity in the 'ast ? years 7e# e't for 200@"0A $hi h $as marred by the global e onomi meltdo$n8% L

IPOs6 EH!it, E C nverti&les 7ear 2000"2001 N ) . Iss!e A1 !nt Iss!es FRs) "r reG 10A 2.E>

B1

2001"2002 2002"200. 200."200B 200B"200> 200>"200? 200?"200E 200E"200@ 200@"200A 200A"2010

,<UR3EL PRIME Database

? ? 1A 2. E? E? @B 21 .A

10@2 10.A .1A1 1B??2 10@0@ 2.E0? B1.2. 20.B 2BAB@

200@"200A 200A"2010
,<UR3EL PRIME Database

0 >

0 21AA.

Regarding 'ubli issues of bonds, the mar!et $as dominated by the finan ial institutions till 200B"0>% 4fter a lull of 2 years, this mar!et is sho$ing some signs of a tivity $ith some issuan es being made by :9)3sL P!&li" $ nds Iss!es 7ear 2000"2001 2001"2002 2002"200. 200."200B 200B"200> 200>"200? 200?"200E 200E"200@ 200@"200A 200A"2010
,<UR3EL PRIME Database

*he Indian )P< mar!et too has $itnessed a signifi ant amount of a tivity in the 'ast ? years 7e# e't for 200@"0A8L #POs6 EH!it, E C nverti&les 7ear N ) . Iss!es 2000"2001 2001"2002 2002"200. 200."200B 200B"200> 200>"200? 200?"200E 200E"200@ 1 0 0 A ? 2? A ? Iss!e A1 !nt FRs) "r reG > 0 0 1B?1? ?E?A 12@?@ 12@E 10@A?

N ) . Iss!es A 1. @ ? > 0 0 1 1 .

Iss!e A1 !nt FRs) "r reG B1.A >.B1 B?A. B.2B B0A> 0 0 1000 1>00 2>00

*he Indian IP<5)P< mar!et ty'i ally $itnessed small"si(ed issuan es till the A0s% *he de ade of 2000 sa$ India emerging as a mar!et ready for TOP *4 Indian IPOs B #POs ever
SNO C 1%an, Na1e

large"si(ed IP<s% *he follo$ing table 'rovides brief details of the to' 10 largest IP<5)P<s everL

IPO B #PO

O%enin( Date 0>50.5200B 1>5015200@ 1A50?5200E 1050.52010 1150?5200E 0.50252010 0E50@5200A 115125200? 015125200> 2A50E5200B

Iss!e A1 !nt FRs)"r reG 10>B2%B0 1012.%20 100BB%00 AA.0%B> A1@E%>0 @B@0%10 ?0.@%>> >E@@%EA >E>0%00 >B20%BA

1 <I& C :4*UR4& 24, 3<RP%&*D% 2 RE&I4:3E P</ER &*D% . I3I3I 94:6 &*D% B :MD3 &*D% > D&) &*D% ? :*P3 &*D% E :+P3 &*D% @ 34IR: I:DI4 &*D% A I3I3I 94:6 &*D% 10 *4*4 3<:,U&*4:3D ,ER;I3E, &*D% ,<UR3EL PRIME Database

)P< IP< )P< )P< IP< )P< IP< IP< )P< IP<

*here is enough de'th in the retail investors, and they have ome in very large numbers to invest in IP<s5)P<s% *he follo$ing table sho$s the to' 10

B2

IP<,5)P<s in terms of number of a''li ations from retail investorsL T % *4 IPOs E #POs J&, N!1&er . Retail A%%li"ati ns
SNO) C 1%an, Na1e FAs at the Ti1e . Iss!eG IPOB #PO 1 2 . B > ? E @ A 10 RE&I4:3E P</ER &*D% M4:24&<RE RE)I:ERD C PE*R<3+EMI34&, &*D% RE&I4:3E P<&DPR<PD&E:E &*D% *4*4 *IM6E: &*D% RE&I4:3E P<&DE*+D&E:E &*D% JI:D4& ;IJ4D4:424R ,*EE& &*D% RE&I4:3E PE*R<&EUM &*D% R4DM<:D ,D:*+E*I3, &*D% I:DU,*RI4& )I:4:3E 3<RP%<) I:DI4 &*D%,*+E RE&I4:3E PE*R<&EUM &*D% IP< IP< )P< IP< )P< IP< IP< IP< IP< IP< O%enin( Date 1>5015200@ 2150>51AA2 1251151AA2 0250A51AA1 1251151AA2 1050251AA> 2.50A51AA. 2050@51AA0 0E51251AA. 1.50B5200? Iss!e A1 !nt FRs)"r reG 1012.%20 11B2%?? .2>%00 21%>0 .2>%00 @1B%>? 21E2%00 2@%@0 >2>%00 2E00%00 N ) . Retail A%%li"ati ns B?2.0@. BB>EE.1 B.?E02@ B0?A2?B .E@@1A0 2@1>2>2 2??.2>1 2>?@?1> 2B0120? 1A.A2EB

,<UR3EL PRIME Database

/ith regard to rights issues, there ontinues to be a reasonable mar!et $ith nearly .0 om'anies ta''ing this route in ea h of the 'ast ? years, raising signifi ant amountsL Ri(hts Iss!es6 EH!it, E C nverti&les 7ear N ) . Iss!e A1 !nt Iss!es 2000"2001 2001"2002 2002"200. 200."200B 200B"200> 200>"200? 200?"200E 200E"200@ 200@"200A 200A"2010
,<UR3EL PRIME Database

200E"200@ 200@"200A 200A"2010

,<UR3EL PRIME Database

.@ 2 ?E

2>EE0 1@A .AE?@

ENTR7 NORMS #OR COMPANIES

,E9I has laid do$n entry norms for om'anies $anting to ma!e a 'ubli issue% IPOs .r 1 Unlisted C 1%anies 4n unlisted issuer ma!ing a 'ubli issue 7i%e% an IP<8 is reKuired to satisfy the follo$ing 'rovisions% It has various routes available as des ribed belo$L

2E 1. 12 22 2? .? .@ .0 2. 2A

FRs) "r reG E2A 10B1 B.1 100? .?1? B12? .E0. .2>1@ 12?22 @.21

4s far as PIPs are on erned, this route $as introdu ed only in 200?"0E, and has $itnessed huge volumes sin e thenL IIPs6 7ear

Entr, N r1 I F" 11 nl, +n /n as the KPr .ita&ilit, R !teLG *he Issuer 3om'any shall meet the follo$ing reKuirementsL 7a8 :et *angible 4ssets of at least Rs% . rore in ea h of the 're eding three full years%

EH!it, E C nverti&les
N ) . Iss!es Iss!e A1 !nt FRs) "r reG 2> BA?.

200?"200E

B.

7b8

Distributable 'rofits in at least three of the immediately 're eding five years%

7a8

*he G'roFe tH shall be a''raised and shall have 'arti i'ation to the e#tent of 1>- by )inan ial Institutions least 10- shall a''raiser7s8% 5 , heduled ome from the 3ommer ial 9an!s of $hi h at

7 8

:et $orth of at least Rs% 1 rore in ea h of the 're eding three full years%

7d8

If the om'any has hanged its name $ithin the last one year, at least >0revenue for the 're eding 1 year should be from the a tivity suggested by the ne$ name% 7b8

*he minimum 'ost"issue fa e value a'ital shall be Rs% 10 rore or there shall be a om'ulsory mar!et"ma!ing for at least 2 years after the listing date%

7e8

*he issue si(e does not e# eed > times the 're"issue net $orth as 'er the audited balan e sheet of the last finan ial year In addition to satisfying the aforesaid entry norms, the allottees in its issue% om'any shall also satisfy the riteria of having at least 1000

*o 'rovide suffi ient fle#ibility and also to ensure that genuine om'anies do not suffer on a ount of rigidity of the entry norm 'arameters, ,E9I has 'rovided t$o other alternative routes to om'anies not satisfying any of the above onditions, as underL Entr, 7a8 N r1 II F" 11 nl, #POs .r 1 Listed C 1%anies 4 listed om'any ma!ing a 'ubli issue 7i%e% an )P<8 is reKuired 7a8 to satisfy the follo$ing reKuirementsL If the om'any has hanged its name $ithin the last one year, at least +n /n as the KII$ R !teLG *he issue shall be through the boo! building route, $ith at least >0- of the issue amount to be mandatory allotted to the Pualified Institutional 9uyers 7PI9s8% 7b8 *he minimum 'ost"issue fa e value rore a'ital shall be Rs% 10 or there shall be a 4ny listed om'any not fulfilling these onditions shall be eligible to ma!e a 'ubli issue by om'lying $ith the PI9 Route or the 4''raisal Route as s'e ified for IP<s% 3ertain ategory of entities $hi h are e#em'ted Entr, N r1 III F" 11 nl, from the aforesaid entry norms, are as underL 7a8 Private ,e tor 9an!s BB +n /n as the KA%%raisal R !teLG 7b8 >0revenue for the 're eding 1 year should be from the a tivity suggested by the ne$ name% *he issue si(e does not e# eed > times the 're" issue net $orth as 'er the audited balan e sheet of the last finan ial year

om'ulsory mar!et"ma!ing for at least 2 years after the listing date%

7b8 7 8

Publi se tor ban!s 4n infrastru ture 'roFe t has om'any been $hose

SE$IS ROLE IN AN ISSUE

*ill the early nineties, the 3ontroller of 3a'ital Issues in the Ministry of )inan e used to a ord 'ermission to om'anies $ishing to ta' the a'ital mar!et and also a''rove the 'ri e, a ording to its formula, at $hi h an issue ould be made% +o$ever, follo$ing the introdu tion of the dis losure"based regime under the aegis of ,E9I in 1AA2, the fo us $as shifted to dis losures% *he om'anies $ere allo$ed to determine the issue 'ri e $ithout any regulatory interferen e or formula, based u'on mar!et for es, and investors $ere reKuired to ta!e an informed de ision based u'on the dis losures% 4ll issues are governed by ,E9I in terms of ,E9I

a''raised by a Publi )inan ial Institution or ID)3 or I&C), or a ban! $hi h $as earlier a P)I and not less than >- of the 'roFe t ost is finan ed by any of these institutions% Ri(hts Iss!es *here are no entry norms for a listed om'any ma!ing a rights issue

OTHER ENTR7 PROVISIONS

4 om'any ma!ing a 'ubli issue is reKuired to inter"alia om'ly $ith the follo$ing 'rovisionsL "inimum #romoter$s %ontribution and &ock-in L In a 'ubli issue by an unlisted om'any, the 'romoters shall ontribute not less than 20- of the 'ost issue a'ital $hi h should be lo !ed in for a 'eriod of . years% G&o !"inH indi ates a free(e on the shares% *he remaining 're"issue a'ital should also be lo !ed in for a 'eriod of 1 year from the date of listing% In ase of 'ubli issue by a listed issuer 7i%e% )P<8, the 'romoters shall ontribute not less than 20- of the 'ost issue a'ital or 20- of the issue si(e% *his ensures that 'romoters of the 'rovision

I3DR guidelines% 4ll om'anies ma!ing a 'ubli issue and all listed om'anies ma!ing a rights issue of more than Rs%>0 la!h are reKuired to file a draft offer do ument $ith ,E9I% *he om'any1s mer hant ban!er has to ensure that it is in om'lian e $ith all the reKuirements of the ,E9I I3DR 2uidelines% ,E9I e#amines the om'lian e $ith these guidelines and also ensures that all material information is dis losed in the offer do uments% *he om'any an ma!e an issue only after in or'orating all hanges

om'any have some minimum sta!e in the om'any for a minimum 'eriod after the issue or after the 'roFe t for $hi h funds have been raised from the 'ubli has ommen ed% !#' (rading) Every om'any oming out $ith an IP< has to go in for an IP< 2rading% 7see later se tion on IP< 2rading8%

re eiving observations from ,E9I on the offer do ument, and suggested by ,E9I% *he validity of the

observation letter is 12 months% *he draft offer do ument filed is also 'la ed by ,E9I on its $ebsite for 'ubli omments%

*here is no reKuirement of filing any offer do ument to ,E9I in ase of 'referential

B>

allotments and PIPs% )or PIPs, ho$ever, the mer hant ban!er handling the issue has to file a o'y of the draft do ument $ith the sto ! e# hanges $here the om'any1s se urities are listed and also file the final 'la ement do ument $ith ,E9I after allotment for re ord 'ur'ose% #ast Tra"+ Iss!es F#TIG ,E9I has introdu ed )*I in order to enable $ell" established and satisfying om'liant listed ertain s'e ifi om'anies entry 7vi8 7v8 7iv8

shares listed during the said si# months 'eriod0 *he om'any has redressed at least A>- of the total shareholder 5 investor grievan es or om'laints re eived till the end of the Kuarter immediately 'ro eeding the month of the date of filing of offer do ument $ith Ro35 ,E% *he om'any has om'lied $ith the listing agreement for a 'eriod of at least three years immediately 're eding the referen e date0 *he im'a t of auditors1 Kualifi ations, if any, on the audited a ounts of the om'any in res'e t of the finan ial years for $hi h su h a ounts are dis losed in the offer do ument does not e# eed >- of the net 'rofit5 loss after ta# of the om'any for the res'e tive years% 7vii8 :o 'rose ution 'ro eedings or sho$ ause noti es issued by the 9oard are 'ending against the om'any or its 'romoters or $hole time dire tors as on the referen e date0 and 7viii8 *he entire shareholding of the 'romoter grou' is held in demateriali(ed form as on the referen e date% D es SE$I re" 11end an, iss!e2 It should be distin tly understood that ,E9I does not re ommend any issue nor does it ta!e any res'onsibility either for the finan ial soundness of any s heme or the 'roFe t for $hi h the issue is 'ro'osed to be made or for the dis losures made in the offer do ument% D es SE$I a%%r ve the " ntents ..er d "!1ent2 ,ubmission of offer do ument to ,E9I should not in any $ay be deemed or onstrued that the same has been leared or a''roved by ,E9I% *he ertifies that the dis losures mer hant ban!er . the

norms5 onditions to a ess Indian Primary Mar!et in a time effe tive manner% ,u h om'anies an 'ro eed $ith )P<s 5 Right Issues by filing a o'y of R+P 5 Pros'e tus $ith the Ro3 or the &etter of <ffer $ith designated ,E, ,E9I and ,to ! E# hanges% ,u h om'anies are not reKuired to file Draft <ffer Do ument for ,E9I omments and to ,to ! E# hanges% Entry :orms for om'anies see!ing to a ess Primary Mar!et through )*I1s in ase aggregate value of se urities in luding 'remium e# eeds Rs% >0 la!hL 7i8 *he shares of the om'any have been listed on any sto ! e# hange having nation$ide terminals for a 'eriod of at least three years immediately 're eding the date of filing of offer do ument $ith Ro35 ,E% 7ii8 *he Gaverage mar!et a'itali(ation of 'ubli shareholdingH of the om'any is at least Rs% 10,000 rore for a 'eriod of one year u' to the end of the Kuarter 're eding the month in $hi h the 'ro'osed issue is a''roved by the 9oard of Dire tors 5 shareholders of the issuer0 7iii8 *he annuali(ed trading turnover of the shares of the om'any during si# alendar months immediately 're eding the month of the referen e date has been at least t$o 'er ent of the $eighted average number of

B?

made in the offer do ument are adeKuate and are in onformity $ith ,E9I guidelines% I. SE$I has iss!ed invest1ent is sa.e2 Investors should ma!e an informed de ision based on the dis losures made in the offer do uments% ,E9I does not asso iate itself $ith any issue5issuer and its role should in no $ay be onstrued as a guarantee for the funds that the investor 'ro'oses to invest in an issue% &servati ns n the

ed +erring #rospectus is a 'ros'e tus $hi h has all the information as reKuired in an <ffer Do ument e# e't the details of either the issue 'ri e or the number of shares being offered or the amount of issue% 7*his means that in ase the 'ri e is not dis losed, the number of shares and the u''er and lo$er 'ri e bands are dis losed% <n the other hand, the issue si(e an be mentioned but the number of shares is determined later after the issue 'ri e is fi#ed% 4n R+P for )P< an be filed $ith the R<3 $ithout the 'ri e band and the issuer, in su h a ase, $ill notify the floor 'ri e or a 'ri e band by $ay of an advertisement one day 'rior to the o'ening of the issue% *o elaborate, in the ase of boo!"built issues, the 'ri e annot be determined until the bidding 'ro ess is om'leted, su h details are not sho$n in the Red +erring 'ros'e tus filed $ith R<3 in terms of the 'rovisions of the 3om'anies 4 t% <nly on om'letion of the bidding 'ro ess, the details of the final 'ri e are in luded in the offer do ument% *he offer do ument filed thereafter $ith R<3 is alled a 'ros'e tus% #rospectus is an offer do ument in ase of a 'ubli issue, $hi h has all relevant details in luding 'ri e and number of shares offered% *his do ument is registered $ith the R<3 before

..er d "!1ent3 d es it 1ean that the

O##ER DOCUMENTSB PROSPECTUS B LETTERS O# O##ER

'ffer document means Pros'e tus in ase of a 'ubli issue or 'ubli offer for sale and &etter of <ffer in ase of a rights issue% 4n offer do ument ontains all relevant information about the om'any, 'romoters, 'roFe t, finan ial details, obFe ts of raising the money, terms of the issue et to hel' an investor ta!e the investment de ision% In essen e, an offer do ument is the do ument used for inviting subs ri'tion to the issue being made% *raft 'ffer document means the offer

the issue o'ens in ase of a fi#ed 'ri e issue and after the losure of the issue in ase of a boo! built issue% ,bridged #rospectus is an abridged version of an offer do ument of a 'ubli issue and is issued along $ith the a''li ation form% It ontains all the salient features of a 'ros'e tus% G&etter of offerH means the offer do ument 're'ared by a om'any for its rights issue% *he &etter of <ffer ontains all dis losures as reKuired in term of the ,E9I 2uidelines to enable the shareholders in ma!ing an informed de ision%

do ument in the draft stage% *he draft offer do uments are reKuired to be filed $ith ,E9I at least .0 days 'rior to the filing of the <ffer Do ument $ith the Registrar of 3om'anies, Ministry of 3or'orate 4ffairs% ,E9I may s'e ify hanges, if any, in the Draft <ffer Do ument and the mer hant ban!er is reKuired to arry out su h hanges in the draft offer do ument before filing the final <ffer Do ument $ith the R<3% *he Draft <ffer do ument is available on the ,E9I $ebsite for 'ubli omments for a 'eriod of 21 days from the date of its filing $ith ,E9I%

BE

,bridged &etter of 'ffer means the abridged version of a &etter of <ffer% *he om'any is reKuired to send the 4bridged &etter of <ffer to every shareholder, along $ith the a''li ation form% 4 om'any is also reKuired to send the main &etter of <ffer u'on reKuest by any shareholder% G-helf #rospectusH is a 'ros'e tus $hi h enables an issuer to ma!e a series of issues $ithin a 'eriod of 1 year $ithout the need for filing a fresh 'ros'e tus every time% *his fa ility is available to 'ubli se tor ban!s 5'ubli finan ial institutions, and has been mainly used for 'ubli issue of bonds% #lacement *ocumentH means a do ument 're'ared for the 'ur'ose of Pualified ontains all Institutional Pla ement and it

advised that the investors should go through all the ris! fa tors of the om'any before ma!ing an investment de ision% Intr d!"ti n *he introdu tion overs a summary of the industry and business of the issuer om'any, the offering details in brief, and summary of onsolidated finan ial, o'erating and other data% 2eneral information about the om'any, the

mer hant ban!ers and their res'onsibilities, the details of bro!ers5syndi ate members to the issue, redit rating 7in ase of debt issues8, ase of debt issues8, debenture trustees 7in

monitoring agen y, boo! building 'ro ess and details of under$riting agreements are also in luded% Im'ortant details of the a'ital stru ture, obFe ts of the offering, funds reKuirement, funding 'lan, s hedule of im'lementation, funds de'loyed, sour es of finan ing of funds already de'loyed, sour es of finan ing for the balan e fund reKuirement, interim use of funds, basi terms of issue, basis for issue 'ri e and ta# benefits are also 'rovided% A& !t the C 1%an, *his 'resents a revie$ of the business of the om'any, history and dire tors, related business strategy, om'etitive strengths, industry"regulation 7if a''li able8, or'orate stru ture, main obFe ts, or'orate governan e, e# hange rates, subsidiary details, management and board of om'ensation, 'arty transa tions,

relevant and material dis losures to enable PI9s to ma!e an informed investment de ision%

UNDERSTANDING THE O##ER DOCUMENT

C ver Pa(e *he 3over Page of the offer do ument overs full onta t details of the issuer nature, number, 'ri e and om'any, the amount of

instruments offered and issue si(e, names of lead managers and registrars, and 'arti ulars regarding listing% <ther details su h as 3redit Rating, IP< 2rading are dis losed, if a''li able% Ris+ #a"t rs *he issuer identifies and 'rovides its vie$ on the internal and e#ternal ris!s that are and $ill be fa ed by the 'rovides a om'any% *he om'any also loo!ing note on the for$ard

dividend 'oli y and management1s dis ussion and analysis of finan ial ondition and results of o'erations% #inan"ial State1ents

statements% *his information is dis losed in the initial 'ages of the do ument and it is also learly dis losed in the abridged 'ros'e tus% It is

B@

)inan ial statement,

hanges in a ounting

O..erin( in. r1ati n Information in ludes terms of the issue, ran!ing of eKuity shares, mode of 'ayment of dividend, fa e value and issue 'ri e, rights of the eKuity shareholders, mar!et lot, nomination fa ility to investors, issue 'ro edure, boo! building 'ro edure if a''li able, bid form, $ho an bid,

'oli ies in the last three years and differen es bet$een the a ounting 'oli ies and the Indian 4 ounting Poli ies 7if the 3om'any has 'resented its )inan ial ,tatements also as 'er either U, 244P5I4, are 'resented% Le(al and ther in. r1ati n &itigations involving the om'any and its om'anies government subsidiaries, 'romoters and grou' the last balan e sheet date,

ma#imum and minimum bid si(e, bidding 'ro ess, bidding at different 'ri e levels, es ro$ me hanism, terms of 'ayment and 'ayment into the es ro$ olle tion a ount, ele troni registration of bids, build u' of the boo! and revision of bids, 'ri e dis overy and allo ation, signing of under$riting agreement and filing of 'ros'e tus $ith ,E9I5R<3, announ ement of statutory advertisement, issuan e of 34: and stat!t r, allotment in the issue, designated date, general instru tions, instru tions for om'leting the bid form, 'ayment instru tions, submission of bid form, other instru tions, dis'osal of a''li ation and a''li ation moneys, interest on refund of e# ess bid amount, basis of allotment or allo ation, method of 'ro'ortionate allotment, dis'at h of refunds, ommuni ations underta!ing by the om'any, utili(ation of issue 'ro eeds, restri tions on foreign o$nershi' of Indian se urities, et % Other In. r1ati n *his overs des ri'tion of eKuity shares and main terms of the 4rti les of 4sso iation, material ontra ts and do uments for ins'e tion, de larations, definitions and abbreviations% -hat is the a1 !nt invest r "an la, d "!1ents2 ,E9I a e'ts no res'onsibility for the Kuantity, Kuality or a ura y of information ontained in the offer do ument% *he do ument is 're'ared by an inde'endent s'e iali(ed agen y" a mer hant ban!er, registered $ith and regulated by ,E9I% BA . .aith that an . the

are dis losed% 4lso material develo'ments sin e a''rovals5li ensing arrangements, investment a''rovals 7)IP95R9I et %8, other government indebtedness, et % are also dis losed% Other re(!lat r, and

dis"l s!res Under this head, the information in ludes authority for the issue, 'rohibition by ,E9I if any, eligibility of the a'ital mar!et, om'any to enter the dis laimer lause, general

dis laimer in res'e t of Furisdi tion, dis laimer lause of the sto ! e# hanges, listing, minimum subs ri'tion, letters of allotment5refunds, e#'ert o'inion, hanges, if any, in the auditors in the last . years, e#'enses of the issue, fees 'ayable to the issue management team, under$riting ommission, bro!erage and selling ommission, 'revious rights and 'ubli issues, 'revious issues for ash, issues other$ise than for ash, outstanding debentures or bonds, outstanding 'referen e shares, ommission and bro!erage on 'revious issues, a'itali(ation of reserves or 'rofits, o'tion to subs ribe in the issue, 'ur hase of 'ro'erty, revaluation of assets, lasses of shares, sto ! mar!et data for eKuity shares of the om'any, 'romise vis"M"vis 'erforman e in the 'ast issues and me hanism for redressal of investor grievan es%

n the " ntents

Mer hant ban!ers are reKuired to do thorough due diligen e $hile 're'aring an offer do ument% -h 1 sh !ld an invest r a%%r a"h i. there are an, %r &le1s /ith the

Is (radin( %ti nal2 IP< grading is mandatory% 4ny issuer $ho $ishes to offer shares through an IP< is reKuired to obtain a grade for his IP<% -h is a!th riCed t (rades2 IP< grades are a$arded by the follo$ing ,E9I" registered 3R4sL 9ri !$or! Ratings India Pvt%&td% $$$%bri !$or!ratings%in 3redit 4nalysis C Resear h &td 734RE8 $$$% areratings% om 3RI,I& &td% $$$% risil% om I3R4 &td% $$$%i ra%in )it h Ratings India 7P8 &td% $$$%fit hindia% om -hat are the .a"t rs that are eval!ated &, the CRA t assess the .!nda1entals . the IPO /hile arrivin( at the (rade2 *he IP< grading 'ro ess is e#'e ted to ta!e into a ount the 'ros'e ts of the industry in $hi h the om'any o'erates, the om'etitive strengths of the om'any that $ould allo$ it to address the ris!s inherent in its business and a'itali(e on the o''ortunities available, as $ell as the om'any1s finan ial 'osition% /hile the a tual fa tors onsidered for grading may not be identi al or limited to the follo$ing, the areas listed belo$ are generally loo!ed into by the 3R4s $hile arriving at an IP< grade a/ard the IPO

dis"l s!res2 *he draft offer do ument submitted to ,E9I is 'ut out by it on it $ebsite for 'ubli omments% In ase a 'erson has any information about the issuer or its dire tors or any other as'e t of the om'any $hi h is material but has not been dis losed the same% or some information has been dis losed in orre tly, he an notify ,E9I about

IPO GRADING
IP< grading has been introdu ed as an endeavor to ma!e additional information available to the investors to fa ilitate better de ision ma!ing before investing in an IP<% 4 grade is assigned by a ,E9I"registered 3redit Rating 4gen y 73R48 to every IP<% *he grade re'resents a relative assessment of the fundamentals of that IP< in relation to the other listed eKuity se urities in India% -hat are the IPO (radin( s"ales2 IP< grading is assigned on a five"'oint 'oint s ale $ith a higher s ore indi ating stronger fundamentals and vice versa as belo$% IP< grade 1L Poor fundamentals IP< grade 2L 9elo$-average fundamentals IP< grade .L 4verage fundamentals IP< grade BL 4bove-average fundamentals IP< grade >L ,trong fundamentals

>0

9usiness Pros'e ts and 3om'etitive Position 7a8 Industry Pros'e ts 7b8 3om'any Pros'e ts

At /hat sta(e is an iss!er reH!ired t &tain the IPO (rade2 IP< grading an be obtained either before filing the draft offer do uments $ith ,E9I or thereafter% +o$ever, the Pros'e tus5Red +erring Pros'e tus, as the ase may be, must ontain the grade given to the IP<% Can a " 1%an, ( . r IPO (radin( .r 1

Pra ti es

)inan ial Position Management Puality 3or'orate 2overnan e

&itigation +istory

3om'lian e

and

1 re than ne CRA2 4 om'any an a''roa h more than one 3R4% +o$ever, the Pros'e tus5Red +erring

and Pros'e ts

:e$

ProFe tsSRis!s

Pros'e tus, as the ase may be, must ontain the grade given to the IP< by all 3R4s that $ere a''roa hed by the om'any for grading its IP<% Can the iss!er re'e"t an IPO (rade2 IP< grade5s annot be reFe ted% Irres'e tive of $hether the issuer finds the grade given by the 3R4 a e'table or not, the grade has to be dis losed in the offer do ument5issue advertisements% +o$ever, the issuer has the o'tion of a''roa hing another 3R4% In su h an event too, all grades obtained for the IP< $ill have to be dis losed%

D es IPO (radin( " nsider the %ri"e at /hi"h the shares /ill &e IPO2 :o% IP< grading is done $ithout ta!ing into a ount the 'ri e at $hi h the se urity $ill be offered in the IP<% ,in e IP< grading does not onsider the issue 'ri e, the investor needs to ma!e an inde'endent Fudgment regarding the 'ri e at $hi h to bid for the shares offered through the IP<, irres'e tive of the IP< grade% D es an IPO (rade3 /hi"h indi"ates Da& ve avera(e 4n IP< grade r str n( .!nda1entals is not a suggestion or ..ered in the

-hat is the r le . SE$I in the IPO (radin( eAer"ise2 ,E9I does not 'lay any role in the assessment made by the 3R4% *he grading is intended to be an inde'endent o'inion of the 3R4s% -h &ears the " st %r "ess2 *he om'any ma!ing the IP< is reKuired to bear the e#'enses in urred for grading its IP<% . the IPO (radin(

1ean hi(h sa.et,2 re ommendation as to $hether one should subs ribe to the IP< or not% IP< grade needs to be read together $ith the dis losures made in the 'ros'e tus in luding the ris! fa tors as $ell as the 'ri e at $hi h the shares are offered in the issue% Em'iri al data no$ learly sho$s that a high graded IP< may not 'rovide 'ositive returns and vi e versa%

-here "an %r "ess2

ne .ind the (rades

&tained

. r the IPO and details

. the (radin(

4ll grades obtained for the IP< along $ith a des ri'tion of the grades are dis losed in the >1

'ros'e tus,

abridged

'ros'e tus,

issue

2overnment of India 'ublished in the 2a(ette of India%H 7iii8 :on"Institutional Investors 7:IIs8 means investors $ho do not fall $ithin the definition of the above t$o ategories%

advertisements et % *he 2rading &etter of the 3R4 $hi h ontains the detailed rationale for assigning a 'arti ular grade is available as a Material Do ument for ins'e tion at the registered offi e of the om'any%

ALLOTMENTS CATEGOR7 O# INVESTORS

Investors are lassified by ,E9I under the follo$ing . ategories"L !n case of book-built issues 7i8 Retail Individual Investor 7RIIs8 means an investor $ho a''lies or bids for se urities for a value of not more than Rs% 1,00,000% 7ii8 Pualified Institutional 9uyers 7PI9s8 means 7a8 Publi finan ial institution as defined in se tion B4 of the 3om'anies 4 t, 1A>?0 7b8 7 8 7d8 7e8 7f8 7g8 7h8 7i8 , heduled ommer ial ban!s0 Mutual funds0 )oreign institutional investor registered $ith ,E9I0 Multilateral and bilateral develo'ment finan ial institutions0 ;enture a'ital funds registered $ith ,E9I0 )oreign ,tate venture Industrial a'ital investors registered $ith ,E9I0 Develo'ment 3or'orations0 Insuran e om'anies registered $ith the 7F8 7!8 7l8 Insuran e funds Regulatory $ith and Develo'ment 4uthority 7IRD480 Provident minimum *here is no dis retion 'ermitted in the allotment 'ro ess% 4ll investors are allotted shares on a 'ro'ortionate basis $ithin their res'e tive investor ategories% :o%25.5200>"DD"II 2., 200> of !n case of fi.ed price issues *he 'ro'ortionate allotment of se urities to different investor ategories is as follo$sL >2 or'us of Rs% 2> rore0 Pension funds $ith minimum or'us of Rs% 2> rore0 :ational Investment )und set u' by resolution dated )% :ovember 1% In ase an issuer om'any ma!es an issue of 100- of the net offer to 'ubli through 100boo! building 'ro essS 7a8 :ot less than .>- of the net offer to retail individual investors0 7b8 :ot less than 1>- of the net offer to non" institutional investors0 7 8 :ot more than >0- of the net offer to Pualified Institutional 9uyersL 2% In ase of om'ulsory boo!"built issues, at least >0- of the net offer should be allotted to Pualified Institutional 9uyers, failing $hi h the issue $ill be de lared as invalid and all subs ri'tion refunded% .% In boo!"built issues made 'ursuant to the reKuirement of mandatory allo ation of ?0to PI9s in terms of Rule 1A728 7b8 of ,e urities 3ontra t 7Regulation8 Rules, 1A>E, the res'e tive figures are .0- for RIIs and 10- for :IIs% monies shall need to be 4llotment in a 'ubli issue to various investor ategories is as follo$sL

1% 4 minimum >0- of the net offer shall initially be made available for allotment to retail individual investors% 2% *he balan e net offer shall be made available for allotment toL a% Individual a''li ants other than retail individual investors, and b% <ther investors in luding or'orate bodies5 institutions, irres'e tive of the number of se urities a''lied for%

In an )P<, the reservation on om'etitive basis an be made for the e#isting retail individual shareholders and in su h ases the allotment to su h shareholders shall be on a 'ro'ortionate basis

PRICING O# AN ISSUE
Indian 'rimary mar!et ushered in an era of free 'ri ing in 1AA2% )ollo$ing this, the Regulations have 'rovided that the issuer in onsultation $ith the mer hant ban!er, on the basis of mar!et demand, de ides the 'ri e% *here is no 'ri e formula sti'ulated by ,E9I and ,E9I does not 'lay any role in 'ri e fi#ation% *he om'any is, ho$ever, reKuired to give full dis losures in the offer do ument, under the 3ha'ter on Justifi ation of Issue Pri e, of the 'arameters $hi h they had onsidered $hile de iding the issue 'ri e% *hese 'arameters in lude EP,, PE multi'le and return on net $orth and om'arison

RESERVATIONS
#ir1 all t1ent invest rs ,E9I guidelines 'rovide that an issuer ma!ing an issue to 'ubli 7i8 7ii8 7iv8 7v8 Indian and an allot shares on a firm basis Multilateral Develo'ment to some ategories as s'e ified belo$L )inan ial Institutions Indian Mutual )unds Permanent5regular issuer om'any , heduled 9an!s em'loyees of the 7iii8 )oreign Institutional Investors

of these 'arameters $ith 'eer grou' om'anies% *here are t$o ty'es of issues one $here om'any fi#es the 'ri e 7 alled fi#ed 'ri e issues8 and the other $here the om'any sti'ulate a floor 'ri e or a 'ri e band and invite bids from the mar!et to then determine the final 'ri e 7 boo! building issues8% #iAed Pri"e O..ers 4n issuer om'any is allo$ed to freely 'ri e the issue% *he basis of issue 'ri e is dis losed in the offer do ument $here the issuer dis loses in detail about the Kualitative and Kuantitative fa tors Fustifying the issue 'ri e% $ + $!ildin( O..ers

Reservati ns n a " 1%etitive &asis Reservation on om'etitive basis is $hen on erned reserved allotment of shares is made in 'ro'ortion to the shares a''lied for by the be made in a 'ubli ategoriesL 7i8 7ii8 Em'loyees of the om'any ,hareholders of the 'romoting om'anies in the ase of a ne$ om'any and shareholders of grou' om'anies in the ase of an e#isting om'any 7iii8 7v8 7vi8 Indian Mutual )unds Indian and Multilateral develo'ment 7iv8 )oreign Institutional Investors Institutions , heduled 9an!s ategories% Reservation on om'etitive basis an issue to the follo$ing

9oo! 9uilding means a 'ro ess by $hi h a demand for the se urities 'ro'osed to be issued is eli ited and built u' and the 'ri e for the se urities is assessed on the basis of the bids >.

obtained% *he issuer an sti'ulate a 'ri e band of 20- 7 a' in the 'ri e band should not be more than 20- of the floor 'ri e8 %*his method 'rovides an o''ortunity to the mar!et to dis over 'ri e for the se urities, though $ithin a band of 20-% Di..erential Pri"in( Pri ing of an issue $here one ategory is offered shares at a 'ri e different from the other ategory is alled differential 'ri ing% In I3DR Regulations, differential 'ri ing is allo$ed only if the se urities allotted to an a''li ant are at a 'ri e higher than the 'ri e at $hi h the net offer to the 'ubli is made% Dis" !nt t Retail 4n issuer om'any an allot shares to retail

'oint $ithin the band% 4ll a''li ants $ho have bid at or above the ut off 'ri e are then eligible for allotment and are allotted shares at the same ut off 'ri e even if they had bid at a higher 'ri e 7Dut h au tion 'ro ess8% *he basis of allotment is then finali(ed and allotment5refund is underta!en% -hat is a %ri"e &and2 *he red herring 'ros'e tus may ontain either the floor 'ri e for the se urities or a 'ri e band $ithin $hi h the investors an bid% *he s'read bet$een the floor and the a' of the 'ri e band annot be more than 20-% *his means that the a' should not be more than 120- of the floor 'ri e% *he 'ri e band an be revised after the issue has o'ened% ,u h revision has to be notified to the sto ! e# hanges, by issuing 'ress release and advertisements and also dis'laying the same on the terminals of the syndi ate members% Moreover, the bidding 'eriod has to be e#tended for a further 'eriod of three days, subFe t to the total bidding 'eriod not e# eeding ten days% -h de"ides the %ri"e &and2 It is u' to the om'any to de ide on the 'ri e or the 'ri e band in onsultation $ith its mer hant ban!ers% H / d es the K"!t: ..L %ti n / r+ . r the retail invest rs2 G3ut"offH o'tion is available only for the retail individual investors i%e% investors $ho are a''lying for se urities $orth u' to Rs% 1,00,000% ,u h investors are reKuired to ti ! the ut"off o'tion $hi h indi ates their $illingness to subs ribe to shares at the 'ri e finally dis overed and de ided by the issuer% Unli!e s'e ifi 'ri e bids $hi h be ome invalid if the bid 'ri e is lo$er than the final 'ri e, bids re eived under the ut" >B

individual investors at a dis ount of ma#imum 10- to the 'ri e at $hi h the shares are offered to the other ategories%

UNDERSTANDING $OOK $UILDING

-hat is & + &!ildin(2

9oo! building is a 'ro ess of 'ri e dis overy% *he a''li ants bid for the shares Kuoting the 'ri e and the Kuantity that they $ould li!e to bid at% *he bids have to be made $ithin the 'ri e band s'e ified by the issuer% Retail investors also have the o'tion of not bidding at a 'arti ular 'ri e but rather using the U ut"off1 o'tion% 4fter the bidding 'ro ess is om'lete, the U ut"off1 'ri e i%e% the final issue 'ri e is arrived at by the issuer de'ending u'on the bids re eived at various 'ri es% *hough an issuer an sti'ulate the final 'ri e to be any 'ri e in luding the highest 'ri e of the 'ri e band in ase the entire Kuantity of shares 'ro'osed to be sold are bid for at that 'ri e, he an also hoose any lo$er 'ri e

off o'tion remain valid for allotment

onsideration for

demat mode% ,in e almost all issues are no$ above this amount, an investor should o'en a demat a ount in ase he $ishes to a''ly for shares in an IP<5)P<% Is it " 1%!ls r, . r an invest r t PAN t a%%l, in an IPOB#PO2 Des% It is om'ulsory to have a P4: and has to be dis losed in the a''li ation form% 7Photo o'y of the P4: is no longer reKuired to be atta hed $ith the a''li ation form8% # r h / 1an, da,s d es an iss!e re1ain %en2 4 'ubli issue has to be !e't o'en for at least . $or!ing days but not more than 10 $or!ing days% In ase the 'ri e band in a 'ubli issue made through boo!"building 'ro ess is revised, the bidding 'eriod has to be e#tended for a minimum 'eriod of . $or!ing days% +o$ever, the total bidding 'eriod should not e# eed 10 $or!ing days% have a

ISSUE PROCESS
H / d es ne (et ne " 1e t " %ies . +n / a& !t the the dra.t ..er

. rth" 1in( iss!es2 And .r 1 /here "an d "!1ent2 ,E9I issues 'ress releases every $ee! regarding the draft offer do uments re eived and observations issued during the 'eriod% *he draft offer do uments are 'ut u' on its $ebsite% *he final offer do uments that are filed $ith ,E9I5R<3 are also 'ut u' on its $ebsite% +ard o'ies of the draft offer do uments an be obtained from ,E9I on a 'ayment of Rs%100 or from sto ! e# hanges, issuer and lead managers% ,oft o'ies an be do$nloaded from the ,E9I $ebsite% Issue advertisements are released by the

om'anies in ne$s'a'ers, maga(ines and even ele troni media% -here "an ne (et the . r1s . r

Rights issue is !e't o'en for a minimum 'eriod of 1> days and for a ma#imum 'eriod of .0 days% H / "an ne +n / a& !t the de1and . r . ti1e d!rin(

a%%l,in(B &iddin( . r the shares2 4''li ation forms for a''lying5bidding for shares are available $ith all syndi ate members, ban! olle tion enters and bro!ers to the issue% In ase of a''li ations made under 4,94, the a''li ation forms are available from the designated ban! bran hes% Is it " 1%!ls r, . r the invest r t have a de1at a"" !nt2 4ll a''li ations in 'ubli issues of si(e in e# ess of Rs%10 rore are to made om'ulsorily in the

an iss!e at an, % int the iss!e %eri d2

In issues made through boo! building, the om'any is reKuired to ensure online dis'lay of the demand and bids during the bidding 'eriod% *his is the o'en boo! system of boo! building $hi h allo$s the investors to be guided by the movements of the bids during the 'eriod in $hi h the bid is !e't o'en% *he hour"to"hour status of bidding in a boo!" built issue is available on the $ebsites of 9,E and :,E on a onsolidated basis% *he data regarding bids is also available investor ategory $ise%

>>

Can the invest r "han(eBrevise his &id2 Des% 4n investor an hange or revise the Kuantity or 'ri e of his bid by using the form for hanging5revising the bid that is available along $ith the a''li ation form% +o$ever, this has to be done before the losure of the issue% Can an invest r "an"el his &id2 Des% 4n investor an an el his bid anytime

4ll allotments, in luding in fi#ed 'ri e issues, are done on a 'ro'ortionate allotment basis% H / and /ithin h / 1!"h ti1e d es an invest r (et se"!rities in his de1at . n n: a"" !nt andB r a re.!nd in "ase all t1ent . shares2 *he 3om'any, after losing of the issue, finali(es the basis of allotment% 9ased u'on this, advi e is sent to the De'ository for redit of shares to the demat a ounts of the su essful allottees%

before the finali(ation of the basis of allotment by ma!ing an a''li ation to the registrar to the issue% -hat %r . "an an invest r reH!est .r 1

Refunds are made through various modes vi(% registered5ordinary 'ost, Dire t 3redit, R*2, 7Real *ime 2ross ,ettlement8, E3, 7Ele troni 3learing ,ervi e8 and :E)* 7:ational Ele troni )unds *ransfer8% If an investor is residing in one of the ?@ enters as s'e ified by the Reserve 9an! of India, he $ill get ele troni refunds through E3, e# e't $here

a s,ndi"ate 1e1&er that his &id has &een entered int the s,ste12 *he syndi ate member is reKuired to return the ounterfoil $ith the signature, date and stam' of the syndi ate member% *he investor should retain this as a 'roof that his bid $as a e'ted in the system% -hat is &asis . all "ati nB&asis .

the investor has dis losed eligibility under Dire t 3redit and R*2,% 7see se tion on E3,8%

all t1ent2 4fter the losure of the issue, the bids re eived are aggregated under different ategories i%e%,

If an investor is residing at any other entre, he $ill get refunds through registered5ordinary 'ost% H / d es ne +n / i. he has &een all tted an, shares2 *he issuer is reKuired to 'ublish an advertisement giving details of the basis of allotment% *he investor is entitled to re eive an allotment advi e $ithin 1> days from the date of losure of a boo!"built issue and the demat redit or refund should ta!e 'la e $ithin this 'eriod%

firm allotments, Pualified Institutional 9uyers 7PI9s8, :on"Institutional 9uyers 7:I9s8, Retail, et % *he oversubs ri'tion ratios are then al ulated for ea h of the ategories as against the shares reserved for ea h of the ategories in the offer do ument% /ithin ea h of these ategories, the bids are then segregated into different bu !ets based on the number of shares a''lied for% *he oversubs ri'tion ratio is then a''lied to the number of shares a''lied for and the number of shares to be allotted for a''li ants in ea h of the bu !ets is determined% ,ubseKuently, the number of su essful allottees is determined%

>?

H / l n( d es it ta+e a.ter the iss!e . r the shares t (et listed2 *he listing on the sto ! e# hanges is done $ithin E days from the finali(ation of the basis of allotment% *his ty'i ally is 1>"1@ days after the losure of the boo! built issue% In ase of fi#ed 'ri e issue, it is about .> days after losure of the issue%

4 'art of this 'roblem $as solved by ,E9I a fe$ years ago by mandating ele troni refund through the ban!ing system 7E3,8% 4,94 is no$ a ne$ system introdu ed by ,E9I in 200@ to revolutioni(e the entire system of a''li ations and refunds% -hat is AS$A2

APPLICATIONS SUPPORTED $7 $LOCKED AMOUNT FAS$AG

$a"+(r !nd Until 200@, a retail investor $as reKuired to atta h a heKue5demand draft overing the full amount of his a''li ation% Details of su h heKues $ere first entered by the ,yndi ate Member, then the ban!ers for heKues $ere sent to the learing, $hi h again reKuired

4,94 means G4''li ation ,u''orted by 9lo !ed amountH% 4,94 is an a''li ation ontaining an authori(ation to the investor1s ban! to blo ! in his ban! a ount an amount eKuivalent to the a''li ation money% *he money remains in the ban!% U'on finali(ation of the basis of allotment, only the amount eKuivalent to the allotment amount is debited to the ban! a ount, and the rest is freed u'% If the allotment is nil, then the entire blo !ed a''li ation amount gets released% -h "an a%%l, thr !(h the AS$A %r "ess2 4ll investors are allo$ed to a''ly through the 4,94 'ro ess% -hat are the &ene.its . r the invest r a%%l,in( thr !(h AS$A2 4''lying through 4,94 'ro ess has the follo$ing benefits for the investorL 7i8 *he investor need not 'ay the a''li ation money by heKue% +e only issues an authori(ation to his ban! to blo ! the ban! a ount to the e#tent of the a''li ation money% 7ii8 *he investor does not have to bother about refunds, as in 4,94 only that mu h money $hi h is reKuired for allotment of se urities, is ta!en from the ban! a ount% 7iii8 *he investor ontinues to earn interest on the blo !ed money as the same remains in his ban! a ount% 7iv8 *he 4,94 a''li ation form is mu h sim'ler% >E

entering of the a''li ant1s data and finally the leared a''li ations $ere sent to the Registrar $ho again 'ro essed the data% *his 'ro ess aused delays and errors% )urthermore, in issues that $ere oversubs ribed, the Registrar then had to 'ro ess the refund $arrants5refund instru tions% :early a month after the a''li ation $as made, the investor $ould related re eive $or! the refund% In highly huge% oversubs ribed issues, the volume of refund" obviously be ame 3om'ounding this $as the 'roblem of refund $arrants getting mis'la ed5lost in transit% &ittle $onder, the largest number of om'laints in IP<s $as related to refunds% /orse, an investor1s money remained out of his rea h for this 'eriod, and $as utili(ed by the system $ithout 'aying interest to the investor, and the in iden e of this $as substantial as most ases resulted not in allotment but in refunds%

7v8

*he

investor

deals

$ith

!no$n

:o% *he a''li ation form for 4,94 is different from the regular a''li ation form for 'ubli issues% *he 4,94 a''li ation forms are available

intermediary i%e% his o$n ban!% Is it 1andat r, . r invest rs t thr !(h AS$A nl,2 :o% 4n investor has the o'tion of ma!ing a''li ation through 4,94 or through the e#isting 'ro ess of a''lying $ith heKue% -hat is a Sel. "erti.ied S,ndi"ate $an+ FSCS$G2 9an!s $hi h have been authori(ed by ,E9I to a e't 4,94 a''li ations ,yndi ate 9an!s 7,3,9s8% Is an iss!er reH!ired t %r vide AS$A 1 de . r all iss!es2 *he issuer is reKuired to 'rovide 4,94 mode in all 'ubli issues though boo! building $here a uniform 'ayment o'tion is being offered to the retail investors% Is it 1andat r, . r all SCS$s t AS$A %r "ess in all iss!es2 It is mandatory for all issuers and all ,3,9s to offer the 4,94 'ro ess in the boo!built issues% -here "an ne s!&1it the AS$A ..er the alled ,elf 3ertified a%%l,

$ith the designated bran hes of ,3,9% Can ne /ithdra/ the &id 1ade thr !(h AS$A2 Des, the 4,94"su''orted bids an be $ithdra$n during the bidding 'eriod% )or this, the ban! to $hi h the bid $as submitted has to be reKuested for $ithdra$al through a duly signed letter% *he blo !ed amount $ill be unblo !ed immediately% 4fter the bid losure 'eriod, one an send the $ithdra$al reKuest to the Registrars, $ho $ill an el the bid and instru t the ,3,9 to unblo ! the a''li ation money in the ban! a ount, but only after the finali(ation of the basis of allotment% -h sh !ld ne a%%r a"h i. it is . !nd that all details in the AS$A . r1 /ere " rre"t3 ,et the a%%li"ati n /as re'e"ted &, "itin( the reas n . /r n( data2 *he relevant ,3,9 should be onta ted% If not resolved, one should $rite to ,E9I% D es an invest r ne"essaril, need t AS$A a%%li"ati n is &ein( s!&1itted2 :o% Can ne a%%l, in the sa1e iss!e & th s,ste1 . %a,1ent thr !(h have

a%%li"ati n . r1s2 4t 'resent, not all the ban!s are 'arti i'ating in the 4,94 'ro ess% Even ban!s $ho are 'arti i'ating are not offering this fa ility in all their bran hes% +o$ever, the a e'tan e entres are in reasing by the day% *he list of ,3,9s and their bran hes $here 4,94 a''li ation forms are being a e'ted is available on the $ebsite of ,E9I 7$$$%sebi%gov%in8% Can ne !se the eAistin( a%%li"ati n . r1 . r %!&li" iss!es . r a%%l,in( thr !(h AS$A2

a DP a"" !nt /ith the sa1e SCS$ /here

thr !(h AS$A %r "ess and thr !(h the eAistin( "heH!e2 :o% 4n investor an a''ly only through one of the routes% Is there an, di..erent treat1ent in

all t1ent . r AS$A and n n:AS$A . r1s2

>@

:o% 4,94 forms are treated at 'ar $ith the non" 4,94 forms D es an invest r (et an a"+n /led(e1ent . r AS$A a%%li"ati ns2 Des% *he ,339 is reKuired to give an ,E9I mandated in 200? the use of E3, for refunds in 'ubli issues% 4''li ants residing in ?@ enters, as 'rovided by R9I, no$ get refunds -h is res% nsi&le . r err rs in the data !%l aded s,ste12 In ase there is an error by the investor in entering the data in the a''li ation form, the investor shall be res'onsible% In ase there is an error by ,3,9 in entering the data in the ele troni bidding system of the sto ! e# hanges, the ,3,9 shall be res'onsible% -hat ha%%ens /hen an iss!e .ailsB is /ithdra/n2 In ase an issue fails or is $ithdra$n, the ,3,9 shall unblo ! the a''li ation money u'on re eiving instru tions from the Registrar% *he list of the ?@ entres is 'rovided belo$L
1 2 . B > ? E @ A 10 11 12 1. 1B 1> 1? 1E 1@ 1A 20 21 22 2. 4gra 4hmedabad 4llahabad 4mritsar 4urangabad 9angalore 9hil$ara 9ho'al 9hubanes$ar 9urd$an7non"MI3R8 3handigarh 3hennai 3oimbatore Dehradun Dhanbad7non"MI3R8 Durga'ur 7non"MI3R8 Erode 2ora!h'ur 2u$ahati 2$alior +aldia 7:on" MI3R8 +ubli +yderabad 2B 2> 2? 2E 2@ 2A .0 .1 .2 .. .B .> .? .E .@ .A B0 B1 B2 B. BB B> B? Indore Jabal'ur Jai'ur Jalandhar Jammu Jamshed'ur Jodh'ur 6a!inada 7non"MI3R8 6an'ur 6o hi5Erna!ulam 6olha'ur 6ol!ata 6o(hi!ode &u !no$ &udhiana Madurai Mangalore Mumbai Mysore :ag'ur :ashi! :ellore 7non"MI3R8 :e$ Delhi BE B@ BA >0 >1 >2 >. >B >> >? >E >@ >A ?0 ?1 ?2 ?. ?B ?> ?? ?E ?@ PanaFi Patna Pondi herry Pune Rai'ur RaF!ot Ran hi ,alem ,himla 7non"MI3R8 ,hola'ur ,iliguri 7non"MI3R8 ,urat *hiruvanantha'uram *iru hira'alli *iru'ati7non"MI3R8 *iru'ur *ri hur Udai'ur ;adodara ;aranasi ;iFay$ada ;isa!ha'atnam

ELECTRONIC CLEARING SCHEME FECSG #OR RE#UNDS

a !no$ledgement%

through E3, 7in addition $ith other modes of ma!ing refunds ele troni ally li!e R*2,, Dire t redit and :E)*8% 4''li ants in other of registered 5 ordinary 'ost% Under E3,, the ban! a ount details of the investors are ta!en dire tly from the de'ositories1 databases and the amounts are ele troni ally redited to the investor1s a ounts% 4n investor should ensure that his ban! details in luding MI3R ode 7a A digit ode $hi h a''ears in the heKue leaf8 are 'rovided to the DP, and is u'dated $henever ne essary% enters ho$ever get refunds through the normal 'ra ti e

in

the

ele"tr ni"

&iddin(

>A

INTERMEDIARIES INVOLVED IN THE ISSUE PROCESS

*he !ey intermediaries $ho are involved in the issue 'ro ess, and are all registered $ith ,E9I, are Mer hant 9an!ers to the issue 7!no$n as 9oo! Running &ead Managers "9R&M" in ase of boo! built 'ubli issues8, Registrars to the issue, 9an!ers to the issue Under$riters and ,yndi ate Members% Mer"hant $an+ers 4 Mer hant 9an!er does the due diligen e to 're'are the offer do ument% *hey are also res'onsible for ensuring om'lian e $ith all la$s5regulations and for mar!eting of the issue% In the 're"issue 'ro ess, the &ead Manager 7&M8 ta!es u' the due diligen e of the om'any1s o'erations5 management5 business 'lans5 legal et % before in luding this information in the <ffer Do ument% )or this, the &Ms are reKuired to e#amine various do uments, in luding those relating to litigation, and also underta!e inde'endent verifi ation of information% *he &Ms also ensure reKuirements and om'lian e $ith sti'ulated om'letion of 'res ribed Re(istrars 4fter the losure of an issue, the data of all a''li ants is 'ro essed by the Registrar $ho, after deleting all invalid a''li ations, 're'ares the basis of allotment% U'on finali(ation of the basis of allotment, the Registrar finali(es the list of eligible allottees and then ensures rediting of shares to the demat a ounts of the su essful a''li ants and dis'at h5 redit of refunds to the unsu essful a''li ants% $an+ers t the Iss!e *he 9an!ers to the Issue re eive the a''li ation monies and notify the Registrar the details of all the 'ayments that have been leared% *he &ead Mer hant 9an!er has to ensure that 9an!ers to the Issue are a''ointed in all the mandatory olle tion enters as s'e ified in ,E9I 7I3DR8 Regulations% Under the 4,94 'ro ess, the ban!ers to the issue also a e't a''li ation forms% Under/riters In ase of under$ritten issues, the under$riters underta!e to subs ribe to the se urities offered by the om'any to the e#tent of undersubs ri'tion by the 'ubli , S,ndi"ate Me1&ers *he 9oo! Runner7s8 may a''oint as syndi ate members those intermediaries $ho are registered $ith ,E9I and $ho are 'ermitted to arry on a tivity as an Under$riter% *he syndi ate members are mainly res'onsible to olle t and enter the bid forms into the system in boo!"built issues%

formalities $ith ,E9I, sto ! e# hanges and R<3% 4''ointment of the other intermediaries li!e Registrar, Printer, 4dvertising 4gen y and 9an!ers to the <ffer is also underta!en by the &M% *he &M also dra$s u' and im'lements the mar!eting strategy for the issue% *he 'ost issue a tivities in luding management of es ro$ a ounts, allo ation, intimation of allo ation, redit for allotted se urities and 5or refunds are 'erformed by the &M% *he mer hant ban!er is res'onsible for ensuring timely and 'ro'er fulfillment of the roles of various agen ies asso iated $ith the issue 'ro ess%

?0

SOME TERMS AND CONCEPTS

Green:sh e O%ti n 4 2reen ,hoe o'tion means an o'tion of allo ating shares in e# ess of the shares in luded in a 'ubli issue and o'erating a 'ost"listing 'ri e stabili(ing me hanism for a 'eriod not e# eeding .0 days in a ordan e $ith the 'rovisions of ,E9I 7I3DR8 Regulations $hi h is granted to a om'any to be e#er ised through a ,tabili(ing 4gent% *his is an arrangement $herein the issue $ould be over allotted to the e#tent of a ma#imum of 1>- of the issue si(e% )rom an investor1s 'ers'e tive, an issue $ith green shoe o'tion 'rovides a higher 'robability of getting shares and also that 'ost listing 'ri e may sho$ relatively more stability% Sa.et, Net 4 safety net s heme is a s heme under $hi h a buy ba ! shall be done of the shares allotted in an issue only from the original resident individual allottees limited u' to a ma#imum of 1000 shares 'er allottee and su h offer is !e't o'en for a 'eriod of ? months from the date listing% *his s heme has to be finali(ed in advan e and dis losed in the 'ros'e tus%

allotment route% +o$ever there is no lo !" in on shares5 se urities allotted through PIP route% Pr 1 ter *he 'romoter has been defined as a 'erson or 'ersons $ho are in over"all om'any, $ho are ontrol of the in the instrumental

formulation of a 'lan or 'rogramme 'ursuant to $hi h the se urities are offered to the 'ubli and those named in the offer do ument as 'romoters7s8% It may be noted that a dire tor 5 offi er of the issuer om'any or 'erson, if they are a ting as su h merely in their 'rofessional a'a ity are not be in luded in the definition of a 'romoter% +o$ever, a finan ial institution, s heduled ban!, foreign institutional investor and mutual fund shall not be deemed to be a 'romoter merely by virtue of the fa t that ten 'er ent or more of the eKuity share a'ital of the issuer is held by su h 'erson% )urther su h finan ial institution, s heduled ban! and foreign institutional investor shall be treated as 'romoter for the subsidiaries or om'anies 'romoted by them or for the mutual fund s'onsored by them% UPromoter 2rou'1 in ludes the 'romoter, an

L "+:In G&o !"inH indi ates a free(e on the shares% ,E9I 7I3DR Regulations8 2uidelines have sti'ulated lo !"in reKuirements on shares of 'romoters mainly to ensure that the 'romoters or main 'ersons, $ho are ontrolling the om'any, shall ontinue to hold some minimum 'er entage in the om'any after the 'ubli issue% *he reKuirements are detailed in 'art I; of 3ha'ter III of ,E9I 7I3DR8 Regulations% *here is lo !"in on the shares held before IP< and also on shares a Kuired through 'referential

immediate relative of the 'romoter 7i%e% any s'ouse of that 'erson, or any 'arent, brother, sister or hild of the 'erson or of the s'ouse8% In ase 'romoter is a body or'orate, a subsidiary or holding om'any of that body or'orate0 any om'any in $hi h the 'romoter holds 10- or more of the eKuity a'ital or $hi h holds 10- or more of the eKuity a'ital of the Promoter0 any om'any in $hi h a grou' of individuals or om'anies or ombinations thereof $ho holds a'ital in that ase the 20- or more of the eKuity a'ital of the issuer

om'any also holds 20- or more of the eKuity om'any% In 'romoter is an individual, any om'any in $hi h ?1

10- or more of the share a'ital is held by the 'romoter or an immediate relative of the 'romoter1 or a firm or +U) in $hi h the UPromoter1 or any one or more of his immediate relative is a member0 any om'any in $hi h a om'any s'e ified in 7i8 above, holds 10- or more, of the share a'ital0 any +U) or firm in $hi h the aggregate share of the 'romoter and his immediate relatives is eKual to or more than 10- of the total, and all 'ersons $hose shareholding is aggregated for the 'ur'ose of

dis losing in the 'ros'e tus Gshareholding of the 'romoter grou'H +o$ever, a finan ial institution, s heduled ban!, foreign institutional investor and mutual fund shall not be deemed to be a 'romoter merely by virtue of the fa t that ten 'er ent or more of the eKuity share a'ital of the issuer is held by su h 'erson% )urther su h finan ial institution, s heduled ban! and foreign institutional investor shall be treated as 'romoter for the subsidiaries or om'anies 'romoted by them or for the mutual fund s'onsored by them%

?2

Cha%ter **

PSU IPOs F DISINVESTMENTSG

*here is no$ a rene$ed fo us on disinvestments in India% P,Us or Publi ,e tor Underta!ings are among the largest and most 'rofitable organi(ations in India% <f the total of 2BE 3entral Publi ,e tor Enter'rises 73P,Es8 and subsidiaries of 3P,Es 7as 'er data available $ith De'artment of Publi Enter'rises as on .1st January 20108, only BE are listed% B> of these are listed at 9,E, $hi h onstitute 2>- of the total mar!et a'itali(ation of B@A0 om'anies listed at 9,E% In addition, 2E Publi ,e tor 9an!s 7P,9s8 $ith their subsidiaries and ? ,tate &evel Publi Enter'rises 7,&PEs8, a ount for another ?- of the total mar!et together a'itali(ation at 9,E% *hus all P,Us onstitute .1%2- of the total mar!et S1all invest rs sh !ld invest in PSU IPOs ,mall investors should loo! out for the P,U disinvestment issues% ,in e only the best of the P,Us are being ta!en to the mar!et, there should be little on ern for the investors regarding the Kuality of the offer 'ri e% om'any or *he redentials of the has already 'romoters% *he only other im'ortant fa tor is the 2overnment demonstrated its bias to$ards the small investors and in almost all IP<s5)P<s floated in the re ent 'ast, the retail investors have been offered a P,Us have the 'otential for even a more dominant role, $ith a large number of 'rofitable unlisted 3P,Es that an go to the mar!et% 9ased u'on data 7of 'rofit ma!ing P,Us as on .1st Mar h 200@8, there are as many as 102 ."year 'rofit ma!ing 3P,Es that are still unlisted% /ith the government1s announ ement of redu ing its sta!e in listed and unlisted 7'rofit"ma!ing8
COMPAN7 :*P3 &*D% P</ER )I:4:3E 3<RP%&*D% P</ER 2RID 3<RP%<) I:DI4 &*D% RUR4& E&E3*RI)I34*I<: 3<RP%&*D% ,J;: &*D% TOTAL

om'anies to A0- via 'ubli number of P,U 'ubli

offers, a large

offers are no$ in the

'i'eline% *his $ould also hel' a hieve the goal set out in the manifesto $hi h stated that GIndian 'eo'le have every right to o$n 'art of the shares of 'ubli se tor om'anies, $hile the government retains the maFority shareholding%H

a'itali(ation at 9,E or Rs% 1E%?@ la!h rore%

dis ount of >- on the dis overed 'ri e% Ideally, the small investors should not see these issues as trading o''ortunities and should not ne essarily loo! at selling out on the listing date% 4 medium to long term vie$ $ould be ideal% *he follo$ing table demonstrates the returns on P,U IP<s that $ere floated in the 'ast fe$ yearsL
M GAINB LOSS 22B%11 2B0%?> A@%1E 1E0%1 *?*)<*

IPO MONTH O##ER PRICE MARKET PRICE AS FRs)G .@2?1 .A0@. .A.2? .ABEA B02?A ON 0>)4<)04*4 FRs)G ?2 200%A> @> >2 10> 2? 2@A%>> 10.%0> 2@.%? 2B%1>

)or more details about 'ast and future disinvestments, investors may visit ///)&se%s!)" 1, a $ebsite reated by 9,E e# lusively on disinvestments%

?.

Cha%ter *0

DEPOSITOR7 ACCOUNT
THE DEPOSITOR7 IN#RASTRUCTURE
-hat is a De% sit r,2 4 de'ository is an organi(ation $hi h holds se urities 7li!e shares, debentures, bonds, government se urities, mutual fund units et %8 of investors in ele troni form at the reKuest of the $an+ and De% sit r,JAn anal (, $ANK +olds funds in an a ount *ransfers funds bet$een a ounts on the instru tion of the a ount holder )a ilitates transfer $ithout having to handle money )a ilitates safe!ee'ing of money DEPOSITOR7 +old se urities in an a ount *ransfers se urities bet$een a ounts on the instru tion of the a ount holder )a ilitates transfer of o$ner" shi' $ithout having to handle se urities )a ilitates safe!ee'ing of se urities investors through a registered De'ository Parti i'ant 7DP8% It also 'rovides servi es related to the transa tions in se urities% H / is a de% sit r, si1ilar t a &an+2 It an be om'ared $ith a ban!, $hi h holds the funds for de'ositors% 4 9an!"De'ository analogy is given in the follo$ing tableL

H / 1an, De% sit ries are re(istered /ith SE$I2 4t 'resent, t$o De'ositories are registered $ith ,E9IL :ational ,e urities De'ository &imited 7:,D&8 3entral De'ository ,ervi es 7India8 &imited 73D,&8% -h is a De% sit r, Parti"i%ant2 4 de'ository interfa es $ith the investors through its agents alled De'ository Parti i'ants 7DPs8% If you $ant to avail of the servi es offered by a de'ository, you need to o'en an a ount $ith a DP% *his is similar to o'ening an a ount $ith any bran h of a ban! in order to utili(e the ban!1s servi es%

H / 1an, De% sit r, Parti"i%ants are re(istered /ith SE$I2 4s in May 2010, a total of EA? DPs 72@? :,D& and >12 3D,&8 are registered $ith ,E9I% *hese olle tively have 1@@B2 entres s'read all a ross the ountry% *hese om'rise ban!s, bro!ers, registrars and

other finan ial se tor 'arti i'ants%

DEMATERIALISATION
-hat is de1aterialiCati n2 Demateriali(ation is the 'ro ess by $hi h 'hysi al share ertifi ates held by an investor are onverted into an eKuivalent number of se urities in ele troni form and redited into the investor1s a ount%

?B

-hat

are

the

&ene.its

om'lete 'ro ess of demateriali(ation is outlined belo$L ,urrender ertifi ates for demateriali(ation to the DP% DP intimates to the De'ository regarding the reKuest for demateriali(ation through the system% DP submits the ertifi ates to the R*4 of the 3om'any% R*4 onfirms the demateriali(ation reKuest from the de'ository%

de1aterialiCati n2

4 safe, onvenient $ay to hold se urities Immediate transfer of se urities :o stam' duty on transfer of se urities Elimination of ris!s asso iated $ith 'hysi al et % ertifi ates su h as bad delivery, fa!e se urities, delays, thefts

Redu tion in 'a'er$or! involved in transfer of se urities Redu tion in transa tion ost :o odd lot 'roblem, even one share an be sold :omination fa ility 3hange in address re orded $ith DP gets registered $ith all $hi h investor $ith holds ea h om'anies in se urities of them

4fter demateriali(ing the ertifi ates, the R*4 u'dates the

a ounts

and

informs the de'ository regarding om'letion of demateriali(ation%

De'ository u'dates its a ounts and informs the DP% DP u'dates the demat a ount of the investor% -hat is an ISIN2 I,I: 7International ,e urities Identifi ation :umber8 is a uniKue 12 digit al'ha"numeri identifi ation number allotted for ea h se urity 7e%g% I:E.@.30101@8% I,I: is not assigned to a om'any0 in fa t, for even eKuity shares issued by a om'any of different ty'es li!e eKuity"fully 'aid u', eKuity"'artly 'aid u', eKuity $ith differential voting 5dividend rights issued by the same issuer $ill have different I,I:s% D de1aterialiCed shares have distin"tive n!1&ers2 Unli!e 'hysi al shares, demateriali(ed shares do not have any distin tive numbers% *hese shares are fungible, $hi h means that all the holdings of a 'arti ular se urity are identi al and inter hangeable%

ele troni ally eliminating the need to orres'ond se'arately

*ransmission of se urities is done by DP eliminating om'anies orres'onden e $ith

4utomati

redit into demat a ount of

shares, arising out"of bonus5 s'lit5 onsolidation5merger et %

+olding investments in eKuity and debt instruments in a single a ount

H / d es int

ne " nvert %h,si"al shares ne

ele"tr ni" h ldin( Fh / "an

de1aterialiCe the se"!ritiesG2 In order to demateriali(e 'hysi al 7'a'er8 se urities, one has to fill in a DR) 7Demat ReKuest )orm8 $hi h is available $ith the DP and submit the same along $ith 'hysi al ertifi ates that are to be demateriali(ed% ,e'arate DR) has to be filled for ea h I,I:% *he

?>

Can dd l t shares &e de1aterialiCed2 Des% <dd lot share demateriali(ed% ertifi ates an also be

H / sh !ld an invest r sele"t the ri(ht DP2 *he most im'ortant fa tors areL 3redibility ante edents, of the DP 7re'utation, of other e#'erien e

DEMATERILISATION IS NOCOMPULSOR7
Is it " 1%!ls r, . r ever, invest r t %en a &ene.i"ial /ner F$OG a"" !nt t trade in the "a%ital 1ar+et2 *hough trading in 'hysi al format is 'ermitted, be ause of the inherent strengths of the ele troni mode, over AA%Asettlements demat 'resently ta!es 'la e in the ele troni

investors, infrastru ture8 ;arious harges that are levied by the DP &o ation of the DP offi e 7'ro#imity to your offi e5residen e, business hours8 <ther servi es offered by the DP li!e ban!ing, bro!ing et % to ensure one" $indo$ dealing and onvenien e% H / is a de% sit r, a"" !nt %ened2 *he DP $ill 'rovide an a ount o'ening form% *his form must be su''orted by o'ies of any one of the a''roved do uments to serve as 'roof of identity 7P<I8 and 'roof of address 7P<48 as s'e ified by ,E9I% 9esides, 'rodu tion of P4: ard in original at the time of o'ening of a ount is also mandatory% *he investor should arry all do uments in

mode% )or better 'ri es of shares to be bought or sold and for the onvenien e of o'erations, an investor should have a de'ository a ount% Moreover, ,E9I no$ allo$s issue of se urities through an IP<5)P< only in the demat format, and as su h investors $ishing to 'arti i'ate in the 'rimary mar!et should have a de'ository a ount 7*o fa ilitate trading by small investors" ma#imum >00 shares, irres'e tive of their value" in 'hysi al mode the sto ! e# hanges 'rovide a se'arate trading $indo$ $hi h gives the fa ility for small investors to sell 'hysi al shares% +o$ever, this segment has been near" dormant for many years no$, 'lagued as it is $ith la ! of liKuidity and huge dis ounts on the mar!et 'ri e that need to be offered8%

original for verifi ation by the DP% *he investor $ould also be reKuired to sign an agreement $ith the DP in a de'ository 'res ribed standard format, $hi h details the rights and duties of the investor and the DP% *he DP is

reKuired to 'rovide the investor $ith a o'y

of this agreement and also the detailed s hedule of harges%

OPENING A DEMAT ACCOUNT

*he DP $ill o'en the a ount and give an a ount H / "an an invest r avail the servi"es a de% sit r,2 *o avail the servi es of a de'ository, an investor is reKuired to o'en a 9enefi ial <$ner 79<8 a ount $ith a De'ository Parti i'ant 7DP8 of any de'ository% . number, $hi h is alled the 9< ID 79enefi iary <$ner Identifi ation :umber8%

??

-h, is an invest r reH!ired t a"" !nt %enin(2

(ive his .

e#am'le, if a share ertifi ate is in the individual name and another ertifi ate is held Fointly $ith some one, t$o different a ounts $ould need to be o'ened% -hat is reH!ired t %h,si"al "erti.i"ates &e d ne i. /ith the ne has sa1e .

&an+ a"" !nt details at the ti1e

9an! a ount details are ne essary for the 'rote tion of interest of the investors% /hen any ash or non ash or'orate benefits su h as rights or bonus or dividend is announ ed for a 'arti ular s ri', the de'ositories 'rovide to the on erned om'any5 R*4, the details of the holdings as on benefit% *he losure date for re !oning the of or'orate investors and their ele troni re ord 5 boo! entitlement

1!lti%le na1es3 &!t the seH!en"e

na1es is di..erent i)e) s 1e "erti.i"ates /ith DA as .irst h lder and D$ as se" nd h lder and ther set . "erti.i"ates /ith D$ as the .irst h lder and DA as the se" nd h lder2 In this ase, the investor may o'en only one a ount $ith U41 C U91 as the a ount holders and lodge the se urity ertifi ates $ith different order of names for demateriali(ation in the same a ount% 4n additional form alled G*rans'osition um Demat )ormW $ill have to be filled in $hi h $ill allo$ hange in the order of names% Can an invest r %erate a ' int a"" !nt n

disbursement of ash benefits su h as dividend is redited dire tly by the om'any5 R*4 to the benefi iary o$ner through the E3, 7Ele troni 3learing ,ervi e8 fa ility $herever available or by issuing $arrants on $hi h the ban! a ount details are 'rinted for the to$ns $here the E3, fa ility is not available% *he 'rinting of the ban! a ount number on the dividend $arrant 'revents any fraudulent misuse% Can 1!lti%le a"" !nts &e %ers n2 Des% 4n investor an o'en more than one a ount in the same name $ith the same DP and also $ith different DPs, and $ith one or both the de'ositories% Is it ne"essar, t have a"" !nt /ith the an be hosen by the %ened &, a

Keither a"" !nt2

r s!rviv rL &asis '!st li+e a &an+

:o% *he demat a ount annot be o'erated on Geither or survivorH basis li!e a ban! a ount% Can s 1e ne else att rne,2 Des% If the 9< authori(es a 'erson to o'erate the a ount by e#e uting a 'o$er of attorney and submits it to the DP, that 'erson an o'erate the a ount on behalf of the 9<% %erate the a"" !nt n

&ehal. . the $O n the &asis . a % /er . sa1e DP as the invest rs &r +er has2 :o% De'ository 5 DP investor as 'er his onvenien e% Can an invest r %en a sin(le a"" !nt . r se"!rities %atterns /ned in di..erent s!"h as /nershi% /ned Is additi n the a"" !nt2 :o% *he names of the a ount holders of a 9< a ount annot be hanged% If any hange has to be effe ted by addition or deletion, a ne$ a ount has to be o'ened in the desired holding 'attern r deleti n . na1es . se"!rities a"" !nth lders %er1itted a.ter %enin(

individ!all, and se"!rities /ith thers2

/ned ' intl,

:o% *he de'ository a ount must be o'ened in the same o$nershi' 'attern in $hi h the se urities are held in the 'hysi al form% )or

?E

7names8 and the se urities then need to be transferred to the ne$ly o'ened a ount, and the old a ount may be losed% Can an invest r "l se his de1at a"" !nt /ith ne DP and trans.er all se"!rities t an ther a"" !nt /ith an ther DP2 Des% *he investor an submit a ount losure reKuest to his DP in the 'res ribed form% *he DP $ill transfer all the se urities lying in the a ount, as 'er the instru tion, and lose the demat a ount% Can an invest r .reeCe r l "+ his

*he investors are reKuired to 'ay only the follo$ing hargesL *ransa tions transa tions8 4nnual a ount maintenan e harges Demateriali(ation and demateriali(ation of se urities )le#ibility is 'rovided by the de'ositories and ,E9I to fi# the above harges 7*he DP may revise the harges any time but has to 'rovide a .0 days noti e to all its a ount holders8% ,E9I reKuires all DPs to submit to their De'ository their 7latest by .0
th

fees

7only

for

sell

a"" !ntFsG2 4n investor an free(e or lo ! his a ount and5or I,I: and5or s'e ifi number of se urities under an I,I: for any given 'eriod of time as 'er a''li able Regulations of ,E9I and 9ye &a$s of the res'e tive de'ository% 4 ounts fro(en for debits 7'reventing se urities out of a ounts8 or for a ounts8 or for both% D es the invest r have t 1ini1!1 &alan"e a"" !nt2 :o% +ee% an, an be of redits transfer

harge stru ture every year

4'ril8% *he de'ository in turn is

reKuired to 'ut all these harge stru tures on its $ebsite to enable the investors to get a om'arative overvie$%

INTRA:DEPOSITOR7 AND INTER: DEPOSITOR7 TRANS#ERS

I. a $O h lds an a"" !nt /ith NSDLBCDSL3 "an he re"eive se"!rities .r 1 an a"" !nt in CDSLBNSDL2 Inter de'ository transfers are 'ossible $ithout any additional osts%

7'reventing any movements of hindran es into

. se"!rities in his

DEPOSITOR7 CHARGES
:o harges are levied by a de'ository on DP and -hat are the vari !s "har(es an invest r has t %a, . r %enin(3 1aintenan"e and "l s!re . a $O a"" !nt2 )or the benefit of the investors, ,E9I has mandated removal of a ount o'ening harges, transa tion a ount harges 7for redit or buy transa tions of se urities8, ustody harges and losing harges 73ustody harges are no$ 'aid by the issuer om'anies%8 onseKuently by a DP on a 9< $hen a 9< transfers all the se urities lying in his a ount to another bran h of the same DP or to another DP of the same de'ository or another de'ository, 'rovided the 9< a ount at the transferee DP and at transferor DP are one and the same, i%e% identi al in all res'e ts% In ase the 9< 4 ount at the transferor DP is a Foint a ount, the 9< a ount at the transferee DP should also be a Foint a ount in the same seKuen e of o$nershi'%

?@

 4ll other transfer of se urities onseKuent to losure of a ount, not fulfilling the above"stated riteria, $ould be treated li!e any other transa tion and harged as 'er the s hedule of harges agreed u'on bet$een the t$o DPs%

*he bro!er $ill give instru tion to its DP to debit his a ount and a ount% 9< $ill give URe ei't Instru tion1 to DP for re eiving redit by filling a''ro'riate form% +o$ever, the 9< an give standing instru tion for redit to his a ount that $ill obviate the need of giving Re ei't Instru tion every time% redit 9<1s

CHANGES IN INVESTOR DETAILS

Can an invest r "han(e the details &an+ a"" !nt2 Des% *he investor must immediately inform the DP regarding the hange in his ban! a ount and orres'onding hange in MI3R 5 I),3 ode 7as all monetary benefits li!e dividends are dire tly redited to the ban! a ount5ban! a ount is 'rinted on the $arrants8% -hat sh !ld &e d ne i. the address . the invest r "han(es2 *he investor should immediately inform his DP of any hange in his address, $ho in turn $ill u'date the re ord $ith the de'ository% *here is no need any more to inform all the om'anies5R*4s individually% . his

In ase of saleL 9< $ill give delivery instru tion through a Delivery Instru tion ,li' 7DI,8 to DP to debit his a ount and redit the bro!er1s a ount% ,u h instru tion should rea h the DP1s offi e at least 2B hours before the 'ay"in, failing $hi h the DP $ill a e't the instru tion only at the 9<1s ris!% -hat is Deliver, Instr!"ti n Sli% FDISG2 -hat %re"a!ti ns sh !ld res%e"t t the DIS2 4 DI, is li!e a ban! heKue boo!% *o give the delivery of the sold shares, the investor needs to fill the DI,% *he follo$ing 're autions should be ta!enL <btain from DP the DI, boo!let and ensure the DP issues an a !no$ledgment for the DI, boo!let issued to the investor% selling Ensure that DI, numbers are 're" 'rinted% Ensure that the investor1s a ount number X3lient IDR is 're"stam'ed on ea h DI, sheet% )or Foint a ounts, all the Foint holders need to sign the DI, before delivering it to the bro!er% Do not use loose DI, sli's% ne ta+e /ith

$U7ING AND SELLING DEMAT SECURITIES

-hat is the %r "ed!re . r &!,in( sellin( de1aterialiCed se"!rities2 *he 'ro edure for buying and demateriali(ed se urities is almost similar to the 'ro edure for buying and selling 'hysi al se urities% *he only differen e lies in the 'ro ess of delivery 7in ase of sale8 and re ei't 7in ase of 'ur hase8 of se urities% In ase of 'ur haseL *he bro!er $ill re eive the se urities in his a ount on the 'ayout day% r

?A

Do not leave blan! signed DI, $ith anyone 7bro!er5 sub"bro!er, DP or any other 'erson8%

res'e t allotment under an IP<5)P<% *he investor needs to 'rovide his mobile number to the de'ository for this 'ur'ose% *he DPs an 'rovide the transa tion statement in ele troni form under digital signature subFe t to their entering into a legally enfor eable arrangement $ith the 9<s to this effe t% -hat i. there are an, dis"re%an"ies in the state1ent . h ldin(s2 In ase of any dis re'an y in the statement of holdings, the investor should onta t his DP and in ase of dis re'an ies in or'orate benefits, he should onta t the om'any 5R*4% If the dis re'an y is not resolved, the investor should a''roa h the on erned De'ository%

6ee' the DI, boo! safely% If only one sale entry is made in the DI, sli', stri!e out the remaining s'a e to 'revent misuse by any one%

*he 9< should 'ersonally fill all details in the DI,% If the DI, boo!let is lost 5 stolen 5 not tra eable, the investor should inform the DP immediately in $riting% <n re ei't of su h intimation, the DP $ill an el the unused sli's of the DI, boo!let%

Is it % ssi&le t (ive deliver, instr!"ti ns t the DP ver the internet2 Des% 9oth :,D& and 3D,& have the fa ility for delivering instru tions to your DP over the internet, alled ,PEEDe and E4,I res'e tively% Are Des% shares all tted in %!&li" iss!es

PLEDGING
Can ne %led(e de1aterialiCed se"!rities2 Des% -hat sh !ld se"!rities2 *he 'ro edure to 'ledge demat se urities is as follo$sL 9oth 9<s, investor 7'ledgor8 and the lender 7'ledgee8 must have 9< a ounts $ith the same de'ository0 *he 'ledgor $ill need to instru t his DP to reate a 'ledge by submitting the onfirm the Pledge ReKuest )orm% *he 'ledgee $ill need to reKuest through his DP% <n e this is done, se urities are 'ledged% 4ll finan ial transa tions bet$een the 'ledgor and the 'ledgee are handled outside the de'ository system, as 'er the usual 'ra ti e% ne d t %led(e de1at

"redited dire"tl, in the ele"tr ni" . r12

TRANSACTION STATEMENT
H / d es !%dated transa"ti n2 *he DP 'rovides to the investor a *ransa tion ,tatement 'eriodi ally, $hi h gives details of urrent balan es and various transa tions made during the 'eriod% If desired, the DP an be as!ed to 'rovide the *ransa tion ,tatement at intervals shorter than the sti'ulated ones, at a small ost% *he de'ositories also 'rovide an ,M, 4lert fa ility $hereby investors an re eive alerts for debits to their demat a ounts and for redits in ne +n / that the DP has the a"" !nt a.ter ea"h

E0

-hat is the %r "ed!re . r "l s!re %led(e a.ter re%a,1ent . the l an2

se urities%

&ending and borro$ing is effe ted

through the de'ository system% Can and h / d es an invest r lend the se"!rities l,in( in his a"" !nt2 Des% *he investor needs to enter into an agreement $ith an a''roved intermediary% 4fter that, one an lend se urities any time by submitting the lending instru tions to the DP% H / d es the invest r (et &a"+ the se"!rities lent &, hi12 *he intermediary may return the se urities at any n time or at the end of the agreed 'eriod of lending% *he intermediary $ill return the se urities together $ith any benefits re eived during the 'eriod of the loan% H / d es ne re"eive the " r% rate n the se"!rities are given to the

4fter the re'ayment of loan, the 'ledgor an reKuest for a losure of the 'ledge by instru ting the DP in a 'res ribed format% *he 'ledgee, on re eiving the 'ayment, $ill instru t his DP a ordingly for the losure of the 'ledge% Can a %led( r "han(e the se"!rities ..ered in a %led(e2 Des% If the 'ledgee agrees, the 'ledgor hange the se urities offered in a 'ledge% -h re"eives the " r% rate &ene.its an

the %led(ed se"!rities2 <nly the se urities 'ledged are blo !ed in the a ount of 'ledgor in favour of the 'ledgee% *he 'ledgor $ould ontinue to re eive all the or'orate benefits%

&ene.its /hi"h a""r!e

LENDINGB $ORRO-ING O# SECURITIES

-hat is Lendin( and $ rr /in( .

d!rin( the %eri d . lendin(2 Initially, the benefits intermediary% +o$ever, $henever the se urities are returned 5 re alled, the intermediary $ill need to return the benefits to the lender%

se"!rities2 If an investor reKuired to deliver a 'arti ular se urity does not readily have that se urity, he an borro$ the same from another 'erson $ho is $illing to lend, as 'er the ,e urities &ending and 9orro$ing , heme% Can lendin( and & rr /in( &e d ne dire"tl, &et/een t/ %ers ns2 :o% &ending and borro$ing has to be done through an U4''roved Intermediary1 registered $ith ,E9I% *he a''roved intermediary $ould borro$ the se urities for further lending to the borro$er% &enders of the se urities and

NOMINATION AND TRANSMISSION

-h "an n 1inate2 :omination an be made only by individuals holding benefi iary a ounts either singly or Fointly% :on"individuals in luding so iety, trust, body or'orate, !arta of +indu Undivided )amily and holders of 'o$er of attorney nominate% -h "an &e a n 1inee2 <nly an individual an be a nominee% 4 nominee annot be a so iety, trust, body or'orate, annot

borro$ers of the se urities are reKuired to enter into se'arate agreements $ith the a''roved intermediary for lending and borro$ing the

E1

'artnershi' firm, 6arta of +indu Undivided )amily or a 'o$er of attorney holder% -h, is it i1% rtant t n 1inate2 :omination is hel'ful in a smooth transmission of shares to the nominee u'on the death of the 9<%

2% In ase of death of the sole holder, $here the sole holder has not a''ointed a nominee, a notari(ed o'y of the death ertifi ate and any one of ,u ession ertifi ate or the 'robated $ill or the 4dministration% *he DP $ill then transfer se urities to the a ount o'y &etter of of

Can n 1inati n n"e 1ade &e "han(ed2 *he nomination on e made an be hanged at a later date by the 9<% -hat is trans1issi n . de1at se"!rities2 *ransmission is the 'ro ess by $hi h the se urities of a de eased a ount holder are transferred to the a ount of his legal ase of

of the laimant%

REMATERIALISATION
Can ele"tr ni" h ldin(s &e " nverted &a"+ int %h,si"al "erti.i"ates2 Des% *his 'ro ess is alled remateriali(ation% If an investor $ishes to get ba ! his se urities in the 'hysi al form, he $ill need to fill the RR) 7Remat ReKuest )orm8 and reKuest his DP for remateriali(ation of the s'e ified se urities in his a ount% *he 'ro ess of remateriali(ation is outlined belo$L Investor ma!es a reKuest for remateriali(ation%

heir5nominee% *ransmission in the demat holdings is very

onvenient as the

transmission formalities for all se urities held in a demat a ount an be om'leted by submitting do uments Fust to the DP, $hereas in ase of 'hysi al se urities, the legal heirs5nominees5surviving Foint holders have to inde'endently orres'ond $ith ea h om'any of $hi h the se urities are held% In the event . death . the s le h lder3

DP intimates the de'ository of the reKuest% De'ository onfirms remateriali(ation

h / sh !ld the s!""ess r "lai1 the se"!rities l,in( in the de1at a"" !nt2 *he laimant should submit to the on erned DP the *ransmission ReKuest )orm 7*R)8 along $ith the follo$ing su''orting do uments 1% In ase of death of sole holder $here the sole holder has a''ointed a nominee, a notari(ed o'y of the death ertifi ate%

reKuest to the R*4% R*4 u'dates a ounts and 'rints the share ertifi ates% De'ository u'dates the a ounts and do$nloads the details to the DP% Registrar dis'at hes the the investor% ertifi ates to

E2

Cha%ter *9

SECONDAR7 MARKET
Invest as an in. r1ed invest r Dou should not buy se urities on im'ulse, a hot ti' or follo$ the herd% Dou should dis riminate bet$een information, asting a$ay irrelevant and illogi al 'ie es of information, and he !ing for o''ortunities and fa ts before buying a se urity% Dou should e#amine the fundamentals of a se urity before ta!ing a de ision to invest% mar!et develo'ment% *he !ey ris! management measures initiated by ,E9I in ludeL"

3ategori(ation of se urities into grou's 1, 2 and . for im'osition of margins based on their liKuidity and volatility%

;aR based margining system% ,'e ifi ation of mar! to mar!et margins ,'e ifi ation of Intra"day trading limits and 2ross E#'osure &imits Real time monitoring of the Intra"day trading limits and 2ross E#'osure &imits by the ,to ! E# hanges

INTRODUCTION
-hat is 1eant &, the se" ndar, 1ar+et2 ,e ondary Mar!et refers to a mar!et $here se urities are traded after being initially offered to the 'ubli in the 'rimary mar!et and5or listed on the ,to ! E# hange% MaFority of the trading is done in the se ondary mar!et% ,e ondary mar!et om'rises of eKuity mar!ets and the debt mar!ets% )or the investor, the se ondary mar!et 'rovides an effi ient 'latform for trading of his se urities% -hat is SE$Is r le in the se" ndar, 1ar+et2 ,E9I is the regulatory authority to 'rote t the interests of the investors in se urities and to 'romote the develo'ment of, and to regulate, the se urities mar!et and for matters there$ith and in idental thereto% onne ted

,'e ifi ation of time limits of 'ayment of margins 3olle tion of margins on u'front basis Inde# based mar!et $ide ir uit brea!ers 4utomati limits de"a tivation of trading

terminals in ase of brea h of e#'osure

;aR based margining system has been 'ut in 'la e based on the ategori(ation of sto !s based on the liKuidity of sto !s de'ending the mar!et% on its im'a t ost and volatility% It addresses AA- of the ris!s in

4dditional

margins

have

also

been

s'e ified to address the balan e 1- ases% 3olle tion of margins from institutional lients on *Y1 basis *he liKuid assets de'osited by the bro!er $ith the e# hange should be suffi ient to over u'front ;aR margins, E#treme &oss Margin, M*M 7Mar! to Mar!et &osses8 and the 'res ribed 9M3% *he Mar! to Mar!et margin $ould be 'ayable before the start of the ne#t day1s trading% *he Margin $ould be al ulated based on gross o'en 'osition of the member% *he gross o'en 'osition for this E.

-hat is SE$I Ris+ Mana(e1ent S,ste12 *he 'rimary fo us of ris! management by ,E9I has been to address the mar!et ris!s, o'erational ris!s and systemi ris!s% *o this

effe t, ,E9I has been ontinuously revie$ing its 'oli ies and drafting ris! management 'oli ies to mitigate these ris!s, thereby enhan ing the level of investor 'rote tion and ataly(ing

'ur'ose $ould mean the gross of all net 'ositions a ross all the in luding his lients of a member 'osition% *he 'ro'rietary

-hat are the vari !s de%art1ents . SE$I re(!latin( 1ar+et2 *he follo$ing de'artments of ,E9I ta!e are of the a tivities in the se ondary mar!et% tradin( in the se" ndar,

e# hanges $ould monitor the 'osition of the bro!ers1 online real time basis and there $ould be automati Sr) N ) 1% dea tivation of terminal on any shortfall of margin% Na1e . the De%art1ent Mar!et Intermediaries Registration and ,u'ervision de'artment 7MIR,D8

Ma' r A"tivities Registration, su'ervision, om'lian e monitoring and ins'e tions of all mar!et intermediaries in res'e t of all segments of the mar!ets vi(% eKuity, eKuity derivatives, debt and debt related derivatives%

2%

Mar!et Regulation De'artment 7MRD8

)ormulating ne$ 'oli ies and su'ervising the fun tioning and o'erations 7e# e't relating to derivatives8 of se urities e# hanges, their subsidiaries, and mar!et institutions su h as 3learing and settlement organi(ations and De'ositories 73olle tively referred to as UMar!et ,R<s1%8 ,u'ervising trading at derivatives segments of sto ! e# hanges, introdu ing ne$ 'rodu ts to be traded, and onseKuent 'oli y hanges

.%

Derivatives and :e$ Produ ts De'artments 7D:PD8

-hat

are

the

vari !s have

a"" !nts

an in

Client A"" !nt B $an+ A"" !nt6

4 ban!

invest r sh !ld se"!rities 1ar+et2

. r tradin(

a ount $hi h is in the name of the res'e tive lient and is used for debiting or rediting money for trading in the se urities mar!et%

$ene.i"ial /ner A"" !nt F$)O) a"" !ntG B De1at A"" !nt6 It is an a ount o'ened $ith a de'ository 'arti i'ant in the name of lient for the 'ur'ose of holding and transferring se urities% Tradin( A"" !nt6 4n a ount $hi h is o'ened by the bro!er in the name of the res'e tive investor for the maintenan e of transa tions e#e uted $hile buying and selling of se urities% iii% ii% -hat .a"t rs sh !ld &e ta+en int a"" !nt &e. re investin( in se"!rities2 <ne should ta!e into a ount the follo$ing fa tors before investing in se uritiesL i% $hether there is a regulatory frame$or! in 'la e in res'e t of the se urity and you are 'rote ted in ase of any eventuality0 $hether the offer of the se urity is in om'lian e $ith the due 'ro ess of la$0 $hether the se urity has any ounter 'arty ris!0

EB

iv%

$hether the se urity an be liKuidated to ash easily so that you liKuidity needs0 an meet your

*he bro!ers5sub"bro!ers are the investor1s lin! to the sto ! e# hange% *hey are intermediaries in the mar!et, under the regulatory dis i'line of ,E9I5the on erned sto ! e# hange% *hey enter into transa tions in se urities on the investor1s behalf% 4n investor1s relationshi' $ith them is governed by the terms set out in the bro!er5 lient"sub"bro!er agreement% 9esides, the sto ! e# hanges offer a ready mar!et for the se urities% &arger number of buyers and sellers available at a sto ! e# hange ensures liKuidity to the investors% Moreover, $hen one deals through an e# hange, the investor gets the best 'ri e 'revailing at that time for the trade and the right to re eive the money or se urities on time% *he other benefit of trading on an e# hange is that an investor does not have to ta!e any ounter'arty ris! $hi h is assumed by a learing or'oration% If an investor $ere to deal 7buy or sell8 dire tly $ith another 'erson, he is e#'osed to the ounter 'arty ris!, i%e% the ris! of non'erforman e by that 'arty% +o$ever, $hen lient"

v% vi%

$hether the se urity generates returns om'atible $ith its ris!0 and $hether the se urity goals fits into your investment 'ortfolio and meets your investment 7diversifi ation, investment hori(on, regularity of in ome, gro$th o''ortunities, the Kuality of the issuer, et %8%

<ne an onvert a se urity to ash if it is listed and traded a tively on sto ! e# hanges% <ne an sell se urities on an e# hange and get ash as 'er the settlement transa tions y le of the e# hange% ,in e on sto ! e# hanges enFoy ash for

settlement guarantee, one $ill invariably get ash in time% If one does not get $hatsoever reason, there is an institutional arrangement to settle the laims% +o$ever, all se urities are not listed on e# hanges and not all listed se urities are a tively traded% If liKuidity is of 'aramount im'ortan e, one should loo! at the history of trading of that 'arti ular se urity% -h, is it advisa&le t a st "+ eA"han(e2 ,to ! e# hange lists se urities and 'rovides investors an o''ortunity to trade in the listed se urities% It ensures ertain dis losures from om'lian es and om'anies in the investor1s trade nl, thr !(h

one deals through a sto ! e# hange, this ounter 'arty ris! is removed due to trade5 settlement guarantee me hanism% )urther, an investor also has several 'rote tion me hanisms against defaults by the bro!er% )inally, an investor has an a ess to the investor grievan e redressal me hanism of the sto ! e# hanges% offered by the sto ! e# hange

interest% It guarantees settlement of trades e#e uted on behalf of the investors and 'rovides the 'rote tion if the bro!er be omes a defaulter% 4ny trade in se urities outside sto ! e# hanges other than s'ot transa tions is not ba !ed by regulatory frame$or! of e# hanges or ,E9I% +en e, an investor does not get any 'rote tion if he trades outside an e# hange%

H / 1an, st "+ eA"han(es are there in the " !ntr,2

E>

Presently, in the a'ital mar!et segment, there are 2 national level sto ! e# hanges 7:,E and 9,E8 and 1? regional e# hanges re ogni(ed by ,E9I% :,E and 9,E are the dominant 'layers%
TURNOVER AT STOCK ENCHANGES FCASH SEGMENTG

<ver the years, the regional sto ! e# hanges have been edged out and a maFority of these are not offering any trading fa ility% *his $ould be evident from the follo$ing tableL

FRs)"r reG

STOCK ENCHANGE 4hmedabad 9angalore 9hubanesh$ar 9,E 3al utta 3o hin 3oimbatore Delhi 2auhati +yderabad I,E Jai'ur &udhiana Madhya Pradesh Madras Magadh Mangalore :,E <*3EI Pune ,6,E Uttar Pradesh ;adodara TOTAL

*??0:?9 *??9:?; *??>:?? 0444:4* 044*:40 0440:49 0449:4; 044=:4> 044>:4? 221@. E.0 1@AA B>?A? " ?> 2E EB1. BB. ?E? " 2A? 10>0 .>? .B0E " 12 " 2 E>2 2?> >>0@ 1?@1 2.>B0 2.1? B20 @B>.? >E?B1 2AB 102? 120A@ B>2 A@B " ?1? 1?20 1.B 22AA 1A.@ 10E " .A .B>A .02 ?@@A 2AAE 2AE.B ?EEA EE .11AAA 1E1E@0 EE. .A> >1E>A .0 12E? 1 ?> >AE@ 1 .E0 0 11 B1B.@. 1B2 EB>. 0 1@?2E 1EBA >B0.> ?0.. 0 10000.2 .>>0.> 1@E 0 @.@E1 0 AE@ 2.. 0 AE.2 2 10A 2 0 1..A>11 12? ?1E1 0 2BEBE 1 1B@BB E0 0 .0E.A2 2E0E> 2E 0 >@2@ 0 B1 >> 0 @>E 1? 2B 0 0 >1.1?E B 11E1 0 2>2.E 10 1>B>A 0 0 .1B0E. ?>B0 0 0 11 0 > ?> 0 0 0 0 1 0 ?1EA@A 0 2 0 1BE?. . B>BB 0 0 >02?1@ 1A2@ 0 0 . 0 2 0 0 0 0 101 0 0 10AA>.B 1? 0 0 11E>1 0 0 0 0 1>E@@>E BB? 0 0 0 0 0 0 0 0 0 0 0 0 .>>10.@ 0 0 0 BE> 0

044?:*4 FA%r:#e&G 0 0 0 0 0 0 12EA0.1 .A. 0 0 0 0 0 0 0 0 0 0 0 0 .@>1EE@ 0 0 0 2> 0 <*9*00=

11000E> .A. 0 0 0 0 0 0 0 0 0 0 0 0 2E>202. 0 0 0 @A 0

?0;5* 049=4= *4099>0 0>>4>4< >?<>*>

?5>?** *504;?= <*94>*5 9><0<>4

In addition, M3I",I is already o'erating in the urren y futures segment and is e#'e ted to laun h the a'ital mar!et segment $ithin 2010% Moreover, United ,to ! E# hange is also e#'e ted to laun h the urren y futures segment $ithin 2010% *he u's and do$ns of an inde# refle t the hanging e#'e tations of the sto ! mar!et about future dividends of IndiaQs or'orate se tor% /hen the inde# goes u', it is be ause the sto ! mar!et thin!s that the 'ros'e tive dividends in the future $ill be better than 'reviously thought% /hen 'ros'e ts of dividends in the future be ome 'essimisti , the inde# dro's% *he ideal -hat are St "+ Mar+et Indi"es2 4 sto ! mar!et inde# should behaviour of the overall a'ture the mar!et% eKuity inde# gives us instant"to"instant readings about ho$ the sto ! mar!et 'er eives the future of IndiaQs or'orate se tor% Every sto ! 'ri e moves for t$o 'ossible reasonsL ne$s about the om'any 7e%g% a 'rodu t laun h, E?

INDICES

Movements of the inde# should re'resent the returns obtained by Wty'i alW 'ortfolios in the ountry%

or the losure of a fa tory, et %8 or ne$s about the ountry 7e%g% nu lear bombs, or a budget announ ement, et %8% *he Fob of an inde# is to 'urely a'ture the se ond 'art, the movements of the sto ! mar!et as a $hole 7i%e% ne$s about the ountry8% *his is a hieved by averaging% Ea h sto ! ontains a mi#ture of these t$o elements " sto ! ne$s and inde# ne$s% /hen $e ta!e an average of returns on many sto !s, the individual sto ! ne$s tends to an el out% <n any one day, there $ould be good sto !"s'e ifi ne$s for a fe$ om'anies and bad sto !"s'e ifi ne$s for others% In a good inde#, these $ill an el out, and the only thing left $ill be ne$s that is ommon to all sto !s% *he ne$s that is ommon to all sto !s is ne$s about India% *hat is $hat the inde# $ill a'ture% )or te hni al reasons, it turns out that the orre t method of averaging is to ta!e a $eighted average, and give to its ea h sto ! a $eight 'ro'ortional mar!et a'itali(ation%

e#a tly mimi

the t$o"sto ! inde#% 4 sto !

mar!et inde# is hen e Fust li!e other 'ri e indi es in sho$ing $hat is ha''ening on the overall indi es "" the $holesale 'ri e inde# is a om'arable e#am'le% In addition, the sto ! mar!et inde# is attainable as a 'ortfolio% *raditionally, indi es have been used as

information sour es% 9y loo!ing at an inde# $e !no$ ho$ the mar!et is faring% *his information as'e t also figures in myriad a''li ations of sto ! mar!et indi es in e onomi resear h% *his is entral issue 'arti ularly valuable $hen an inde# refle ts highly u' to date information 7a $hi h is dis ussed in detail ahead8 and the 'ortfolio of an investor ontains illiKuid se urities " in this ase, the inde# is a lead indi ator of ho$ the overall 'ortfolio $ill fare% In re ent years, indi es have ome to the fore o$ing to dire t a''li ations in finan e, in the form of inde# funds and inde# derivatives% Inde# funds are funds $hi h 'assively Zinvest in the inde#Q% Inde# derivatives allo$ 'eo'le to hea'ly alter their ris! e#'osure to an inde# 7this is alled hedging8 and to im'lement fore asts about inde# movements 7this is alled s'e ulation8% +edging using inde# derivatives has be ome a entral 'art of ris! management in the modern e onomy% *hese a''li ations are no$ a multi"trillion dollar industry $orld$ide, and they are riti ally lin!ed u' to mar!et indi es% )inally, indi es serve as a ben hmar! for measuring the 'erforman e of fund managers% 4n all"eKuity fund should obtain returns li!e the overall sto ! mar!et inde#% 4 >0L>0 debtL eKuity fund should obtain returns lose to those obtained by an investment of >0- in the inde# and >0- in fi#ed in ome% 4 $ell"s'e ified relationshi' bet$een an investor and a fund manager should e#'li itly define the ben hmar! EE

,u''ose an inde# ontains t$o sto !s 4 and 9% 4 has a mar!et a'itali(ation of Rs%1000 rore and 9 has a mar!et a'itali(ation of Rs%.000 rore% *hen $e atta h a $eight of 15B to movements in 4 and .5B to movements in 9% It is easy to reate a 'ortfolio, $hi h $ill reliably get the same returns as the inde#% i%e% if the inde# goes u' by B-, this 'ortfolio $ill also go u' by B-% ,u''ose an inde# is made of t$o sto !s, one $ith a mar!et a' of Rs%1000 rore and another $ith a mar!et a' of Rs%.000 rore% *hen the inde# 'ortfolio $ill assign a $eight of 2>- to the first and E>- $eight to the se ond% If $e form a 'ortfolio of the t$o sto !s, $ith a $eight of 2>on the first and E>- on the se ond, then the 'ortfolio returns $ill eKual the inde# returns% ,o if you $ant to buy Rs%1 la!h of this t$o"sto ! inde#, you $ould buy Rs%2>,000 of the first and Rs%E>,000 of the se ond0 this 'ortfolio $ould

against $hi h the fund manager $ill be om'ared, and in $hat fashion% *he most im'ortant ty'e of mar!et inde# is the broad"mar!et inde#, onsisting of the large, liKuid sto !s of the ountry% In most ountries, a single maFor inde# dominates ben hmar!ing, inde# funds, inde# derivatives and resear h a''li ations% In India, $e have NI#T7 <4 and SENSEN as the maFor inde#% In addition, more s'e iali(ed indi es often find interesting a''li ations% In India, $e have seen situations $here a dedi ated industry fund uses an industry inde# as a ben hmar!% In India, $here lear of ategories of o$nershi' grou's e#ist, it om'anies sorted by o$nershi' be omes interesting to e#amine the 'erforman e lasses of grou'%

registration number begins $ith the letters WI:9W and that of a sub bro!er $ith the letters GI:,W% )or the bro!ers of derivatives segment, the registration number begins $ith the letters GI:)H% *here is no sub"bro!er in the derivatives segment% -hat .a"t rs sh !ld &e " nsidered /hen sele"tin( a &r +er2 *he bro!er5sub"bro!er must be registered $ith ,E9I5 the on erned sto ! e# hange, $hi h one an verify from the registration ertifi ate dis'layed at his offi e% *he list of su h authori(ed bro!ers5 sub"bro!ers is available $ith the res'e tive e# hanges% +e should have the infrastru ture to transa t your business $ith s'eed and a ura y% 9esides, the investor should also loo! for your onvenien e su h as lo ation, ost and Kuality of servi e, et %

DEALING IN SECURITIES
4n investor should onsider the follo$ing fa tors -h sh !ld ne " nta"t . r st "+ 1ar+et transa"ti ns2 4n investor should onta t a bro!er or a sub bro!er registered $ith ,E9I for arrying out the transa tions 'ertaining to the a'ital mar!et% -h is a &r +er2 4 bro!er is a member of a re ogni(ed sto ! e# hange, $ho is 'ermitted to do trades on the s reen"based trading system of different sto ! e# hanges% +e is enrolled as a member $ith the on erned e# hange and is registered $ith ,E9I% -h is a s!& &r +er2 4 sub bro!er is a 'erson $ho is registered $ith ,E9I as su h and is affiliated to a member of a re ogni(ed sto ! e# hange% H / des ne +n / i. the &r +er r s!& -hat are the 1a' r &li(ati ns and $hen sele ting a bro!erL )rom $here the bro!er5sub"bro!er has learnt the businessT +o$ long has he been serving the se urities industryT /hether he has eligible Kualifi ations as a bro!erT +o$ many lients does he serveT /hat fees and e#'enses does he hargeT

res% nsi&ilities . a &r +er2 Entering into an agreement $ith his lient or $ith sub bro!er and lient0 Maintenan e of se'arate boo!s of a ounts and re ords for lients0

&r +er is re(istered2 <ne an onfirm it by verifying the registration ertifi ate issued by ,E9I% 4 bro!erQs

E@

Maintenan e of money of lients in a se'arate a ount and their o$n money in a se'arate a ount0

as also the Rules, Regulations, 4rti les, 9yela$s, 3ir ulars, Dire tives and 2uidelines% -hat is Me1&er:Client A(ree1ent # r12 *his form is an agreement entered bet$een lient and bro!er in the 'resen e of $itness $here the lient agrees 7is desirous8 to trade5invest in the se urities listed on the on erned E# hange through the bro!er after being satisfied of bro!ers a'abilities to deal in se urities% *he member, on the other hand agrees to be satisfied by the genuineness and finan ial soundness of the lient and ma!ing lient a$are of his 7bro!er1s8 liability for the business to be ondu ted%

Issue of daily statement of utili(ation to lients0

ollateral

4''ointment of om'lian e offi er0 Issue of ontra t note to his lient $ithin 2Bhrs of the e#e ution of the ontra t0 Delivery 5 Payment to be made to the lient $ithin 2B hrs of 'ay=out0 and <ther duties as s'e ified in the ,E9I 7,to ! 9ro!ers and ,ub"9ro!ers8 Rules, 1AA2%

Is an invest r reH!ired t &r +er2

si(n an, r s!&:

a(ree1ent /ith the &r +er

-hat +ind . details d es an invest r have t %r vide in Client Re(istrati n . r12 *he bro!ers have to maintain a database of their lients, for $hi h the investor $ould have to fill lient registration form% In 'rovide follo$ing informationL :ame, date of birth, 'hotogra'h, address, edu ational residential :RI5others8% UniKue Identifi ation :umber 7$herever a''li able8% 9an! and de'ository a ount details% In ome ta# no% 7P4:52IR8 $hi h also serves as uniKue lient ode% If the investor is registered $ith any other bro!er, then the name of bro!er and on erned ,to ! e# hange and 3lient 3ode :umber% Proof of identity submitted either as M4PI: UID 3ard5Pan :o%5Pass'ort5;oter ID5Driving li ense5Photo Identity ard issued by Em'loyer registered under M4PI:% )or 'roof of address 7any one of the follo$ing8L EA Kualifi ations, status 7Resident o u'ation, Indian5 ase of individual lient registration, the investor has to broadly

Des% )or the 'ur'ose of engaging a bro!er to e#e ute trades on behalf of the investor from time to time and furnish details relating to the investor for enabling the bro!er to maintain lient registration form, an investor has to sign the GMember " 3lient agreementH if dealing dire tly $ith a bro!er% In ase the investor is dealing through a sub"bro!er, he has to sign a G9ro!er " ,ub bro!er " 3lient *ri'artite 4greementH% *he Model 4greement bet$een 9ro!er"3lient 5 9ro!er ",ub 9ro!er " 3lient and 6no$ your 3lient )orm ,E9I $ebsite an be vie$ed from 7$$$%sebi%gov%in8%

Model *ri'artite 4greement bet$een 9ro!er" ,ub bro!er and 3lients is a''li able only for the ash segment% *he Model 4greement has to be e#e uted on the non"Fudi ial stam' 'a'er% *he 4greement ontains lauses defining the rights and res'onsibility of 3lient vis"M"vis bro!er5 sub bro!er% *he do uments 'res ribed are model formats% *he sto ! e# hanges5sto ! bro!er may in or'orate any additional lauses in these onfli t do uments 'rovided these are not in

$ith any of the lauses in the model do ument,

Pass'ort ;oter ID Driving &i ense 9an! Passboo! Rent 4greement Ration 3ard )lat Maintenan e 9ill *ele'hone 9ill Ele tri ity 9ill 3ertifi ate issued by em'loyer registered under M4PI: Insuran e Poli y

7 o'y of u'dated shareholding 'attern to be submitted every year8% 3o'ies of the Memorandum and 4rti les of 4sso iation in ase of a om'any 5 body in or'orate 5 'artnershi' deed in ase of a 'artnershi' firm% 3o'y of the Resolution of board of dire torsQ a''roving 'arti i'ation in eKuity 5 derivatives 5 debt trading and naming authori(ed 'ersons for dealing in se urities% Photogra'hs of Partners5/hole time dire tors, individual 'romoters holding >- or more, either dire tly or indire tly, in the shareholding of the om'any and of 'ersons authori(ed to deal in se urities% If registered $ith any other bro!er, then the name of bro!er and on erned ,to ! e# hange and 3lient 3ode :umber% -hat is 1eant &, UniH!e Client C de2 In order to fa ilitate maintaining database of their lients, it is mandatory for all bro!ers to use uniKue lient ode $hi h $ill a t as an e# lusive identifi ation for the P4: lient% )or this 'ur'ose, number5driving number5'ass'ort

Ea h lient has to use one registration form% In ase of Foint names 5family members, a se'arate form has to be submitted for ea h 'erson% In ase of 3or'orate 3lient, follo$ing

information has to be 'rovidedL :ame, address of the 3om'any5)irm% UniKue Identifi ation :umber

7$herever a''li able8% Date of in or'oration and date of ommen ement of business% Registration number 7$ith R<3, ,E9I or any government authority8% Details of P4: 4 ount :umber% Details of Promoters5Partners56ey Personnel of the

li ense5voters ID number5 ration ard number ou'led $ith the freKuently used ban! a ount number and the de'ository benefi iary a ount an be used for identifi ation, in the given order, based on availability% -hat is a ris+ dis"l s!re d "!1ent2 In order to a Kuaint the investors in the mar!ets of the various ris!s involved in trading in the sto ! mar!et, the members of the e# hange have been reKuired to sign a ris! dis losure do ument $ith their lients, informing them of the various ris!s li!e ris! of volatility, ris!s of lo$er liKuidity,

managerial

3om'any5)irm in s'e ified format% 9an! and De'ository 4 ount Details 3o'ies of the balan e sheet for the last 2 finan ial years 7 o'ies of annual balan e sheet to be submitted every year8% 3o'y of latest share holding 'attern in luding list of all those holding more than >- in the share a'ital of the om'any, duly ertified by the 3om'any ,e retary 5 /hole time Dire tor5MD

@0

ris!s

of

higher

s'reads,

ris!s

of

ne$ -hat details are reH!ired t &e 1enti ned n the C ntra"t n te iss!ed &, the st "+ &r +er2 4 bro!er has to issue a ontra t note to lients for all transa tions in the form s'e ified by the sto ! e# hange% *he have follo$ingL :ame, address and ,E9I Registration number of the Member bro!er% :ame of 'artner 5'ro'rietor 54uthori(ed ,ignatory% Dealing <ffi e 4ddress5*el :o5)a# no, 3ode number of the member given by the E# hange% UniKue Identifi ation :umber% 3ontra t number, date of issue of ontra t note inter"alia should

announ ements, ris!s of rumours et % H / d es ne %la"e rders /ith the

&r +er r s!& &r +er2 4n investor an either go to the bro!er1s 5sub bro!er1s offi e or 'la e an order over the 'hone 5internet or as defined in the Model 4greement% H / d es an invest r +n / /hether his rder has &een %la"ed2 *he ,to ! E# hanges assign a UniKue <rder 3ode :umber to ea h transa tion, $hi h is intimated by bro!er to his lient and on e the order is e#e uted, this order 'rinted on the ode number is ontra t note% *he bro!er

member has also to maintain the re ord of time $hen the lient has 'la ed order and refle t the same in the ontra t note along $ith the time of e#e ution of the order% -hat d "!1ents sh !ld &e &tained

ontra t note, settlement number and time 'eriod for settlement% 3onstituent 73lient8 name53ode :umber% <rder number and order time

orres'onding to the trades% *rade number and *rade time% Puantity 9ro!erage and and 6ind Pur hase of ,e urity 5,ale rate

.r 1 &r +er n eAe"!ti n . trade2 4n investor has to ensure re ei't of the follo$ing do uments for any trade e#e uted on the E# hangeL a% 3ontra t note to be given $ithin sti'ulated time% b% In the ase of ele troni issuan e of ontra t notes by the bro!ers, the lients shall ensure that the same is digitally signed and in ase of inability to vie$ the same, shall ommuni ate the same to the bro!er, u'on $hi h the bro!er shall ensure that the 'hysi al ontra t note rea hes the lient $ithin the sti'ulated time% It is the ontra t note that gives rise to +en e, an investor should

brought5sold by the lient% se'arately mentioned% ,ervi e ta# rates and any other harges levied by the bro!er% ,e urities *ransa tion *a# 7,**8 as a''li able% 4''ro'riate stam's affi#ed on the original ontra t note or a mention that the onsolidated stam' duty is 'aid% ,ignature of the ,to ! bro!er54uthori(ed ,ignatory% 4 ontra t note 'rovides for the re ourse to the system of arbitrators for settlement of dis'utes

ontra tual rights and obligations of 'arties of the trade% insist on ontra t note from sto ! bro!er%

@1

arising out of transa tions% <nly the bro!er an issue the ontra t notes% -hat is the 1aAi1!1 &r +era(e that a &r +erBs!& &r +er "an "har(e2 *he ma#imum bro!erage that an be harged by a bro!er has been s'e ified in the ,to ! E# hange Regulations and hen e, it may differ from a ross various e# hanges% 4s 'er 9,E C :,E 9ye &a$s, a bro!er annot harge more than 2%>- bro!erage from his ma#imum ,E9I bro!erage bro!ers is lients% *his of the in lusive and ,ub Ste% 9) H / d es tradin( ta+es %la"e and /hat is the %r "ess . tradin(2 *he normal ourse of online trading in the Indian mar!et onte#t is 'la ed belo$L Ste% *) Ste% 0) Investor 5 trader de ides to trade Pla es order $ith a bro!er to buy 5 sell the reKuired Kuantity of res'e tive se urities 9est 'ri ed order mat hes based on 'ri e"time 'riority Ste% ;) <rder Ste% <) e#e ution ele troni ally ommuni ated to the bro!er1s terminal *rade onfirmation sli' issued to the investor 5 trader by the bro!er Ste% 5) /ithin 2B hours of trade e#e ution, ontra t note is issued to the investor 5 trader by the bro!er Ste% =) -hat are the "har(es that "an &e levied n the invest r &, a st "+ &r +erBs!& &r +er2 *he trading member an hargeL 1% 9ro!erage harged by member bro!er% default on behalf of lient 7investor8 .% ,ervi e ta# as sti'ulated% B% ,e urities a''li able% -hat is an A"" !nt Peri d Settle1ent2 *he bro!erage, servi e ta# and ,** are indi ated se'arately in the ontra t note% -hat is STT2 ,e urities *ransa tion *a# 7,**8 is a ta# being levied on all transa tions done on the sto ! e# hanges at rates 'res ribed by the 3entral 2overnment from time to time% Pursuant to the ena tment of the )inan e 7:o%28 4 t, 200B, the 2overnment of India notified the ,e urities *ransa tion *a# Rules, 200B and ,** ame into effe t from < tober 1, 200B% @2 4n a ount 'eriod settlement is a settlement $here the trades 'ertaining to a 'eriod stret hing over more than one day are settled% )or e#am'le, trades for the 'eriod Monday to )riday are settled together% *he obligations for the a ount 'eriod are settled on a net basis% 4 ount 'eriod settlement has been dis ontinued sin e January 1, 2002, 'ursuant to ,E9I dire tives% *ransa tion *a# 7,**8 as In ase of short or bad delivery of funds 5 ould not be 2% Penalties arising on s'e ifi se urities, the e# hange orders for an au tion to settle the delivery% If the shares out as 'er ,E9I guidelines% bought in the au tion, the transa tion is losed Pay"in of funds and se urities before *Y2 day Ste% >) Pay"out of funds and se urities on *Y2 day

bro!erage harged by the sub"bro!er% )urther, 7,to ! bro!ers8 Regulations, 1AA2 sti'ulates that sub bro!er annot harge from his lients, a ommission $hi h is more than 1%>- of the value mentioned in the res'e tive 'ur hase or sale note%

-hat is the %a,:in da, and %a,: !t da,2 -hat is a R llin( Settle1ent2 In a Rolling ,ettlement trades e#e uted during the day are settled based on the net obligations for the day% Presently the trades 'ertaining to the rolling settlement are settled on a *Y2 day basis $here * stands for the trade day% +en e, trades e#e uted on a Monday are ty'i ally settled on the follo$ing /ednesday 7 onsidering 2 $or!ing days from the trade day8% *he funds and se urities 'ay"in and 'ay"out are arried out on *Y2 day% Pay in day is the day $hen the bro!ers shall ma!e 'ayment or delivery of se urities to the e# hange% Pay out day is the day $hen the e# hange ma!es 'ayment or delivery of se urities to the bro!er% ,ettlement y le is on *Y2 rolling settlement basis $%e%f% 4'ril 01, 200.% *he e# hanges have to ensure that the 'ay out of funds and se urities to the lients is done by the bro!er $ithin 2B hours of the 'ayout% *he E# hanges $ill have to issue 'ress release immediately after 'ay out% -hat are the %res"ri&ed %a,:in and %a,: !t da,s . r .!nds and se"!rities . r N r1al Settle1ent2 *he 'ay"in and 'ay"out days for funds and se urities are 'res ribed as 'er the ,ettlement 3y le% 4 ty'i al ,ettlement 3y le of :ormal ,ettlement is given belo$L A"tivit, *rading 3learing ,ettlement Post ,ettlement Rolling ,ettlement *rading 3ustodial 3onfirmation Delivery 2eneration ,e urities and )unds 'ay in ,e urities and )unds 'ay out ;aluation Debit 4u tion 9ad Delivery Re'orting 4u tion settlement 3lose out Re tified bad delivery 'ay"in and 'ay"out Da, * *Y1 $or!ing days *Y1 $or!ing days *Y2 $or!ing days *Y2 $or!ing days *Y2 $or!ing days *Y. $or!ing days *YB $or!ing days *Y> $or!ing days *Y> $or!ing days *Y? $or!ing days

Re"bad delivery re'orting and 'i !u' *Y@ $or!ing days 3lose out of re"bad delivery *YA $or!ing days N te6 *he above is a ty'i al settlement y le for normal 7regular8 mar!et segment% *he days 'res ribed for the above a tivities may hange in ase of fa tors li!e holidays, ban! losing et % 4n investor may refer to s heduled dates of 'ay"in5'ay"out notified by the E# hange for ea h settlement from time"to"time%

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In "ase . %!r"hase . shares3 /hen d es an invest r have t 1a+e %a,1ent t the &r +er2 *he 'ayment for the shares 'ur hased is reKuired to be done 'rior to the 'ay in date for the relevant settlement or as other$ise 'rovided in the Rules and Regulations of the E# hange% It is advisable to ma!e 'ayment by $ay of a ount 'ayee heKue in the name of the bro!er5sub"bro!er only% 4 'ro'er re ei't should be olle ted from the intermediary% Dou should re eive 'ayment for se urities $ithin B@ hours of de laration of 'ay"out by the res'e tive sto ! e# hange% In "ase . sale . shares3 /hen sh !ld the shares &e (iven t the &r +er2 *he delivery of shares has to be done 'rior to the 'ay in date for the relevant settlement or as other$ise 'rovided in the Rules and Regulations of the E# hange and agreed $ith the bro!er5sub bro!er in $riting%

day% +o$ever, as settlement

y le has been

redu ed from*Y. rolling settlement to *Y2 $%e%f% 4'ril 01, 200., the 'ay out of funds and se urities to the lients by the bro!er $ill be $ithin 2B hours of the 'ayout% Is there an, %r visi n /here an invest r "an (et .aster deliver, . shares in his a"" !nt2 *he investors5 lients an get dire t delivery of shares in their benefi iary a ounts% *o avail this fa ility, you have to give details of your benefi iary a ount and the DP"ID of your DP to your bro!er along $ith the ,tanding Instru tions for UDelivery"In1 to your De'ository Parti i'ant for a e'ting shares in your benefi iary a ount% 2iven these details, the 3learing 3or'oration53learing +ouse shall send 'ay out instru tions to the de'ositories so that you re eive 'ay out of se urities dire tly into your benefi iary a ount% -hat is da, tradin(2

-hat 1ar(ins r de% sits are reH!ired &, the &r +er2 *he $ith regulations the bro!er% do It not mandate on any your reKuirement for the investor to !ee' a de'osit de'ends understanding $ith the bro!er5sub" bro!er% Dou are, ho$ever, reKuired to 'ay u'front margin to the bro!er before the trade is e#e uted% E# hanges generally 'res ribe higher levels of margins to be olle ted from lients as u'front de'ending on the liKuidity of the se urity%

Day trading refers to buying and selling of se urities $ithin the same trading day su h that all 'ositions $ill be losed before the mar!et lose of the trading day% In the Indian se urities mar!et, only retail investors are allo$ed to day trade% Are all the invest rs 1andated t " 1%l, /ith PAN reH!ire1ent2 Des% /ith effe t from July 02, 200E, P4: has been made mandatory for all the investors 'arti i'ating in the se urities mar!et% In order to strengthen the 6no$ Dour 3lient 76D38 norms and identify every 'arti i'ant in the se urities mar!et $ith their res'e tive P4: to ensure sound audit trail of all the transa tions, ,E9I has mandated P4: as the sole identifi ation number for all 'ersons transa ting in the se urities @B

H / l n( it ta+es t transa"ti n2

re"eive 1 ne, . r a

sale transa"ti n and shares . r a &!, 9ro!ers $ere reKuired to ma!e 'ayment or give delivery $ithin t$o $or!ing days of the 'ay " out

mar!et,

irres'e tive

of

the

amount

of *he guidelines sti'ulate that Gthe lose out Pri e $ill be the highest 'ri e re orded in that s ri' on the e# hange in the settlement in $hi h the on erned ontra t $as entered into and u'to the date of au tion5 lose out <R 20- above the offi ial losing 'ri e on the e# hange on the day on $hi h au tion offers are alled for 7and in the event of there being no su h losing 'ri e on that day, then the offi ial losing 'ri e on the immediately 're eding trading day on $hi h there $as an offi ial losing 'ri e8, $hi hever is higher% ,in e in the rolling settlement the au tion and the lose out ta!es 'la e during trading hours, the referen e 'ri e in the rolling settlement for lose out 'ro edures $ould be ta!en as the 'revious day1s losing 'ri e% -hat is Mar(in Tradin( #a"ilit,2 Margin *rading is trading $ith borro$ed funds5se urities% It is essentially a leveraging me hanism $hi h enables investors to ta!e e#'osure in the mar!et over and above $hat is 'ossible $ith their o$n resour es% ,E9I has been 'res ribing eligibility onditions and 'ro edural details for allo$ing the Margin *rading )a ility from time to time% 3or'orate bro!ers $ith net $orth of at least Rs% . rore are eligible for 'roviding Margin trading fa ility to their lients subFe t to their entering into an agreement to that effe t% 9efore 'roviding margin trading fa ility to a lient, the member and the lient have been mandated to sign an agreement for this 'ur'ose in the format s'e ified by ,E9I% It has also been s'e ified that the lient shall not avail the fa ility from more than one bro!er at any time%

transa tion% -hat is Trade . r Trade Se(1ent2 In a *rade for *rade segment, settlement of trades is done on the basis of gross obligations for the day% :o netting is allo$ed and every trade is being settled se'arately% -hat is Dire"t Mar+et A""ess FDMAG2 Dire t Mar!et 4 ess 7DM48 is a fa ility $hi h allo$s bro!ers to offer lients dire t a ess to the e# hange trading system through the bro!er1s infrastru ture $ithout manual intervention by the bro!er% ,ome of the advantages offered by DM4 are dire t ontrol of lients over orders, faster e#e ution of lient orders, redu ed ris! of errors asso iated $ith manual order entry, greater trans'aren y, in reased liKuidity, lo$er im'a t osts for large orders, better audit trails and better use of hedging and arbitrage o''ortunities through the use of de ision su''ort tools 5 algorithms for trading% Presently, DM4 fa ility is available for institutional investors -hat is an A!"ti n2 *he sto ! e# hange 'ur hases the reKuisite Kuantity in the 4u tion Mar!et and gives them to the buying trading member% *he shortages are met through au tion 'ro ess and the differen e in 'ri e indi ated in ontra t note and 'ri e re eived through au tion is 'aid by member to the e# hange, $hi h is then liable to be re overed from the lient% -hat ha%%ens i. the shares are n t & !(ht in the a!"ti n2 If the shares ould not be bought in the au tion i%e% if shares are not offered for sale in the au tion, the transa tions are losed out as 'er ,E9I guidelines%

@>

*he fa ility of margin trading is available for 2rou' 1 se urities and those se urities $hi h are offered in the initial 'ubli offers and meet the onditions for in lusion in the derivatives segment of the sto ! e# hanges% )or 'roviding the margin trading fa ility, a bro!er may use his o$n funds or borro$ from s heduled ommer ial ban!s or :9)3s regulated by the R9I% 4 bro!er is not allo$ed to borro$ funds from any other sour e% *he Wtotal e#'osureW of the bro!er to$ards the margin trading fa ility should not e# eed the borro$ed funds and >0 'er ent of his Wnet $orthW% /hile 'roviding the margin trading fa ility, the bro!er has to ensure that the e#'osure to a single lient does not e# eed 10 'er ent of the Wtotal e#'osureW of the bro!er% Initial margin has been 'res ribed as >0- and the maintenan e margin has been 'res ribed as B0-% If the bro!er has borro$ed funds for the 'ur'ose of 'roviding margin trading fa ility, the name of the lender and amount borro$ed should be dis losed latest by the ne#t day%

fa ility, shall be

overed under the arbitration

me hanism of the e# hange% -hat is Se"!rities Lendin( S"he1e2 ,e urities &ending and 9orro$ing is a s heme $hi h enables lending of idle se urities by the investors to the learing or'oration and earning a return through the same% )or se urities borro$ing and lending system, learing or'orations of the sto ! e# hange $ould be the nodal agen y and be registered as the G4''roved IntermediariesH 74Is8% *he learing or'oration an borro$, on behalf of the members, se urities for the 'ur'ose of meeting shortfalls% *he defaulter selling bro!er may ma!e the delivery $ithin the 'eriod s'e ified by the learing or'oration% In the event of the defaulted selling bro!er failing to ma!e the delivery $ithin the s'e ified 'eriod, the learing or'oration has to buy the se urities from the o'en mar!et and return the same to the lender $ithin seven trading days% In ase of an inability to 'ur hase the se urities from the mar!et, the transa tion shall be losed out% TRANS#ER O# SECURITIES IN PH7SICAL MODE H / d es trans.er . se"!rities ta+e %la"e

*he sto ! e# hange, in turn, has to dis lose the s ri'"$ise gross outstanding in margin a ounts $ith all bro!ers to the mar!et% ,u h dis losure regarding margin"trading done on any day shall be made available after the trading hours on the follo$ing day% *he arbitration me hanism of the e# hange $ould not be available for settlement of dis'utes, if any, bet$een the lient and bro!er, arising out of the margin trading fa ility% +o$ever, all transa tions done on the e# hange, $hether normal or through margin trading

in %h,si"al 1 de2 *o effe t a transfer in the 'hysi al mode the se urities should be sent to the om'any along $ith a valid, duly e#e uted and stam'ed transfer deed duly signed by or on behalf of the transferor 7seller8 and transferee 7buyer8% It $ould be a good idea to retain 'hoto" o'ies of the se urities and the transfer deed $hen they are sent to the om'any for transfer% It is essential that these are sent by registered 'ost $ith a !no$ledgement due and $at h out for the re ei't of the a !no$ledgement ard% If one does not re eive the onfirmation of re ei't $ithin a reasonable @?

'eriod, he should immediately a''roa h the 'ostal authorities for onfirmation% ,ometimes, for onvenien e, one may hoose

,ometimes, 'hysi al se urities may be lost or mis'la ed% *he investor should immediately reKuest the om'any to re ord a sto' transfer of the se urities and simultaneously a''ly for issue of du'li ate se urities% )or effe ting sto' transfer, the om'any may reKuire the investor to 'rodu e a ourt order or the o'y of the )IR filed $ith the Poli e% )urther, to issue du'li ate se urities, the

not to transfer the se urities immediately% *his may fa ilitate easy and Kui ! selling of the se urities% In that ase one should ta!e are that the transfer deed remains valid other$ise he $ill have revalidate the transfer deed $ith on erned R<3% +o$ever, in order to avail the or'orate benefits li!e the dividends, bonus or rights from the om'any, it is essential that the se urities are transferred in the buyer1s name% -hat %r "ed!re d es a " 1%an, . ll / . r trans.er . se"!rities2 <n re ei't of reKuest for transfer, the om'any 'ro eeds to transfer the se urities as 'er 'rovisions of the la$% In ase they find some mista!es in transfer deed and annot effe t the transfer, the om'any returns ba ! the se urities giving details of the grounds under $hi h the transfer ould not be effe ted% *his is !no$n as om'any obFe tion% -hat sh !ld ne d in "ase a " 1%an, om'any obFe tion for 'ro eed to get the

om'any may reKuire the investor to submit indemnity bonds, affidavit, sureties et % besides issue of a 'ubli noti e%

sends " 1%an, &'e"ti n2 /hen one re eives a transfer, he should

errors5dis re'an ies orre ted% +e may have to onta t the transferor 7the seller8 either dire tly or through your bro!er for re tifi ation or re'la ement $ith good se urities% *hen one an resubmit the se urities and the transfer deed to the om'any for affe ting the transfer% In ase one is unable to get the errors re tified or get them re'la ed, he has re ourse to the seller and his bro!er through the sto ! e# hange to get ba ! the money% -hat sh !ld ne d in "ase . se"!rities are l stB 1is%la"ed2

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Cha%ter *;

CONTINUING DISCLOSURES $7 LISTED COMPANIES

Investors are the 'rimary users of finan ial statements% *hese are used to assess the 'resent and the future business and 'rofitability of an enter'rise as the investors1 'rimary interest is in the future gro$th of a om'anyQs sto ! 'ri e and5or the li!elihood of the dividends%
)inan ial re'orting onsisting of 9alan e ,heet, Profit C &oss 4 ount, :otes to 4 ounts, 3ash )lo$ ,tatement, 4uditor Re'ort and Dire tors Re'ort are some of the im'ortant dis losures made by listed om'anies, and are in luded as a 'art of the om'any1s annual re'ort% 3lause B1L 3lause .>L 3lause BAL )inan ial Results ,hareholding Pattern 3or'orate 2overnan e Re'ort 4'art from this, the &isting 4greement reKuires om'anies to ma!e dis losure under various lauses% ,ome of the lauses reKuiring dis losures areL

om'any 'aying

In addition, the &isting 4greement reKuires immediate de laration, intimation finan ial to the e# hange on o urren e of any material event 7i%e% dividend statements dis losure, bonus shares, rights issue, ta!eover, insider trading, 'ledging et %8

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Cha%ter *<

MUTUAL #UNDS
INTRODUCTION
-hat is a 1!t!al .!nd2 4 Mutual fund is a me hanism for 'ooling the resour es of the investors and investing the same in the mar!et, in a ordan e $ith the s heme obFe tives% Investors are issued units by a mutual fund against their investments% *he 'rofits or losses made by the mutual fund are shared by the investors in 'ro'ortion to their investments% Pr .essi nal Mana(e1ent6 4 mutual fund *he units of the mutual funds are e#tremely liKuid% In ase of o'en ended s hemes, the units an be redeemed on any $or!ing day at the a''li able :4; of that day from the mutual fund itself% In the ase of losed ended s hemes, one an trade the units on the sto ! e# hange $here the units of the fund are listed% Re ently, both :,E and 9,E have also started 'latforms for trading of mutual fund units% Most mutual funds offer a number of s hemes, ea h $ith a different investment obFe tive% 4ll mutual funds are regulated by ,E9I% -h, invest in a 1!t!al .!nd2 *he se urities mar!et is highly om'le#% *he H / 1an, 1!t!al .!nds are India2 Unit *rust of India $as the first mutual fund set u' in India in the year 1A?.% In early 1AA0s, 2overnment allo$ed 'ubli se tor ban!s and institutions to set u' mutual funds% ,ubseKuently, this se tor $as o'ened u' to the 'rivate se tor% Presently, there are .@ a tive mutual funds o'erating in India 7list, $ith addresses, of all @A %eratin( in ris!s also rise for 'eo'le $ho neither have the time, s!ills or resour es to sele t the right se urities nor to monitor their investments subseKuently nor to ta!e de isions on e#its% ,ele ting se urities $ith gro$th and in ome 'otential from the large number of listed se urities involves areful resear h and monitoring of the mar!et, $hi h is not 'ossible for most small investors% 4lso the !ey to su essful investing in se urities mar!ets lies in L / C sts6 4 mutual fund has e onomies of s ale0 the fund 'ays lo$er ost be ause of larger volumes and this benefit is 'assed on to the investor% Ch i"e . S"he1es6 Mutual funds offer a $ide range of s hemes to suit the different needs of the investors% Diversi.i"ati n6 4n investor in a mutual fund a Kuires a diversified 'ortfolio no matter ho$ small his investment% *hus the ris! of loss is s'read over a large number of sto !s% has investment management s!ills and resear h s!ills% ,ome s'e ifi advantages of investing in the mar!et through a mutual fund areL 4 Mutual fund is a 'rofessional intermediary bet$een the investor and the sto ! mar!et% *he mutual fund mitigates to a large e#tent the short omings of dire t investing% building a diversified 'ortfolio, $hi h reKuires substantial a'ital%

mutual funds is given in &ist 2 at the end of this 2uide8% *he broad lassifi ation is as underL T,%e $an+ S% ns red Joint ;entures " Predominantly Indian Joint ;entures "Predominantly )oreign <thers Instit!ti ns Private Se"t r Indian )oreign Joint ;entures"Predominantly Indian Joint ;entures"Predominantly )oreign *otal * * * N )

-hat is the siCe

. the 1!t!al .!nd

ind!str, and /hat are the vari !s t,%es . assets !nder 1ana(e1ent /ith the12 *he mutual fund industry has $itnessed a 'henomenal gro$th in the 'ast fe$ years% )rom a meagre Rs% EA,B?B rore as on .1 st Mar h,200., the assets under management $ith the mutual fund industry stood at Rs% ?1.,AEA rore as on .1 st Mar h,2010% It is, ho$ever, interesting to note that the eKuity assets om'rised only 2@ - of the total assets0 the fo us being on in ome funds%

*5 < < = 9>

*he ategory"$ise and ty'e"$ise details, as on .1 st Mar h 2010, are 'rovided belo$L

7Rs% rore8
T,%e In ome O%en End 2>B,EA2 Cl se End B1,>EA Interval 1>,.BB T tal .11,E1> Ml >1

EKuity 9alan ed &iKuid5Money Mar!et 2ilt E&,,"EKuity 2old E*) <ther E*)s )und of )unds Investing <verseas T tal J &ess than 1 -%
,<UR3EL 4M)I

1>B,??E 1,?2@ E@,0AB .,.A> 20,A11 1,>A0 A>E 2,@?2 <903>>5

1A,1>E 1,?2@ " " .,1>> " "

2.0 " " " " " "

1EB,0>B 1E,2B? E@,0AB .,.A> 2B,0?? 1,>A0 A>E 2,@?2 5*93?=?

2@ . 1. 1 B J J J *44

*<3<=;

5*93?=?

-hat is the r le .!nds ind!str,2

. SE$I in the 1!t!al

4ll mutual funds s hemes are reKuired to be a''roved by ,E9I before these are offered to the investors% H / is a 1!t!al .!nd set !%2 4 mutual fund is set u' in the form of a trust $hi h has a s'onsor, a trustee, an asset management om'any 74M38 and a ustodian% *he trust is established by a s'onsor or more than one s'onsor $ho is li!e a 'romoter of a om'any% A0

Until 1AA2, there $as no regulation of this industry% In 1AA2, $ith the ena tment of the ,E9I 4 t, the mutual fund industry $as brought under ,E9I $hi h formulates the 'oli ies and regulates this industry%

daily basis% *he !ey feature of o'en"ended *he trustees of the mutual fund are assigned the res'onsibility of 'rote ting the interests of the unitholders and are vested $ith the general 'o$er of su'erintenden e and dire tion over the 4M3% *hey monitor the 'erforman e and om'lian e of ,E9I Regulations by the mutual fund% ,E9I Regulations reKuire that at least t$o thirds of the dire tors of the trustee om'any must be inde'endent i%e% they should not be asso iated $ith the s'onsors% *he 4M3 manages the funds by ma!ing investments in various ty'es of se urities% ,E9I Regulations reKuire that at least >0- of the dire tors of the 4M3 must be inde'endent i%e% they should not be asso iated $ith the s'onsors% S"he1es a"" rdin( t *he 3ustodian holds the se urities of various s hemes of the fund in its ustody% O&'e"tive 4 s heme an also be lassified as gro$th s heme, in ome s heme or balan ed s heme based u'on its investment obFe tive% ,u h s hemes may be o'en"ended Mutual funds offer a very large variety of o'tions, to suit the investors1 needs% /hile some of the s hemes are a tively managed by the mutual fund, some s hemes are 'assive s hemes% ACTIVE #UNDS S"he1es a"" rdin( t the Mat!rit, Peri d 4 mutual fund s heme an be lassified into an o'en"ended s heme or a lose"ended s heme% Open ended Fund! Sche"e 4n o'en"ended fund or s heme is one that is available for subs ri'tion and re'ur hase on a ontinuous basis% *hese s hemes do not have a fi#ed maturity 'eriod% Investors an buy and sell the units of the s heme at the :et 4sset ;alue 7:4;8 related 'ri es $hi h are de lared on a $r#%th ! &'uity Oriented Sche"e *he aim of gro$th funds is to 'rovide a'ital a''re iation over the medium to long" term% ,u h s hemes normally invest a maFor 'art of their or'us in eKuities, and as su h arry higher ris!s5re$ards% 2ro$th s hemes are good for investors having a long"term outloo!% *hese s hemes further offer three o'tions" 2ro$th, Dividend Payout and Dividend Re"invest% Under the gro$th o'tion, no dividend is 'aid out and the :4; of the unit refle ts the u'"to" date a'ital a''re iation% Under the dividend 'ayout o'tion, investors re eive dividend if there is distributable sur'lus available and after 'ayout of the dividend, the :4; of the s heme falls by the amount 'aid out 'er unit% *his dividend is ta# free in hands of investors% Under the dividend re"invest o'tion, A1 or lose"ended s hemes% ,u h s hemes an be broadly lassified as follo$sL the Invest1ent Cl#se ended Fund! Sche"e 4 lose"ended fund or s heme has a sti'ulated maturity 'eriod 7e#am'le > years or E years8% *he s heme is o'en for subs ri'tion only during a s'e ified 'eriod at the time of laun h of the s heme% ,ubseKuently, investors an buy or sell the units of the s heme on the sto ! e# hanges $here the units are listed% In order to 'rovide an e#it route to the investors, some lose"ended funds give an o'tion of selling ba ! the units to the mutual fund through 'eriodi re'ur hase at :4; related 'ri es% *hese s hemes normally dis lose their :4;s on a $ee!ly basis% s hemes is liKuidity%

MUTUAL #UND SCHEMES

the dividend, instead of being 'aid out, is reinvested su h that the number of units held in reases% Inc#"e ! Debt Oriented Sche"e *he aim of the in ome s hemes is to 'rovide regular and steady in ome to the investors% 4s su h, these s hemes generally invest in fi#ed in ome se urities su h as bonds, or'orate debentures, 2overnment se urities and money mar!et instruments% ,u h funds offer lo$ returns and are less ris!y% *he :4;s of su h funds get affe ted 'rimarily be ause of hanges in interest rates% If the interest rates fall, the :4;s of su h s hemes are li!ely to in rease in the short run and vi e versa% (alanced Sche"e 9alan ed funds offer the middle 'ath by ombining both gro$th and in ome% 4s su h, these s hemes invest both in eKuities and in fi#ed in ome se urities% *hese are a''ro'riate for investors $ho do not $ish to ta!e e# essive ris! and at the same time are also loo!ing for some a'ital a''re iation% ,u h s hemes generally invest B0"?0- in eKuity and the balan e in debt instruments% M#ney Mar)et #r *i'uid Sche"es *hese s hemes are 'rimarily li!e in ome s hemes, $ith features of easy liKuidity, 'reservation of term a'ital and moderate in ome% su h as treasury bills,

$ilt Fund *hese funds invest e# lusively in government se urities, $hi h have no default ris!% :4;s of these s hemes flu tuate due to the hanges in interest rates and other e onomi fa tors% Sect#r Specific Funds!Sche"es *hese s hemes invest in the se urities of a 're" s'e ified se tor5industry 7as dis losed in their offer do ument8% E#am'les of su h se tors in lude Pharma euti als, ,oft$are, )ast Moving 3onsumer 2oods 7)M328, Petroleum, Publi ,e tor et % *he returns in these funds are signifi antly de'endent on the 'erforman e of the res'e tive se tor5industry% /hile these funds may give higher returns, they are also more ris!y% Ta+ Sa,ing Sche"es *hese s hemes offer ta# rebates to the investors under s'e ifi 'rovisions of the In ome *a# 4 t% 4 good e#am'le of this is the EKuity &in!ed ,avings , hemes 7E&,,8% Pension s hemes laun hed by mutual funds also offer ta# benefits% ,u h s hemes are gro$th oriented and invest 're" dominantly in eKuities% Capital Pr#tecti#n Oriented Sche"es 3a'ital Prote tion <riented , hemes are oriented to$ards 'rote tion of a'ital but not $ith guaranteed returns% ,u h s hemes ty'i ally invest a 'art of their 'ortfolio into 444 rated bonds in su h a $ay that on maturity, this investment eKuals to 100 'er ent of initial investment 'ortfolio, thereby 'rote ting the original a'ital% *he balan e of 'ortfolio is invested in other assets $hi h offer higher returns% ,E9I reKuires a redit rating agen y to rate and revie$ the 'ortfolio stru ture of su h s hemes on a Kuarterly basis% -ssured .eturn Sche"es 4ssured Return , hemes are s hemes that assure a s'e ified return to the unitholders for the entire A2

*hese s hemes invest e# lusively in safe short" instruments ertifi ates of de'osit, inter"ban! et % ommer ial 'a'er and

all money, government se urities

*hese s hemes are normally used by

or'orate and individual investors for 'ar!ing sur'lus funds on a short term basis% In ome re eived from su h s hemes is ta#"free%

'eriod of the s heme or only for a ertain 'eriod, irres'e tive of the 'erforman e of the s heme% ,u h returns are reKuired to be fully guaranteed by the s'onsor or the 4M3% *y'i ally, su h assured returns are on the lo$er side% Syste"atic In,est"ent Plans (SIP)/

Inde+ Funds Inde# )unds re'li ate the 'ortfolio of a 'arti ular inde# su h as the 9,E ,ense# or the ,CP :,E :ifty% *hese s hemes invest in the se urities in the same $eightage as in the inde#% :4;s of su h s hemes rise or fall in a ordan e $ith the rise or fall of the inde#, though not e#a tly by the same 'er entage due to the Gtra !ing errorH% &+change Traded Funds 4n Inde# fund sele ts a mar!et inde# and ma!es investments in the bas!et of sto !s dra$n from the onstituents of that inde#% *he fund may invest in any or all of the sto !s onstituting that inde# but not ne essarily in the same 'ro'ortion% E# hange *raded )unds, 'o'ularly !no$n as E*)s also ma!e investments based on a mar!et inde# or ommodity but in a fi#ed number of units, say 1000 units% *his is alled a reation bas!et% E*)s are listed on a sto ! e# hange for trading of units% &isting 'rovides liKuidity to units in less than reation si(e% *hus lots of less than 1000 E*) units an be traded by retail investors at the sto ! e# hanges% In an E*) that is based on a mar!et inde#, reation bas!ets $ill have sto !s of that inde# in the same 'ro'ortion as the inde# and hen e the ben hmar! $ill be that 'arti ular inde#% $#ld based &TFs 2old based E*)s $ere introdu ed in 200E% Just li!e in the ase of an eKuity mutual fund, the underlying asset is the sto !s of various

Syste"atic 0ithdra%al Plans (S0P) and Syste"atic Transfer Plans (STP) ,ystemati Investment Plan 7,IP8 is a onvenient o'tion $hi h offers dis i'lined saving and investing% Under ,IP, an investor invests a fi#ed amount regularly, say every month or Kuarter% ,u h investments are made at the res'e tive 'revailing :4;s% *he investor an redeem his units any time irres'e tive of $hether he has om'leted his minimum investment in that s heme% Under the ,ystemati /ithdra$al Plan 7,/P8, the unitholder may redeem a fi#ed number of units on a monthly, Kuarterly or annual basis% Under the ,ystemati *ransfer Plan 7,*P8, an investor in one s heme an !ee' transferring funds to another s heme, de'ending u'on his outloo! of the mar!et% *he investor may transfer a fi#ed sum of money on a 'eriodi basis% 4 transfer is treated as redem'tion of units from the e#isting s heme at a''li able :4; and a fresh investment in units of the ne$ s heme% PASSIVE #UNDS Inde# )unds, E# hange *raded )unds and )und of )unds are largely 'assive investment funds% Instead of hurning 'ortfolio in sear h of good o'tions5se urities, the fund is e#'e ted to 'erform along $ith the s'e ified inde#5ben hmar! by staying invested% In vie$ of this, the total re urring e#'enses are also lo$er than a tively managed funds%

om'anies, in the ase of 2E*), the underlying asset is standard gold bullion of 0%AA> 'urity% *he investors1 holding is denoted in units, $hi h gets listed on a sto ! e# hange% Fund #f Funds 4 s heme that invests 'rimarily in the s hemes of the same mutual fund or of other mutual funds, and not dire tly in any se urity, is !no$n as a A.

)und of )und 7)o)8%

*he :4; of the )o)

ommissions and to in entivi(e 4ugust,200A, a8

long term

de'ends u'on the :4;s of the s hemes in $hi h it invests% 4n )o) s heme enables the investors to a hieve greater diversifi ation%

investment, ,E9I de ided that $ith effe t from

*here shall be no entry load for all mutual fund s hemes% *he s heme a''li ation forms shall arry a suitable dis losure to the effe t that the u'front ommission to distributors $ill be 'aid by the investor dire tly to the distributor, based on his assessment of various fa tors in luding the servi e rendered by the distributor%

LOADSBENPENSES
b8 ,E9I had earlier abolished initial issue e#'enses and mutual fund s hemes $ere allo$ed to re over e#'enses onne ted $ith sales and distribution through entry load only% )urther, investors ma!ing dire t a''li ations to the mutual funds $ere e#em'ted from entry load% 8 Earlier, though the investor 'aid for the servi es rendered by the mutual fund distributors, the distributors $ere remunerated by the 4M3s from the loads dedu ted from the invested amounts or from the redem'tion 'ro eeds% ,E9I also 'ermitted 4M3s to mar!eting and selling harge the s heme e#'enses in luding d8 7under the annual re urring e#'ense8 for distributor1s ommission% Moreover, all loads in luding 3ontingent

<f the e#it load or 3D,3 harged to the investor, a ma#imum of 1of the redem'tion 'ro eeds shall be maintained in a se'arate a ount $hi h an be used by the 4M3 to 'ay mar!eting and ommissions to the are of other e#'enses% 4ny distributor and to ta!e selling balan e shall be immediately% *he distributors shall dis lose all the ommissions 7in the form of trail ommission or any other mode8 'ayable to them for the different om'eting s hemes of various mutual funds from amongst $hi h the s heme is being re ommended to the investor%

redited to the s heme

Deferred ,ales 3harge 73D,38 for the s heme $ere maintained in a se'arate a ount and this amount $as used by the 4M3s to 'ay ommissions to the distributors and to ta!e are of other mar!eting and selling e#'enses% It had been left to the 4M3s to redit any sur'lus in this a ount to the s heme, $henever felt a''ro'riate% In order to in entivi(e long term investors it $as onsidered ne essary that e#it loads53D,3s $hi h are beyond reasonable levels are redited to the s heme immediately% In order to em'o$er the investors in de iding the ommission 'aid to distributors in a ordan e $ith the level of servi e re eived, to bring about more trans'aren y in 'ayment of

INVESTING IN A MUTUAL #UND

4n investor an either sele t an e#isting s heme of a mutual fund or invest in a :e$ )und <ffer of a mutual fund%

H / t "h

se a s"he1e .r 1 a n!1&er .

s"he1es availa&le2

AB

4n investor should first define his investment obFe tives, for e#am'le, short"term returns or long term a'ital a''re iation% 4 ordingly, suitable s hemes mat hing the investment obFe tive offered by various mutual funds should be identified% <ne must study the offer do ument of the mutual fund s heme arefully% *he 'ast tra ! re ord of 'erforman e of the s heme or other s hemes of the same mutual fund is an im'ortant in'ut in the de ision ma!ing% *hough 'ast 'erforman e of a s heme is not an indi ator of its future 'erforman e and good 'erforman e in the 'ast may or may not be sustained in the future, this is one of the im'ortant fa tors for ma!ing the investment de ision% <ne may also om'are the 'erforman e $ith other s hemes having similar investment obFe tives% ,'e ial attention should be 'aid to the s heme

the Kuality of investments% Investors, as su h, should hoose a s heme based 'urely on merit% -hat are Ne/ #!nd O..ers FN#OsG2 4n asset management om'any 74M38 is eligible to bring out ne$ s hemes% *hese ne$ s hemes are alled :e$ )und <ffers 7:)<s8% Ea h of these s hemes $ill have a defined investment obFe tive% :)<s are laun hed along $ith s heme offer do uments and their abridged versions, alled the U6ey Information Memorandum1 76IM8% , hemes are available for subs ri'tion during :)< for a ertain 'eriod% 4fter losure date of the :)<, allotment is made to investors% 4n o'en"ended s heme re eives subs ri'tion on an ongoing basis even after the :)< losure and subseKuent re" o'ening $hereas lose"ended s hemes are not eligible to re eive subs ri'tion after :)< losure% *he funds so olle ted by the mutual fund in a s heme are then invested by it as 'er the obFe tives set out in the offer do ument% Is there an, di..eren"e &et/een a Ne/ #!nd O..erin( FN#OG . a 1!t!al .!nd ..erin( FIPOG

highlights, s heme s'e ifi ris! fa tors, details of fees, e#'enses and load and 'ast 'erforman e, a'art from the investment obFe tives and 'oli ies and om'aring it $ith other s hemes% I. s"he1es in the sa1e "ate( r, sh !ld ne "h NAV2 Many investors are tem'ted to invest in s hemes that are available at a lo$ :4;% 4 ordingly, they are even dra$n to$ards :)<s, $hi h are made available at Rs% 10 'er unit% Investors should understand that in ase of mutual funds s hemes, lo$er or higher :4;s of similar ty'e s hemes of different mutual funds have no relevan e% 4t the entry 'oint for the investor in an e#isting s heme, the :4; refle ts the 'resent value of the underlying assets, and a higher :4; in fa t sho$s a om'arative high Kuality of assets% In :)<s, the initial or'us shall be first invested and the :4; shall then de'end u'on .

FN#OG and an initial %!&li" . a " 1%an,2

di..erent 1!t!al .!nds are availa&le3 se a s"he1e /ith a l /er

Des, there is a differen e% Investing in an IP< means that investment is being made in a s'e ifi om'any and as su h the returns on su h investments $ould entirely be de'endent u'on the sto ! 'ri e movement of the om'any $hi h in turn $ould de'end on the 'erforman e of the om'any and also mar!et onditions% +o$ever, in the ase of mutual funds, the funds olle ted from the investors are 'ooled in and then invested in a bas!et of om'anies, and not a single om'any% *he :4; of the mutual fund $ould therefore be a net refle tion of the 'erforman e of all the om'anies in the bas!et% In vie$ of this, $hile the 'ri e of shares of a A>

om'any may rise or fall in a signifi ant manner, the :4; of a mutual fund $ould ty'i ally not be subFe t to signifi ant rises or falls% ,in e a mutual fund $ould ta!e some time to de'loy the funds raised in an :)<, its true :4; $ould start refle ting only u'on de'loyment of all the monies% H / d es ne invest in a s"he1e . a

-hat sh !ld d "!1ent2

ne l

+ . r in an

..er

4n abridged offer do ument, $hi h ontains very useful information, is reKuired to be given to ea h 'ros'e tive investor by the mutual fund% <ne should read the $hole offer do ument very arefully% Due are must be given to 'ortions relating to main features of the s heme, ris! fa tors, initial issue e#'enses and re urring e#'enses to be harged to the s heme, entry or e#it loads, s'onsor1s tra ! re ord, edu ational Kualifi ation and $or! e#'erien e of !ey 'ersonnel in luding fund managers, 'erforman e of other s hemes laun hed by the mutual fund in the 'ast, 'ending litigations and 'enalties im'osed% -hat are the K7C n r1s . r 1!t!al .!nd invest1ents2 *he need to U6no$ Dour 3lient1 is vital for 'revention of money laundering% 4M3s are therefore reKuired to see! information and do umentation to establish the identity of the investors% investors% In addition, Permanent 4 ount :umber 7P4:8 is no$ om'ulsory for the

1!t!al .!nd2 )or :)<s, mutual funds normally release advertisements in ne$s'a'ers5*; informing the s heme highlights and the date of laun h of the :)<% Investors an also onta t agents and distributors of mutual funds $ho are s'read all over the ountry for ne essary information and a''li ation forms% )illed a''li ation forms an be de'osited $ith mutual funds through these agents5distributors that 'rovide su h servi es% Post offi es and ban!s also distribute the units of mutual funds% In some ases, the mutual funds offer huge ommissions to the distributors, $ho in turn, 'ass on a 'art of this to the investors% Investors should not be arried a$ay by su h ommission5gifts given by agents5distributors for investing in a 'arti ular s heme% )or investing in e#isting s hemes, in ase of

-hat "are sh !ld &e eAer"ised /hile .illin( !% the a%%li"ati n . r1 .!nd s"he1e2 <ne must learly $rite his name, address, number of units a''lied for and su h other information as reKuired in the a''li ation form% *he ban! a ount details should be 'rovided to 'revent any fraudulent en ashment of heKues5drafts issued by the mutual fund at a later date for the 'ur'ose of dividend or re'ur hase% 4ny hanges in the address, ban! a ount details et % at a later date should be informed to the mutual fund immediately% A? . a 1!t!al

o'en"ended s hemes, the units an be 'ur hased dire tly from the fund itself% <ne an a''roa h the fund1s offi e or through the In distributors5bro!ers5 sub"bro!ers5agents%

ase of losed"ended s hemes, one an buy the units from the sto ! e# hange $here the units are listed or from the funds 'roviding re'ur hase fa ility% Re ently, both 9,E and :,E have also reated 'latforms for 'ur hase5sale of mutual fund units%

-hen d es the invest r (et the "erti.i"ate r state1ent . a"" !nt a.ter investin( in an N#O2 Mutual funds are reKuired to des'at h ertifi ates or statements of a ounts $ithin si# $ee!s from the date of losure of the initial ase of lose" subs ri'tion of the s heme% In

a higher 'er entage of the fund in eKuity om'ared to $hat is dis losed in the offer do ument% ,u h hanges may also be ne essary on a short term basis on defensive onsiderations i%e% to 'rote t the :4;% 4s su h, mutual funds are allo$ed allo ation ertain fle#ibility in altering the asset onsidering the interest of the

ended s hemes, the investors $ould either get a demat a ount statement or unit ertifi ates% In ase of o'en"ended s hemes, a statement of a ount is issued by the mutual fund $ithin .0 days from the date of losure of initial 'ubli offer of the s heme%

investors% +o$ever, if a mutual fund 'ro'oses to hange the asset allo ation on a 'ermanent basis, it is reKuired to inform all the unitholders and give them an o'tion to e#it the s heme at 'revailing :4; $ithout any load% Can a 1!t!al .!nd "han(e the nat!re .

H / l n( d es it ta+e . r trans.er . !nits a.ter %!r"hase .r 1 st "+ 1ar+ets in "ase . "l se:ended s"he1es2 *ransfer of units is reKuired to be done $ithin thirty days from the date of lodgment of ertifi ates $ith the mutual fund% H / 1!"h ti1e d es it ta+e t re"eive

the s"he1e .r 1 the ..er d "!1ent2

ne s%e"i.ied in the

Des% +o$ever, no hange in the nature or terms of the s heme, !no$n as fundamental attributes of the s heme e%g% stru ture, investment 'attern, et % an be arried out unless a $ritten ommuni ation is sent to ea h unitholder and an advertisement is given in the ne$s'a'ers% *he unitholders have the right to e#it the s heme at the 'revailing :4; $ithout any e#it load if they do not $ant to ontinue $ith the s heme% *he mutual funds are also reKuired to follo$ similar 'ro edure $hile hange in s'onsor% des'at h the H / d es ne +n / /here the 1!t!al onverting the s heme from lose"ended to o'en"ended s heme and in ase of

dividendsBre%!r"hase %r "eeds2 4 mutual fund is reKuired to des'at h the dividend $arrants $ithin .0 days of the de laration of the dividend and the redem'tion or re'ur hase 'ro eeds $ithin 10 $or!ing days from the date of redem'tion or re'ur hase reKuest made by the unitholder% In ase of failures to

redem'tion5re'ur hase 'ro eeds $ithin the sti'ulated time 'eriod, the 4M3 is liable to 'ay interest as s'e ified by ,E9I from time to time 71>- at 'resent8% Can a 1!t!al .!nd "han(e the asset all "ati n /hile de%l ,in( the .!nds raised .r 1 the invest rs2 3onsidering the mar!et trends, a 'rudent fund manager may li!e to hange the asset allo ation% )or e#am'le, a fund manager may li!e to invest

.!nd s"he1e has invested the 1 ne, 1 &iliCed .r 1 the invest rs2 Mutual funds are reKuired to dis lose their om'lete 'ortfolios of all of their s hemes on a half"yearly basis and 'ublish the same in the ne$s'a'ers% ,ome mutual funds also send the 'ortfolios to their unitholders% *he s heme 'ortfolio sho$s investment made in ea h se urity $ithin ea h asset money mar!et lass i%e% eKuity, debentures, instruments, government

se urities, et % and their Kuantity, mar!et value AE

and - to :4;% *hese 'ortfolio statements are also reKuired to dis lose illiKuid se urities in the 'ortfolio, investment made in rated and unrated debt se urities, non"'erforming assets 7:P4s8, et % ,ome mutual funds send ne$sletters to the unitholders on Kuarterly basis $hi h also ontain 'ortfolios of the s hemes% Advi"e .r 1 distri&!t rsBadvis rs *he investors may see! advi e from e#'erts and onsultants in luding agents and distributors of mutual funds s hemes $hile ma!ing investment de isions%

H / d es

ne +n / the %er. r1an"e

.a

1!t!al .!nd s"he1e2 *he 'erforman e of a s heme is refle ted in its net asset value 7:4;8% :4;s of mutual fund s hemes are 'ublished in the ne$s'a'ers% :4;s are also available on the $ebsites of the mutual funds% 4ll mutual funds are also reKuired to 'ut their :4;s on the $ebsite of the 4sso iation of Mutual )unds in India 74M)I8 7$$$%amfiindia% om8 and thus the investors an a ess :4;s of all mutual fund s hemes at a single 'la e% Mutual funds are also reKuired to 'ublish their

MUTUAL #UND PER#ORMANCE

-hat is Net Asset Val!e FNAVG s"he1e2 *he 'erforman e of a 'arti ular s heme of a mutual fund is denoted by :et 4sset ;alue 7:4;8% Mutual funds invest the monies olle ted in a s heme from the investors in the se urities mar!ets% *he :4; is the mar!et value of the se urities held by the s heme% ,in e mar!et value of se urities hanges every day, :4; of a s heme also varies daily% *he :4; 'er unit is the mar!et value of se urities of a s heme divided by the total number of units of the s heme on any 'arti ular date% )or e#am'le, if the mar!et value of se urities of a mutual fund s heme is Rs% 200 la!h and the mutual fund has issued 10 la!h units, the :4; 'er unit of the s heme $ould be Rs%20% :4; is reKuired to be dis losed by the mutual funds on a daily basis for o'en ended s hemes and on a $ee!ly basis for lose"ended s hemes% . a

'erforman e in the form of half"yearly results $hi h also in lude their returns5yields over a 'eriod of time i%e% last si# months, 1 year, . years, > years and sin e in e'tion of s hemes% )rom these statements, an investor an also loo! into other details li!e 'er entage of e#'enses of total assets as these have an affe t on the yield% Mutual funds are also reKuired to send an annual re'ort to all the unitholders at the end of ea h year% In addition, various studies5resear h5 analysis on the mutual fund s hemes are regularly arried by ne$s'a'ers, maga(ines and *; hannels% *hese in lude ran!ing of various s hemes in terms of their 'erforman e% Investors should study these re'orts and !ee' themselves informed about the 'erforman e of various s hemes of different mutual funds% *hey an also om'are the 'erforman e of the s hemes in $hi h they have invested $ith similar s hemes of the other mutual funds as also $ith the ben hmar!s li!e 9,E ,ense#, ,CP 3:I :ifty, et %

A@

-hat in. r1ati n is .!rnished t .!nd2

the

MISC)
Are the " 1%anies /hi"h have na1es li+e D1!t!al &ene.it the sa1e as 1!t!al .!nds s"he1es2 Dou should not assume that the om'anies having the name Gmutual benefitH are mutual funds% *hese om'anies may not ome under the 'urvie$ of ,E9I% Is the hi(her net / rth . the s% ns r a

invest r a.ter he invests in a 1!t!al Ea h investor in mutual fund units is entitled to re eive several 'ie es of information% In the ase of fresh subs ri'tion, the mutual fund is reKuired to dis'at h statements of a ounts $ithin a ma#imum .0 days% *his statement ontains information on allotment 'ri e and the load harged, number of units allotted, date of allotment, the folio number for the subs ri'tion, :4; as on date et % Investors $ho invest through ,IP5,*P5,/P re eive the statement of a ounts $ithin 10 days and an u'date on their investments every Kuarter of the year% -here d es ne (et in. r1ati n n the

(!arantee . r &etter ret!rns2 In the offer do ument of any mutual fund s heme, finan ial 'erforman e in luding the net $orth of the s'onsor for a 'eriod of three years is reKuired to be given% *he only 'ur'ose is that the investors should !no$ the tra ! re ord of the om'any $hi h has s'onsored the mutual fund% +o$ever, higher net $orth of the s'onsor does not mean that the s heme $ould give better returns or the s'onsor $ould om'ensate in ase the :4; falls% Can N n:Resident Indians FNRIsG invest in 1!t!al .!nds2 Des, :RIs an also invest in mutual funds% I. a 1!t!al .!nd s"he1e is / !nd !%3 /hat ha%%ens t the 1 ne, invested2 In ase of $inding u' of a s heme, the mutual fund 'ays a sum based on 'revailing :4; after adFustment of e#'enses%

1!t!al .!nds ind!str,2 4lmost all the mutual funds have their o$n $ebsites% Dou an also a ess the :4;s, half" yearly results and 'ortfolios of all mutual funds on the $ebsite of 4sso iation of Mutual )unds in India 74M)I8 7$$$%amfiindia% om8% 4M)I has also 'ublished useful literature for the investors% <ne an also log on to the $ebsite of ,E9I 7$$$%sebi%gov%in8 and go to GMutual )undsH se tion for information on ,E9I regulations and guidelines, data on mutual funds, draft offer do uments filed by mutual funds, addresses of mutual funds, et %

AA

Cha%ter *5

INDIAN DEPOSITOR7 RECEIPTS FIDRsG

Can a . rei(n " 1%an, a""ess the Indian "a%ital 1ar+et . r raisin( .!nds2 Des, a foreign om'any an a ess the Indian a'ital mar!et for raising funds% *his Re ei'ts 7IDRs8 -hat is an IDR2 4n IDR is an instrument denominated in Indian Ru'ees in the form of a de'ository re ei't reated by a Domesti De'ository 7 ustodian of se urities registered $ith the ,E9I8 against the underlying eKuity of the issuing om'any% -h is eli(i&le t iss!e IDRs2 *he foreign issuing om'any should have 're"issue 'aid"u' a'ital and free reserves of at least U,[ >0 million and have a minimum average mar!et U,[ 100 million a ontinuous trading re ord or history on a sto ! e# hange in its 'arent ountry for at least three immediately 're eding years a tra ! re ord of distributable 'rofits for at least three out of immediately 're eding five years listed in its home 'rohibited $ith to ountry and not been se urities by $ith any the issue to -hether IDRs "an &e " nverted int !nderl,in( eH!it, shares2 IDRs an be onverted into the underlying eKuity shares only after the e#'iry of one year from the date of the issue of the IDR, subFe t to the om'lian e of the related 'rovisions of )oreign E# hange Management 4 t and regulations issued there under by the R9I in this regard% *he si(e of an IDR issue annot be less than Rs% >0 rore% a'itali(ation 7during the -hether the dra.t %r s%e"t!s . r IDRs has t &e .iled /ith SE$I as in the "ase . d 1esti" iss!es2 Des% *he foreign issuer is reKuired to file the draft 'ros'e tus $ith ,E9I% last . years8 in its 'arent ountry of at least an be done through the issue of Indian De'ository -hi"h 1a' r inter1ediaries are inv lved in iss!an"e . IDRs2 <verseas 3ustodian 9an! is a ban!ing om'any $hi h is established in a ountry outside India and has a 'la e of business in India and a ts as ustodian for the eKuity shares of the issuing om'any against $hi h IDRs are 'ro'osed to be issued in the underlying eKuity shares of the issuer is de'osited% Domesti De'ository $ho is a ustodian of se urities IDRs% Mer hant 9an!er registered $ith ,E9I $ho is res'onsible for due diligen e and through $hom the draft 'ros'e tus for issuan e of the IDR is filed $ith ,E9I by the issuer om'any% registered $ith ,E9I and authori(ed by the issuing om'any to issue

regulatory body and has a good tra ! re ord res'e t om'lian e se urities mar!et regulations%

100

-h

is res% nsi&le t " r% rate h lders2 &ene.its

distri&!te the t the IDR

Investments by Indian

om'anies in IDRs

annot e# eed the investment limits, if any, 'res ribed for them under the a''li able la$s% -h "an invest in IDRs2 In every issue of IDRS 7i8 4t least >0- of the IDRs issued have to be subs ribed to by PI9s0 7ii8 *he balan e >0- is available for subs ri'tion by non"institutional investors, in luding the retail investors%

<n re ei't of dividend or other or'orate a tion on the IDRs, the Domesti De'ository is reKuired to distribute the same to the IDR holders in 'ro'ortion to their holdings of IDRs% -hat are the reH!ire1ents . r investin( in IDRs2 IDRs an be 'ur hased by any 'erson $ho is resident in India as defined under )EM4% Minimum a''li ation amount in an IDR issue is Rs%20,000%

101

Cha%ter *=

COLLECTIVE INVESTMENT SCHEMES

-hat is a C lle"tive Invest1ent S"he1e2 4 ording to the ,E9I 4 t, a 3olle tive or Investment , heme 73I,8 is any s heme under $hi h the 7vi8 any s heme or arrangement under $hi h de'osits are a e'ted by a om'any de lared as a :idhi or a mutual benefit so iety under se tion ?204 of the 3om'anies 4 t, 1A>? 71 of 1A>?80 7vii8 any s heme or arrangement falling $ithin the meaning of 3hit business as defined in lause 7d8 of se tion 2 of the 3hit )und 4 t, 1A@2 7B0 of 1A@280 7viii8 any s heme or arrangement under $hi h , hemes offered by the 'lantation are a good e#am'le of a 3I,% -hi"h s"he1es are n t treated as CIS2 *he follo$ing do not onstitute a 3I,L 7i8 any s heme or arrangement made or offered by a o"o'erative so iety or a so iety being a so iety registered or deemed to be registered under any la$ relating to 7ii8 o"o'erative so ieties for the time being in for e in any ,tate0 any s heme or arrangement under $hi h de'osits are a e'ted by non" ban!ing finan ial om'anies0 7iii8 any s heme or arrangement being a ontra t of insuran e to $hi h the Insuran e 4 t, a''lies0 7iv8 any s heme or arrangement 'roviding for any , heme, Pension Provident , heme )und or the the and Insuran e Em'loyees 7v8 , heme framed under Under /hat "ir"!1stan"es "an a " 1%an, re(istered as a CIMC raise .!nds .r 1 the %!&li"2 4 registered 3IM3 is eligible to raise funds from the 'ubli by laun hing s hemes% ,u h s hemes have to be om'ulsorily redit rated as $ell as a''raised by an a''raising agen y% *he s hemes also have to be a''roved by the *rustee and ontain dis losures, as 'rovided in the Regulations, $hi h $ould enable the investors to ma!e informed de ision% Can an eAistin( CIS raise .!rther .!nds2 4n e#isting 3I, annot laun h any ne$ s heme or raise money from the investors even under the e#isting s heme, unless a ertifi ate of registration is granted to it by ,E9I% om'anies fund% -h is a!th riCed t .l at CIS2 3I, an be organi(ed, o'erated and managed only by a 3olle tive Investment Management 3om'any 73IM38 registered $ith ,E9I% ontributions made are in the nature of subs ri'tion to a mutual

arrangement made or offered by any om'any ontributions, or 'ayments made by the investors, are 'ooled and utili(ed $ith a vie$ to re eive 'rofits, in ome, 'rodu e or 'ro'erty, and is managed on behalf of the investors% Investors do not have day"to"day ontrol over the management and o'eration of su h s hemes or arrangements%

Mis ellaneous Provisions 4 t, 1A>20 any s heme or arrangement under $hi h de'osits are a e'ted under se tion >@4 of the 3om'anies 4 t, 1A>? 71 of 1A>?80

102

4 o'y of the offer do ument of the s heme has to be filed $ith ,E9I and if no modifi ations are suggested by ,E9I $ithin 21 days from the date of filing then the 3IM3 is entitled to issue the offer do ument to the 'ubli for raising funds from them% Are the !nit "erti.i"ates iss!ed !nder a CIS reH!ired t eA"han(es2 Des, these have to be om'ulsorily listed on the sto ! e# hanges as mentioned in the <ffer do ument% Are the invest rs entitled t re"eive &e listed n the st "+

do ument has been filed or for the orre tness of the statements made or o'inions e#'ressed in the offer do ument% It is the res'onsibility of the 3IM3 to ensure that the dis losures made in the offer do ument are generally adeKuate and are in onformity $ith the ,E9I Regulations% Under /hat "ir"!1stan"es /ill an eAistin( CIS &e / !nd !%2 4n e#isting 3I, $hi h failed to ma!e an a''li ation for registration, or $as not desirous of obtaining 'rovisional registration, or has not been granted 'rovisional registration, or having obtained 'rovisional registration fails to om'ly $ith the 'rovisions as laid do$n in the Regulations, $as 5 is reKuired to $ind u' the e#isting s heme7s8% -hat is the %r "ed!re . r /indin( !% . an eAistin( CIS2 )irst of all, an e#isting 3I, has to send an information memorandum to the investors $ho have subs ribed to the s hemes, detailing the state of affairs of the s heme, the amount re'ayable to ea h investor and the manner in $hi h su h amount is determined% *he said information memorandum has to be dated and signed by all the Dire tors of the s heme% *he information memorandum has to e#'li itly state that investors desirous of ontinuing $ith the s heme $ill have to give a

in. r1ati n a& !t the s"he1es /here the, have invested and at /hat interval2 *he investors are entitled to re eive a o'y of the 9alan e ,heet, Profit and &oss 4 ount and a o'y of the summary of the yearly a''raisal re'ort from 3IM3, $ithin t$o months from the losure of ea h finan ial year% )urther, the s heme $ise annual re'ort or an abridged form thereof has to be 'ublished in a national daily not later than t$o alendar months from the date of finali(ation of a ounts% 4lso, s heme $ise un"audited Kuarterly finan ial results have to be 'ublished in a national daily by the 3IM3 $ithin one month from the lose of ea h Kuarter% D es '!st the .ilin( . an ..er d "!1ent

'ositive onsent, $ithin one month from the date of the information memorandum, to $ith the s heme% If 'ositive onsent to ontinue $ith the s heme is re eived from only 2>- or less of the total number of e#isting investors, the s heme shall be $ound u' and 'ayment be made to the investors $ithin three months of the date of the information memorandum% 10. ontinue

. a s"he1e &, a CIMC /ith SE$I 1ean that the invest1ent in that s"he1e is sa.e and s !nd2 It is to be distin tly understood that submission of offer do ument to ,E9I should not in any $ay be deemed or onstrued that the same has been leared or a''roved by ,E9I% ,E9I does not ta!e any res'onsibility either for the finan ial soundness of any s heme for $hi h the offer

'rose ution a'art from 'assing of dire tions su h as D es SE$I (!arantees the re%a,1ent 1 ne, de% sited !nder a CIS2 4s a regulatory body, ,E9I does not guarantee or underta!e the re'ayment of money to the investors% H / "an ne as"ertain the re(istrati n 7iii8 7ii8 . 7i8 reKuiring the 'erson on erned not to olle t any money from investor or to laun h any s heme0 'rohibiting the 'erson on erned from dis'osing of any of the 'ro'erties of the s heme a Kuired in violation of the Regulations0 reKuiring the 'erson on erned to dis'ose off the assets of the s heme in a manner as may be s'e ified in the dire tions0 -hat are the %enal %r visi ns i. a re(istered CIMC vi lates %r visi ns . the Re(!lati ns2 If a registered 3IM3 violates ertain 'rovisions of the Regulations, a tion in terms of 7v8 sus'ension5 an ellation of ertifi ate may be 7iv8 reKuiring the 'erson on erned to refund any money or the assets to the on erned investors along $ith the reKuisite interest or other$ise, olle ted under the s heme0 'rohibiting the 'erson on erned from o'erating in the a'ital mar!et or from a essing the ,E9I may also, in the interests of the se urities mar!et and the investors, initiate riminal s'e ified 'eriod% a'ital mar!et for a stat!s a CIMC2 Registration details of all 3IM3s are available on the ,E9I $ebsite%

initiated against the entity by ,E9I%

10B

Cha%ter *>

PORT#OLIO MANAGERS
-h is a P rt. li Mana(er2 4ny 'erson $ho 'ursuant to a ontra t or arrangement $ith a lient, advises or dire ts or underta!es on behalf of the lient 7$hether as a dis retionary 'ortfolio manager or other$ise8 the management or administration of a 'ortfolio of se urities or the funds of the lient, as the ase may be is a 'ortfolio manager% -hat is the di..eren"e &et/een a *he a''li ant should have in its em'loyment minimum of t$o 'ersons $ho, bet$een them, have at least five years e#'erien e as 'ortfolio manager or sto ! bro!er or investment manager or in the areas related to fund management% *he a''li ant also has to fulfill the a'ital adeKua y reKuirements, et % -h is the %rin"i%al ..i"er . a % rt. li dis"reti nar, % rt. li 1ana(er and a 1ana(er2 *he 'rin i'al offi er of the a''li ant has either = 7i8 a 'rofessional Kualifi ation in finan e, la$, a ountan y or business 3entral management from a university or an institution re ognised by the a foreign university0 -hat d es SE$I " nsider /hile (rantin( the "erti.i"ate . re(istrati n t a or 7ii8 an e#'erien e of at least ten years in related a tivities in the se urities mar!et in luding in a 'ortfolio manager, sto ! bro!er or as a fund manager -hat is the "a%ital adeH!a", reH!ire1ent . a % rt. li 1ana(er2 *he 'ortfolio manager is reKuired to have a minimum net $orth of Rs% >0 la!h% Is it 1andat r, that a % rt. li % rt. li 1ana(er2 ,E9I ta!es into a ount all matters $hi h it deems relevant to the a tivities relating to 'ortfolio management% *he a''li ant has to be a body or'orate and must have ne essary li!e adeKuate offi e s'a e, infrastru ture 2overnment or any ,tate 2overnment or 'ortfolio manager, sto ! bro!er or as a fund manager%

n n: dis"reti nar, % rt. li 1ana(er2 *he dis retionary 'ortfolio manager individually and inde'endently manages the funds of ea h lient in a ordan e $ith the needs of the lient in a manner $hi h does not 'arta!e hara ter of a Mutual )und, $hereas the non"dis retionary 'ortfolio manager manages the funds in a ordan e $ith the dire tions of the lient%

eKui'ments and the man'o$er to effe tively dis harge the a tivities of a 'ortfolio manager% *he 'rin i'al offi er of the a''li ant should have either =a 'rofessional Kualifi ation in finan e, la$, a ountan y or business management from a university or an institution re ognised by the 3entral 2overnment or any ,tate 2overnment or a foreign university0 or an e#'erien e of at least ten years in related a tivities in the se urities mar!et in luding in a

1ana(er sh !ld a%% int a "!st dian2 Every 'ortfolio manager $ho has total assets under management of value more than five hundred ore ru'ees shall a''oint a ustodian%

10>

*his ondition $ill not be a''li able to 'ortfolio managers offering 'urely advisory servi es% H / l n( d es the "erti.i"ate .

Is there an, s%e"i.ied val!e se"!rities &el / /hi"h a

. .!nds % rt. li

1ana(er "ann t a""e%t .r 1 the "lient /hile %enin( the a"" !nt . r the %!r% se . renderin( % rt. li 1ana(e1ent servi"e t the "lient2 *he 'ortfolio manager is reKuired to a e't funds or se urities having a minimum $orth of five la!y -hether an, " ntra"t sh !ld &e 1ade &et/een the % rt. li "lient2 Des% *he 'ortfolio manager, before ta!ing u' an assignment of management of funds or 'ortfolio of se urities on behalf of the lient, enters into an agreement in $riting $ith the lient learly defining the inter se relationshi' and setting out their mutual rights, liabilities and obligations relating to the management of funds or 'ortfolio of se urities ontaining the details as s'e ified in , hedule I; of the ,E9I 7Portfolio Managers8 Regulations, 1AA.% -hat .ees "an a % rt. li 1ana(er "har(e .r 1 its "lients . r the servi"es rendered &, hi12 *he ,E9I 7Portfolio Managers8 Regulations, 1AA., have not 'res ribed any s ale of fee to be harged by the 'ortfolio manager to its lients% +o$ever, the regulations 'rovide that the 'ortfolio manager shall harge a fee as 'er the agreement $ith the lient for rendering 'ortfolio management servi es% *he fee so harged may be a fi#ed amount or a return based fee or a ombination of both% *he 'ortfolio manager shall ta!e s'e ifi 'rior 'ermission from the lient for harging su h fees for ea h a tivity for $hi h servi e is rendered by the 'ortfolio manager dire tly or indire tly 7$here su h servi e is outsour ed8, -hat is the dis"l s!re 1e"hanis1 % rt. li 1ana(ers t their "lients2 *he 'ortfolio manager 'rovides to the lient the Dis losure Do ument at least t$o days 'rior to entering into an agreement $ith the lient% *he Dis losure Do ument, inter alia, ontains the Kuantum and manner of 'ayment of fees 'ayable by the lient for ea h a tivity for $hi h servi e is rendered by the 'ortfolio manager dire tly or indire tly 7 $here su h servi e is out sour ed8, 'ortfolio ris!s, om'lete dis losures in res'e t of transa tions $ith related 'arties as 'er the a ounting standards s'e ified by the Institute of 3hartered 4 ountants of India in this regard, the 'erforman e of the 'ortfolio manager and the audited finan ial statements of the 'ortfolio 10? . the Is a % rt. li 1ana(er %er1itted t invest the .!nd . its "lients in derivatives2 4 'ortfolio manager is 'ermitted to invest in derivatives, in luding transa tions for the 'ur'ose of hedging and 'ortfolio rebalan ing, through a re ogni(ed sto ! e# hange% +o$ever, leveraging of 'ortfolio is not 'ermitted in res'e t of investment in derivatives% *he total e#'osure of the 'ortfolio lient in derivatives should not e# eed his 'ortfolio funds 'la ed $ith the 'ortfolio manager and the 'ortfolio manager should basi ally invest and not borro$ on behalf of his lients% 1ana(er and its ru'ees from the lient $hile o'ening the a ount for the 'ur'ose of rendering 'ortfolio management servi e to the lient% re(istrati n re1ain valid2 *he ertifi ate of registration remains valid for three years%

manager for the immediately 're eding three years% On /hat &asis is the %er. r1an"e % rt. li 1ana(er "al"!lated2 *he 'erforman e of a dis retionary 'ortfolio manager is al ulated using $eighted average method ta!ing ea h individual ategory of . the

investments for the immediately 're eding three years and in su h ases 'erforman e indi ators is also dis losed% -here "an an invest r l + !t . r

in. r1ati n n % rt. li 1ana(ers2 :ames and addresses of all ,E9I"registered 'ortfolio managers are available on ,E9I $ebsite%

10E

Cha%ter *?

DELISTING
-hat is 1eant &, delistin( . se"!rities2 *he term GdelistingH of se urities means 'ermanent removal of se urities of a listed om'any from a s'e ified sto ! e# hange5s% 4s a onseKuen e of delisting, the se urities of that om'any are no longer traded at that sto ! e# hange% -hat is the di..eren"e &et/een V l!ntar, Delistin( and C 1%!ls r, Delistin(2 In voluntary delisting, a om'any de ides on its o$n to remove its se urities from trading at a 'arti ular sto ! e# hange5all sto ! e# hanges $here its se urities are listed 3om'ulsory delisting refers to the 'ermanent removal of se urities of a listed om'any from a sto ! e# hange as a 'enal measure at the behest of the sto ! e# hange for $ith not ma!ing various submissions5 om'lying me hanism, $hereby the e#it 'ri e of the se urities is determined in a ordan e to boo!" building 'ro ess% In ases $here the eKuity shares are freKuently traded in all the sto ! e# hanges $here these are listed, the average of the $ee!ly high and lo$ of the losing 'ri es of the eKuity shares of the om'any during 2? $ee!s or 2 $ee!s 're eding the date on $hi h the re ogni(ed sto ! e# hanges $ere notified of the board meeting in $hi h the delisting 'ro'osal $as onsidered, $hi hever is higher as Kuoted on the re ogni(ed sto ! e# hange $here the eKuity shares of the traded% /here the eKuity shares of the om'any are om'any are most freKuently

infreKuently traded in all the re ogni(ed sto ! e# hanges $here they are listed, a floor 'ri e is reKuired to be determined by the 'romoter and the mer hant ban!er by ta!ing into a ount the highest 'ri e 'aid by the 'romoter for a Kuisitions, if any, of eKuity shares of the lass

reKuirements set out in the &isting 4greement% -hat is the eAit %% rt!nit, availa&le . r invest rs in "ase a " 1%an, (ets delisted v l!ntaril,2 If a om'any is listed at any national e# hange 7'resently :,E and 9,E8 and $ishes to voluntarily delist its se urities from any or all of the regional sto ! e# hanges, it does not need to 'rovide any e#it o''ortunity to the shareholders, the logi being that a mar!et $ould ontinue to e#ist at the national e# hange5s even after the delisting from the regional e# hange5s% +o$ever, if a om'any $ishes to voluntarily

sought to be delisted, in luding by $ay of allotment in a 'ubli or rights issue or 'referential allotment, during the 2? $ee!s 'eriod 'rior to the date on $hi h the re ogni(ed sto ! e# hanges $ere notified of the board meeting in $hi h the delisting 'ro'osal $as onsidered and after that date u' to the date of the 'ubli announ ement and onsider other 'arameters in luding return on net $orth, boo! value of the shares of the om'any, earning 'er share, 'ri e earning multi'le vis"M"vis the industry average%

delist its se urities from all the sto ! e# hanges $here it is listed in luding from the national e# hanges if it is listed there, it has to follo$ the ,E9I Regulations $hi h 'rovide an e#it

/here the eKuity shares of the

om'any are

freKuently traded in some re ogni(ed sto ! e# hanges and infreKuently traded in some other re ogni(ed sto ! e# hanges $here they are listed, 10@

the 'ri e shall be highest of the 'ri es arrived at in a ordan e $ith the fa tors as stated above% EKuity shares are deemed to be infreKuently traded if on the re ogni(ed sto ! e# hange, the annuali(ed trading turnover in su h shares during the 're eding si# alendar months 'rior

to month in $hi h the re ogni(ed sto ! e# hanges $ere notified of the board meeting in $hi h the delisting 'ro'osal $as onsidered, is less than five 'er ent 7by number of eKuity shares8 of the total listed eKuity shares of that lass and the term UfreKuently traded1 shall be a ordingly% onstrued

10A

Cha%ter 04

$U7$ACK
-hat is the 1anner in /hi"h a listed " 1%an, "an &!,&a"+ its /n shares2 4 om'any an buyba ! its o$n shares in any of the follo$ing mannerL 7i8 )rom the e#isting shareholders on a 'ro'ortionate 7ii8 basis through the tender offer method0 )rom o'en mar!et throughL 7a8 7b8 7iii8 Can a 9oo! building 'ro ess ,to ! e# hange, H / d es ..er . r12 " 1%an, &!,&a"+ its shares 4 shareholder an ma!e an a''li ation on 'lain 'a'er stating his folio number, name, address, number of shares held, share ertifi ate number, distin tive numbers, number of shares tendered, together $ith the original share ertifi ate and tender the same at the olle tion entres5registrars, as mentioned in the 'ubli announ ement% If the shares are held in demat form, the information should in lude the relevant details li!e DP 4 ount :umber, DP ID et % #r 1 /here "an shares2 &isted om'anies are reKuired to inform the sto ! e# hange5s about the general meetings and resolutions 'assed regarding buyba !s% 4s su h, information on om'anies 'ro'osing to buyba ! shares an be obtained from the sto ! e# hanges% ,ubseKuently, $hen the buyba ! offer do ument or 'ubli announ ement is filed by the om'any $ith ,E9I, ,E9I 'uts the offer do ument on its $ebsite% H / d es ne de"ide as t /hether he sh !ld h ld the shares r a""e%t the ..er2 *he de ision as to $hether one should hold the shares or a e't the offer de'ends u'on various fa tors su h as the 'ri e of the offer, e#'e tations of the et % om'any1s 'erforman e in the future, liKuidity of the shares, one1s ash reKuirements ne (et details . the Is a shareh lder " 1%!ls ril, reH!ired t a""e%t the &!,&a"+ ..er2 :o% *he de ision to a e't or forgo the offer lies e# lusively $ith the shareholder% " 1%anies %r % sin( t &!,&a"+ their /ith !t res l!ti n2 Des% 4 om'any may buyba ! its shares $ithout a shareholders1 resolution to the e#tent of 10- of its 'aid u' eKuity a'ital and reserves% +o$ever, if a om'any intends to buyba ! its shares beyond this eiling, the same has to be a''roved by the shareholders% %assin( shareh lders ne %arti"i%ate in the ..er . r &!,&a"+ in "ase he d es n t re"eive the TENDER METHOD H / d es ne tender his shares . r &!,&a"+ in the tender ..er 1eth d2 *he om'any $ill send you a tender5offer form% *he shareholder, in ase he $ishes to offer his shares, has to fill u' the form as 'er the instru tions of the do uments as!ed for% om'any and en lose the

)rom odd lot shareholders%

110

-hat

is

the

1anner

in

/hi"h

the OPEN MARKET METHOD -hat are the 1eth ds . &!,&a"+ .r 1 the 1ar+et2 Instead of ma!ing a buy ba ! offer to ea h individual shareholder, a om'any may use the o'en mar!et method under $hi h it $ill buy ba ! shares from the mar!et and not from individual shareholders% It an do so through

" 1%an, de"ides the a""e%tan"es .r 1 ea"h shareh lder2 In ase the shares of the om'any are tradeable om'ulsorily in demat segment, the a e'tan es from any investor shall be on a 'ro'ortionate basis irres'e tive of the number of shares tendered in the buyba !, and irres'e tive of $hether shares are in 'hysi al or demat form% If the shares are not in om'ulsory demat

segment, first the entire shares tendered being less than the minimum mar!et lot shall be a e'ted in full% *hereafter, the a e'tan es $ill be on 'ro'ortionate basis in a manner to ensure that the a e'tan es are in mar!et lot% In su h a ase, a dra$ of lots shall be done, as in the ase of 'ubli issues% /hen do the shareholders re eive intimation about a e'tan e of their sharesT *he om'any is reKuired to send intimation to the tenderers $ithin 1> days from the losure of the offer%

7i8 boo!"building 'ro ess or 7ii8 sto ! e# hange -hat is the %r "ess the & . &!,&a"+ thr !(h

+&!ildin( 1eth d2

4 om'any an buy"ba ! its shares through the boo!"building 'ro ess% It needs to ma!e a 'ubli announ ement $hi h should ontain the detailed methodology of the boo!"building 'ro ess, the manner of a e'tan e, the format of a e'tan e to be sent by the shareholders and the details of bidding entres% *he boo! building 'ro ess has to be made

-hen d es the shareh lder re"eive the %a,1ent2 *he om'any is reKuired to send the 'ayment $ithin 21 days from the losure of the buyba ! offer%

through an ele troni ally lin!ed trans'arent fa ility% *he offer has to remain o'en for a 'eriod not less than fifteen days and not e# eeding thirty days% *he mer hant ban!er and the om'any

-hat is the 1eth d . &!,&a"+ . dd l t shares2 *he 'rovisions 'ertaining to buy ba ! through tender offer are a''li able to odd lot shares%

determine the buy"ba ! 'ri e based on the a e'tan es re eived% *he final buy"ba ! 'ri e, $hi h shall be the highest 'ri e a e'ted shall be 'aid to all shareholders $hose shares have been a e'ted for buy"ba !% -hat is the %r "ess the st "+ eA"han(e2 *he om'any is reKuired to a''oint a mer hant ban!er and ma!e a 'ubli announ ement about the buyba !, at least seven days 'rior to the 111 . &!,&a"+ thr !(h

ommen ement of buy"ba !% *he buyba ! an be made only on sto ! e# hanges having nation$ide trading terminals% *he buyba ! an be made only through the order mat hing me hanism e# e't Uall or none1 order mat hing system0 *he om'any and the mer hant ban!er are

'ublish the said information in a national daily on a fortnightly basis and every time $hen an additional five 'er ent of the buy ba ! has been om'leted% -hat sh !ld a shareh lder d st "+ eA"han(es2 *he shareholder has no role to 'lay in this method as the om'any is buying ba ! from the o'en mar!et on an anonymous basis% in "ase a

" 1%an, is d in( a &!,&a"+ thr !(h the reKuired to submit the information regarding the shares or other s'e ified se urities bought ba ! to the sto ! e# hange on a daily basis and

112

Cha%ter 0*

DERIVATIVES
4 lot of 'eo'le have different o'inions and vie$s on derivatives% *he vie$s range from them being useful instruments to being an unne essary $aste of time, effort and money% 4re derivatives really useful or notT 4re these finan ial tools inherently good or badT -hat is a derivative2 Derivatives are finan ial ontra ts $hi h derive their value from movements in the s'ot 'ri e of an underlying asset% )or e#am'le, $heat farmers may $ish to enter into a ontra t to sell their harvest at a future date to eliminate the ris! of a hange in 'ri es by that date% ,u h a transa tion $ould ta!e 'la e through a for$ard or futures mar!et% *his mar!et is the Wderivatives mar!etW, and the 'ri es of this mar!et $ould be driven by the s'ot mar!et 'ri e of $heat $hi h is the WunderlyingW% *he term W ontra tsW is often a''lied to denote the s'e ifi traded instrument, $hether it is a derivative ontra t in $heat, gold or eKuity shares% *he $orld over, derivatives are a !ey 'art of the finan ial system% *he most im'ortant ontra t ty'es are futures and o'tions, and the most im'ortant underlying mar!ets are eKuity, treasury bills, ommodities, foreign e# hange, real estate et % *he term QDerivativeQ indi ates that it has no inde'endent value, i%e% its value is entirely GderivedH from the value of the underlying asset% *he underlying asset an be se urities, ommodities, bullion, urren y, live sto ! or H / are derivatives "ate( riCed2 Derivatives are usually broadly theL relationshi' bet$een the underlying and the derivative 7e%g% for$ard, o'tion, s$a'8 ty'e interest mar!et of underlying rate in 7e%g% eKuity derivatives, foreign e# hange derivatives, derivatives, they ommodity trade 7e%g%, derivatives or redit derivatives8 $hi h e# hange traded or over"the" ounter8 'ay"off 'rofile 7,ome derivatives have non"linear 'ayoff diagrams due to embedded o'tionality8 *here is no definitive rule for distinguishing one from the other, so the distin tion is mostly a matter of ustom% -h, sh !ld an invest r !se derivatives2 Derivatives are used by investors toL 'rovide leverage or gearing, su h that a small movement in the underlying value an ause a large differen e in the value of the derivative% ,in e the investor is reKuired to 'ay a small fra tion of the ategori(ed by 7b8 7a8 a se urity derived share, from loan, a debt instrument, $hether *he term Derivative has been defined in ,e urities 3ontra ts 7Regulations8 4 t, asL"

se ured or unse ured, ris! instrument or ontra t for differen es or any other form of se urity0 a ontra t $hi h derives its value from the 'ri es, or inde# of 'ri es, of underlying se urities0

anything else% In other $ords, Derivative means a for$ard, future, o'tion or any other hybrid ontra t of 're determined fi#ed duration, lin!ed for the 'ur'ose of an inde# of se urities% ontra t fulfillment to the value of a s'e ified real or finan ial asset or to

11.

value of the total ontra t as margin, trading in futures is a leveraged a tivity sin e the investor is able to ontrol the total value of the ontra t $ith a relatively small amount of margin% *hus the leverage enables the investors to ma!e a larger 'rofit 7or loss8 $ith a om'aratively small amount of a'ital% s'e ulate and to ma!e a 'rofit if the value of the underlying asset moves the $ay they e#'e t 7e%g% moves in a given dire tion, stays in or out of a s'e ified range, rea hes a ertain level8 hedge or mitigate ris! in the underlying, by entering into a derivative ontra t $hose value moves in the o''osite dire tion to their underlying 'osition and an els 'art or all of it out obtain e#'osure to underlying $here it is not 'ossible to trade in the underlying 7e%g% $eather derivatives8 reate o'tionality $here the value of the derivative is lin!ed to a s'e ifi ondition or event 7e%g% the underlying rea hing a s'e ifi 'ri e level8 -hat are the &ene.its derivatives2 Derivatives fa ilitate the buying and selling of ris! and many 'eo'le onsider this to have a 'ositive im'a t on the e onomi system% 4lthough someone loses money $hile someone else gains money $ith a derivative, under normal ir umstan es, trading in derivatives should not adversely affe t the e onomi system be ause it is not (ero sums in utility% -hat are the d /nsides . derivatives2 4 maFor disadvantage of derivatives is the ris! of losing money% /hile derivatives hel' in rease 'rofits and redu e ris!s, they may also ma!e an . investin( in

investor lose out on a lot of money or other assets% )or e#am'le, a otton farmer enters into a ontra t $ith a $eaver% *he otton 'rodu er may agree on a fi#ed 'ri e to sell the otton to the $eaver on harvest time% *his ensures a fi#ed in ome and a sure ustomer for the otton farmer% <n the other hand, the $eaver is also ensured of a su''ly of otton% *his agreement ould be a disadvantage $hen the 'ri e of otton flu tuates% If the 'ri e of otton goes u', the farmer $ould still have to sell the otton at the earlier agreed ost% *his ma!es the farmer lose out on the 'rofit% Pri e flu tuations on the otton ould affe t the $eaver too% If the 'ri e of otton goes do$n, he still has to 'ay the high ost that $as agreed in the ontra t, regardless of the de rease in ottonQs 'ri e or value% Investors must understand that investment in derivatives has an element of ris! and is generally not an a''ro'riate avenue for someone of limited resour es5 limited investment and5or trading e#'erien e and lo$ ris! toleran e% 4n investor should therefore arefully onsider $hether su h trading is suitable for him or her in the light of his or her finan ial ondition% 4n investor must a e't that there an be no guarantee of 'rofits or no e# e'tion from losses $hile e#e uting orders for 'ur hase and 5 or sale of derivative ontra ts, Investors $ho trade in derivatives at the E# hange are advised to arefully read the Model Ris! Dis losure Do ument and the details ontained therein% *his do ument is given by the bro!er to his lients and must be read, the im'li ations understood and signed by the investor% *he do ument learly states the ris!s asso iated $ith trading in derivatives and advises investors to bear utmost aution before entering into the mar!ets%

11B

-hat is hed(in(2 +edging is a te hniKue that attem'ts to redu e ris!% It hel's in redu ing the ris! asso iated $ith e#'osures in underlying mar!et by ta!ing a ounter" 'ositions in the futures mar!et% )or e#am'le, an investor $ho has 'ur hased a 'ortfolio of sto !s may have a fear of adverse mar!et onditions in future $hi h may redu e the value of his 'ortfolio% +e an hedge against this ris! by shorting the inde# $hi h is orrelated $ith his 'ortfolio, say the :ifty >0 or the 9,E ,ense#% In ase the mar!ets fall, he $ould ma!e a 'rofit by sKuaring off his short :ifty >05 9,E ,ense# 'osition% *his 'rofit $ould om'ensate for the loss he suffers in his 'ortfolio as a result of the fall in the mar!ets% +edging an be done by using derivatives%

-h, is . r/ard " ntra"tin( !se.!l2 )or$ard ontra ting is very valuable in hedging and s'e ulation% *he lassi hedging a''li ation $ould be that of a $heat farmer for$ard "selling his harvest at a !no$n 'ri e in order to eliminate 'ri e ris!% 3onversely, a bread fa tory may $ant to buy bread for$ard in order to assist 'rodu tion 'lanning $ithout the ris! of 'ri e flu tuations% If a s'e ulator has information or analysis $hi h fore asts an u'turn in 'ri e, then he an go long on the for$ard mar!et instead of the ash mar!et% *he s'e ulator $ould go long on the for$ard, $ait for the 'ri e to rise, and then ta!e a reversing transa tion ma!ing a 'rofit% -hat are the %r &le1s . . r/ard

1ar+ets2 )or$ard mar!ets $orld$ide are affli ted by several 'roblemsL (a) la ! of entralisation of trading, (b) illiKuidity, and (c) ounter'arty ris!% *he for$ard mar!et is li!e the real estate mar!et in that any t$o 'ersons an form ontra ts against ea h other% *his often ma!es them design terms of the deal $hi h are very onvenient in that s'e ifi situation for the s'e ifi 'arties, but ma!es the ontra ts non"tradeable if more 'arti i'ants are involved% 4lso the W'hone mar!etW here is unli!e the entralisation of 'ri e dis overy that is obtained on an e# hange, resulting in an illiKuid mar!et 'la e for for$ard mar!ets% 3ounter'arty ris! in for$ard mar!ets is a sim'le ideaL $hen one of the t$o sides of the -hat is a . r/ard " ntra"t2 In a for$ard ontra t, t$o 'arties agree to do a trade at some future date, at a stated 'ri e and Kuantity% :o money hanges hands at the time the deal is signed% transa tion hooses to de lare ban!ru't y, the other suffers% )or$ard mar!ets have one basi issueL the larger the time 'eriod over $hi h the for$ard ontra t is o'en, the larger are the 'otential 'ri e movements, and hen e the larger is the ounter" 'arty ris!% Derivatives allo$ transferring the ris! asso iated $ith the underlying asset from one 'arty to another% )or e#am'le, a $heat farmer and a miller ould sign a futures ontra t to e# hange a s'e ified amount of ash for a s'e ified amount of $heat in the future% 9oth 'arties have redu ed a future ris!L for the $heat farmer, the un ertainty of the 'ri e, and for the miller, the availability of $heat% +o$ever, there is still the ris! that no $heat $ill be available be ause of events uns'e ified by the ontra t, li!e the alled a $eather, or that one 'arty $ill renege on the ontra t% 4lthough a third 'arty, derivatives are insured against ris!% learing house, insures a futures ontra t, not all ounter'arty

11>

a stated 'ri e% *he buyer5holder of the o'tion, Even $hen for$ard mar!ets trade standardi(ed ontra ts, and hen e avoid the 'roblem of illiKuidity, the ounter'arty ris! remains a very real 'roblem% -hat is a #!t!res C ntra"t2 4 futures ontra t is a legally binding agreement bet$een t$o 'arties to buy or sell an asset at a ertain time in the future at a )uture ertain 'ri e% ontra ts are organi(ed5standardi(ed Under ,e urities 3ontra ts 7Regulations8 4 t, 1A>? Go'tion in se uritiesH means a ontra t for the 'ur hase or sale of a right to buy or sell, or a right to buy and sell, se urities in future, and in ludes a teFi, a mandi, a teFi mandi, a galli, a 'ut, a all or a 'ut and all in se urities% <'tions are of t$o ty'es " 3all and Put o'tionsL W3allsW give the buyer the right but not the -hat is the di..eren"e &et/een .!t!res and . r/ard " ntra"ts2 )utures mar!ets $ere designed to solve all the three 'roblems of for$ard mar!ets% )utures mar!ets are e#a tly li!e for$ard mar!ets in terms of basi e onomi s% +o$ever, ontra ts are standardised and trading is entrali(ed 7on a sto ! e# hange8% *here is no ounter'arty ris! 7than!s to the institution of a learing )urther, <'tions are they lassified based on $hen an be e#er ised% *he t$o most 'o'ular ontra ts that an be or'oration $hi h be omes ounter'arty to both sides of ea h transa tion and guarantees the trade8% In futures mar!ets, unli!e in for$ard mar!ets, in reasing the time to e#'iration does not in rease the for$ard mar!ets% -hat is an O%ti n " ntra"t2 <'tion ontra t is a ty'e of derivatives ontra t $hi h gives the right, but not an obligation, to buy or sell the underlying at a stated date and at ounter 'arty ris!% )utures mar!ets are highly liKuid as om'ared to the WPutsW give the buyer the right, but not the obligation to sell a given Kuantity of underlying asset at a given 'ri e on or before a given future date% obligation to buy a given Kuantity of the underlying asset, at a given 'ri e on or before a given future date% 'ur hases the right from the seller5$riter for a onsideration $hi h is alled the 'remium% /hile a buyer5holder of an o'tion 'ays the 'remium and buys the right to e#er ise his o'tion, the seller5$riter of an o'tion is the one $ho re eives the o'tion 'remium and is therefore obliged to sell5buy the asset if the buyer e#er ises it on him% *he underlying asset ould in lude se urities, an inde# of 'ri es of se urities et %

ontra ts in terms of Kuantity, Kuality 7in ase of ommodities8, delivery time and 'la e for settlement on any date in future% *he ontra t e#'ires on a 're"s'e ified date $hi h is alled the e#'iry date of the futures underlying asset or ontra t% <n e#'iry, an be settled by delivery of the ash% 3ash settlement

enables the settlements of obligations arising out of the future5o'tion ontra t in ash%

ty'es are Euro'ean or 4meri an% 4meri an o'tions are o'tions e#er ised at any time u'to the e#'iration date% *his reKuest for e#er ise is submitted to the e# hange, $hi h randomly assigns the e#er ise reKuest to the sellers of the o'tions, $ho are obligated to settle the terms of the ontra t $ithin a s'e ified time frame% Euro'ean o'tions are o'tions that an be e#er ised only on the e#'iration date% *he 'ri e at $hi h the o'tion is 11?

to be e#er ised is alled ,tri!e 'ri e or E#er ise 'ri e% 4s in the ase of futures ontra ts, o'tion ontra ts an also be settled by delivery of the underlying asset or ash% +o$ever, unli!e futures, ash settlement in an o'tion ontra t entails 'aying5re eiving the differen e bet$een the stri!e 'ri e5e#er ise 'ri e and the s'ot 'ri e of the underlying asset either at the time of e#'iry of the ontra t or at the time of e#er ise5 assignment of the o'tion ontra t% -hat is the " n"e%t the 1 ne, and O!t res%e"t . O%ti ns2 In: the: 1 ne, 'ositive %ti ns FITMG " 4n in"the" money o'tion is an o'tion that $ould lead to ash flo$ to the holder if it $ere e#er ised immediately% 4 3all o'tion is said to be in"the"money $hen the urrent 'ri e stands at a level higher than the stri!e 'ri e% If the ,'ot 'ri e is mu h higher than the stri!e 'ri e, a 3all is said to be dee' in"the"money o'tion% In the ase of a Put, the 'ut is in"the"money if the ,'ot 'ri e is belo$ the stri!e 'ri e% At:the:1 ne,: %ti n FATMG " 4n at"the money o'tion is an o'tion that $ould lead to (ero ash flo$ if it $ere e#er ised immediately% 4n o'tion on the inde# is said to be Wat"the" moneyW $hen the urrent 'ri e eKuals the stri!e 'ri e% O!t: .:the:1 ne,: %ti n FOTMG " 4n out" of" the"money <'tion is an o'tion that $ould lead to negative ash flo$ if it $ere e#er ised immediately% 4 3all o'tion is out"of"the"money $hen the urrent 'ri e stands at a level $hi h is less than the stri!e 'ri e% If the urrent 'ri e is mu h lo$er than the stri!e 'ri e the all is said to be dee' out"of"the money% In ase of a Put, . In the 1 ne,3 At . the 1 ne, in

the Put is said to be out"of"money if urrent 'ri e is above the stri!e 'ri e% -hat are IndeA #!t!res and IndeA O%ti n C ntra"ts2 )utures ontra t based on an inde# i%e% the underlying asset is the inde#, are !no$n as Inde# )utures 3ontra ts% )or e#am'le, futures ontra ts on :I)*D Inde# and 9,E".0 Inde#% *hese ontra ts derive their value from the value of the underlying inde#% ,imilarly, o'tion ontra ts, $hi h are based on some inde#, are !no$n as Inde# <'tions 3ontra ts% +o$ever, unli!e Inde# )utures, the buyer of Inde# <'tion 3ontra ts has only the right but not the obligation to buy 5 sell the underlying inde# on e#'iry% Inde# <'tion 3ontra ts are generally Euro'ean ,tyle o'tions% 4n inde# in turn derives its value from the 'ri es of se urities that onstitute the inde# and is reated to re'resent the sentiments of the mar!et as a $hole or of a 'arti ular se tor of the e onomy% Indi es that re'resent the $hole mar!et are broad based indi es and those that re'resent a 'arti ular se tor are se toral indi es% In the beginning, futures and o'tions $ere 'ermitted only on ,CP :ifty and 9,E ,ense#% ,ubseKuently, fulfilling the se toral eligibility indi es riteria% $ere also 'ermitted for derivatives trading subFe t to Derivative ontra ts may be 'ermitted on an inde# if @0- of the inde# onstituents are individually eligible for derivatives trading% +o$ever, no single ineligible sto ! in the inde# should have a $eightage of more than >- in the inde#% *he inde# is reKuired to fulfill the eligibility riteria even after derivatives1 trading on the inde# has begun% If the inde# does not fulfill the riteria for . onse utive

11E

months, then derivative ontra ts on su h inde# $ould be dis ontinued% 9y its very nature, an inde# annot be delivered on maturity of the Inde# futures or Inde# o'tion ontra ts% *herefore, these ontra ts are essentially ash settled on E#'iry% -hat are the &ene.its . tradin( in IndeA #!t!res " 1%ared t an, ther se"!rit,2 4n investor an trade the Qentire sto ! mar!etQ by buying inde# futures instead of buying individual se urities $ith the effi ien y of a mutual fund% *he advantages of trading in Inde# )utures areL *he ontra ts are highly liKuid Inde# )utures 'rovide higher leverage than any other sto !s It reKuires lo$ initial a'ital reKuirement It has lo$er ris! than buying and holding sto !s It is Fust as easy to trade the short side as the long side <nly have to study one inde# instead of 100s of sto !s -hat is the str!"t!re . Derivative

-hi"h derivative " ntra"ts are %er1itted &, SE$I2 Derivative 'rodu ts have been introdu ed in a 'hased manner starting $ith Inde# )utures 3ontra ts in June 2000% Inde# <'tions and ,to ! <'tions $ere introdu ed in June 2001 and July 2001 follo$ed by ,to ! )utures in :ovember 2001% ,e toral indi es $ere 'ermitted for derivatives trading in De ember 2002% Interest Rate )utures on a notional bond and *"bill 'ri ed off Vero 3ou'on Dield 3urve 7V3D38 have been introdu ed in June 200. and e# hange traded interest rate futures on a notional bond 'ri ed off a bas!et of 2overnment ,e urities $ere 'ermitted for trading in January 200B% -hat is the eli(i&ilit, "riteria . r st "+s n /hi"h derivatives tradin( 1a, &e %er1itted2 4 sto ! on $hi h a sto ! o'tion and a single sto ! future ontra t are 'ro'osed to be introdu ed is reKuired to fulfill the follo$ing broad eligibility riteriaL"

*he sto ! shall be hosen from amongst the to' >00 sto !s in terms of average daily mar!et a'itali(ation and average daily traded value in the 'revious si# months on a rolling basis%

Mar+ets in India2 Derivative trading in India an ta!e 'la e either on a se'arate and inde'endent Derivative E# hange or on a se'arate segment of an e#isting ,to ! E# hange% fun tions *he as Derivative a ,elf" C E# hange5,egment the oversight

*he sto !1s median Kuarter"sigma order si(e over the last si# months shall be not less than Rs%1 la!h% 4 sto !1s Kuarter"sigma order si(e is the mean order si(e 7in value terms8 reKuired to ause a hange in the sto ! 'ri e eKual to one"Kuarter of a standard deviation%

Regulatory <rgani(ation 7,R<8 and ,E9I a ts as regulator% learing settlement of all trades on the Derivative E# hange5,egment $ould have to be through a 3learing 3or'oration5+ouse, $hi h is inde'endent in governan e and membershi' from the Derivative E# hange5,egment%

*he mar!et $ide 'osition limit in the sto ! shall not be less than Rs%>0 rore%

4 sto ! an be in luded for derivatives trading as soon as it be omes eligible% +o$ever, if the sto ! does not fulfill the eligibility riteria for . 11@

onse utive months after being admitted to derivatives trading, then derivative ontra ts on su h a sto ! $ould be dis ontinued% -hat 1eas!res have &een s%e"i.ied &, SE$I t %r te"t the ri(hts . invest r in

suffered by the investor, if any, on settled5 losed out 'osition are om'ensated from the Investor Prote tion )und, as 'er the rules, bye"la$s and regulations of the derivative segment of the e# hanges%

*he E# hanges are reKuired to set u' arbitration and investor grievan es redressal me hanism o'erative from all the four areas5 regions of the ountry%

the Derivatives Mar+et2 *he measures s'e ified by ,E9I in ludeL

Investor1s money has to be !e't se'arate at all levels and is 'ermitted to be used only against the liability of the investor and is not available to the trading member or learing member or even any other *he *rading Member is investor%

-hat is 1ini1!1 " ntra"t siCe2 ,E9I has s'e ified that the value of a derivative ontra t should not be less than Rs% 2 la!h at the time of introdu ing the ontra t in the mar!et% -hat is a 1ini derivative " ntra"t2 *he minimum ontra t si(e for the mini derivative ontra t on Inde# 7,ense# and :ifty8 is Rs% 1 la!h at the time of its introdu tion in the mar!et% *he lo$er minimum ontra t si(e means that smaller investors are able to hedge their 'ortfolio using these ontra ts $ith a lo$er a'ital outlay% *his means a better hedge for 'ortfolio and also results in more liKuidity in the mar!et% -h, l n(er dated indeA %ti ns2 &onger dated derivatives 'rodu ts are useful for those investors $ho $ant to have a long term hedge or long term e#'osure in derivative mar!et% *he 'remiums for longer term derivatives 'rodu ts are higher than for standard o'tions in the same sto ! be ause the in reased e#'iration date gives the underlying asset more time to ma!e a substantial move and for the investor to ma!e a healthy 'rofit% Presently, longer dated o'tions on ,ense# and :ifty $ith tenure of u'to . years are available for the investors% -hat is the EA%irati n Da,2

reKuired to 'rovide every investor $ith a ris! dis losure do ument $hi h $ill dis lose the ris!s asso iated $ith derivatives trading so that investors an ta!e a ons ious de ision to trade in derivatives%

*he investor $ould get the ontra t note duly time stam'ed for re ei't of the order and e#e ution of the order% *he order $ill be e#e uted $ith the identity of the lient% /ithout lient ID, the order $ill not be a e'ted by the system% *he investor ould also demand the trade onfirmation sli' $ith his ID in su''ort of the ontra t note% *his $ill 'rote t him from the ris! of 'ri e favour, if any, e#tended by the member%

monies $ith the

In the derivative mar!ets, all 'aid the trading by the investor to$ards margins on all o'en 'ositions is !e't in trust 3learing or learing +ouse53learing member, the 3or'oration and in the event of default of amounts 'aid by the lient to$ards margins are segregated and not utili(ed to$ards the default of the member% +o$ever, in the event of a default by a member, losses

11A

It is the last day on $hi h the ontra ts e#'ire% )utures and <'tions ontra ts e#'ire on the last *hursday of the e#'iry month% If the last *hursday is a trading holiday, the January 200@ .1,200@% -hat is the l t siCe . " ntra"t in the ontra ts e#'ire on the 'revious trading day% )or E%g% *he ontra ts mature on January

ontra ts having maturity of 4'ril 2B,200@ $ould be introdu ed for trading%

-hat are C!rren", #!t!res2 3urren y futures are ontra ts to buy or sell a s'e ifi underlying urren y at a s'e ifi time in the future, for a s'e ifi 'ri e% 3urren y futures are e# hange"traded and ontra t terms% 3urren y future ontra ts allo$ investors to hedge against foreign e# hange ris!% ,in e these ontra ts are mar!ed"to mar!et daily, investors anSby losing out their 'ositionSe#it from their obligation to buy or sell the urren y 'rior to the ontra t1s delivery date% 3urren y )utures have been further e#'lained in detail in 3ha'ter 22% Interest Rate #!t!res Interest rate futures are derivative ontra ts $hi h have an interest bearing 2<I se urity as the underlying instrument% *he buyer of an Interest Rate )utures ontra t agrees to ta!e ontra ts and they are

eH!it, derivatives 1ar+et2 &ot si(e refers to number of underlying se urities in one ontra t% *he lot si(e is determined !ee'ing in mind the minimum ontra t si(e reKuirement at the time of introdu tion of derivative ontra ts on a 'arti ular underlying% )or e#am'le, if shares of IDV &td are Kuoted at Rs%1000 ea h and the minimum ontra t si(e is Rs%2 la!h, then the lot si(e for that 'arti ular s ri's stands to be 20000051000 \ 200 shares i%e% one ontra t in IDV &td% overs 200 shares% -hat is the " ntra"t ","le . r EH!it, &ased %r d!"ts2 )utures and <'tions ontra ts have a ma#imum of ."month trading y le "the near month 7one8, the ne#t month 7t$o8 and the far month 7three8, e# e't for the &ong dated <'tions ontra ts% :e$ ontra ts are introdu ed on the trading day follo$ing the e#'iry of the near month ontra ts% *he ne$ ontra ts are introdu ed for a three month duration% *his $ay, at any 'oint in time, there $ill be . ontra ts available for trading in the mar!et 7for ea h se urity8 i%e%, one near month, one mid month and one far month duration res'e tively% )or e#am'le on January 2?,200@ there $ould be three month ontra ts i%e% 3ontra ts e#'iring on January .1,200@, )ebruary 2@, 200@ and Mar h 2E, 200@% <n e#'iration date i%e January .1,200@, ne$

standardi(ed in terms of delivery date, amount

delivery of the underlying bonds $hen the ontra t e#'ires, and the ontra t seller agrees to deliver the debt instrument% Most ontra ts are not settled by delivery, but instead are traded out before e#'iration% *he value of the ontra t rises and falls inversely to hanges in interest rates% )or e#am'le, if 2ovt% bond yields rise, 'ri es of 2ovt% bonds fall and hen e futures ontra ts on 2ovt% bonds also fall in 'ri e% 3onverse also holds true% Interest Rate )utures have been further e#'lained in detail in 3ha'ter 2.%

120

$EGIN DERIVATIVES TRADING6 IUESTIONS E ANS-ERS

,our eL :,E H / d 1ar+et2 )utures5 <'tions ontra ts in both inde# as $ell as sto !s an be bought and sold through the trading members% ,ome of the trading members also 'rovide the internet fa ility to trade in the futures and o'tions mar!et% Dou are reKuired to o'en an a ount $ith one of the trading members and om'lete the related formalities $hi h in lude signing of member" onstituent agreement, 6no$ Dour 3lient 76D38 form and ris! dis losure do ument% *he trading member $ill allot to you a uniKue lient identifi ation number% *o begin trading, you must de'osit ash and5or other ollaterals $ith your trading member as may be sti'ulated by him% Is there an, 1ar(in %a,a&le2 Des% Margins are om'uted and olle ted on" line, real time on a 'ortfolio basis at the lient level% Members are reKuired to margin u'front from the same to the E# hange% H / are the " ntra"ts settled2 4ll the )utures and <'tions ontra ts are settled in ash on a daily basis and at the e#'iry or e#er ise of the res'e tive ontra ts as the ase may be% 3lients5*rading Members are not reKuired to hold any sto ! of the underlying for dealing in the )utures 5 <'tions mar!et% 4ll out of the money and at the money o'tion ontra ts of the near month maturity e#'ire $orthless on the e#'iration date% /.ample) 3urrent :ifty is .@@0% Dou buy one ontra t 7lot si(e >08 of :ifty near month alls for Rs%20 ea h% *he stri!e 'ri e is .A00% *he 'remium 'aid by you L 7Rs%20 ] >08\ Rs%1000% 2iven these, your brea!"even :ifty level is .A20 7.A00Y208% If at e#'iration, :ifty advan es to .AEB, thenL olle t the EAa1%le C) Ass!1%ti n6 4n investor feels the mar!et $ill rise over the short term% Possible 4 tion by youL 9uy :ifty alls lient C re'ort the EAa1%le $) <n 01 Mar h an investor feels the mar!et $ill fall " ,ells 1 ontra t of Mar h 493 &td% )utures at Rs% 2?0 7mar!et lotL .008 0A Mar h 493 &td% )utures 'ri e has fallen to Rs% 2B0 ,Kuares off the 'osition at Rs% 2B0 Ma!es a 'rofit of Rs%?000 7.00]208 " " Have a vie/ n the 1ar+et2 EAa1%le A) <n 01 Mar h an investor feels the mar!et $ill rise " 9uys 1 ontra t of Mar h 493 &td% )utures at Rs% 2?0 7mar!et lotL .008 0A Mar h 493 &td% )utures 'ri e has risen to Rs% 2@0 ,ellsoff the 'osition at Rs% 2@0% Ma!es a 'rofit of Rs%?000 7.00]208 I start tradin( in the derivatives #E- $ASIC STRATEGIES

121

:ifty e#'iration level &ess ,tri!e Pri e <'tion value &ess Pur hase 'ri e Profit 'er :ifty Profit on the ontra t 0ote) 1)

.AEB .A00 EB%007.AEB".A008 20%00 >B%00 Rs% 2,E00 7Rs% >B] >08

*G

If :ifty is at or above the stri!e 'ri e .@B0 at e#'iration, the 'ut holder $ould not find it 'rofitable to e#er ise the o'tion and $ould lose the 'remium i%e% Rs%@>0% If at e#'iration, :ifty is bet$een .@B0 7the stri!e 'ri e8 and .@2. 7brea!even8, the holder ould e#er ise the 'uts and re eive the amount by $hi h the stri!e 'ri e e# eeds the inde# level% *his $ould offset some of the ost 7'remium8%

If :ifty is at or belo$ .A00 at e#'iration, the all holder $ould not find it 'rofitable to e#er ise the o'tion and $ould lose the 'remium i%e% Rs%1000% If at e#'iration, :ifty is bet$een .A00 7the stri!e 'ri e8 and .A20 7brea!even8, the holder ould e#er ise the alls and re eive the amount by $hi h the inde# level e# eeds the stri!e 'ri e% *his $ould offset some of the ost 7'remium8% .8

*he holder, de'ending on the mar!et ondition and his 'er e'tion, may sell the 'ut even before e#'iry%

EAa1%le E) Use P!t as a % rt. li hed(e2 Ass!1%ti n6 Dou are on erned about a do$nturn in the short term in the mar!et and its effe t on your 'ortfolio% *he 'ortfolio has 'erformed $ell and you e#'e t it to ontinue to a''re iate over the long term but $ould li!e to 'rote t e#isting 'rofits or 'revent further losses% Possible 4 tion by youL 9uy :ifty 'uts% /.ample) Dou hold a 'ortfolio of >000 shares of 493 &td% &td% valued at Rs% 10 &a!hs 7J Rs%200 ea h share8% 9eta of 493 &td% is 1% 3urrent :ifty is at B2>0% Dou $ish to 'rote t your 'ortfolio from a dro' of more than 10- in value 7i%e% Rs% A,00,0008% :ifty near month 'uts of stri!e 'ri e .@2> 710- a$ay from B2>0 inde# value8 is trading at Rs% 2% *o hedge, you buy > 'uts i%e% 2>0 :ifties, eKuivalent to Rs%10 la!hs]1 79eta of 493 &td8 5B2>0 or Rs% 11.00005B2>0% *he 'remium 'aid by you is Rs%>00 7i%e%2>0]28% If at e#'iration, :ifty de lines to .>00, and 493 &td% falls to Rs% 1?B%E0, then

2)

*he holder, de'ending on the mar!et ondition and his 'er e'tion, may sell the all even before e#'iry%

EAa1%le D) Ass!1%ti n6 4n investor feels the mar!et $ill fall over the short term Possible 4 tion by youL 9uy :ifty 'uts /.ample) 3urrent :ifty is .@@0% Dou buy one ontra t 7lot si(e >08 of :ifty near month 'uts for Rs%1E ea h% *he stri!e 'ri e is .@B0% *he 'remium 'aid by you $ill be Rs%@>0 71E]>08% 2iven these, your brea!"even :ifty level is .@2. 7i%e% stri!e 'ri e less the 'remium8% If at e#'iration, :ifty de lines to .E@?, thenL Put ,tri!e Pri e :ifty e#'iration level <'tion value &ess Pur hase 'ri e Profit 'er :ifty Profit on the ontra t 0ote) .@B0 .E@? >B 7.@B0".E@?8 1E .E Rs%1@>07Rs%.E]>08

Put ,tri!e Pri e :ifty e#'iration level

.@2> .>00 122

<'tion value 7'er :ifty8 Profit 'er :ifty

.2> 7.@2>".>008 .2.

4n investor buys 100 :ifty all o'tions at a stri!e 'ri e of Rs% B000 on June 1>% :ifty inde# is at B0>0% Premium 'aid \ Rs% 10,000 7JRs% 100 'er all I 100 alls8% E#'iry date of the ontra t is June 2?%

&ess Pur hase 'ri e 7'er :ifty8 2 Profit on the ontra t Rs%@0,E>0 7Rs%.2.] 2>08 493 &td% shares value Rs%@,2.,>00 Profit on the :ifty 'ut ontra ts *otal value Rs%A,0B,2>0 Rs%@0,E>0

<n June 2?, :ifty inde# loses at .A00% *he all $ill e#'ire $orthless and the investor losses the entire Rs% 10,000 'aid as 'remium% EAa1%le ;)

Rs% A,0B,2>0 is a''ro#% 10- lo$er than the original value of the 'ortfolio% /ithout hedging and using 'uts, the investor $ould have lost more than 10- of the value% Ris+s ass "iated /ith tradin( in

4n investor buys 100 493 &td% 'ut o'tions at a stri!e 'ri e of Rs% B00 on June 1>% 493 &td% share 'ri e is at .@0% Premium 'aid \ Rs% >,000 7JRs% >0 'er 'ut I 100 alls8% E#'iry date of the ontra t is June 2? <n June 2?, 493 &td% shares lose at Rs% B10%

Derivatives: S 1e EAa1%les EAa1%le *) 4n investor 'ur hased 100 :ifty )utures J Rs% B200 on June 10% E#'iry date is June 2?% *otal Investment L Rs% B,20,000% Initial Margin 'aid L Rs% B2,000 <n June 2?, su''ose, :ifty inde# .,@00% &oss to the investor 7B200 " .E@08 I 100 \ Rs% B2,000 *he entire initial investment 7i%e% Rs% B2,0008 is lost by the investor% EAa1%le 0) 4n investor 'ur hased 100 493 &td% )utures J Rs% 2>00 on June 10% E#'iry date is June 2?% *otal Investment L Rs% 2,>0,000% Initial Margin 'aid L Rs% .E,>00 <n June 2?, su''ose, 493 &td% shares lose at Rs% 2000% &oss to the investor 72>00 " 20008 I 100 \ Rs% >0,000 EAa1%le 9) loses at

12.

*he 'ut $ill e#'ire $orthless and the investor losses the entire Rs% >,000 'aid

12B

Cha%ter 00

CURRENC7 DERIVATIVES
*he Reserve 9an! of India in its 4nnual Poli y ,tatement for the Dear 200E"0@ 'ro'osed to set u' a /or!ing 2rou' on 3urren y )utures to study the international e#'erien e and suggest a suitable frame$or! to o'erationalise the 'ro'osal, in line $ith the urrent legal and E# hange Management 4 t, 1AAA as Q4D 3ategory "I ban!Q are 'ermitted to be ome trading and learing members of the urren y futures mar!et of the re ogni(ed sto ! e# hanges, on their o$n a ount and on behalf of their lients, subFe t to fulfilling ertain minimum 'rudential reKuirements 'ertaining to net $orth, non" 'erforming assets et % :,E $as the first e# hange to have re eived an in"'rin i'le a''roval from ,E9I for setting u' urren y derivative segment% :ational ,to ! E# hange $as the first e# hange to laun h 3urren y futures trading in India on 4ugust 2A, 200@ $ith the laun h of urren y futures trading in U, Dollar"India Ru'ee 7U,D"I:R8% M3I",I also ommen ed o'erations soon thereafter% Moreover, United ,to ! E# hange, a Foint venture 'romoted by 9,E, is e#'e ted to laun h the urren y futures segment very soon% Per1itted C!rren"ies 3urren y futures are urrently available in U, Dollars, 9ritish Pounds, Euro and Ja'anese Den% *he Regulatory frame$or! for urren y futures trading in the ountry, as laid do$n by the Tradin( Me"hanis1 *he 3urren y Derivatives trading system 'rovides a fully automated s reen"based trading for urren y futures on a nation$ide basis as $ell as an online monitoring and surveillan e me hanism% *he system su''orts an order driven mar!et, *he membershi' of the urren y futures mar!et of a re ognised sto ! e# hange has been mandated to be se'arate from the membershi' of the eKuity derivative segment or the ash segment% 9an!s authori(ed by the Reserve 9an! of India under se tion 10 of the )oreign $herein orders mat h automati ally% <rder mat hing is essentially on the basis of se urity, its 'ri e and time% 4ll Kuantity fields are in ontra ts and 'ri e in Indian ru'ees% *he e# hange notifies the ontra t si(e and ti ! si(e for ea h of the ontra ts traded on this segment from time to 12> regulators, 'rovide that 'ersons resident in India are 'ermitted to 'arti i'ate in the urren y futures mar!et in India subFe t to dire tions ontained in the 3urren y )utures 7Reserve 9an!8 Dire tions, 200@, $hi h have ome into for e $ith effe t from 4ugust ?, 200@%

regulatory frame$or!% *his 2rou' submitted its re'ort in 4'ril, 200@% )ollo$ing this, R9I and ,e urities and E# hange 9oard of India 7,E9I8 Fointly onstituted a ,tanding *e hni al 3ommittee to inter"alia evolve norms and oversee im'lementation of E# hange *raded 3urren y Derivatives% *he 3ommittee submitted its re'ort on May 2A, 200@% *his re'ort laid do$n the frame$or! for the laun h of E# hange *raded 3urren y )utures in terms of the eligibility norms for e#isting and ne$ E# hanges and their 3learing riteria for 3or'orations5+ouses, members of su h 3or'orations5+ouses, and other related eligibility

E# hanges53learing surveillan e issues% me hanism

'rodu t design, ris! management measures,

time% /hen any order enters the trading system, it is an a tive order% It tries to find a mat h on the o''osite side of the boo!% If it finds a mat h, a trade is generated% If it does not find a mat h, the order be omes 'assive and sits in the res'e tive order boo! in the system% C ntra"t S%e"i.i"ati ns . r C!rren", #!t!res 3urren y Derivatives ontra ts are traded having near 12 alendar month e#'iry y les% 4ll

ontra ts e#'ire t$o $or!ing days 'rior to the last $or!ing day of every alendar month 7subFe t to holiday alendars8% *his is also the last trading day for the e#'iring ontra t% *he ontra t $ould ease to trade at 12L00 noon on the last trading day% 4 ne$ $ould be ontra t $ith 12th month e#'iry introdu ed immediately ensuring

availability of 12 monthly ontra ts for trading at any 'oint%

12?

Cha%ter 09

INTEREST RATE #UTURES

*he finan ial se tor, or'orate and even onseKuently the futures 'ri es fall and vi e versa% *he rationale is that as interest rates in rease, the o''ortunity ost of holding bond de reases, sin e investors are able to reali(e greater yields by buying other investments that have higher interest rates% )utures 'ri es mirror these rise and falls of the underlying bond 'ri es% Overvie/ . Interest Rate #!t!res Interest rate ris! an be minimi(ed through the use of interest rate futures% 4n interest rate futures ontra t is Wan agreement to buy or sell a debt instrument at a s'e ified future date at a 'ri e that is fi#ed today%W Interest rate futures are derivative ontra ts $hi h have an notional interest bearing se urity as the underlying instrument% *he buyer of an interest rate futures ontra t agrees to ta!e delivery of the underlying debt instruments $hen the ontra t e#'ires and the seller of interest rate futures agrees to deliver the debt instrument% *he value of interest rate futures ontra ts rise and fall inversely to hanges in interest rates% 4s interest rates rise, bond 'ri es fall and Interest rate futures are derivative ontra ts $hi h have an interest bearing 2<I se urity as the underlying instrument% *he buyer of an Interest Rate )utures ontra t agrees to ta!e delivery of the underlying bonds $hen the ontra t e#'ires, and the ontra t seller agrees to deliver the debt instrument% Most ontra ts are not settled by delivery, but instead are traded out before e#'iration% *he value of the inversely to ontra t rises and falls hanges in interest rates% )or households are affe ted by interest rate ris!% Interest rate flu tuations im'a t 'ortfolios of ban!s, insuran e om'anies, 'rimary dealers, 'rovident funds et % +ouseholds $ith loans to 'ay off are affe ted by a rise in rates% Interest rates are lin!ed to a variety of e onomi onditions% *hey an hange ra'idly, im'a ting investments and debt bligations%

e#am'le, if 2ovt% bond yields rise, 'ri es of 2ovt% bonds fall and hen e futures ontra ts on 2ovt% bonds also fall in 'ri e% 3onverse also holds true%

Interest Rate #!t!res at NSE Parti"!lars ,ymbol Mar!et *y'e Instrument *y'e Underlying :otional 3ou'on *i ! si(e *rading +ours 3ontra t ,i(e Des"ri%ti n 10D2,E : )U*IRD 10 Dear :otional 3ou'on"bearing 2overnment of India 72<I8 se urity E- $ith semi"annual 3om'ounding 0%2>'aise orI:R 0%002> AL00 am to >L00 'm 7Monday to )riday8 I:R 2 la!hs

12E

Puotation

,imilar to Kuoted 'ri e of 2<I se urities u' to four de imals $ith .05.?0 day ount onvention%

*enor 3ontra t 3y le

Ma#imum MaturityL 12 months )our )i#ed Kuarterly ontra ts ontra ts for entire year ending Mar h, June, ,e'tember C De ember% *o start $ith :,E has introdu ed t$o Kuarterly

Daily ,ettlement Pri e

;olume /eighted average 'ri e of the ontra t during the time 'eriod s'e ified by the E# hange% If not traded in s'e ified timings then the theoreti al 'ri e of the ontra t as determined by the e# hange $ill be the daily settlement 'ri e

,ettlement Me hanism

^ Daily ,ettlement " Mar!ed to mar!et daily ^ )inal ,ettlement " Physi al settlement on delivery day in the delivery month i%e% last $or!ing day of the month

Deliverable 2rade ,e urities

^ 2<I ,e urities maturing at least @ years but not more than 10%> years from first day of the delivery month $ith a minimum total outstanding of Rs 10,000 rores% *he list of the deliverable grade se urities $ill be informed by the e# hange from time to time% ^ )urther any ne$ se urity $hi h meets the eligibility riteria as mentioned above shall be added to the list of deliverable grade se urities% +o$ever, additions, if any, shall be made not later than 10 business days before the first business day of the delivery month

3onversion )a tor Invoi e Pri e &ast *rading Day Delivery Day Initial Margin

*he onversion fa tor $ould eKuate the deliverable se urity 7'er ru'ee of 'rin i'al8, to yield E- $ith semiannual om'ounding% )utures settlement 'ri e times onversion fa tor 'lus a rued Interest *$o business day 're eding the last business day of the delivery month% &ast business day of the delivery month% ,P4: _ 9ased Margin subFe t to minimum 2%..- on first day and 1%?subseKuently%

E#treme loss Margin

0%.- of the value of the gross o'en 'ositions of the futures ontra ts

Ph,si"al Settle1ent Me"hanis1 *he Interest Rate )utures ontra ts at :,E $ould be 'hysi ally settled by the delivery of deliverable grade se urities% Physi al delivery $ill be through ele troni boo! entry system of :,D&, 3D,& and ,2&53,2& ,ettlement through R9IPD<

,ettlement y leL *Y2 delivery $ith sellerQs intention to deliver t$o business days 'rior to a tual delivery date%

C nversi n #a"t r S,ste1 *he invoi e value of futures must be adFusted to refle t the s'e ifi 'ri ing hara teristi s of the se urity that is tendered% 4 ordingly, bond futures utili(e a W onversion fa torW to refle t the value of the se urity that is

12@

tendered by referen e to the E- futures ontra t standard% 3onversion fa tors for all the deliverable se urities $ould be !no$n on the first trading day of ea h futures ontra t% ,ay for e#am'le, follo$ing are the onversion fa tors for deliverable se urities for a E- 10D 2<I se urity future ontra tL Se"!rit, ?%A0- 2<I201A ?%.>- 2<I2020 E%AB- 2<I2021 10%2>- 2<I2021 @%20- 2<I 2022 Chea%est t Deliver *he short 'osition holder an hoose from the list of deliverable bonds, de'ending on $hi h of the available bonds is the hea'est to deliver% )or that $e need to al ulate the follo$ing for ea h of the deliverable bondL 3urrent Mar!et Pri e 4dFusted )utures Pri e C nversi n #a"t r 0%AA.1 0%A>B> 1%0E1. 1%2B?> 1%0ABA

borro$ed money% *he bond is held until it is delivered into the futures ontra t and the borro$ing is re'aid% A%%li"ati ns . Interest Rate #!t!res Retail 'arti i'ants an 'rimarily use futures for trading and hedging 'ur'oses as illustrated belo$% Dire tional *rading If one has a strong vie$ that interest rates $ill rise in the near future and $ants to benefit from rise in interest rates0 one an do so by ta!ing short 'osition in IR) ontra ts and benefit from the falling futures 'ri es% +edging loan against in rease in interest rates 7short hedge8 4 Individual e#'e ting the interest rates to go u' and thus, higher ash outflo$s in future, an hedge the ris! by going short in the interest rate futures ontra ts% ! 1 for !ndividuals having a +ome loan B ha,e ta)en a h#"e l#an #n fl#ating rate

*he bond $ith the lo$est basis $ould be the hea'est to deliver 73*D8 bond% 9asis is eKual to the differen e bet$een mar!et 'ri e of bond and adFusted futures 'ri e 7futures 'ri e multi'lied by onversion fa tor8% #inan"in( C st E I1%lied Re% Rate )inan ing ost is the ost of borro$ing for funding the long bond 'osition through re'o% Im'lied re'o rate is the rate of return that an be earned by simultaneously selling a bond futures ontra t and then buying an a tual bond in the ash mar!et using

#f interest1 I a" %#rried ab#ut rise in interest rates/ %hich shall increase the &MI #f "y h#"e l#an1 Can I pr#tect "yself against interest rate fluctuati#ns2 Des% /ith Interest rate futures, one an hedge against interest rate flu tuations% &et us understand the use of interest rate futures $ith the hel' of an e#am'le Case St!d, * : C nvert , !r .l atin( rate h 1e l an t .iAed rate h 1e l an 4tul has ta!en a home loan from a ban! on floating rate of interest and needs to hedge his interest rate ris!% If ban! in reases the floating 12A

rate it $ill affe t the ash outflo$ of 4tul due to in rease in monthly EMI% *herefore to manage his Interest rate ris! he may enter into IR) ontra t% *he ban! is harging floating interest rate of 79P&R Y 2-8 $hi h is urrently at E-% &oss on +ome &oan L an Details 4mount Rate of Interest *enure EMI In Rs%>0 &a!hs E10Dears7120Months8 Rs% >@,0>B 'er month :et 2ain 7.,.A,>00".,1.,0@08 \ Rs% 2?,B20 *rade date Interest Rate )utures Pri e Profit on )utures 02":ov"200A @Rs A.%21 7100" A.%218]2000]2> \Rs%.,.A,>00 7?0,??.">@,0>B8]120 Months \ Rs% .,1.,0@0

ase there is 100 basis 'oint in reases in *herefore, $e an see that 4tul has hedged his e#'osure of the home loan against Interest rate ris! by ta!ing the 'osition in IR)% @Rs% ?0,??. 'er month In the above e#am'le $e have seen that ho$ one an onvert his floating rate home loan to a fi#ed rate home loan% ,imilarly, one an onvert his fi#ed rate home loan to a floating rate home loan% ontra ts to &et us understand the same $ith the hel' of a ase study% Case st!d, 0: C nvert , !r .iAed rate h 1e l an t .l atin( rate h 1e l an Pradi' is having a home loan on a fi#ed rate of interest and may in ur a notional loss if Interest rates go do$n% +e $ants to onvert his fi#ed rate home loan to floating rate loan% L an Details 4mount Rate of Interest *enure EMI Rs%>0 &a!hs 1010Dears7120Months8 Rs% ??,0E>

9P&R, it shall lead to hange in floating rate from E- to @- $hi h $ill im'a t his EMI as belo$L Rate of Interest EMI

H / "an At!l hed(e his a& ve interest rate ris+2 4tul an sell interest rate future minimi(e the loss due to rising interest rates% Enterin( in t an IR# " ntra"t 4tul sells 2> ontra ts of IR) 72>]2000]1008 \ I:R >0 la!hs on .1st 4ug" 200A% *rade date Interest Rate )utures Pri e Margin Paid .1"4ug"200A ERs100 Rs 12>000 72%>-8

If on 02":ov"200A, the ban! has in reased the home loan interest rate to @- due to in rease of 9P&R, then futures 'ri e $ill fall to Rs A.%21% 4tul lose out his 'osition by buying 2> ontra ts and gain in futures mar!et%

Even if interest rates go do$n the EMI of Pradi' shall remain fi#ed% 9ut Pradi' $ill in ur notional loss due to fall in interest rate% 1.0

<n 2":ov"0A assuming the interest rate falls to If the ban! has redu ed the home loan interest rate to A- due to de rease of 9P&R then the notional loss on home loan $ill be Rs 2E.@ 'er month Rate of Interest Estimated EMI :otional &oss ARs% ?.,..E ??,0E>"?.,..E \ 7Rs%2E.@8 'er month &oss &oan *herefore, he an hedge this notional loss by ta!ing long 'osition in IR) Pradi' interest rate future an buy ontra ts to hedge his *herefore, Pradi' has a hieved his obFe tive of onverting his fi#ed rate home loan to a floating Enterin( in t an IR# " ntra"t Pradi' buys 2> ontra ts of IR) 72>]2000]1008 J I:R >0 la!hs on .1st 4ug 200A *rade date Interest Rate )utures Pri e Margin Paid .1"4ug"200A ERs100 Rs 12>000 72%>-8 *hough interest rate futures ontra t is a hedging tool, ho$ever there $ould not be a 'erfe t hedge as there may not be 'erfe t relation bet$een the interest rate on the home loan and the 10 yr interest rate% rate by ta!ing 'osition in IR) :et 2ain on ?- and the futures 'ri e is 10E%BB% *rade date Interest Rate )utures Pri e Profit on)utures 02":ov"200A ?10E%BB 710E%BB" 1008]2000]2>\Rs%.,E2, 000 +ome 7??,0E>"?.,..E8]120 Months \ Rs% .,2@,>?0 7.,E2,000".,2@,>?08 \ Rs% B.,BB0

interest rate ris! due to falling interest rate%

1.1

Cha%ter 0;

INVESTOR ASSOCIATIONS
It is often diffi ult for an investor to fight for his rights at an individual level% *his an also in lude settling of investor grievan es% It is ideal for an investor to be ome a member of at least one investor asso iation, $ho an ta!e u' auses on his behalf% Moreover, many of the investor asso iations regularly organi(e edu ation seminars for their members, in addition to *he list of investor asso iations5:2<s5voluntary agen ies registered $ith IEP) and ,E9I is given in &ist . at the end of this 2uide% organi(ing s'e ial tal!s by eminent e#'erts% Many of these efforts are su''orted by the Investor Edu ation C Prote tion )und, Ministry of 3or'orate 4ffairs and ,E9I%

1.2

Cha%ter 0<

INVESTOR GRIEVANCE REDRESSAL

*he a'ital mar!et an gro$ only $hen investors find it safe for them to invest and they are assured that the rules governing the mar!et are fair and Fust for all the 'layers% Moreover, there has to be an effe tive me hanism for resolutions of dis'utes and grievan es% *he follo$ing are the authorities5me hanisms for handling of investor grievan es% fa ility $hi h enables an investor to monitor the 'rogress of redressal%

Invest r Grievan"e handlin( !nder MCA0*

*here are three main ste'sL *) L d(in( . " 1%laint 4n investor first needs to log in to the M3421 'age of the Ministry1s *his $ebsite, $eb'age $$$%m a%gov%in5M34215%

MINISTR7 O# CORPORATE A##AIRS

<ne of the im'ortant a tivities relating to investor a$areness is the handling of investors1 grievan es% *he Ministry of 3or'orate 4ffairs 7M348, along $ith other redressal finan ial se tor regulators, needs to 'rovide an effi ient and effe tive grievan e frame$or! to address and resolve the grievan es s'eedily% M34 has a multi"level frame$or! for handling of the investor grievan es% 4t the first level, the investors an a''roa h any of the offi ers of the Registrar of 3om'anies, the Regional Dire tors as $ell as the +eadKuarters of M34 $ith their grievan es% 4s a standard 'ro ess, the om'anies% )or om'laints re eived by these authorities are ta!en u' $ith the res'e tive om'laints relating to areas not in the harter of M34, these are for$arded to the relevant regulator and the investors are also advised to a''roa h the on erned regulator% Investor a Kuired 2rievan e a +andling fo us C Redressal $ith the

'rovides an o'tion of lodging the om'laints under the lin! UInvestor 2rievan es1% *his lin! also 'rovides an o'tion for tra !ing the status of the om'laints% 9y li !ing on the lin! for U&odging

3om'laint1 an UInvestor 3om'laint )orm1 o'ens $hi h is reKuired to be filled in by the investor% 4n im'ortant field in the form relates to Unature of om'laint1 $hi h hel's in ategori(ing the om'laints% *he broad areas in $hi h the nature of om'laint has been divided into are as follo$sL a% b% % d% e% f% dire tor <ther om'laints of serious nature *he form also allo$s for 'rovision of atta hment of relevant 'a'ers5 do uments $hi h an investor may li!e to submit in su''ort of the om'laint% 4n investor should ensure that the form is 1.. ,hares or dividends Debentures or bonds )i#ed de'osits 7non"re ei't of amount8 Mis ellaneous non"re ei't :on"filing of return of essation of a

s'e ial

im'lementation of M3421 e"2overnan e 'ortal, $hi h has a dedi ated online fa ility for filing of grievan es online $ithout having to visit the R<3 offi e% It also has Uonline status tra !ing1

filled

fully

and it%

orre tly U'on

before

In ase the om'lainant is satisfied $ith the re'ly of the om'any and a !no$ledges the same to the R<3 offi e, the treated as losed and the om'laint is om'any is

submitting

su essful

submission, the system generates a uniKue U,ervi e ReKuest :umber1 7,R:8 $hi h fa ilitates subseKuent tra !ing of the om'laint% 0) Pr "essin( . " 1%laint <n e a om'laint is su essfully submitted and ,R: is generated, the e" om'laint is dire ted to the ba ! offi e 'ortal of the on erned R<3 offi e% $ho 'ro esses the om'laint through orres'onden e for $hi h U&11 7&etter 18 is generated by the system% *his &1 is a standard letter tem'late $hi h 'rovides for for$arding the om'laint to the on erned om'any and dire ting the om'any to res'ond to the om'laint $ithin 10 days time% *he system also generates an U4 !no$ledgement &etter1 to the 9)

intimated a ordingly% +o$ever, in ase, the om'lainant is not satisfied $ith the re'ly, he an send his omments to the R<3 $hi h again ta!es u' the matter $ith the om'any% *he role of R<3, till this 'ro ess, is of fa ilitating +o$ever, in redressal by the om'any% ase it is observed that the

om'any has been resorting to frivolous re'lies, the R<3 ste's in to invo!e the 'rovisions of ,e tion 2.B718 of the 3om'anies 4 t, to enable ta!ing the 'ro ess to its logi al end% *he om'lainant is !e't informed throughout the entire 'ro ess through the online tra !ing fa ility% Cl s!re . " 1%laint <n e intimation is re eived from the om'lainant that he is satisfied $ith the re'lies of the om'any or $ith the ste's ta!en by the om'any for redressal of his grievan es, the om'laint is losed under

om'lainant intimating that the om'laint has been ta!en u' $ith the res'e tive om'any% In ase no re'ly is re eived $ithin the om'any, is

sti'ulated time, &2 7&etter 28, $hi h is in the nature of reminder to the generated through the system% If no re'ly is re eived, an order under ,e tion 2.B718 of the 3om'anies 4 t is generated through the system, alling for relevant re ords to be 'rodu ed before the R<3 for verifi ation5 s rutiny% *his fa ilitates the R<3 to legally enfor e redressal of the om'laint% In ase the om'any still ignores this order, a

intimation to him as $ell as the om'any% In ases $here the om'lainant does not furnish his omments on the re'ly of the om'any, a reminder is sent to the om'lainant and if the res'onse is still not re eived, the om'laint is losed, but only after onsidering $hether the issues have been addressed a''ro'riately by the om'any% *he 'ortal of the Ministry also 'rovides guidan e to the investors $ho are desirous of filing om'laints through U)reKuently 4s!ed Puestions1 7)4Ps8 $hi h also e#'lains the 'ro ess of filing and tra !ing of om'laints%

'rose ution is filed after issue of order under ,e tion 2.B7.48 of the 3om'anies 4 t% In ase the om'any res'onds $ithin the s'e ified time, the same is for$arded to the om'lainant and his omments are sought%

1.B

Invest r Hel%line
*he Ministry also o'erates an outsour ed servi e through $$$%investorhel'line%in% Investor +el'line is a dedi ated 'ortal to handle investor grievan es under one roof overing areas related to various authorities li!e Ministry of 3om'any 4ffairs, Registrar of 3om'anies, ,e urities and E# hange 9oard of India and Reserve 9an! of India% *he servi e 'rovider ta!es u' the redressal of the om'laints both $ith the on erned regulators as $ell as $ith the om'anies on behalf of the Ministry% 4 number of investors have been using this fa ility% *he investors an log"in their grievan es related to the a'ital mar!et and om'any de'osits% Investor +el'line 'ro esses these, follo$s u' $ith the on erned entities and reKuests the regulators5authorities for intervention at an a''ro'riate time, if reKuired% Ste% *6 H / t l d(e , !r (rievan"e2 Investors are reKuired to fill in a sim'le form to register% /hile registering, the investor has several novel and user friendly features% In all, there are eleven different ty'es of 2rievan e )orms, suiting the need of the investor% Investors need Investor +el'line if Dou have not re eived refund order or allotment advi e for shares a''lied for in a 'ubli issue Dou have not re eived dividend de lared on your shares Dou have not re eived shares or units after allotment, transfer or de laration of bonus an hoose his o$n User ID and Pass$ord% *he form

Dou have not re eived debentures, bond ertifi ate, interest or 'rin i'al amount on redem'tion Dou have not got an offer of Rights Issue from the om'any Dou have not re eived interest 'ayments from olle tive investment s hemes or 'lantation om'anies

Dou have not re eived the annual re'ort, noti e for 42M or 'ro#y form *he hange in your address has not been re orded Dou have not re eived matured amount of your de'osits *here is a grievan e relating to your Demat 4 ount

/hile lodging the om'laint, the user an sear h the om'any name from an online database $hi h ontains over @000 entities in luding listed om'anies, mutual funds, 3olle tive Investment , hemes 73I,8 et % )or easy identifi ation, the database ontains both old and ne$ names of the om'anies% In ase, the user does not find the desired om'any in this database, he an reKuest for addition of the om'any name to the database% I+ $ill then sear h for the om'any in its offline database and 'ro ess the reKuest% <n e a grievan e is lodged, a uniKue grievan e ID is assigned to the investor, $hi h an be used by him for tra !ing his grievan e% *he investor need not remember this ID as a fa ility has been also 'rovided for tra !ing the grievan e by sim'ly logging in the user ID and 'ass$ord% *he investor an tra ! the status of his grievan e online along $ith a summari(ed history sheet detailing the ste's ta!en for redressal of his grievan e, re'lies re eived et %

1.>

*he $ebsite has an intera tive tra !ing system and online reminder 5 redressal me hanism% It also ontains a se tion to inform the investors about their rights under various a ts and the 'ro edures to get these enfor ed% Ste% 06 Invest r Hel%line %r "ess Sta(e * U'on submission, the grievan es are s rutini(ed and the 'arti ulars given are he !ed on various 'arameters, and in a''ro'riate ases, reFe ted% *he valid om'laints are then for$arded to the on erned om'any5entity for a tion $ithin .0 days, and o'ies are sent to the on erned regulators in serious ases% Sta(e 0 = If om'laints are not res'onded to or resolved $ithin .0 days, the same are for$arded to the on erned regulator% Sta(e 9 = If no res'onse is re eived from the om'any in another .0 days, the matter is again ta!en u' $ith the on erned authorities% Sta(e ; = 4 further 'eriod of B> days is 'rovided for the redressal of grievan e% Sta(e < = If the grievan e is not redressed $ithin 10> days of filing, the on erned regulator is reKuested for an intervention% Sta(e 5 = 4fter a 'eriod of si# months, ases are ta!en u' $ith the on erned regulators5authorities in a onsolidated manner for a''ro'riate a tion and reforms%

T,%e:IL Refund <rder5 4llotment 4dvise% T,%e:IIL :on"re ei't of dividend% T,%e:IIIL :on"re ei't of share ertifi ates after transfer% T,%e:IVL Debentures% T,%e:VL :on"re ei't of letter of offer for rights% T,%e VIL 3olle tive Investment , hemes T,%e VIIL Mutual )unds5 ;enture 3a'ital )unds5 )oreign ;enture 3a'ital Investors5 )oreign Institutional Investors5 Portfolio Managers, 3ustodians% T,%e VIIIL 9ro!ers5 ,e urities &ending Intermediaries5 Mer hant 9an!ers5 Registrars and *ransfer 4gents5 Debenture *rustees5 9an!ers to Issue5 Under$riters5 3redit Rating 4gen ies5 De'ository Parti i'ants% T,%e INL ,e urities E# hanges5 3learing and ,ettlement <rgani(ations5 De'ositories% T,%e NL Derivative *rading T,%e NIL 3or'orate 2overnan e5 3or'orate Restru turing5 ,ubstantial 4 Kuisition and *a!eovers5 9uyba ! 5 Delisting 5 3om'lian e $ith &isting 3onditions In order to e#'edite the 'ro ess of redressal of om'laints and to ma!e the 'ro ess of lodging a om'laint easier for the om'lainants, all ,E9I registered intermediaries have been mandated to designate an e"mail ID of the grievan e redressal division5 om'lian e offi er e# lusively for the 'ur'ose the email of ID handling and other om'laints% relevant *he details intermediaries have also been advised to dis'lay 'rominently on their $ebsites%

SE$I
In the event of grievan es not adeKuately resolved by the on erned om'any or the intermediary, investors should a''roa h ,E9I% *he follo$ing !inds of om'laints an be filed $ith ,E9IL

Pri1ar, Mar+et Most of the issue om'laints 'ertain to non" re ei't of refund or allotment, or delay in re ei't of refund or allotment and 'ayment of interest thereon% Dou an a''roa h the om'lian e offi er of the issue, $hose name and onta t number is

1.?

mentioned on the

over 'age of the <ffer

C lle"tive Invest1ent S"he1es *he investor should a''roa h the on erned 3I,% If satisfa tory res'onse is not re eived, the investor should $rite to ,E9I% *he investors should also a''roa h the Distri t 3onsumer Redressal )orums in ase the on erned 3I, fails to honour its ommitments or

Do ument% *hese om'laints an also be made to the 'ost issue &ead Manager, $ho in turn $ill ta!e u' the matter $ith registrar to redress the om'laints% In ase the investor does not re eive any re'ly $ithin a reasonable time, the investor may om'lain to ,E9I% Se" ndar, Mar+et 4 om'laint should be filed $ith the res'e tive sto ! e# hange $ho is reKuired to resolve all the om'laints% If ne essary, an investor an also resort to arbitration% +o$ever, if the om'laint is not resolved or is unduly delayed, om'laints along $ith su''orting do uments should be for$arded to ,E9I% In ase of om'laint against a sub bro!er, the om'laint should also be for$arded to the bro!er $ith $hom the sub bro!er is affiliated% 4rbitration is an alternative dis'ute resolution me hanism 'rovided by a sto ! e# hange for resolving dis'utes bet$een the trading members and their lients in res'e t of trades done on the e# hange% *he detailed arbitration 'ro edures are available on the $ebsites of the e# hanges% M!t!al #!nds *he offer do uments ontain the name and onta t details of the 'erson $hom the investors may a''roa h in ase of any Kuery, om'laints or grievan es% If the om'laints remain unresolved, investors may a''roa h ,E9I for fa ilitating redressal of their om'laints% <n re ei't of om'laints, ,E9I ta!es u' the matter $ith the on erned mutual fund and follo$s u' $ith it regularly% Investors may also send their om'laints dire tly to ,E9I%

for any defi ien y in servi e% )or boun ing of 'ost"dated heKues issued by the 3I,, investors an move the ourts under ,e tion 1.@ of the :egotiable Instruments 4 t% /here ever the investors do not have a right to the land or to the 'rodu e arising out of the land, su h investment is treated as de'osits and $hen a om'any fails to re'ay the de'osits, it attra ts the 'rovisions of se tion >@4 of the 3om'anies 4 t, 1A>?% ,E9I has no Furisdi tion over su h de'osits% )or om'laints against 3I, before the date of

notifi ation of the ,E9I Regulations on < tober 1>, 1AAA, $hen most 3I, had olle ted funds from the 'ubli , any a tion by ,E9I against defaulting entities does not ne essarily ensure the refund of money invested by the investors in su h entities% P rt. li Mana(ers Investors $ould find in the Dis losure Do ument the name, address and tele'hone number of the investor relation offi er of the 'ortfolio manager $ho attends to the investor Kueries and om'laints% *o hel' investors, the grievan e redressal and dis'ute me hanism is also 'rovided by the 'ortfolio manager in the Dis losure Do ument% Investors an also a''roa h ,E9I for redressal of their om'laints%

1.E

De1at A"" !nt In ase of any om'laint 5 'roblem 5 Kuery, the investor should first onta t his DP% If the DP is unable to resolve, the investor should a''roa h the on erned de'ository, failing $hi h ,E9I should be onta ted dire tly%

Investor ,ervi es 3ell also renders administrative assistan e to arbitration 'ro eedings in res'e t of arbitration ases that are admitted for 4rbitration under the E# hangeQs 4rbitration )rame$or!% Invest r Pr te"ti n #!ndL Investor Prote tion )und is the fund set u' by the ,to ! E# hanges to meet the legitimate investment s'e ulative to se urities nature% ,E9I has laims of the 'res ribed

STOCK ENCHANGES FNSEB$SEG

*he follo$ing ty'es of om'laints should be filed $ith the sto ! e# hangesL 3om'laints related traded5listed $ith the e# hanges% 3om'laints regarding the trades effe ted in the e# hange $ith res'e t om'anies listed on it% 3om'laints against the bro!ers5sub" bro!ers of the e# hange% NSE6 *o ater to the needs of investors, :,E has established its Investor ,ervi es ell $ith offi es in maFor to$ns% *his 3ell fa ilitates resolution of om'laints of investors against the listed or'orate entities and :,E members% *he Investor ,ervi es 3ell also to renders arbitration under the administrative are admitted assistan e for to the

lients of the defaulting members that are not of guidelines for utili(ation of IP) at the ,to ! E# hanges% *he ,to ! E# hanges have been 'ermitted to fi# suitable om'ensation limits, in onsultation $ith the IP)53P) *rust% It has been 'rovided that the amount of available against a single om'ensation laim of an investor

arising out of default by a member bro!er of a ,to ! E# hange shall not be less than Rs% 1 la!h in ase of maFor ,to ! E# hanges vi(%, 9,E and :,E, and Rs% >0,000 in ase of other ,to ! E# hanges%

RESERVE $ANK O# INDIA

*he R9I $ebsite has a dedi ated fa ility for investor grievan es handling and resolution% 4ll om'laints relating to ban!s and om'any fi#ed de'osits should be filed $ith R9I%

'ro eedings in res'e t of arbitration ases that 4rbitration E# hangeQs 4rbitration )rame$or!% $SE6 *o ater to the needs of investors, :,E has established its De'artment of Investors ,ervi es $ith offi es in maFor to$ns% *his 3ell fa ilitates resolution of om'laints of investors against the listed or'orate entities and :,E members% *he

CONSUMER #ORUM
,hares of debentures after they have been issued are regarded as goods% In ase of defi ien y of servi e by an intermediary or om'any, an investor an a''roa h the 3onsumer )orum%

1.@

Cha%ter 05

SOME USE#UL -E$SITES

,ome useful $ebsites, es'e ially related to the a'ital mar!et, are listed belo$L GOVERNMENT3 REGULATOR7 E OTHER $ODIES 3<MP4:D &4/ 9<4RD 3REDI* I:)<RM4*I<: 9URE4U 7I:DI48 &*D% MI:I,*RD <) 3<RP<R4*E 4))4IR, MI:I,*RD <) )I:4:3E RE,ER;E 94:6 <) I:DI4 ,E3URI*IE, C EI3+4:2E 9<4RD <) I:DI4 EDUCATION 9,E *R4I:I:2 I:,*I*U*E )I:4:3I4& P&4::I:2 ,*4:D4RD, 9<4RD,I:DI4 )* 6:</&ED2E M4:42EME:* 3<%&*D% I3,I"3E:*RE )<R 3<RP<R4*E RE,E4R3+ C *R4I:I:2 I:DI4: I:,*I*U*E <) 34PI*4& M4R6E*, I:DI4: I:,*I*U*E <) 3<RP<R4*E 4))4IR, I:,*I*U*E <) 3+4R*ERED 433<U:*4:*, <) I:DI4,*+E I:,*I*U*E <) 3<MP4:D ,E3RE*4RIE, <) I:DI4,*+E I:,*I*U*E <) 3<,* C /<R6, 433<U:*4:*, <) I:DI4 I:;E,*<R PR<*E3*I<: C EDU34*I<: )U:D :4*I<:4& 3<U:3I& <) 4PP&IED E3<:<MI3 RE,E4R3+ :4*I<:4& I:,*I*U*E <) ,E3URI*IE, M4R6E*, DEPOSITORIES 3E:*R4& DEP<,I*<RD ,ER;I3E, 7I:DI48 &*D% :4*I<:4& ,E3URI*IE, DEP<,I*<RD &*D% STOCK ENCHANGES 4+MED494D ,*<36 EI3+4:2E &*D% 94:24&<RE ,*<36 EI3+4:2E &*D% 9+U94:E,/4R ,*<36 EI3+4:2E &*D% 9<M94D ,*<36 EI3+4:2E &*D% 34&3U**4 ,*<36 EI3+4:2E &*D% 3<3+I: ,*<36 EI3+4:2E &*D% DE&+I ,*<36 EI3+4:2E &*D% I:*ER"3<::E3*ED ,*<36 EI3+4:2E <) I:DI4 &*D% J4IPUR ,*<36 EI3+4:2E &*D% &UD+I4:4 ,*<36 EI3+4:2E &*D% M4D+D4 PR4DE,+ ,*<36 EI3+4:2E &*D% M4DR4, ,*<36 EI3+4:2E &*D% M3I ,*<36 EI3+4:2E &*D% :4*I<:4& ,*<36 EI3+4:2E <) I:DI4 &*D% <*3 EI3+4:2E <) I:DI4 PU:E ,*<36 EI3+4:2E &*D% U:I*ED ,*<36 EI3+4:2E <) I:DI4 &*D% U**4R PR4DE,+ ,*<36 EI3+4:2E &*D% ;4D<D4R4 ,*<36 EI3+4:2E &*D% -E$SITE $$$% lb%ni %in $$$% ibil% om $$$%m a%gov%in $$$%finmin%ni %in $$$%rbi%org%in $$$%sebi%gov%in -E$SITE $$$%bseindia% om $$$%f'sbindia%org $$$%ft!m % om $$$%i si%edu $$$%utii m% om $$$%ii a%in $$$%i ai%org $$$%i si%edu $$$%i $ai%org $$$%ie'f%gov%in $$$%n aer%org $$$%nism%a %in -E$SITE $$$% dslindia% om $$$%nsdl% o%in -E$SITE $$$%aselindia%org $$$%bgse% o%in $$$%bhseindia% om $$$%bseindia% om $$$% se"india% om $$$% o hinsto !e# hange% om $$$%dseindia%org%in $$$%iseindia% om $$$%Fsel%in $$$%lse% o%in $$$%m'seindia% om $$$%madrassto !e# hange%in $$$%m #"s#% om $$$%nseindia% om $$$%ot ei%net $$$%'unesto !e# hange% om $$$%useindia% om $$$%u'se"india% om $$$%vselindia% om

1.A

Cha%ter 0=

A$$REVIATIONS
4M3 4M)I 4:MI 4,E 9g,E 9*I 9< 9,E 9<&* 39I 3D,& 3I, 3o,E 3P) 3,E 3,I D)I DP D,E ED )4Ps )C< )II 2oI +,E I34I I3,I IDR IP) IP< I,E I,I: 6IM &,E M9s M34 M)s :4; :9)3 4sset Management 3om'any 4sso iation of Mutual )unds in India 4sso iation of :,E Members of India 4hmedabad ,to ! E# hange &td% 9angalore ,to ! E# hange &td% 9an!er to the Issue 9enefi iary <$ner 9ombay ,to ! E# hange 9,E <nline *rading ,ystem &td% 3entral 9ureau of Investigation 3entral De'ository ,ervi es 7India8 &td% 3olle tive Investment , heme 3o hin ,to ! E# hange &td% 3ustomer Prote tion )und 3al utta ,to ! E# hange &td% 3oimbatore ,to ! E# hange &td% Develo'ment )inan ial Institution De'ository Parti i'ant Delhi ,to ! E# hange &td% Enfor ement Dire torate )reKuently 4s!ed Puestions )utures and <'tions )oreign Institutional Investor 2overnment of India +yderabad ,to ! E# hange &td% Institute of 3hartered 4 ountants of India Institute of 3om'any ,e retaries of India Indian De'ository Re ei'ts Investor Prote tion )und Initial Publi <ffering Inter" onne ted ,to ! E# hange International ,e urities Identifi ation :umber 6ey Information Memorandum &udhiana ,to ! E# hange &td% Mer hant 9an!ers Ministry of 3or'orate 4ffairs Mutual )unds :et 4sset ;alue :on 9an!ing )inan ial 3om'any 1B0

:II :I,M :,D& :,E PI& P,U PI9 R9I R+P RII R,Es ,4* ,E9I ,6,E ,R< ,** U33 UI: UP,E U*I ;3) ;,E

:on"Institutional Investor :ational Institute of ,e urities Mar!ets :ational ,e urities De'ository &imited :ational ,to ! E# hange of India &imited Publi Interest &itigation Publi ,e tor Underta!ing Pualified Institutional 9uyer Reserve 9an! of India Red +erring Pros'e tus Retail Individual Investor Regional ,to ! E# hanges ,e urities 4''ellate *ribunal ,e urities and E# hange 9oard of India ,aurashtra 6ut h ,to ! E# hange &td% ,elf Regulatory <rganisation ,e urities *ransa tion *a# UniKue 3lient 3ode UniKue Identifi ation :umber Uttar Pradesh ,to ! E# hange Unit *rust of India ;enture 3a'ital )und ;adodara ,to ! E# hange &td%

1B1

LIST *

REGULATOR7 $ODIES
ASSOCIATION O# MUTUAL #UNDS IN INDIA E0?"E0@,94&4R4M4 94:DR4"6UR&4 3<MP&EI 94:DR4 7E8 MUM94I"B00021 P+<:EL 2?>A020?, 2?>A02B., 2?>A02B? )4IL 2?>A020A EM4I&L sinorJamfiindia% om UR&L $$$%amfiindia% om $AR COUNCIL O# INDIA 21,R<U,E 4;E:UE I:,*I*U*I<:4& 4RE4 :E/ DE&+I"110002 P+<:EL 2.2.1?BE, 2.2.1?B@, 22A1@?.? )4IL 2.2.1E?E EM4I&L infoJbar oun ilofindia%org UR&L $$$%bar oun ilofindia%org CENTRAL DEPOSITOR7 SERVICES FINDIAG LTD) P+IR<VE JEEJEE9+<D *</ER,,1E*+ )&<<R D4&4& ,*REE*, )<R* MUM94I"B00001 P+<:E L 22E2....,22E2...B )4I L 22E2.1AA EM4I& L investorsJ dslindia% om UR& L $$$% dslindia% om COMPTROLLER AND AUDITOR GENERAL O# INDIA P<36E*"A DEE: D4D4& UP4D+D4D M4R2 :E/ DE&+I"11012B EM4I&L 'disJ ag%gov%in UR&L $$$% ag%gov%in INDIAN NE-SPAPER SOCIET7 I:, 9UI&DI:2 R4)I M4R2 :E/ DE&+I"110001 P+<:EL 2.E1>B01 )4IL 2.E2.@00 EM4I&L insJins%org%in UR&L $$$%indianne$s'a'erso iety%org INSTITUTE O# CHARTERED ACCOUNTANTS O# INDIA I34I 9+4/4: I:DR4PR4,*+4 M4R2 :E/ DE&+I"110002 P+<:EL .0110B01, .0110B0B, .A@A.A@A )4IL .0110>@1 EM4I&L i aihoJi ai%org UR&L $$$%i ai%org INSTITUTE O# COMPAN7 SECRETARIES O# INDIA I3,I +<U,E 22, I:,*I*U*I<:4& 4RE4 &<D+I R<4D :E/ DE&+I"11000. P+<:EL B1>0BBBB, 2B?1E.21, 2B?1E.2B )4IL 2B?2?E2E EM4I&L infoJi si"india% om UR&L $$$%i si%edu INSTITUTE O# COST E -ORKS ACCOUNTANTS O# INDIA 12, ,UDDER ,*REE* 6<&64*4"E0001? P+<:EL 22>210.1, 22>210.B, 22>210.> )4IL 22>2EAA. EM4I&L eoJi $ai%org UR&L $$$%i $ai%org INSURANCE REGULATOR7 E DEVELOPMENT AUTHORIT7 P4RI,R4M4 9+4;4:4M, .RD )&<<R 94,+EER942+ +DDER494D">0000B P+<:EL 2..@1100 )4IL ??@2...B EM4I&L irdaJirda%gov%in UR&L $$$%irdaindia%org MINISTR7 O# CORPORATE A##AIRS ,+4,*RI 9+4;4:, >*+ )&<<R, 4"/I:2 R4JE:DR4 PR4,4D R<4D :E/ DE&+I"110001 P+<:EL 2..@2.2B, 2..@B01E, 2..@A22E )4IL 2..@B2>E EM4I&L hK%delhiJm a%gov%in UR&L $$$%m a%gov%in MINISTR7 O# #INANCE DEP*%<) E3<:<MI3 4))4IR, :<R*+ 9&<36 :E/ DE&+I"110001 P+<:EL 2.01B@E1 )4IL 2.01E2E1 EM4I&L ig ellJni %in UR&L $$$%finmin%ni %in MINISTR7 O# IN#ORMATION E $ROADCASTING 4"/I:2, ,+4,*RI 9+4/4: DR%R4JE:DR4 PR4,4D R<4D :E/ DE&+I"110001 P+<:EL 2..@BB>. EM4I&L Fsb%inbJni %in UR&L $$$%mib%ni %in

1B2

NATIONAL HOUSING $ANK 3<RE >"4, I:DI4 +49I*4* 3E:*RE, .RD">*+ )&<<R &<DI R<4D :E/ DE&+I"11000. P+<:EL 2B?BA0.1, 2B?BA0.2, 2B?BA0.. )4IL 2B?B?A@@ EM4I&L hoJnhb%org%in UR&L $$$%nhb%org%in NATIONAL SECURITIES DEPOSITOR7 LTD) *R4DE /<R&D, 4"/I:2, B*+ )&<<R 64M4&4 MI&&, 3<MP<U:D ,E:4P4*I 94P4* M4R2, &</ER P4RE& MUM94I"B0001. P+<:E L 2BAAB200 )4I L 2BAE?.>1 EM4I& L infoJnsdl% o%in UR& L $$$%nsdl% o%in PRESS COUNCIL O# INDIA ,<<3+:4 9+4/4: @, 3%2%< 3<MP&EI, &<D+I R<4D :E/ DE&+I"11000. P+<:EL 2B.??EB?, 2B.??B0>, 2B.??B0B )4IL 2B.??22B EM4I&L ' ib''Jgmail% om UR&L $$$%'ress oun il%ni %in REGISTRAR O# COMPANIES Re(istrar . C 1%anies3 Andhra Pradesh MI:I,*RD <) 3<RP<R4*E 4))4IR, 2:D )&<<R, 3P/D 9UI&DI:2 6E:DRID4 ,4D4: ,U&*4: 94V4R, 6<*I +DDER494D">001A> P+<:EL 0B0"B?>EA.E, B?>2@0E )4IL 0B0"B?>2@0E EM4I&L ro %hyderabadJm a%gov%in Re(istrar . C 1%anies3 $ihar E Ohar+hand MI:I,*RD <) 3<RP<R4*E 4))4IR, B*+ )&<<R, 9&<36 4 /E,*ER: /I:2 M4URD4 &<6 3<MP&EI D46 94:2&</ R<4D P4*:4"@00001 P+<:EL 0?12"2221E2 )4IL 0?12"2221E2 EM4I&L ro %'atnaJm a%gov%in Re(istrar . C 1%anies3 G a Da1an E Di! MI:I,*RD <) 3<RP<R4*E 4))4IR, 3<MP4:D &4/ 9+4/4: P&<* :<%21, ED3 3<MP&EI, P4**< P4:4JI"B0.001 P+<:EL 0@.2"2B.@?1E, 2B.@?1@ )4IL 0@.2"2B.@?1@ EM4I&L ro %goaJm a%gov%in Re(istrar . C 1%anies3 G!'arat MI:I,*RD <) 3<RP<R4*E 4))4IR, R<3 9+4;4:, <PP% RUP4& P4R6 ,<3IE*D 9E+I:D 4:6UR 9U, ,*<P :4R4:PUR4 4+MED494D".@001. P+<:EL 0EA"2EB.E>AE )4IL 0EA"2EB.@.E1 EM4I&L ro %ahmedabadJm a%gov%in

Re(istrar . C 1%anies3 Oa11! E Kash1ir MI:I,*RD <) 3<RP<R4*E 4))4IR, +4&& :<%B0> " B0@ 94+U P&4V4, ,<U*+ 9&<36 R4I& +E4D 3<MP&EI J4MMU"1@0012 P+<:EL 2BE0.0? )4IL 01A1"2BE0.0? EM4I&L ro %FammuJm a%gov%in UR&L $$$%ro Fammu%ni %in Re(istrar . C 1%anies3 Karnata+a3 $an(al re MI:I,*RD <) 3<RP<R4*E 4))4IR, 2:D )&<<R,QEQ /I:2 6E:DRID4 ,4D4: 6<R4M4:24&4 94:24&<RE">?00.B P+<:EL 0@0"2>>.EBBA, 2>?..10B5> )4IL 0@0"2>>.@>.1 EM4I&L ro %bangaloreJm a%gov%in UR&L $$$%!ar%ni %in5ro Re(istrar . C 1%anies3 Kerala E La+shad/ee% MI:I,*RD <) 3<RP<R4*E 4))4IR, 3<MP4:D &4/ 9+4/4: 9M3 R<4D *+RI66464R4 6<3+I"?@2021 P+<:EL 0B@B"2B2.EBA, 2B21B@A )4IL 0B@B"2B22.2E EM4I&L ro %erna!ulamJm a%gov%in UR&L $$$%ro !erala%ni %in Re(istrar . C 1%anies3 M)P) E Chattis(arh3 G/ali r MI:I,*RD <) 3<RP<R4*E 4))4IR, .RD )&<<R, ,4:J4D 3<MP&EI, Q4Q 9&<36 J4DE:DR4 24:J 2/4&I<R"BEB00A P+<:EL 0E>1"2.21A0E )4IL 0E>1"2..1@>. EM4I&L ro %g$aliorJm a%gov%in Re(istrar . C 1%anies3 Maharashtra3 M!1&ai MI:I,*RD <) 3<RP<R4*E 4))4IR, 100, E;ERE,*,M4RI:E DRI;E MUM94I"B00002 P+<:EL 22@12?.A )4IL 022"22@11AEE EM4I&L ro %mumbaiJm a%gov%in Re(istrar . C 1%anies3 NCT . Delhi E Har,ana MI:I,*RD <) 3<RP<R4*E 4))4IR, B*+ )&<<R, I)3I *</ER ?1, :E+RU P&43E :E/ DE&+I"11001A P+<:EL 011"2?2.>E0., 2?2.>E0B )4IL 011"2?2.>E02 EM4I&L ro %delhiJm a%gov%in Re(istrar . C 1%anies3 Orissa MI:I,*RD <) 3<RP<R4*E 4))4IR, 2:D )&<<R, 3+4&3+I*R4 9+4/4: <)D3, 9UII 94V4R 3U**436"E>.001 P+<:EL 0?E1"2.0>.?1, 2.0?A>@ )4IL 0?E1"2.0>.?1 EM4I&L ro % utta !Jm a%gov%in

1B.

Re(istrar . C 1%anies3 P!d!"herr, MI:I,*RD <) 3<RP<R4*E 4))4IR, 1,* )&<<R, :<% .> E&4:2< :424R PUDU3+ERRD"?0>011 P+<:EL 0B1."22B012A EM4I&L ro %'ondi herryJm a%gov%in UR&L $$$%ro 'ondy%'on%ni %in Re(istrar . C 1%anies3 P!ne MI:I,*RD <) 3<RP<R4*E 4))4IR, PM* 9UI&DI:2, PU:E ,*<36 EI3+4:2E .RD )&<<R, DE334: 2DM6+4:4 PU:E"B1100B EM4I&L ro %'uneJm a%gov%in Re(istrar . C 1%anies3 P!n'a&3 H)P) E Chandi(arh MI:I,*RD <) 3<RP<R4*E 4))4IR, 3<RP<R4*E 9+4/4:, P&<* :<%B 9 ,E3*<R 2E 9 M4D+D4 M4R2 3+4:DI24R+"1?001A P+<:EL 01E2"2?.AB1>, 2?.AB1? )4IL 01E2"2?.AB1? EM4I&L ro % handigarhJm a%gov%in Re(istrar . C 1%anies3 Ra'asthan3 Oai%!r MI:I,*RD <) 3<RP<R4*E 4))4IR, 3<RP<R4*E 9+4/4: 2:D )&<<R,25?"E,RE,IDE:3D 4RE4 3I;I& &I:E, J4IPUR".02001 P+<:EL 01B1"2222B?>, 2222B?? )4IL 01B1"2222B?B EM4I&L ro %Fai'urJm a%gov%in Re(istrar . C 1%anies3 Shill n( MI:I,*RD <) 3<RP<R4*E 4))4IR, M<RE&&< 9UI&DI:2, 2R<U:D )&<<R ,+I&&<:2"EA.001 P+<:EL 0.?B"222.??> EM4I&L ro %shillongJm a%gov%in Re(istrar . C 1%anies3 Ta1ilnad!3 Chennai MI:I,*RD <) 3<RP<R4*E 4))4IR, 2:D )&<<R,9&<36 :<% ?, 9 /I:2,,+4,*RI 9+4/4: :<%2?, +4DD</, R<4D 3+E::4I"?000.B P+<:EL 0BB"2@2EE1@2, 2@2E2?E? )4IL 0BB"2@2.B2A@ EM4I&L ro % hennaiJm a%gov%in UR&L $$$%ro hennai%tn%ni %in Re(istrar . C 1%anies3 Ta1ilnad!3 C i1&at re MI:I,*RD <) 3<RP<R4*E 4))4IR, RE2I,*R4R <) 3<MP4:IE, 2:D )&<<R,,*<36 EI3+4:2E 9UI&DI:2 ?@.,*RI3+D R<4D, ,I:24:4&&UR 3<IM94*<RE"?B100> P+<:EL 0B22"2.1@1E0, 2.1A?B07D8 )4IL 0B22"2.2B012 EM4I&L ro % oimbatoreJm a%gov%in UR&L $$$%ro oimbatore%tn%ni %in $$$%ro !ovai%tn%ni %in

Re(istrar . C 1%anies3 Uttar Pradesh E Uttaran"hal3 Kan%!r MI:I,*RD <) 3<RP<R4*E 4))4IR, 105BAA 9, 4&&E:24:J,6+4&4,I &I:E 64:PUR"20@002 P+<:EL 0>12".>2.0B )4IL 0>12"2A1E?A EM4I&L ro %!an'urJm a%gov%in Re(istrar . C 1%anies3 -est $en(al MI:I,*RD <) 3<RP<R4*E 4))4IR, :IV4M P4&43E, 2:D M%,%<% 9UI&DI:2 2:D )&<<R, 2.B5B, 4%J%3%9<,E R<4D 6<&64*4"E00020 P+<:EL 0.."22@00B0A )4IL 0.."22A0.EA> EM4I&L ro %!ol!ataJm a%gov%in RESERVE $ANK O# INDIA 3E:*R4& <))I3E ,+4+ID 9+424* ,I:2+ R<4D MUM94I"B00001 P+<:EL 22?00>02, 22?.0>02 )4IL 22?00.>@ EM4I&L hel'do Jrbi%org%in UR&L $$$%rbi%org%in SECURITIES E ENCHANGE $OARD O# INDIA HEAD O##ICE ,E9I 9+4;4:,P&<* :<%3"B4,2"9&<36 94:DR4"6UR&4 3<MP&EI, 94:DR4 7E4,*8 MUM94I"B000>1 P+<:EL 2?BBA000, B0B>AAA1 )4IL 2?BBA01. EM4I&L sebiJsebi%gov%in UR&L $$$%sebi%gov%in NORTH PONE >*+ )&<<R, 94:6 <) 94R<D4 9UI&DI:2 1?,,4:,4D M4R2 :E/ DE&+I"110001% P+<:E L 2.E2B001"0> )4I L 2.E2B00? EM4I& L sebinroJsebi%gov%in SOUTH PONE .RD )&<<R,DQM<:*E 9UI&DI:2 .2,DQM<:*E 3<&<:D **6 R<4D,4&/4RPE* 3+E::4I"?0001@ P+<:E L 2B?EB00052B?EB1>0 )4I L 2B?EB001 EM4I& L sebisroJsebi%gov%in EAST PONE .RD )&<<R,&C* 3+4M9ER, 1?,34M43 ,*REE* 6<&64*4"E0001E P+<:E L 2.02.000 )4I L 22@EB.0E EM4I& L sebieroJsebi%gov%in -EST PONE 2R<U:D )&<<R,U:I* :<"002,,464R I :E4R 24:D+I2R4M R4I&/4D ,*4*I<: <PP%:E+RU 9RID2E 4,+R4M R<4D 4+MED494D".@000A P+<:E L 2?>@.?..5.>

1BB

EM4I& L sebi$roJsebi%gov%in STOCK ENCHANGES Ah1eda&ad St "+ EA"han(e Ltd) 64MD+E:U 3<MP&EI <PP%,4+4J4:4:D 3<&&E2E, 4M94/4DI 4+MED494D".@001> P+<:EL 2?.0EAE1, 2?.0EAE2, 2?.0EAE. )4IL 2?.0@@EE EM4I&L infoJaselindia%org UR&L $$$%aselindia%org $an(al re St "+ EA"han(e Ltd) ,*<36 EI3+4:2E *</ER, >1,J%3%R<4D,1,* 3R<,, 94:24&<RE">?002E P+<:EL B1>E>2.B, B1>E>2.> )4IL B1>E>2.2 EM4I&L bgseJbgse% o%in UR&L $$$%bgse% o%in $h!&anes/ar St "+ EA"han(e Ltd) ,*<36 EI3+4:2E 9+4;4: P"2,J4D4DE; ;I+4R P%<%3+4:DR4,E6+4RPUR 9+U94:E,/4R"E>102. P+<:EL 2>B>0@2 )4IL 2>B>0AB EM4I&L bhseJsan harnet%in UR&L $$$%bhseindia% om $ 1&a, St "+ EA"han(e Ltd) P+IR<VE JEEJEE9+<D *</ER, D4&4& ,*REE*, )<R* MUM94I"B00001 P+<:EL 22E212.B, 22E212.. )4IL 22E21A1A EM4I&L infoJbseindia% om UR&L $$$%bseindia% om Cal"!tta St "+ EA"han(e Ltd) E,&D<:, R4:2E 6<&64*4"E00001 P+<:EL 2210BBE0, 22.0?AEE, 22.0?A2@ )4IL 22102210 EM4I&L seadmnJ se"india% om UR&L $$$% se"india% om C "hin St "+ EA"han(e Ltd) .?51>?>"4"1E,B*+ )&<<R, ME, 9UI&DI:2, JUD2E, 4;E:UE,64&<<R 6<3+I"?@201E P+<:EL .0B@>1A )4IL 2B00..0 EM4I&L se1Jvsnl% om UR&L $$$% o hinsto !e# hange% om Delhi St "+ EA"han(e Ltd) D,E +<U,E .51,4,4) 4&I R<4D :E/ DE&+I"110002 P+<:EL B?BE0002, 2.2E@A1@, B?BE000> )4IL B?BE00>. EM4I&L infoJdseindia%org%in UR&L $$$%dseindia%org%in

Ga!hati St "+ EA"han(e Ltd) ,4R4) 9UI&DI:2, 4::EI 4%*%R<4D 2U/4+4*I"E@1001 P+<:EL >1E2E., >>.?E0, >1E@@. )4IL >B.2E2 EM4I&L iseghtJis india% om Inter:C nne"ted St "+ EA"han(e . India Ltd) I:*ER:4*I<:4& I:)<*E3+ P4R6 *</ER E,>*+ )&<<R ,E3*<R .0,;4,+I :4;I MUM94I"B00E0. P+<:EL 2E@120>?, 2E@120>@, 2E@120?2 )4IL 2E@120?1 EM4I&L ises Jbom.%vsnl%net%in UR&L $$$%iseindia% om Oai%!r St "+ EA"han(e Ltd) ,*<36 EI3+4:2E 9UI&DI:2 J%&%:%M4R2, M4&;ID4 :424R J4IPUR".0201E P+<:EL 2E2A100, 2E2A0AB, 2E2A0B1 )4IL 2E2A0@2 EM4I&L infoJFsel%in UR&L $$$%Fsel%in L!dhiana St "+ EA"han(e Ltd) )ER<VE 24:D+I M4R6E* &UD+I4:4"1B1001 P+<:EL 2EEBE1?, 2EE2.1E, B?12.1E )4IL 2B01?B> EM4I&L iseJsatyam%net%in UR&L $$$%lse% o%in Madh,a Pradesh St "+ EA"han(e Ltd) P4&I64 P&4V4,P+4,E"II 201,M%*%+%3<MP<U:D,2:D )&<<R I:D<RE"B>2001 P+<:EL B.2@B2, B.2@B., B.2@BB )4IL B.2@BA EM4I&L m'seJm'seindia% om UR&L $$$%m'seindia% om Madras St "+ EA"han(e Ltd) EI3+4:2E 9UI&DI:2 :E/ :<%.0 7<&D :<%118 ,E3<:D &I:E 9E43+ 3+E::4I"?00001 P+<:EL 2>22@A>1, 2>22B.A2, 2>22B.@2 )4IL 2>2BB@AE EM4I&L mseedJvsnl% om UR&L $$$%madrassto !e# hange%in MCN St "+ EA"han(e Ltd) EI3+4:2E ,PU4RE 3*, :<%2>>,,URE: R<4D, 4:D+ERI 7E8 MUM94I"B000A. P+<:EL ?E.1A000 )4IL ?E.1A00B EM4I&L infoJm #"s#% om UR&L $$$%m #"s#% om

1B>

Nati nal St "+ EA"han(e . India Ltd) EI3+4:2E P&4V4 94:DR4"6UR&4 3<MP&EI 94:DR4 7E8 MUM94I"B000>1 P+<:EL 2?>A@100, ??B1@100 )4IL 2?>A@120 EM4I&L `nseJnse% o%in UR&L $$$%nseindia% om OTC EA"han(e . India A2,M46ER *</ER, Q)Q 3U))E P4R4DE MUM94I"B0000> P+<:EL 221@@1?B, 221@@1?>, 221@@>11 )4IL 221@@>0. EM4I&L ot e#inJvsnl% om UR&L $$$%ot ei%net P!ne St "+ EA"han(e Ltd) ,+I;&EE&4 3+4M9ER,,B*+ )&<<R E>2,,4D4,+I; PE*+ R%9%6UM4*+E64R M4R2 PU:E"B110.0 P+<:EL 2BB@>E02 )4IL 2BB?00@. EM4I&L 'unesto !Jvsnl% om

UR&L $$$%'unesto !e# hange% om United St "+ EA"han(e . India Ltd) 3"E,&4IMI *</ER,,2:D )&<<R 94:DR4"6UR&4 3<MP&EI 94:DR4 7E8 MUM94I"B000>1 P+<:EL B2BBBAAA )4IL B2BBBA00 EM4I&L infoJuseindia% om UR&L $$$%useindia% om Uttar Pradesh St "+ EA"han(e Ltd) P4D4M *</ER, 1B511.,3I;I& &I:E, 64:PUR"20@001 P+<:EL 2..@11>, 2..@0EB )4IL 2..@1E> EM4I&L u'seJvsnl%in UR&L $$$%u'se"india% om Vad dara St "+ EA"han(e Ltd) )<R*U:E *</ER,,.RD )&<<R 2>BE,,4D4JI2U:J ;4D<D4R4".A000> P+<:EL 2.?1>.B, 2.B0.E@, 2.?.1AB )4IL 2.?1B>2 EM4I&L vseJd2vis'% om UR&L $$$%vselindia% om

1B?

LIST 0

MUTUAL #UNDS IN INDIA

AEGON MUTUAL #UND AMC 6 AEGON ASSET MANAGEMENT CO)PVT)LTD) 2D, I:)I:I*D,.RD )&<<R P4R4:JPE Q9Q ,3+EME,,U9+4,+ R<4D ;I&E P4R&E 7E8 MUM94I"B000>E P+<:E L ?E.10000 EM4I& L servi esJreligareaegon% om /E9,I*EL $$$%religareaegonmf% om AIG GLO$AL INVESTMENT GROUP MUTUAL #UND AMC 6 AIG GLO$AL ASSET MANAGEMENT CO) FINDIAG PVT)LTD) )3+ +<U,E,2R<U:D )&<<R PE:I:,U&4 3<RP<R4*E P4R6 24:P4*R4< 64D4M M4R2,&</ER P4RE& MUM94I"B0001. P+<:E L B0A.0000,B0A.0101 EM4I& L investor areJaig% om /E9,I*EL $$$%aiginvestments% o%in ANIS MUTUAL #UND AMC 6 ANIS ASSET MANAGEMENT CO)LTD) :4RIM4: 9+4;4:,11*+ )&<<R ;I:4D 6%,+4+ M4R2 :4RIM4: P<I:* MUM94I"B00021 P+<:E L .AB0..00 EM4I& L ustomerservi eJa#ismf% om /E9,I*EL $$$%a#ismf% om $ARODA PIONEER MUTUAL #UND AMC 6 $ARODA PIONEER ASSET MANAGEMENT CO)LTD) >01,*I*4:IUM,>*+ )&<<R /E,*ER: EIPRE,, +I2+/4D 2<RE24<: 7E8 MUM94I"B000?. P+<:E L .0EB1000 EM4I& L infoJbaroda'ioneer%in /E9,I*EL $$$%baroda'ioneer%in $ENCHMARK MUTUAL #UND AMC 6 $ENCHMARK ASSET MANAGEMENT CO)PVT)LTD) B0>,R4+EJ4 3+4M9ER, 21.,)REE PRE,, J<UR:4& M4R2 :4RIM4: P<I:* MUM94I"B00021 P+<:E L ??>12E2E EM4I& L $ebmasterJben hmar!funds% om /E9,I*EL $$$%ben hmar!funds% om $HARTI ANA MUTUAL #UND AMC 6 $HARTI ANA INVESTMENT MANAGERS PVT)LTD) >1,64&P4*4RU ,D:ER2D,E4,* /I:2,>*+ )&<<R ;46<&4 ,4:*43RUV 7E8 MUM94I"B000>> P+<:E L B0BEA000 EM4I& L servi eJbhartia#a"im% om /E9,I*EL $$$%bhartia#a"im% om $IRLA SUN LI#E MUTUAL #UND AMC 6 $IRLA SUN LI#E ASSET MANAGEMENT CO)LTD) *</ER 4,4+UR4 3E:*RE,2:D )&<<R M4+464&I 34;E, R<4D,MID3 4:D+ERI 7E8 MUM94I"B000A. P+<:E L ??A2@000 EM4I& L onne tJbirlasunlife% om /E9,I*EL $$$%birlasunlife% om CANARA RO$ECO MUTUAL #UND AMC 6 CANARA RO$ECO ASSET MANAGEMENT CO)LTD) 3<:,*RU3*I<: +<U,E,B*+ )&<<R >,/4&3+4:D +IR43+4:D M4R2 94&&4RD E,*4*E MUM94I"B00001 P+<:E L ??>@>000,??>@>001,??>@>002 EM4I& L rmfJ anararobe o% om /E9,I*EL $$$% anararobe o% om DEUTSCHE MUTUAL #UND AMC 6 DEUTSCHE ASSET MANAGEMENT FINDIAG PVT)LTD) 222,6<D46 +<U,E,2:D )&<<R DR%D%:%R<4D )<R* MUM94I"B00001 P+<:E L ??>@B.00 EM4I& L d$s%mutualJdb% om /E9,I*EL $$$%d$s"india% om DSP $LACKROCK MUTUAL #UND AMC 6 DSP $LACKROCK INVESTMENT MANAGERS LTD) *U&,I4:I 3+4M9ER,,/E,* /I:2,11*+ )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L ??>E@000 EM4I& L servi eJds'bla !ro !% om /E9,I*EL $$$%ds'bla !ro !% om EDEL-EISS MUTUAL #UND AMC 6 EDEL-EISS ASSET MANAGEMENT LTD) 3+4:DERMU6+I,10*+ )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L B0AEAA00 EM4I& L investor%am Jedel a'% om /E9,I*EL $$$%edel$eissmf% om ESCORTS MUTUAL #UND AMC 6 ESCORTS ASSET MANAGEMENT LTD) 11,,3I:DI4 +<U,E 3<::4U2+* 3IR3U, :E/ DE&+I"110001 P+<:E L 2..>1.B.,2..21?>B,2..2>1EE EM4I& L hel'Jes ortsmutual% om /E9,I*EL $$$%es ortsmutual% om

1BE

#IDELIT7 MUTUAL #UND AMC 6 #IL #UND MANAGEMENT PVT)LTD) >?,M46ER 3+4M9ER, ;I,>*+ )&<<R 220,:4RIM4: P<I:* MUM94I"B00021 P+<:E L ??>>B000 EM4I& L investor%lineJfidelity% o%in /E9,I*EL $$$%fidelity% o%in #ORTIS MUTUAL #UND AMC 6 #ORTIS INVESTMENT MANAGEMENT FINDIAG PVT)LTD) 101,,46+4R 9+4;4:,10*+ )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L ??>?0000 EM4I& L ustomer areJfortisinvestments%in /E9,I*EL $$$%fortisinvestments%in #RANKLIN TEMPLETON MUTUAL #UND AMC 6 #RANKLIN TEMPLETON ASSET MANAGEMENT FINDIAG PVT)LTD) /<36+4RD* *</ER,,&E;E& B 94:DR4"6UR&4 3<MP&EI , 94:DR4 7E8 MUM94I"B000>1 P+<:E L ?E>1A100 EM4I& L m!tgJtem'leton% om /E9,I*EL $$$%fran!lintem'letonindia% om GOLDMAN SACHS MUTUAL #UND AMC 6 GOLDMAN SACHS ASSET MANAGEMENT FINDIAG PVT)LTD) A>1"4,R4*I<:4& +<U,E 4PP4,4+E9 M4R4*+E M4R2 PR49+4DE;I MUM94I"B0002> P+<:E L ??2EA.22,??2EA0.2 EM4I& L gsamindiaJgs% om /E9,I*EL $$$%gsam%in HD#C MUTUAL #UND AMC 6 HD#C ASSET MANAGEMENT CO)LTD) R4M<: +<U,E,.RD )&<<R +%*%P4RE6+ M4R2 1?A,943694D RE3&4M4*I<:,3+UR3+24*E MUM94I"B00020 P+<:E L ??.1?... EM4I& L liserJhdf fund% om /E9,I*EL $$$%hdf fund% om HS$C MUTUAL #UND AMC 6 HS$C ASSET MANAGEMENT FINDIAG PVT)LTD) .1B,D%:%R<4D, )<R* MUM94I"B00001 P+<:E L ??1B>000 EM4I& L hsb mfJhsb % o%in /E9,I*EL $$$%assetmanagement%hsb % om5in ICICI PRUDENTIAL MUTUAL #UND AMC 6 ICICI PRUDENTIAL ASSET MANAGEMENT CO)LTD) PE:I:,U&4 *</ER,@*+ )&<<R PE:I:,U&4 3<RP<R4*E P4R6 24:P4*R4< 64D4M M4R2,&</ER P4RE& MUM94I"B0001. P+<:E L 2BAAE000

EM4I& L enKuiryJi i i'ruam % om /E9,I*EL $$$%i i i'ruam % om ID$I MUTUAL #UND AMC 6 ID$I ASSET MANAGEMENT LTD) ID9I 9UI&DI:2,2:D )&<<R P&<* :<%.A"B1,,E3*<R"11 39D 9E&4PUR :4;I MUM94I"B00?1B P+<:E L ??0A?100 EM4I& L onta tusJidbimutual% o%in /E9,I*EL $$$%idbimutual% o%in ID#C MUTUAL #UND AMC 6 ID#C ASSET MANAGEMENT CO)PVT)LTD) 1,I:DI49U&&, 3E:*RE @B1,JUPI*ER MI&& 3<MP<U:D ,E:4P4*I 94P4* M4R2,E&P+I,*<:E R<4D 7/8 MUM94I"B0001. P+<:E L ??2@AAAA EM4I& L investorJidf mf% om /E9,I*EL $$$%idf mf% om ING MUTUAL #UND AMC 6 ING INVESTMENT MANAGEMENT FINDIAG PVT)LTD) ?015?02,/I:D,<R <)) 3%,%*%R<4D 64&I:4,,4:*43RUV 7E8 MUM94I"B000A@ P+<:E L B0@2EAAA EM4I& L informationJin%ing% om /E9,I*EL $$$%ingim% o%in OM #INANCIAL MUTUAL #UND AMC 6 OM #INANCIAL ASSET MANAGEMENT CO)LTD) 101,M46ER 3+4M9ER, III,10*+ )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L .A@EEEEE EM4I& L m!tgJFmfinan ial%in /E9,I*EL $$$%Fmfinan ialmf% om OP MORGAN MUTUAL #UND AMC 6 OP MORGAN ASSET MANAGEMENT INDIA PVT)LTD) 64&P4*4RU ,D:ER2D,.RD )&<<R,/E,* /I:2 ,4:*43RUV 7E8 MUM94I"B000>> P+<:E L ?E@.E000 EM4I& L india%investorsJF'morgan% om /E9,I*EL $$$%F'morganmf% om KOMC MUTUAL #UND AMC 6 KOMC ASSET MANAGEMENT CO)LTD) 1?@,4*&4:*4 :4RIM4: P<I:* MUM94I"B00021 P+<:E L 2@.2.>0,2@.2.>1 EM4I& L !Fm mutualJ!Fm mutual% om KOTAK MAHINDRA MUTUAL #UND AMC 6 KOTAK MAHINDRA ASSET MANAGEMENT CO)LTD) >4,946+*4/4R,>*+ )&<<R 22A,:4RIM4: P<I:* MUM94I"B00021 P+<:E L ??.@BBBB

1B@

EM4I& L mutualJ!ota!% om /E9,I*EL $$$%!ota!mutual% om LET MUTUAL #UND AMC 6 LET INVESTMENT MANAGEMENT LTD) /<R&D *R4DE 3E:*RE 3<MP&EI,3E:*RE" 1,2E*+ )&<<R, 3U))E P4R4DE MUM94I"B0000> P+<:E L ?1.???00 EM4I& L ltmfJlntmf% om /E9,I*EL $$$%lntmfl% om LIC MUTUAL #UND AMC 6 LIC MUTUAL #UND ASSET MANAGEMENT CO)LTD) I:DU,*RI4& 4,,UR4:3E 9UI&DI:2 B*+ )&<<R <PP%3+UR3+24*E ,*4*I<: MUM94I"B00020 P+<:E L 22@B2>21,22@>1??.,22@>1??1 EM4I& L li mfam Jli mutual% om /E9,I*EL $$$%li mutual% om MIRAE ASSET MUTUAL #UND AMC 6 MIRAE ASSET GLO$AL INVESTMENTS FINDIAG PVT)LTD) U:I* ?0?,/I:D,<R,?*+ )&<<R <)) 3,* R<4D, 64&I:4,,4:*43RUV 7E8 MUM94I"B000A@ P+<:E L ?E@00.00,?E@00.01 EM4I& L ustomer areJmiraeassetmf% o%in /E9,I*EL $$$%miraeassetmf% o%in MORGAN STANLE7 MUTUAL #UND AMC 6 MORGAN STANLE7 INVESTMENT MANAGEMENT PVT)LTD) )<R9E, 9UI&DI:2,>*+ )&<<R 3+4R4:JI* R4I M4R2, )<R* MUM94I"B00001 P+<:E L 220A??00 EM4I& L mfinvestor areJmorganstanley% om /E9,I*EL $$$%morganstanley% om5indiamf MOTILAL OS-AL MUTUAL #UND AMC 6 MOTILAL OS-AL ASSET MANAGEMENT CO)LTD) @15@2,94J4J 9+4;4:,@*+ )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L .A@0B2?. EM4I& L mfservi eJmotilalos$al% om /E9,I*EL $$$%motilalos$al% om5assetmanagement PEERLESS MUTUAL #UND AMC 6 PEERLESS #UNDS MANAGEMENT CO)LTD) 1,3+</RI:2+EE ,PU4RE, .RD )&<<R 6<&64*4"E000?A P+<:E L B01@>000 EM4I& L onne tJ'eerlessmf% o%in /E9,I*EL $$$%'eerlessmf% o%in PRINCIPAL MUTUAL #UND AMC 6 PRINCIPAL PN$ ASSET MANAGEMENT CO)PVT)LTD) EI3+4:2E P&4V4,2:D )&<<R,9 /I:2 94:DR4"6UR&4 3<MP&EI, 94:DR4 7E8 MUM94I"B000>1 P+<:E L ?EE20>>>

EM4I& L ustomerJ'rin i'alindia% om /E9,I*EL $$$%'rin i'alindia% om IUANTUM MUTUAL #UND AMC 6 IUANTUM ASSET MANAGEMENT CO)PVT)LTD) 10E,RE2E:* 3+4M9ER,,1,* )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L 22@E>A2. EM4I& L investorrelationsJKuantumam % om /E9,I*EL $$$%Kuantumam % om RELIANCE MUTUAL #UND AMC 6 RELIANCE CAPITAL ASSET MANAGEMENT LTD) <:E I:DI49U&&, 3E:*RE,*</ER 1,12*+ )&<<R JUPI*ER MI&&, 3<MP<U:D% E&P+I:,*<:E R<4D MUM94I"B0001. P+<:E L .0AAB?00 EM4I& L ustomer` areJrelian emutual% om /E9,I*EL $$$%relian emutual% om RELIGARE MUTUAL #UND AMC 6 RELIGARE ASSET MANAGEMENT CO)PVT)LTD) 2D, I:)I:I*D,.RD )&<<R P4R4:JPE Q9Q ,3+EME ,U9+4,+ R<4D,;I&E P4R&E 7E8 MUM94I"B000>E P+<:E L ?E.10000 EM4I& L servi eJreligaremf% om /E9,I*EL $$$%religaremf% om SAHARA MUTUAL #UND AMC 6 SAHARA ASSET MANAGEMENT CO)PVT)LTD% AE"A@,4*&4:*4,A*+ )&<<R :4RIM4: P<I:* MUM94I"B00021 P+<:E L ?E>20121,?E>20122,?E>2012E EM4I& L saharamutualJsaharamutual% om /E9,I*EL $$$%saharamutual% om S$I MUTUAL #UND AMC 6 S$I #UNDS MANAGEMENT PVT)LTD) 1A1,M46ER *</ER, QEQ ,3U))E P4R4DE MUM94I"B0000> P+<:E L 221@0221,221@022.,221@0222 EM4I& L 'artnerforlifeJsbimf% om /E9,I*EL $$$%sbimf% om SHINSEI MUTUAL #UND AMC 6 SHINSEI ASSET MANAGEMENT FINDIAG PVT)LTD) +4R3+4:DR4I +<U,E,>*+ )&<<R @1,M4+4R,+I 64R;E R<4D M4RI:E &I:E, MUM94I"B00002 P+<:E L ??1B2A00 EM4I& L investor areJshinseifunds% om /E9,I*EL $$$%shinseifunds% om SUNDARAM $NP PARI$AS MUTUAL #UND AMC 6 SUNDARAM $NP PARI$AS ASSET MANAGEMENT CO)LTD) ,U:D4R4M *</ER,,2:D )&<<R B?,/+I*E, R<4D, R<D4PE**4+ 3+E::4I"?0001B

1BA

P+<:E L 2@>@..?2,2@>@..?E,22@>11@1 EM4I& L sundarammutualJsundarambn''aribas%in /E9,I*EL $$$%sundarambn''aribas%in TATA MUTUAL #UND AMC 6 TATA ASSET MANAGEMENT LTD) )<R* +<U,E 221,DR%D%:%R<4D )<R* MUM94I"B00001 P+<:E L ??>E@2@2,??>E@2>A EM4I& L !iranJtataam % om /E9,I*EL $$$%tatamutualfund% om TAURUS MUTUAL #UND AMC 6 TAURUS ASSET MANAGEMENT CO)LTD) 4M& 3E:*RE"1,2R<U:D )&<<R @,M4+4& I:DU,*RI4& E,*4*E M4+464&I 34;E, R<4D,4:D+ERI 7E8 MUM94I"B000A. P+<:E L ??2B2E00 EM4I& L KueriesJtaurusmutualfund% om /E9,I*EL $$$%taurusmutualfund% om

UTI MUTUAL #UND AMC 6 UTI ASSET MANAGEMENT CO)LTD) U*I *</ER,2: 9&<36 94:DR4"6UR&4 3<MP&EI 94:DR4 7E4,*8 MUM94I"B000>1 P+<:E L ??E@???? EM4I& L !hurshid%mistryJuti% o%in /E9,I*EL $$$%utimf% om

1>0

LIST 3

NGOsBVOLUNTAR7 AGENCIES REGISTERED -ITH IEP#

ACTION O# STUDENTS AND 7OUTH #OR A-ARENESS AND DEVELOPMENT B0A,1,* )&<<R,R4M4 M4R6E* MU:IR64 :E/ DE&+I " 1100?E ADARSH SEVA SANSTHAN ;I&&42E L DEE+ " 22>202 4,+<6PUR 3+43+U ,4R4I: P<,* L ,IR4U&I 64&4: DI,*RI3* L 94R494:6I AGENC7 #OR $ACK-ARD COMMUNIT7 DEVELOPMENT FA$CDG 4* L M<<:&4:D ;I4 L 9R4+M42IRI P%<%9+U94: PUR " E>2011 DI,*RI3* L PURI ADARSHA RURAL DEVELOPMENT E TRAINING SOCIET7 6<DI6<:D4 " >1>?01 3+I&4M4*+UR DI,*RI3* L 4:4:*4PUR ANNAI KASTUR$A MAGLIR MUNNETRA SANGAM 12?,*+IRUM4&4I 3<&<:D,E*+ ,*REE* PP%3+4;4DI DI,*RI3* L M4DUR4I ARUN INSTITUTE O# RURAL A##AIRS FAIRAG 4* L 4,/46+<&4 ;I4 L M4+IM424DI P%<%64R4MU& " E>A01B DI,*RI3* L D+E:64:4& ASSOCIATION #OR -OMEN A-ARENESS E RURAL DEVELOPMENT FA-ARDG >>4,4::4 ,4&4I 4*+4:I"?.@>02 DI,*RI3* L ER<DE ASSOCIATION O# #INANCIAL PLANNERS A0E,*<&,*<D +<U,E 1>"1E,*<&,*<D M4R2 :E/ DE&+I " 110001 P+<:E L 70118">1>22A?2 )4I L 70118">1>22A?1 AVADH GRAMEEN VIKAS SANSTHAN ?1A,,+4+24:J 7:E4R +E4D P<,* <))I3E8 ,U&*4:PUR " 22@001 P+<:E L 70>.?28"22.01@, 70>.?28"22>>>., 70>.?28" 2>>02. AVADH SAMAO SEVA SANSTHAN ;I&&42E L 6URMIDEE+4 P<,* L R4M4D4,P4**I *E+,+I& L 4694RPUR DI,*RI3* L 4M9ED64R:424R $ASTI AREA DEVELOPMENT COUNCIL 4*5P%<%,<;4R4MPUR " E>?001 DI,*RI3* L 94&4,<RE $HAG7A A$HIVRIDHI SEVA SAMSTHE :<%B.,:E/ ;E:64*E,+ :424R 6<*:<<R DI,*RI3* L 2U&94R24 $HARAT O7OTI J+4:JIRI M4:24&4 3U**436 " E>.00A $HARTI7A MAHILA KAL7AN SAMITI PR464,+ 9+4/4: )4IV494D R<4D 94R494:6I " 22>001 $RIGHT ASSOCIATION #OR NO$LE E DECENT HUMAN UNDERSTANDING F$ANDHUG M4D+U94:,.RD &4:E PURI " E>2002 CENTRE #OR ALTERNATIVE TRAINING EVALUATION AND RESEARCH FCATERG R4JE:DR4 :424R,P%<%M4D+UP4*4:4 3U**436 " E>.010 P+<:E L 70?E18"2.B.B?2 )4I L 70?E18"2.B.B?2 EM4I&L aterorrissaJhotmail% om, aterorissaJyahoo% o%in CENTRE #OR COMMUNIT7 DEVELOPMENT P4*+4P4*:4M R<4D :E4R 3+E36 P<,* P4R4&46+EMU:DI " E?1200 CENTRE #OR HUMAN RIGHTS RESEARCH STUDIES .E51,&4&M<+4: 2+<,+ R<4D :E4R 9U, ,*4:D P%<%6RI,+:4:424R " EB112. DI,*RI3* L :4DI4 CENTRE #OR SOCIAL EDUCATION E DEVELOPMENT FCSEDG B>,E4,* ;4I*+D4:4*+4PUR4M M4DUR4I " ?2>01@ CHARITES E SOCIAL RESEARCH #OUNDATION >>15J+4520B,R4M :424R 4&4M942+ &U36:</"22?00> CHETTANA VIKAS 4&424R6<I& " ?2>>.01 DI,*RI3* L M4DUR4I CHE7UTA #OUNDATION +%:<%2"2"E?.,*U&4,I:424R 3<&<:D 2<&:464 4M9ERPE* +DDER494D " >0001.

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CHITRAKOOT SEVA ASHRAM MI,,I<: R<4D :E4R 3+UR3+24*E ,4*RU2+4:PURI,64R;I 3+I*R46<<* " 21020> CITIPENS ASSOCIATION #OR RURAL DEVELOPMENT FCARDG 3<RP<R4*I<: R<4D 9ER+4MPUR " E?0001 DI,*RI3* L 24:J4M COMMUNIT7 ORGANISED #OR OPPRESSED AND DEPRESSED UP&I)*ME:* 73<<DU8 2252A"9.,P4&4:I4PP4 :424R *RI3+D R<4D R4M4:4*+PUR4M 3<IM94*<RE " ?B10B> CONSUMER ASSOCIATION O# PONDICHERR7 MI2"1>,4DD4:6U**IP4&4D4M P<:DI3+ERRD " ?0>00A CONSUMER EDUCATION AND RESEARCH SOCIET7 ,UR46,+4 ,4:6<<&, *+4&*EJ 4+EMD494D"24:D+I:424R +I2+/4D 4+MED494D " .@00>B P+<:E L 70EA8"2EB@AAB>, 70EA8"2EB>0>2@, 70EA8" 2EB>10AE )4I L 70EA8"2EB@AABE CONSUMER UNIT7 AND TRUST SOCIET7 FCUTSG D"21E,9+4,64R M4R2,94:I P4R6 J4IPUR " .0201? P+<:E L 701B28"20EB@2 )4I L 70B1B8"220EB@?, 70B1B8"220.AA@ EM4I&L utsJ uts%org DEEP VID7A MANDIR SAMITI 24D4*RI:424R D4U,4 " .0..0. DEEPA RURAL DEVELOPMENT SOCIET7 1515.21,R%6%:424R <PP%U,+<D4D4 E%M%,3+<<& 4:4:*4PUR DEVELOPMENT EDUCATION E -EL#ARE INSTITUTE FDE-IG :<%1BA52,D4&&DUR4I 9U:24&</ ,*REE* 6<;I&P4**I " ?2@>02 DI,*RI3* L *+<<*+U6UDI DOMPUKAR HUMAN DEVELOPMENT SOCIET7 P, L 3+4PR4 ;I&&%C P< D<MPU64R " EB112. DI,*RI3* L :4DI4 EDUCATION3COMMUNICATION E DEVELOPMENT TRUST FEDUCATORG P<:DU6UDI& 25>4,M4M4R4*+UP4**I R<4D U,I&4MP4**I " ?2>>.2 DI,*RI3* L M4DUR4I

EETARAM 7OUTH ASSOCIATION +%:<%2"2"E5.51,&4IM4REDDD 3<&<:D UPP4& " >000.A DI,*RI3* L R%R% ENVIRONMENTAL RESEARCH INSTITUTE AND HUMAN CARE <))I3E :<%10>E,,4MI:4*+4PUR4M <<R24M P<,* 6<&4R 2<&D )IE&D, " >?.120 DI,*RI3* L 6<&4R #EDERATION O# CONSUMER ORGANISATION ,1,9E43<:E ;IE/ 2?,64R4:EE,/4R4R P42<D4 ,*REE* 3+E::4I " ?0000B GANIA UNNA7AN COMMITTEE P%<%9E&4P4D4P4*:4 " E>20?A DI,*RI3* L :4D424R+ GAURI OAN KAL7AN VIKAS SAMITI ME MI:I MI2"B@ +EM4:*+ ;I+4R,94RR4 " 2 64:PUR " 20@02E GHATKOPAR INVESTORSQ -EL#ARE ASSOCIATION FGI-AG @,:EEM 3++4D4 M%2%R<4D 2+4*6<P4R7E4,*8 MUM94I " B000EE P+<:E L 70228"2>110B2?, 70228"2>1?0>BB, 70228" 2>11>11> /E9,I*E L $$$%ghat!o'arinvestors%org GRAM VIKAS PARISHAD R4:24&<< ;I4 L 64*+I4*<&I P%<%JUM4RMUR " E@2B2E DI,*RI3* L :424<: P+<:E L 70.?E28"2BA012 EM4I&L gv'EAJhotmail% om GRAMA VIKAS SOCIET7 424&42UR6I " >?2101 *4&U6 L 3+I3694&&4PUR DI,*RI3* L 6<&4R GRAM7A UNNA7AN SANSTHA P<,* 9<I%.@ ;I&&%P%<%94R6<&4 " E@2001 DI,*RI3* L :424<: GUOARAT INVESTORS AND SHAREHOLDERS ASSOCIATION 6IM,IM,.RD )&<<R :E4R :4;R4:2PUR4 P<,* <))I3E 4+MED494D " .@000A P+<:E L 70EA8"2?B.01E0 )4I L 70EA8"?>?@A?E GURU NANAK SILAI $UNAI KADAI PRAKSHIKSHAN SAMITI /4RD :<%B PI&I94:24 " ..>?0. DI,*RI3* L +4:UM4:24R+

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HARIHAR $AHUUDDESHI7A SANSTHA 35< :46+4*E :42PUR R<4D,;ID+D4 :424R ,+REE6RU,+:4 M4:DIR /4RD+4 " BB2001 HEALTH CARE E SOCIAL -EL#ARE SOCIET7 2B51?E?, 9R4+M4:4:D4PUR4M D4R24MI**4 :E&&<RE " >2B00. INDIAN INSTITUTE O# TECHNOLOG7 E ENTREPRENEURS FINDIAG II3R 34MPU, :E4R M4:2&4 *R4DER, ,+46*I 3+</34 9IJ:<R " 2B?E?2 INSTITUTE O# COMPAN7 SECRETARIES O# INDIA3THE FICSIG I3,I +<U,E 22,I:,*I*U*I<:4& 4RE4 &<D+I R<4D :E/ DE&+I " 11000. INTEGRATED -OMEN DEVELOPMENT INSTITUTE 1B5>E,*+IRU :424R, ;I&&I;4664M 3+E::4I " ?000BA P+<:E L 70BB8"?1@0B@A )4I L 70BB8"?1@BAE0 EM4I&L $omenaidJmd.%vsnl%net%in INVESTORS AND MARKETING MEM$ERQS -EL#ARE SOCIET73THE @E,&E:I: ,*REE*,1,* )&<<R 6<&64*4 " E0001. INVESTORS GRIEVANCE #ORUM FIG#G :EE&4M :424R MU&U:D7E4,*8 MUM94I " B000@1 P+<:E L 70228">?BB1>1 EM4I&L igf%mumbaiJvsnl%net INVESTORS GRIEVANCES #ORUM FAG 1"@">225E,,+D4M PR4,4D I:,*I*U*E <) ,<3I4& ,ER;I3E, +<*E& ,/4R4J &4:E 3+I664D4P4&&D +DDER494D " >00020 OAN KAL7AN SEVA SANSTHAN J42DI,+ 9+4;4: M<+4&&4 2<<R4: *4&4ID4 :E4R M4R/4RI ,3+<<& ,+4+J4:PUR " 2B2001 KAMALNISTHA SANSTHAN ;I&&42E C P<,* L 6<&,I4 " ...0B2 *4&U64 L :4/4&24R+ DI,*RI3* L J+U:J+U:U KARIMPUR SOCIAL -EL#ARE SOCIET7 1,*4R46D4, R<4D :4DI4 " EB11>2 DI,*RI3* L :4DI4

KARTIK SHIKSHAN SANSTHAN 12E52@A,JU+I 9U, DEP<* 64:PUR " 20@01B KERALA INVESTOR PROTECTION AND EDUCATION SOCIET7 .?51??A,MU&&E:6UV+I +<U,E <PP%,6D&I:E M4R9&E 4R3+,64**464R4 R<4D P%<%64&<<R 6<3+I " ?@201E KISAN $AL AVAM MAHILA KAL7AN SAMITI ;I&&42E P4R;4:PUR P<,*%94&PUR *E+,I& 6E:4&24:J " 2E1001 DI,*RI3* L 2<:D4 KOLHAPUR INVESTORSQ ASSOCIATION 6<&+4PUR " B1?001 P+<:E L 702.18"2??EE2E, 702.18"2?>.22E, AB220BBE> MR%2IRI,+%3%D<,+ EM4I&L !ialJvsnl% om KRISHNA OAN KAL7AN SAMITI 6+4R64 R<4D +U,,4I:494D J4U:PUR LITERATE -EL#ARE ASSOCIATION3TAMILNADU M4I: R<4D P%<%64D4M4&4I6U:DU " ?2>>EA *4&U6 L 4U:DIP4**I DI,*RI3* L *+E:I MAA KUSHARI MAHILA VIKAS SANSTHAN ;I&&42E 4:D P<,* L 6U,UM9I ;I4 L :4/4924:J DI,*RI3* L U::4< MAHADEV VIKAS SAMITI 2A2,JI/4JI :424R *+4*IPUR 2/4&I<R " BEB011 MAHILA MANDAL SE-A SANSTHAN BE?,R4MJ4:46I :424R ;4,+4R4*+PUR 2<R46+PUR MARCH O# 7OUTH #OR HEALTH3 EDUCATION E ACTION #OR RURAL TRUST FM7:HEARTG RP"11>,P4:D4; :424R *4:64P4:I R<4D 9+U94:E,/4R " E>101@ MIDAS TOUCH INVESTORS ASSOCIATION 424R/4&4 9UI&DI:2 *+E M4&& 64:PUR " 20@001 P+<:E L 70>128".0B@>B, 70>128".0B@BB, A@.A0.22> MR%;IRE:DR4 J4I: EM4I&L a!nJgaitode% om, aishJmd.%vsnl%net%in

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NATURE ENVIRONMENT EDUCATION E DEVELOPMENT SOCIET7 FNEEDSG 25202,/4*ER *4:6 R<4D P<,* L ;4&&IP4*E* ;4:ID4M94DI DI,*RI3* L ;E&&<RE NEELKANTH SARVSE-A SANSTHAN .51AA,;I64, :424R &U36:</ " 22?022 NEHRU 7UVA MANDAL AKKARA RESULPUR SAMITI ;I&&42E L 4664R4 R4,U&PUR P<,* L D4DR4U& ,+4+J4+4:PUR " 2B2001 NEHRUOI SEVA CENTRE 1@2,M4I: R<4D P%<%ME**UPE**I " ?2?20. DI,*RI3* L ;IRUD+U:424R NILACHAL SEVA PRATISTHAN 4* L D4D4;I4+4R ;I4 L 64:4, P%<%24D4,4+I " E>201E DI,*RI3* L PURI ODD #OUNDATION P&<* :<%E>A ,4+EED :424R 9+U94:E,/4R ORGANIPATION #OR RURAL DEVELOPMENT 2A51,MU&&4I :424R PU&ID42<U:D4MP4**D 64RUM4*+UR P%< " ?2>>1B *4&U6 L *+IRUM4:24&4M DI,*RI3* L M4DUR4I PRAGATI EVAM PRERENA SANSTHA 49<;E 3++4;I ,*UDI< R4M :424R,,<D4&4 J4IPUR " .0201A PRAKRITIK CHIKITSALA7A TATHA SAMITI :E4R M4ID4: *4:,E: R<4D,P4D4; 2/4&I<R PRIME INVESTORS PROTECTION ASSOCIATION AND LEAGUE FPIPALG 3"B.4,24:2<*RI E:3&4;E 4&46:4:D4 :E/ DE&+I " 11001A P+<:E L 70118"2?02E1?B, 70118".2A0?.@1 MR%4,+I,+ 424R/4&, ,R%2E:ER4& M4:42ER EM4I&L infoJ$at houtinvestors% om /E9,I*E L $$$%$at houtinvestors% om RAO MAHILA SHILP KALA VIKAS SANSTHAN ;I&&42E L +EM4RI4 &U36:</ R<4D,;4,4:*PUR P<,* L 6<*;4&I DE+4*+ 94+R4I3+ " 2E1@01

RAOKOT SAHER OILLA GRAHAK SURAKSHA MANDAL .2A,P<P4*9+4I ,<R4*+I4 9+4;4: ,4D4R 94V4R R4J6<* " .?0001 EM4I&L mavanirambJsan harnet%in REENA SAMAO SEVA SAMITI &4*E ,+RI ,4:*+<,+ ,+4RM4 ;46I& 64 M464: R4J24D+ P+4*+46 6E :EE3+E D4*ID4 RURAL DEVELOPMENT TRUST ?B52.>,2<;ER:ME:* +<,PI*4& R<4D *+E:I " ?2>>.1 S)K)PU$LIC SCHOOL SAMITI 3+4:D:I 3+</6 PUR4:I 494DI ,RI 24:24:424R " ..>001 SARDAR PATEL SANSTHAN @E,9+<<P 3<&<:D,,*REE* :<%1 :E4R ,6+I; M4:DIR ,%,%9%R<4D ,RI 24:24:424R " ..>001 SAVERA )"1@,E0 )EE* R<4D PREM :424R"1 6IR4DI,:4:2&<I :E/ DE&+I " 1100@? SEEMANT GRAMIN MAHILA VIKAS SAMITI RI*+4 942R4+ P<,* L 9+4R4D+I DI,*RI3* L 942E,/4R SHARDA SHIKSHA SAMITI ,+4+4PUR,:424R P4&I64 3<&<:D ,+UJ4&PUR 3I*D ,+UJ4&PUR " B?>..1 SHIV SHIKSHAN SANSTHAN PR4*4P :424R ,+<D<PUR,,4:24:ER J4IPUR " .0200. SHREE ONANODA7A GRAMIN VID7A TRUST :<%.E0B,,U9R4M4:I 9UI&DI:2 MU*D4&PE*,MU&9424& *</: DI,*RI3* L 6<&4R SNEKITHI TRUST ;%PU*+UR ,4*+ID4M4:24&4M P<,* " ?.A120 *4&U6 L 6U&I*+4&4I DI,*RI3* L 64RUR SOCIAL E LITERAC7 DEVELOPMENT ASSOCIATION FSLDAG ,,"12@>,,E3*<R"+ &D4 3<&<:D,64:PUR R<4D &U36:</ " 22?012

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SOCIET7 #OR CAPITAL MARKET RESEARCH AND DEVELOPMENT 10"D,9I2J<, *</ER,10*+ )&<<R :E*4JI ,U9+4,+ P&43E PI*4MPUR4 DE&+I " 1100.B P+<:E L 70118"2E1A0BE@ )4I L 70118"2E1@EB0E EM4I&L s mrdJbol%net%in SOCIET7 #OR COMMUNIT7 DEVELOPMENT PROOECT @@,,REER4:24P4&4D4M R<4D 6UM4R4,4MDP4**D ,4&EM"?.?00E SOCIET7 #OR CONSUMERQS E INVESTORS PROTECTION FSCIPG 1510A,2:D )&<<R <&D R4JE:DER :424R :E/ DE&+I " 1100?0 SOCIET7 #OR DEVELOPMENT O# THE OPPRESSED B0,4;4ID4R ,*REE* MU&&4I;4DI " ?.?1B1 *4&U6 L 4**UR DI,*RI3* L ,4&EM SOCIET7 #OR EDUCATION ACTION AND DEVELOPMENT B5.B 4,1,* )&<<R U3+4PP4R4M9+U M4I: R<4D 4IDD4R 9U:2&</ M4DUR4I " ?2>01E SOCIET7 #OR EMANCIPATING NEO SOCIAL EDUCATION FSENSEG M4I: R<4D *+IRUPP43+E**I " ?.0?10 DI,*RI3* L ,I;424:2I SOCIET7 #OR REHA$ILITATION E DEVELOPMENT O# RURAL -ORKERS FSHRUTIG )&4* :<%1.>,P&<* :<%>? 4MR4P4&I 2R<UP +<U,I:2 ,<3IE*D I%P%EI*E:,I<:, P4*P4R24:J DE&+I " 1100A2 SRAVANI MAHILA MANDAL 125B5.B0,<9U&4DE;4 :424R 4:4:*4PUR " >1>001

SUR7A RURAL DEVELOPMENT SOCIET7 M<*464P4&&I 2U&UR P<,* " >?120E *4&U6 L 942EP4&&I DI,*RI3* L 6<&4R TAMILNADU INVESTORS ASSOCIATION 4J"AE,A*+ M4I: R<4D 4::4 :424R 3+E::4I " ?000B0 P+<:E L 70BB8"BA?0BBA, 70BB8"2@.12>.A, A@B01?2@.0 MR%4%6%:4R4D4:, PRE,IDE:* EM4I&L aishJvsnl% om, aishJmd.%vsnl%net%in /E9,I*E L $$$%taindia% om TECHNICAL E SOCIAL RESEARCH ACADEM7 9".25?,,49+4P4*I 9+4;4: :4RI4 ;4R4:4,I " 22100> TR7 +%<%4".. :E/ ,E&4MPUR M4R6E* DE&+I " 1100>. VIVEKANAND GRAMOD7OG SANSTHAN 6E,+4; :424R 3<&<:D ,+4+J4+4:PUR"2B2001 VOC RURAL DEVELOPMENT CENTRE FVOCRDCG 64*3+4I64**D " ?2>21@ *4&U6 L ;4DIP4**D DI,*RI3* L M4DUR4I VOLUNTAR7 ORGANIPATION IN INTEREST O# CONSUMER EDUCATION FVOICEG BB1,794,EME:*8 J4:2PUR4 M4*+UR4 R<4D :E/ DE&+I " 1100BB P+<:E L 70118"2B.1A0@1, 70118"2B.1A0E@ EM4I&L voi eJvsnl% om 100% DU24 MUR*I ,E;4 4,+R4M 2<P4&PUR " E>202> DI,*RI3* L :4D424R+ -OMENS ORGANISATION #OR RURAL DEVELOPMENT F-ORDG P<,* 9<I :<%1 P%<%P4:D4M4:24&4M"?.E20@ *4&U6 L P4RM4*+I ;E&UR DI,*RI3* L :4M4664&

INVESTOR ASSOCIATIONS REGISTERED -ITH SE$I

ALL GUOARAT INVESTOR TRUST 6RI,+:4 3<MP&EI,94,EME:* :E4R 3+<I3E RE,*4UR4:* 3%2%R<4D 4+MED494D".@000A P+<:E L .00@0@@1 EM4I& L infoJagi't%org /E9,I*E L $$$%agi't%org PROTECTION $HOPAL STOCK INVESTORS ASSOCIATION EA,M4&;ID4 :424R 9+<P4&"B?200. P+<:E L 2>>>.A?,2>E2E>@ $OM$A7 SHAREHOLDERSQ ASSOCIATION3THE >?,9+UPE: 3+4M9ER,,.RD )&<<R A,D4&4& ,*REE*, )<R* MUM94I"B0002. P+<:E L 22?EB@@>

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ACKNO-LEDGEMENTS E DISCLAIMER
ACKNO-LEDGEMENTS *his reading material has been 're'ared5 om'iled5ada'ted 'rimarily from the information available on the $ebsites of the Ministry of 3or'orate 4ffairs 7$$$%m a%gov%in8, Investor Edu ation and Prote tion )und 7$$$%ie'f%gov%in8, ,E9I 7$$$%sebi%gov%in8, :,E 7$$$%nseindia% om8, 9,E 7$$$%bseindia% om8, M3I",I 7$$$%m #"s#% om8 and PRIME Database 7$$$%'rimedatabase% om8 and from the reading material 'rodu ed by I34I, I3,I and I3/4I% DISCLAIMER *he information 'rovided herein is 'urely for dissemination of information and reating a$areness among the investors about various as'e ts of the a'ital mar!et% 4lthough due are and diligen e has been ta!en in the 're'aration5 om'ilation of this reading material, the Ministry of 3or'orate 4ffairs or the Editor or the organi(ations distributing this reading material shall not be res'onsible for any loss or damage resulting from any a tion or de ision ta!en by a 'erson on the basis of the ontents of this reading material% It may also be noted that la$s5regulations governing the a'ital mar!et are ontinuously

u'dated5 hanged, and hen e an investor should familiari(e himself $ith the latest la$s5regulations by visiting the relevant $ebsites or onta ting the relevant regulatory body%

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