Maninder final summer training project

A PROJECT REPORT ON “ULIPS v/s Mutual Fund” as an investment option MBA (2009-2011) Under the Supervision of- Ms. Jyoti Sharma (Faculty, PCTE) Mr. Sarbjit pal (ASM, HSBC Investdirect) Submitted by- Maninder Vadhrah Punjab College of Technical Education Ludhiana Acknowledgement “Gratitude is not a thing of expression, it is more a matter of feeling”. In this present world of competition there is a race of existence in which those who are having will to come forward will succeed. Project is a bridge between practical and theoretical working, with this will I have joined the project. I really wish to express my gratitude towards all those people who have helped me. I am really indebted to Mr. Sarbjit pal (ASM, HSBC Investdirect) Ludhiana, for his kind hearted support and expert advice in the completion of the project. I am also very thankful to Ms. Jyoti Sharma (Faculty, PCTE) for her timely guidance, supervision & encouragement that have helped me to get this golden opportunity and who provided me her expert advice, inspiration & moral support in spite of her busy schedule & assignments, has mainly provided my understanding of this project. Last , but not the least, I say only this much that all are not to be mentioned but none is forgotten and I will like to extend my special thanks and gratitude to my parents who always encourage me in pursuit of excellence. Abstract There is recent controversy between SEBI and IRDA regarding the ULIPs to be treated as insurance product. Generally investors are confused between ulips and mutual fund. So in this project the between both the investment potion was analyzed and it is also determined that which is more suitable for the investors. Ulips are life insurance policies which offer a mix of investment and insurance. Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. In accordance with the requirement of MBA course I have summer training project on the topic “ULIPS v/s Mutual fund” as an investment option. The main objective of the research project was to study the two instruments and make a detailed comparison of the two. For conducting the research project sample size of 100 customers of selected. The information regarding the project research was collected through the questionnaire formed by me which was filled by the customers there. Ms. Jyoti Sharma Maninder Vadhrah (Faculty PCTE) (MBA 2C) Certificate 1 This is to certify that report entitled “ULIPs v/s Mutual fund” as an investment option among the investors of Ludhiana is submitted for the degree of MBA in subject of summer training report, is a bonifide research report carried out by Maninder kaur Vadhrah, PCTE student under my supervision & no part of this has been submitted for any other degree. The assistance and help received for the course of investigation have been fully acknowledged Ms. Jyoti Sharma (Faculty Advisor) ContentPage no. PART A Introduction to Corporate and briefing about group companies Historical Background of the Group: - The HSBC Group is named after its founding member, the Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between Europe, India & China. The inspiration behind the founding of the bank was Thomas Sutherland a scot who was then working for the Peninsular and Oriental Steam Navigation Company. He realized that there was considerable demand for local banking facilities in Hong Kong and on the China coast and he helped to establish the Bank, which opened in Hong Kong in March 1865 and in Shanghai a month later. Soon after its formation the bank opened agencies and branches around the world. Although that network reached as far as Europe and North America, the emphasis was n building up representation in China and the rest of the Asia- Pacific region. HSBC was a pioneer of modern banking practices in a number of countries. In Japan, where a branch was established in 1866, the bank acted as adviser to the government on banking and currency. In 1888, it was the first bank to be established in Thailand, where it printed the country’s first banknotes. From the outset trade finance was a strong feature of the local and International business of the bank, an expertise that has been recognized throughout its history. Bullion, exchange, merchant banking and note issuing also played an important part. By the 1880s, the bank was acting as banker to the Hong Kong government and also participated in the management of British government accounts in China, Japan, Penang and Singapore. In 1874 the bank handled China’s first public loan and thereafter issued most of China’s public loans. Introduction to HSBC: - We are the world’s local Bank. Headquarters in London, HSBC is one of the largest banking & financial services organization in the world. HSBC’s international network comprises over 9500 offices in 76 countries & territories in Europe, the Asia-Pacific region, the Americas, the Middle East & Africa. With listings on the London, Hong Kong, New York, Paris & Bermuda stock exchange share in HSBC holdings places are held by nearly 200,000 shareholders in some 100 countries & territories. The shares are traded on the New York Stock Exchange in the form of American Depository Receipts. Vision Statement To become the preferred long term financial partner to a wide base of customers whilst optimizing stakeholders value! Mission Statement To establish a base of 1 million satisfied customers by 2010. We will create this by being a responsible and trustworthy partner! Names and Location of group companies : - Latin America ,[object Object]

HSBC Bank Brazil SA, Banco Multiplo

HSBC Bank Argentina SAAsia Pacific ,[object Object]

HSBC Bank Malaysia BerhadMiddle East ,[object Object]

The Saudi British BankNorth America ,[object Object]

HSBC Bank CanadaEurope ,[object Object]

HSBC Trinkaus und Burkhardt AGThe HSBC Group in India: - The HSBC Group in India is represented by several entities including The HongKong and Shanghai Banking Corporation Limited which offers a full range of banking and financial services to its over 2.8 million customers in India through its 47 branches and 170 ATMs across 26 cities. HSBC is one of India’s leading financial services groups, with over 34,000 employees in its banking, investment banking and capital markets, asset management, insurance broking , two global IT development centres and six global resourcing operations in the country. The Bank is the founding and a principal member of the HSBC group which, with over 9,500 offices in 85 countries and territories and assets of US $2,547 Billion at 30 June 2008, is one of the world’s largest banking and financial services organizations. Table 1(a):-Group Companies in India: - S.No.CompaniesYear of Commencement of operations in India1.The Mercantile Bank of India, China & London18532.The Hongkong & Shanghai Banking Corporation Limited (HBAP)18673.HSBC Securities & Capital Markets (India) Pvt. Ltd. (HBAP)19954.HSBC Private Equity Management (Mauritius) Limited (Indialiaison Office)19955.HSBC Electronic Data Processing India Pvt. Ltd. (HDPI)20006.HSBC Primary Dealership (India) Pvt. Ltd. (HCPD)20017.HSBC Professional Services (India) Pvt. Ltd. (HPSI)20018.HSBC Software Development (India) Pvt. Ltd.(HSDI)20029.HSBC Asset Management (India) Pvt. Ltd.200210.HSBC Insurance Brokers (India) Pvt. Ltd.200311.HSBC Operations & Processing Enterprise (India) Pvt. Ltd. (HOPE)200312.Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.2008 Products/Services and brands : - Through an international network linked by advertisement techniques, rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services like- ,[object Object]

Investment BankingPersonal Financial Services (PFS): - HSBC India offers a wide range of competitively priced services & products to over 1.75 million individual resident Indians as well a Non-resident Indian customers across India, USA, UK, Middle East & South East Asia. HSBC’s 150 year presence in India allows it to enjoy the advantage of deep rooted knowledge of local markets & customs. This has lead to development of products & services, which are attuned to the financial needs of Indians in the cities where HSBC operatives. The HSBC brand is associated with core values such as transparency, trust & honesty. These factors enable HSBC India to remain highly competitive & at the leading edge of the retail & commercial banking market in the country. The distribution network in India consists of 47 branches in 26 cities supported by 170 ATMs at 142 locations. In addition, self service banking channels, such as Internet Banking & a 24 hour centralized all India Call Centre provide a strong backbone to the distribution capabilities. A second load balancing Call Centre became operational in January 2005 at HSBC Operations & Processing Enterprise (India) Private Limited, Chennai Customers can apply for all products & services online at www.hsbc.co.in ,[object Object]

Premier & mid market customers have access to comprehensive Financial Planning & HSBC is a market leader in the provision of Wealth Management services. In 2005, HSBC was the largest distributor of Retail Mutual Funds in India, & the biggest sales channel for Banc assurance partner TATA AIG.

Non-Resident Indians (NRI’s) constitute 56% of the Bank’s deposit base. The banking needs of NRIs are fulfilled from branches in India & 11 NRI centers abroad. We have over 84,000 NRI Customers, & have started referring customers to Financial Planning Managers & the Private Bank in the host countries, to address their needs for investment products. A free remittance service is offered between accounts held by NRIs with HSBC overseas & onshore. In 2006, an International Banking Centre was established facilitate cross border business referrals.In October 2005, HSBC launched an onshore Private Banking proposition branded HSBC Private Banking. The proposition targets clients with minimum assets of INR 25 M & encompasses asset classes such as Real Estate, Equity Derivatives & Commodities. This is an addition to Fixed Income & Equities, which are already being offered. The proposition uses “Active Advisory” as its cornerstone & key differentiator. The Bank has sought RBI approval to establish a separate consumer finance branch network under a non banking financial institution, which will distribute personal loans & ancillary products to a broader segment of the Indian consumer base than is currently served by the Bank’s existing product portfolio. The personal loan product is being piloted through the bank branch network & initial results are promising. Wealth Management & Branch Banking: - HSBC has 47 branches Pan-India across 26 locations wealth Management services are delivered to customers through qualified Wealth Management across each of these branches. Wealth Management helps customers develop & execute a realistic & practical long term savings, investments & protection plans by investing in mutual funds, bonds & purchase of insurance products manufactured by TATA AIG. Qualified, trained & accredited Wealth Management assist customers in charting a road map to achieve their individual financial goals & protect their family from unforeseen eventualities keeping in mind their available resources & based on each customers independent risk profile. Wealth Management services is currently offered to HSBC Premier & Power Vantage customers. Commercial Banking: - HSBC is a leading provider of financial services to small, medium-sized and middle-market enterprises. The Group has over 43,000 such customers in proprietors India, including sole, clubs and associations, incorporated businesses companies. Commercial and publicly quoted Banking provides a full range of banking services to these customers including multi-currency business accounts, payment and cash management, trade services, factoring and a range of borrowing solutions. In India, Commercial Banking has a presence in 47 branches covering 26 key cities and for the convenience of our customers, a multi channel service including Internet and Phone banking. For SME customers, HSBC offers the complete range of transaction baking services as well as unsecured loans and loans for and against property. The services are supported by a large Sales and Relationship Management team in key locations across the country India is the first country in the HSBC Group where Commercial Banking lends to Microfinance Institutions, thus providing indirect funding to hundreds of small business owned and run by members of underprivileged sections of society. A dedicated unit has been formed to focus on Microfinance and other Priority Sector institutions, with a view to further reach out to the marginalized and under banked. Factoring: - HSBC India offers a comprehensive range of Factoring and Supply Chain Finance Solutions, which include the following products: ,[object Object]

For the Sales Channel of our corporate customers.

Factoring (With or Without Credit Protection).

Export Factoring (With or Without Credit Protection).

Portfolio Invoice Discounting (With partial credit protection).

Distributor Finance.Payables Financing: - HSBC India’s Payable Financing product enables companies to finance their payables to vendors. This helps companies to provide immediate liquidity to vendors against their supplies at competitive rates and will enable the company to negotiate better pricing terms with vendors. It also enables the vendors to improve their cash flow by providing continuous liquidity against their receivables. Our payables financing products can be structured either against Bills of Exchange or Accepted Invoices. Purchase Order Financing is a facility to suppliers of our Corporate Banking Clients to finance their pre shipment working capital requirements Pre shipment working capital lines are sanctioned to the supplier’s against Purchase Orders issued to the suppler Factoring: - This is a service that covers the financing and collection of account receivables in domestic trade. Receivables are factored, by HSBC with added service of credit protection, collection and sales ledges administration. Thus the management of the company may concentrate on production and sales and need not concern itself with non-core activities like collection and sales ledger administration. Export Factoring enables companies to finance their open account export sales at competitive rates either in Rupees or Foreign Currency. Through a network of overseas based correspondent factors, HSBC provides credit protection against buyer default and collection services. Portfolio Invoice Discounting Essentially covers purchase of receivables with partial credit protection based on a First Loss Deficiency Guarantee. The portfolio should be well spread with acceptable levels of concentration and the debtors must have had a satisfactory track record with the company. A field audit will be conducted to determine portfolio quality based on which a First Loss Deficiency Guarantee percentage will be agreed Collection remains the responsibility of the Corporate with repayments either on a pre-agreed schedule or based on actual collections. Distributor Finance is currently offered to the distribution channel of Large Corporate Banking Clients and can be structured to suit the specific requirements of each corporate and its distribution channel. Through the Distribute Finance Program, HSBC finances company’s dealers, which will assist the company in providing steady, assured credit to its distribution chain. Payments and cash management Integrated domestic and regional cash management solutions are provided to corporate and institutional customers in India. The suite of offerings under the cash management umbrella includes comprehensive Receivables Management solutions, with an endeavour to completely integrate with the customer’s back-end operating systems and processes. HSBC is the leading foreign bank in India in providing capital market solutions, which include Bankers to Issue, Escrow account Services and Dividend payments solutions. Six Sigma measurement practices are followed for our operational capabilities. HSBC net, the HSBC Group’s online real time web-enabled corporate banking platform, allows customers to execute financial transactions, obtain international financial market information and review details of their domestic and international accounts from anywhere in the world, 24 hours a day. Trade (international and domestic) service HSBC offers a wide range of international and domestic Trade products. In India, we offer one of the largest trade processing capabilities among peer banks, spread across 5 cities. Each of our Trade processing centers is ISO 9001-2000 certified. We work closely with Group Offices overseas and leverage our extensive global network to offer structured, tailor made solutions to a wide range of customers. Our clients in India include large India and multinational companies, Mid Market companies as well as customers in the Small and Medium Enterprises segment. Corporate & Institutional Banking Corporate Banking (CB) is an integral part of the Global Banking structure which focuses on offering a full range of service to multinationals, large domestic corporate and institutional clients a wide range of banking and financial services provided to domestic and international operations of large local corporate and local operations of multinationals corporations. Services include access to commercial banking products, including working capital facilities such as domestic and international trade operations and funding, channel/distributor financing, and overdrafts, as well as domestic and international collections and payments, INR and Foreign currency term loans (external commercial borrowing in foreign currency), letters of guarantee etc.) Institutional Banking drives the Group’s relationship with banks, financial institutions, securities houses, insurance companies, and asset management companies and other non-banking companies, non-government and development organizations operating in India. Investment Banking and Markets brings together the advisory and financing, equity Securities, equity linked transactions, asset management, treasury and capital markets, and private equity activities of the Groups to complete the Global Banking structure and provide a complete range of financial products to our clients. Clients are serviced by sector based client service teams that combine relationship managers, product specialists and industry specialists to develop customized financial solutions. These form the relationship team along with the Investment Banking structure and provide a complete range of financial products to our clients. Our Global Relationship Management teams are tasked with understanding in depth the sectors in which our clients operate with the aim of adding value through detailed industry knowledge and structured financial solutions. Focus on overseas acquisition financing, corporate finance and advisory roles, overseas cash management opportunities, cross border funding, project & export finance through concerted marketing with all product providers. Sectoral account management- Improved industry knowledge andsector4 expertise. The CB portfolio is largely spread within the following sectors divided as under. CORPORATES INSTITUTES Consumer Brands Banks Industrials &Technology Financial Institutions Energy and Utilities Securities Telecommunications MutualFunds/AssetManagement Companies Automotive Insurance Healthcare Financial Sponsors Transport and Logistics Business Process Outsourcing (BPO’s) Media Broker and Dealers Markets (Domestic & Export): - Group Service Centres The HSBC Global Technology Centre in Pune, India develops software for the entire HSBC group. As a cost saving measure HSBC is off shoring processing work to lower cost economies in order to reduce the cost of providing services in developed countries. These locations take on work such as data and customer service, but also internal software engineering at Pune, Hyderabad(India), Vishakhapatnam (India), Kolkata (India), Guangzhou (China), and Curitiba (Brazil). Chief Operating Officer Alan Jebson said in March 2005 that he would be very surprised if fewer than 25,000 people were working in the centres over the next three years: “I don’t have a precise target but I would be surprised if we had less than 15 (global service centres) in three years’ time.” He went on to say that each centre cost the bank from $20m to $30m to set up, but that for every job moved the bank saves about $20,000 (£10,400). Trade unions, particularly in the US and UK, blame these centres for job losses in developed countries, and also for the effective imposition of wage caps on their members. HSBC Building, Shanghai Currently, HSBC operates centres out of eight countries, including Brazil (Curitiba), The CzechRepublic (Ostrava), India (Kolkata, Hyderabad, Bangalore, Visakhapatnam, Mumbai, Gurgaon andPune), China (Shanghai, Guangzhou and Shenzhen), Malaysia (Kuala Lumpur), Poland (Krakow), Sri Lanka (Rajagiriya) and Philippines (Manila). The Malta trial for a UK high value call centre has resulted in a growing operation that country. An option under consideration is reported to be a processing centre in Vietnam to access the French skills of the population and therefore cut costs in the bank’s French operations. On June 27, 2006, HSBC reported that a quot;
small numberquot;
of customers had suffered from fraud totalling £233,000 after an employee at the Bangalore call centre supplied confidential customer information to fraudsters. HSBC Private Bank HSBC Private Bank is the group's private banking operation, providing private banking and trustee services to wealthy individuals and their families worldwide. The Private Bank has in excess of 60 offices worldwide, with the major centres being Miami, New York, London, Geneva and Hong Kong. HSBC Premier HSBC Premier is the group's premium financial services product. The exact benefits and qualification criteria vary depending on country, but typically require deposits and investments of at least $100,000, £50,000, or €100,000. Alternatively those who have an individual annual income of at least £100,000 paid into their HSBC Premier Bank Account and are a customer of the bank's Independent Financial Advisory Service. Customers have a dedicated Premier Relationship Manager, global 24 hour access to call centres,free banking services and preferential rates. A HSBC Premier customer receives the HSBC Premier services in all countries that offer HSBC Premier, without having to meet that country's qualifying criteria. HSBC Bank International HSBC Bank International is the offshore banking arm of the HSBC Group, focusing on providing offshore solutions and cross border services to expatriates andmigrants. It provides a full range of multi-currency personal banking services to a range of customer segments, including a full internet banking and telephone banking service. Sometimes referred to as quot;
HSBC Offshorequot;
, the business also offers independent financial planning, and has representative offices all over the world, often working alongside local HSBC operations in those regions. HSBC Bank International originated from the business started by Midland Bank and is based in the Channel Islands with further operations on the Isle of Man. Its operations in the Channel Islands are centered around its registered headquarters on the seafront in St Helier, Jersey. Named 'HSBC House', the building comprises departments such as Premier, Global Funds & Investments, e-Business and a 24 hour 'Direct Banking Centre'. HSBCnet HSBCnet is a global service that caters to local business needs by offering specialised functionality for different regions worldwide. The system provides access to transaction banking functionality - ranging from payments and cash management to trade services features - as well as to research and analytical content from HSBC. It also includes foreign exchange and money markets trading functionality. The system is used widely by HSBC's high-end corporate and institutional clients served variously by the bank's global banking and markets, commercial banking and global transaction banking divisions. HSBCnet is also the brand under which HSBC markets its global e-commerce proposition to its corporate and institutional clients. HFC Bank (UK Operation) is a wholly owned subsidiary, with 135 High Street branches in the UK selling loans to the quot;
sub-primequot;
market. During 2007 and 2008, has been trying to fend off a union recognition campaign by the Trade Union Unite. HSBC Direct HSBC Direct is a telephone/online direct banking operation which attracts customers through mortgages, accounts and savings. It was first launched in the USA in November 2005 and is now available in Britain, Canada,Taiwan, South Korea and France. Poland is launching business direct in September 2009. Other relevant information IndustryBankingFinancial servicesInvestment servicesFoundedHong Kong (1865)Founder(s)Thomas SutherlandHeadquartersLondon, United Kingdom[1]Number of locations9,500 offices in 88 countries & territoriesArea servedWorldwideKey peopleStephen Green(Group Chairman)Michael Geoghegan(Group CEO)ProductsFinance and insuranceConsumer BankingCorporate BankingInvestment BankingInvestment ManagementGlobal Wealth ManagementPrivate EquityMortgagesCredit CardsRevenue▼ $103.74 billion (2009)Operating income▼ $7.079 billion (2009) Profit▼ $5.834 billion (2009) Total assets▼ $2.364 trillion (2009) Total equity▲ $128.299 billion (2009) Employees302,000 (2009) SubsidiariesHSBC Bank plcHSBC GLT IndiaThe Hongkong and Shanghai Banking CorporationHSBC Bank USAHSBC Bank Middle EastHSBC MexicoHSBC Bank BrazilHSBC FinanceWebsiteHSBC.com Introduction to particular firm /division PROFILE OF THE IL&FS INVESTSMART LTD Infrastructure Leasing & Financial Services Limited (IL&FS) is one of India's leading infrastructure development and finance companies IL&FS has a distinct mandate catalyzing the development of infrastructure in the country. The organization has focused on the commercialization and development of infrastructure projects and creation of value added financial services. From concept to execution, IL&FS houses the expertise to provide the complete array of services necessary for successful project completion: visioning, documentation, finance, development, management, technology and execution. This company was started in 1980 with a major objective of financing major infrastructure and leasing services. Over the years, IL&FS has broad-based its shareholding, which today includes Life Insurance Corporation of India, ORIX Corporation – Japan, Housing Development Corporation of India, Abu Dhabi Investment Authority, State Bank of India, and Central Bank of India. IL&FS Investsmart Securities Ltd (IISL) is one of India’s leading financial services organizations. IISL, through its subsidiaries in India and Singapore, provides a wide range of investment products to its retail and institutional banking, insurance broking & distribution, mutual funds distribution and related financing services. IISL’s 2,000 employees provide a complete range of investment solutions to over 138,000 customers in India through its 88 branches and 19 franchised outlets from 133 cities and has been recognized as “National Best Performing Financial Advisor – Retail” for two years in a row (06-07 & 07-08) BY CNBC TV 18. Fig1(a). Subsidiaries of IL&FS Ltd IL&FS Investsmart Securities Limited IL&FS Investsmart Securities Limited (IISL) is one of India’s leading financial services organizations providing individuals and corporate with customized financial management solutions. At IISL, they believe in quot;
Realizing customer goals togetherquot;
. One will find in them - a trusted investment partner to help customer work towards achieving investor’s financial goals. IL&FS institutional expertise, combined with a thorough understanding of the financial markets results in appropriate investment solutions for investors. The strong team of Relationship Managers, Customer Service Executives, Advisory Managers and Research Analysts, offers efficient execution backed by in-depth research, knowledge and expertise to customers across the country. With a pan-India presence of over 300 offices, IIL is geared to meet all the investment needs through its branches. IL&FS Investsmarts Limited is an initiative in the field of Financial Services started by Infrastructure Leasing & Financial Services (IL&FS), an institution known for its innovative and pioneering initiatives in the areas of Infrastructure, Corporate Finance and Investment Banking. IISL was set up in October 1997 and began retail operations in September1998. IL&FS Investsmart Securities Limited (IISL) was set up with the objective of becoming one of the leading full service brokerage houses in the country with a strong expertise in web-based technology as well as strengths in physical distribution. Today with a presence in more than 90 cities across India through more than 300 outlets, IISL has become one of the most prominent players in the Financial Services Industry with service offerings across different categories. In the year 2008 investsmarts securities received the Best Performing National Financial Advisor – Retail Segment at the CNBC TV 18 National Financial Advisor Award. The Retail Business Division at IISL is involved in dealing with a range of financial products offered to customers across India through multiple locations. The retail business is further categorized into various business divisions catering to varied needs of our customers. These include divisions catering to customers for Investment options such as Equity Trading, Derivatives Trading, IPO Investments, Fixed Income products, Mutual Fund Investments as well as Insurance and Home Loans Advisory services. IL&FS Investsmart Securities leverages on its pedigree of IL&FS, which has core competency of institutional and retail financial services and products. IL&FS is a financial institution known for its innovative and pioneering initiatives in the areas of infrastructure, corporate finance and Investment Banking. Global majors E*TRADE FINANCIAL through its wholly owned subsidiary E*TRADE Mauritius Limited and Softbank Asia Infrastructure fund L.P. (SAIF) have equity participation in IL&FS Investsmart. SAIF is a leading Asian private equity firm headquartered in Hong Kong. US based E*TRADE FINANCIAL corporation is a leading financial services organization providing financial services including brokerage, banking and lending for retail, corporate and institutional customers. It operates branded web sites in 12 countries. In particular, IL&FS have always felt the need for a successful brokerage Group to have an international capability. IL&FS believe that the strength of the HSBC Group provides a unique opportunity for Investsmart to execute its strategic vision. It is IL&FS intention to retain a close association with Investsmart through co-operation on a number of areas that will be mutually beneficial and on an arm's length basis” Mr. Ravi Parthasarathy added, “I believe that HSBC Group will provide Investsmart employees significant opportunities to enhance the value proposition for their customers. Investsmart employees will also benefit from the training and development infrastructure that arises from being a part of one of the world’s leading banking organizations.” Corporate Action To establish a base of 1 million satisfied customers by 2010. We will create this by being a responsible and trustworthy partner !An approach to business that reflects responsibility, transparency and ethical behavior. Respect for employees, clients & stakeholder groups. ILL’s strong team of Relationship Managers, Customer Service Executives, Advisory Managers and Research Analysts, offers efficient execution backed by in-depth research, knowledge and expertise to customers across the country. With a pan-India presence of over 300 offices, IIL is geared to meet all the customers’ investment needs through an office nearby. All the interested investors need to do is drop in at the nearest branch or call and ILL will be happy to do the rest! ILL says about its Customer At IIL, we believe in quot;
Realizing your goals togetherquot;
. Customer will find in IL&FS a trusted investment partner to help work towards achieving financial goals of clients. IL&FS institutional expertise, combined with a thorough understanding of the financial markets results in appropriate investment solutions for clients. Advantages of IL&FS Today, IL&FS Investsmart Limited is one of India’s leading financial services organization delivering value and innovation to over 100,000 customers through more than 300 offices across the India. 7 Reasons for investing with IL&FS Investsmart Limited is smarter. ,[object Object]

Expertise: They bring within customer reach, IL&FS institutional expertise and their valuable understanding of the financial markets.

One-stop-shop: They cater to all investors’ investment needs under one roof.

Trust: They enjoy the pedigree of IL&FS and share its expertise in financial services.

Personalized Service: They help customer through the entire investment process, step by step, with innovative and efficient services.

Unbiased & Objective Advise: They partner you in your investment process, with our team of expert investment advisors.

Extensive Reach: Through a host of mediums: - offline through more than 300 offices across India.- Online through our website.

Retail Business: Retail offerings of IIL seek to cover all financial planning requirements of individuals, which include providing personalised investment management services including planning, advisory and execution and monitoring of the full range of investment services. Broadly the retail services are divided into two broad categories. HSBC in India The HSBC Group in India is represented by several entities including The Hong Kong and Shanghai Banking Corporation Limited which offers a full range of banking and financial services to its over 2 million customers in India through its 47 branches and 170 ATMs across 26 cities. HSBC is one of India’s leading financial services groups, with over 33,000 employees in its banking, investment banking and capital markets, asset management, insurance broking, two global IT development centers and six global resourcing operations in the country. The Bank is the founding and a principal member of the HSBC Group which, with over 10,000 offices in 83 countries and territories and assets of US$2,354 billion at 31 December 2007, is one of the world’s largest banking and financial services organizations. Sale of Stake in Investsmart to HSBC IL&FS agrees to sell its stake in Investsmart to HSBC. Infrastructure Leasing and Financial Services Limited (IL&FS), is to sell its 29.36 percent stake in IL&FS Investsmart Limited (Investsmart), a leading retail brokerage house in India, to HSBC. Under the terms of the agreements, HSBC, through Group subsidiaries, proposes to acquire IL&FS’s 29.36 per cent stake of Investsmart for a consideration of INR 410 crores (approximately US$ 96.9 million). In addition, IL&FS will be paid INR 82 crores (approximately US$ 19.4 million) as part of a three–year non-compete agreement. HSBC also proposes to acquire an additional 43.85 per cent stake in Investsmart from E*TRADE Mauritius Limited, an indirectly wholly-owned subsidiary of E*TRADE Financial Corporation. Both IL&FS and E*TRADE Mauritius Limited will receive a price of INR200 per share for their respective stakes. HSBC will also make an open offer to acquire up to 20 per cent of the remaining shares in Investsmart. Details of the open offer to Investsmart shareholders will be published in the Indian press and distributed to shareholders in accordance with local regulations. Established in 1997 by IL&FS, Investsmart is a financial services firm with a strong presence in retail broking. It has a national distribution network comprising 88 branches, 190 franchise outlets and more than 660 terminals in 133 cities throughout India. Its 2,000 staff serves over 138,000 clients. While strong in retail broking, it also has businesses in Institutional broking, investment banking, wealth management, insurance distribution and margin financing. Ravi Parthasarathy, Chairman of IL&FS, said “IL&FS’s goal is to position IIL as a leader in the brokerage sector. In particular, IL&FS have always felt the need for a successful brokerage Group to have an international capability. And believe that the strength of the HSBC Group provides a unique opportunity for Investsmart to execute its strategic vision. It is IL&FS intention to retain a close association with Investsmart through co-operation on a number of areas that will be mutually beneficial and on an arm's length basis” Mr. Parthasarathy added, “I believe that HSBC Group will provide Investsmart employees significant opportunities to enhance the value proposition for their customers. Investsmart employees will also benefit from the training and development infrastructure that arises from being a part of one of the world’s leading banking organizations.” HSBC will be making the acquisition through Group subsidiaries, including HSBC Securities and Capital Markets (India) Private Limited, the Group’s broking arm in India. The agreement and open offer are subject to regulatory and other approvals. With a market capitalization of approximately US$300 million, Investsmart is listed on the National Stock Exchange and the Bombay Stock Exchange and its Global Depository Shares are listed on the Luxembourg Stock Exchange ends/more. PRODUCT PROFILE All the products of ILFS can be broadly divided into the following two categories: ,[object Object]

Other services.1. Online Trading Product of IL&FS Investsmart Basically IL&FS Investsmart offers three types of products to its retail customers. They are: ,[object Object]

SmartTradea. SmartSTART: SmartStart is a powerful browser based trading system for those who are relatively new to online investing. A unique integrated account, which integrates customer banking, broking, and demat accounts of the clients. A comprehensive trading service, which allows customer to invest in equities and derivatives. SmartStart trading platform allows customer the flexibility of trading on any internet capable system, with access to both the NSE and BSE System Requirement ,[object Object]

Internet Connection: Broadband/Dial-Up connection (Modem at a minimum of 28.8/33.6 Kbps)

System: Pentium 3 or 4 GHz or best available at market RAM (Physical) 128 MB or better

Operating System: Windows 98/2000 or Windows XP.Features of SmartStart ,[object Object]

Control of investor’s money.

Ensure the best price for investors.

Live financial news and analysis.

Access to NSE and BSEb. SmartINVEST SmartInvest is a browser-based system designed for customers who transact occasionally. It is ideal for investors who believe in the Buy and Hold Approach towards investment in equities. SmartInvest's capability as a browser-based trading platform gives customer the benefit of real-time streaming data with the flexibility of trading on any Internet capable system. With access to both the NSE and BSE, customers are in the driver's seat when routing their order to the best price on either of the exchanges. SmartInvest sophisticated yet easy to use point and click order entry interface allows customer to react more quickly to the markets and make better decisions. System Requirement ,[object Object]

System: Pentium 3 or 4 Ghz or best available at market RAM (Physical) 128 MB or better

Operating System: Windows 98/2000 or Windows XPFeatures of SmartInvest Instant Loading: The browser- based applet system allows customer to instant access to client’s account with no wait time, unlike other system that takes a few minutes to load. Works behind a proxy: This platform can be accessed on any internet-enabled network. They can be accessed even from costumer work place. Live streaming quotes: Keeps an eye on the stocks of customer’s choice with streaming real time quotes and customizable market data. Color-coded price changes help them to spot trends and in turn help the customer to react faster. Multiple watch lists: The new watch list option allows the customer to create up to 10 groups of watch list with each group accommodating 15 scripts. Each watch list can be personalized by the customers according to their choice of scripts. NSE and BSE Access: Flexibility of trading on both NSE and BSE via a single screen. Single order form for Cash and F & O: Single order form offers the customers the convenience of transacting in various segments of the market without having to switch between multiple windows. Point and click order entry: Makes order entry quick and simple with a click on the security, the same is inserted on the order form in the trade screen. Hot key functions: Using a single keystroke (hotkey) function the customer can achieve important task very similar to a broker’s terminal. Accessing important reports is also one keystroke away. Market depth window: It gives an immediate “at a glance” information about the stock they are following. The view provides the best 5 bids and offers quotes and the outstanding order quantities. Back office access: View segment wise ledger bills and contract notes, trades, positions, account balance, realized/unrealized profit and loss, and buying power all in real time. c. SmartTRADE: SmartTrade is an EXE based desktop software designed for active traders who transact frequently to capture favourable short-term price movements. The platform offers active traders the tools they need to make critical decisions with confidence. SmartTrade is designed and built from the ground up to address the needs of active traders. SmartTrade makes the most of state-of the-art technology to deliver power, speed and reliability. Through an easy-to-use interface, users are provided with the same tools and advantages that the professionals enjoy. System Requirement ,[object Object]

Operating System: Windows 98/2000 or Windows XP.This account is an EXE based desktop software designed for active traders who transact frequently to capture favourable short-term price movements. The platform offers active traders the tools they need to make critical decisions with confidence. Smart Trade is designed and built from the ground up to address the needs of active traders. Smart Trade makes the most of state of the art technology to deliver power, speed and reliability. Through an easy to use interface, users are provided with the same tools and advantages that the professionals enjoy. Features of SmartTrade Fully customizable display: The save desktop option allows the clients to save their created trade screen layout, so the next time they access the application the created layout is not lost. Dynamic charts with Indicators: Provides the clients a wealth of charting capabilities and timing indicators, which allow them to go right into the action with real time daily charts, and intra-day charts. Watch price movements by minutes, days or weeks. EOD Charts: Smart Trade puts up to 5 years of in depth history at their command with the power to instantly back-test any trading strategy they design, before risking one rupee of their trading capital. Real- Time market data: Get real time market data from both NSE and BSE, similar to what a professional broker gets. Advanced alert capabilities: Alert window allows the customer to be free from watching every tick. Users can be notified once a security has reached the set parameters. Multiple securities can be monitored using the set parameters. These alerts can be triggered both visually and audibly. Live order status: Tracking all their orders are made easy through the order status screen. Further drill down into all details pertaining to an order is available in the order detail sub report. Track your orders real time: Track customer stock orders and trades in real time. Real time position updates: All their positions are updated automatically and instantly. The need of refresh button is avoided. Dynamic buying power: It reflects their credits and debits instantly on every trade execution. No need to refresh each statement to know their latest buying limits. Derivative chain: This feature provides with a list of all derivative contracts available for the selected security. To view derivative prices of a security just right click on the symbol and click on derivative chain. Lock terminal option: If the system is unattended, this function locks the trading platform for the customers and can be accessed again only on providing the proper login details. Message window docking: This feature enables the customers to receive trading messages, intraday trading calls and messages from both the exchanges flashed real time onto their screens. 2. Advisory Services Basically IL&FS Investsmart offers following types of services to its retail customers. They are: ,[object Object]

Portfolio management services.

IPO Advisory and Distribution Services.

Investment Advisory services.a. Mutual Fund Advisory Services As a part of Mutual Fund Advisory Services, their team of experts across India helps investors in selecting the right scheme from over 500 offerings, matching customer needs, goals and risks. In addition to this, we also help you constantly monitor their MF portfolio, making changes according to the changing needs as per the market scenario, in order to make customers money work for investors. At IL&FS Investsmart (IIL), their expert teams of relationship managers interact with investors on a regular basis to discern customer changing needs, in tune with the changing environment. Most of investors require some assistance in making selections appropriate to their individual needs. Investors need sound advice from people who have expertise to decipher the financial jargon of investment options available today. Their Investment Advisory Team helps customer customize and execute plans, based on their individual needs towards wealth maximization. b. Portfolio Management Services (PMS) Financial markets today offer enormous growth potential. But managing investors own investments can be an extremely challenging task. Anticipating market trends, assessing the impact of socio-economic changes on customer investments, keeping abreast of latest corporate developments and financial analysis all adds up. Managing one’s investments has become nearly a full-time affair that requires considerable time and expertise. At IL&FS Investsmart, they offer customer just the solution that allows clients to relax as IL&FS put their money to work through the IIL-PMS, a Discretionary Portfolio Management Service. c. IPO Advisory and Distribution Services IL&FS Investsmart (IIL) is one of India's leading companies engaged in the activity IPO Advisory and Distribution. IL&FS primary markets division does a comprehensive research before recommending issues to clients. IL&FS pan India reach helps us in mobilising large number of applications across India during public offerings, this has ensured that constantly figure amongst the top ranking performers in the primary market distribution space. As a part of their online offering, customers can invest in IPO's not only through IL&FS branches but also through our website, which also provides customer with regular updates on the IPO scenario, Open IPO's as well as all the forthcoming IPO's at any given point of time. The primary markets distribution division works in conjunction with the retail and wholesale distribution networks, as well as IL&FS private client group. In case there are not IL&FS customers, but still want to invest in any particular IPO, IL&FS suggest client to visit any of branch locations near clients or else call us for an application form and IL&FS would courier it to customer. d. Insurance Advisory Services IL&FS Investsmart (IIL) is customer one stop shop for all Insurance & Retirement needs. They have also been recognized as India’s Best Retail Financial Advisors at the CNBC TV18 Financial Advisory Awards 2006-07, 2007-08. Their key service features include the following: Risk management solutions for all Comprehensive research for all policies available on a regular basis Recommendations on a comprehensive insurance cover based on clients needs Maintain proper records of client policies e. Investment Advisory Services The investment advisory team in the company helps customize plans, base on customer individual needs. 3. Other services Basically IL&FS Investsmart offers following types of other services to its retail customers. They are: ,[object Object]

Research and Financial Analysis.

Value added services.a. Online Services The website offers unique features such as real time news and analysis, a personal portfolio manager, research tools, corporate profiles, mutual fund and product options, IPO centres, stock alerts, investment advisory services, query solving and much more. b. Research and Financial Analysis The research team in the company thoroughly studies each asset class-equity, mutual funds, commodities and fixed income products. The qualified financial analysts in the company study the market trends and make objective recommendations, so that customers can make well-informed decisions. c. Value Added Service Smart update – Extensively researched monthly reports detailing the market performance of various investment options. Mutual fund Weekly updates – Analysis of the Mutual Fund industry, offering an overview of Mutual Fund Schemes. Flavour of Equity – Monthly reports on the change in exposure in the top 10 stocks, churning of portfolios and the entry and exit of stocks by the respective fund managers of select Mutual Fund companies. Bond Fund Snapshot – Monthly reports on analysis of bond funds of select mutual fund companies. Rolling returns – Monthly reports on the fundamental and technical call for equities and derivatives for short term. Market wrap – Daily post market analysis. Smart trader – Daily reports on the fundamental and technical call for equities and derivatives for short term. Equity Research reports – Sector and company wise reports on the fundamentals, along with a recommendation of the stock. Strategy note – Quarterly note on the broad equity market views, macro fundamentals and top stock picks. Result preview – Pre result quarterly reports on select companies. Result update – Post result quarterly reports on select companies. Event notes – Implications and analysis of major corporate events like mergers and takeovers. Visit notes – Notes on the company’s outlook and discussion during a corporate visit. Deri Watch – Weekly, sock specific technical and derivatives statistics reports. Deri Strat – Daily derivatives market strategy. IPO Updates – Analysis on the current IPO with support for and against it. Policy Updates – Updates and analysis of important announcements and policies like the budget and monetary. Morning coffee – Daily update on the Indian and International financial markets. Morning Track – Monthly research reports on the debt and money markets. Commodity reports – Daily and weekly commodity reports. Depository & Custodial services - Company also offers dematerialization services as the company is Depository Participant of NSDL. Top Management A committed and formidable management team anchors the company towards its goal and provides direction in diverse areas of business strategy, operating management, regulatory reporting, human resources development, product development etc. Equipped with excellent domain knowledge and extensive experience, they drive IIL’s vision. ,[object Object]

Mr. Avdhoot DeshpandeHead - Equity and Capital Markets

Mr. Vipul Shah Head - NBFC

Mr. Dharmen shah Vice President - Institutional Equity

Mr. B.S. Shashidhar Head - IAIFL and General Insurance

Mr. Jaideep Anand Senior Vice President - Institutional Sales & Dealing

Mr. C. Diwakar Chief Information Officer (CIO)

Mr. Bhuvnesh Khanna Head - Alternate Channels

Mr. K. Venkatesh Head – Distribution Fig 2(a)Organization Chart of HSBC InvestDirect Ludhiana Branch SWOT Analysis INTRODUCTION SWOT Analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats for a business entity. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favourable and unfavorable to achieving that objective. The technique is credited to Albert Humphrey, who led a research project at Stanford University in the 1960s and 1970s using data from fortune 500companies ,[object Object]

Weaknesses: Attributes of the organization which are harmful to achieving the objective.

Opportunities: External conditions which are helpful to achieving the objective.

Threats: External conditions which could damage the business’s performance. SWOT ANALYSIS OF IL&FS INVESTSMART LTD. Strengths ,[object Object]

Expertise: IIL brings within the customers reach their institutional expertise and the ability to effectively combine an invaluable understanding of the financial markets, with an intention of building a long-term partnership.

One-stop-shop for all the investment needs: IIL gives all the types of services and products an individual investor can dream and think off. All the financial products and services are under one-roof.Unbiased and objective advice: The teams of expert investment advisors customize plans to suit the needs of investors. Extensive reach: IIL make sure that they are always accessible to customers through a host of mediums. A customer can contact them either through website or through their branches and channel partners of more than 300 offices across India. Brand image: IIL as such is a well known brand in industry. Competitive pricing: It charges less brokerage compared to its competitors. Weaknesses Expensive products: Some of the products like SmartTrade are quite expensive. An annual charge for SmartTrade is Rs. 3000. Tedious procedures: Tedious procedures and delays in processing the data and documents of new customers. Fund transfer: It has tie-ups with only 5 banks for online fund transfer, where as other competitors have more tie-ups. Attrition: High attrition rates in trainees category. Unattractive offers: Some offers of the company like Advance Subscription Plan with a deposit of Rs.50,000 to avail low brokerage charges. The low brokerage charges will be effective for the clients for a minimum turnover of Rs. 50 Crore p.a. Opportunities Indian economy seems to be out of recession. This is the right time for inventers to re-enter the market. The company should adopt some strategies to increase the business through existing clients. The increasing number of management graduates helps to get sales force at trainee levels at less salaries or commission basis. It reduces the salaries and commissions expenses of the company. The company can tie up with reputed B Schools for trainees. Huge untapped market in rural areas, Tier2 and Tier 3 cities and towns of India can be concentrated to increase the business. Many a banks are offering fund transfer services. The company can increase the tie-ups for fund transfers at attract customers of different banks. Threats Stiff competition from existing players in the market and there is also a threat of new entrants. It has lead to cut throat competition in terms of brokerage charges and exposure. Increasing awareness of mutual funds and ULIPs created by Domestic Institutional Investors has reduced the direct investment in to stock market to some extent. This automatically reduces the business of stock brokers. Changing economic scenario in India and changes in government policies will have great impact on the revenue of this company Many a investors burnt their figures during the bearish market conditions. It has turned many a trading accounts inoperative. FINANCIAL STATEMENT ANALYSIS Ratio Analysis: - A Ratio is a simple arithmetical expression of the relationship of one number to another. The Ratio Analysis is one of the most powerful tools of financial analysis. It is with the help of ratios that the financial statements can be analyse more clearly and decisions made from such analysis. Ratio Analysis is the process of establishing & interpreting various ratios for helping in making certain decisions. Liquidity Ratio: - Liquidity refers to the ability of a concern to meet its current obligations as and when these become due. The short-term obligations are met by realising amounts from current, floating or circulating assets. The current assets should either be liquid or near liquidity. These should be convertible into cash for paying obligations of short-term nature. Current Ratio: - The current ratio is the ratio of total current assets to current liabilities. The current ratio indicates the firm’s ability to pay its current liabilities. By using this ratio the extent of the soundness of current financial position of an undertaking and the degree of safety provided to the creditors. Greater the current ratio the larger amount of rupee available to the firm per rupee of current liabilities. Current Ratio = Current Assets Current Liabilities Table 2(a) Current Ratio 200920082007Current Ratio1.902.302.20 Fig 3(a) Current Ratio Interpretation: - From the above data it can be clearly interpreted that the current ratio for the march 2009 is less as compared to previous year. For the last year it was good and it was depicting that the short term financial position of the company was very good and for this year current ratio is good but not as per the previous standards. Quick Ratio: - Quick ratio also called as Acid test ratio. The quick ratio is a fairly stringent measure of liquidity. It is based on those current assets, which are highly liquid – inventories are excluded from the numerator of this ratio because inventories are deemed to be the least liquid component of current assets. Quick ratio can be calculated by dividing the quick assets by current liabilities. Quick ratio is a liquidity ratio or 1:1 ratio this ratio indicates liquid financial position of an enterprise. Quick Ratio = Quick Assets Current liabilities Table 3 (a):- Quick Ratio 200920082007Quick Ratio1.101.101.00 Fig 4(a):- Quick Ratio Interpretation: - From the above data we can see that the quick ratio of the bank is good and satisfying the thumb rule of 1:1 also. For the last two years it is same i.e. 1.10:1 that means bank is well enough to pay off its creditors. Return on Total Assets: - It refers to a ratio that measures a company's earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. To calculate ROTA: = EBIT Total Net Assets Table 4(a):- Return on total asset 200920082007Return on Total Assets9.9012.0012.50 Fig 5(a) :- Return on total asset Interpretation: - It can be observed from the above data that return on total assets is decreasing from the previous years. However it doesn’t mean that net profit of the bank has been decreased it is basically due to increase in total assets which is much higher than the net profit. Gross Profit Ratio: - Gross profit ratio is defined as the difference between net sales and cost of good sold. This ratio shows the margin left after the meeting manufacturing costs. It measures the efficiency of production as well as pricing. To analyze the factors underlying the variation in gross profit margin the proportion of various element of cost to sales is studied. The gross profit ratio is computed by dividing gross profit by sales Gross profit Gross Profit Ratio = *100 Sales Table 5(a):- Gross profit Ratio 200920082007Gross Profit Ratio30.2030.8031.50 Fig 6(a):- Gross profit Ratio Interpretation: - G/p ratio of the company is ranging from 30-31 for the last three years and there is however a little bit change in the ratio for the last years. There is not any standard thumb rule to compare this ratio but as per market trend this percentage is good. Net Profit Ratio: - This ratio indicates the earning left for shareholder as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing pricing, and tax management. Jointly considered, the gross and net profit margin ratios provide a valuable understanding of the cost and profit structure of the firm and enable the analyst to identify the sources of business efficiency. Net profit ratio is computed by dividing net profit by sales. Net Profit Ratio = Net profit Sales Table 6(a):- Net profit Ratio 200920082007Net Profit Ratio6.605.506.10 Fig 7(a):- Net profit Ratio Interpretation: - Net profit ratio of the company has increased from the previous year and this shows the company is performing well and the main reason for increase in the net profit is increase in sales which is more than the increase in expenses of the company. Debt Equity Ratio: - It is calculated to measure the relative claims of outsiders and the owners against the firm’s assets. This ratio indicates the relationship between the external equities or the outsiders funds and the internal equities or the shareholders’ funds. Debt-Equity Ratio = Outsiders Funds Shareholders’ Funds Table 7(a) Debt Equity Ratio 200920082007Debt-Equity Ratio2.591.421.44 Graph 8(a) Debt Equity Ratio Interpretation: - Debt equity ratio of the company has been improved from the last year and this shows that the company has increased its debts but however more increase in debt will increase the risk from the equity shareholder’s point of view. Total Debt to Total Assets Ratio: - The ratio indicates the relationship between the total liabilities to outsiders to total assets of a firm and can be calculated as follows:- = Total Liabilities to Outsiders Total Assets Table 8(a):- Total debt to total asset 200920082007Total Debt to Total Assets ratio0.690.550.54 Fig 9(a):- Total debt to total asset Interpretation: - In above data we can see that the total debt to total assets for last three years is continuously increasing that Shows Company is now increasing the share of debts in assets. But on the other hand it is also enlarging the risk profile for the creditors. Trend Analysis: - An aspect of technical analysis that tries to predict the future movement of a stock based on past data. Trend analysis is based on the idea that what has happened in the past gives traders an idea of what will happen in the future. Trend analysis tries to predict a trend like a bull market run and ride that trend until data suggests a trend reversal (e.g. bull to bear market). Trend analysis is helpful because moving with trends, and not against them, will lead to profit for an investor. Table 9(a):-Trend Analysis of Net Sales: - YearsSalesPercentage2006-20074777.641002007-20085208.38109.022008-20096106.43127.81 Fig 10(a):-Trend Analysis of Net Sales Interpretation : -From the above data we can observe that the net sales of the company is increasing which may tends to increase in the net profit of the company and also will lead to increase in the net-worth. Table 10(a):- Trend Analysis of Expenses (Administrative Selling & Distribution): - YearsExpensesPercentage2006-2007720.321002007-2008792.62110.042008-2009809.66112.40 Fig 11(a):- Trend Analysis of Expenses (Administrative Selling & Distribution): Interpretation: - From the above data we can observe that the expenses from the last years are increasing but their percentage change is not as much as in the sales which will tend to increase in the Net profit. But increase in expenses from 2006-07 to 2007-08 is more than the net sales which may tend to decreases in profit. Table 11(a):-Trend Analysis of Net Profit YearsNet ProfitPercentage2006-2007291.121002007-2008286.5098.412008-2009401.52137.92 Fig 12(a):- Trends analysis of Net Profit Interpretation: - As from the above trend it can be analyzed that Net profit for the company is continuously increasing. But however increase N/P from 2006-07 to 2007-08 was decreased due to increase in expenses as compared to previous years. PART B Chapter 1 Introduction to the project Introduction to ULIPS Unit-linked insurance plans, popularly known as Ulips are life insurance policies which offer a mix of investment and insurance similar to traditional life insurance policies such as endowment, money-back and whole-life, but with one major difference. Unlike traditional policies, in Ulips investment risk lies with the insured (i.e., policy holder) and not with the insurance company. Put another way, in case of adverse market conditions, you can even lose your capital invested. The returns in a ULIP depend upon the performance of the fund in the capital market. ULIP respondents have the option of investing across various schemes, i.e, diversified equity funds, balanced funds, debt funds etc. It is important to remember that in a ULIP, the investment risk is generally borne by the investor. In a ULIP, respondents have the choice of investing in a lump sum (single premium) or making premium payments on an annual, half-yearly, quarterly or monthly basis. Respondents also have the flexibility to alter the premium amounts during the policy's tenure. For example, if an individual has surplus funds, he can enhance the contribution in ULIP. Conversely an individual faced with a liquidity crunch has the option of paying a lower amount (the difference being adjusted in the accumulated value of his ULIP). ULIP respondents can shift their investments across various plans/asset classes (diversified equity funds, balanced funds, debt funds) either at a nominal or no cost. Brief History of Insurance The insurance sector in India dates back to 1818, when Oriental Life Insurance Company like Bombay life Assurance Company, in 1823 and Tritons Insurance Company, for General Insuran.. ce, in 1850 were incorporated. Insurance ACT was passed in 1928 but it was subsequently reviewed and comprehensive legislation was enacted in 1938 the nationalization of life insurance business took place in 1956 when 245 Indian and Foreign insurance societies were first merged and then nationalized. It paved the way towards the establishment of life insurance Corporation (LIC) and since then it has enjoyed a monopoly over the life insurance business in India. General Insurance business. Subsequently in 1973, non-life insurance business was nationalized and the General Insurance Business (Nationalization) ACT, 1972 was promulgated. The General Insurance Corporation (GIC) in its present form was incorporated in 1972 and maintains a very strong hold over the non-life insurance business in India. Due to concerns of relatively low spread of insurance in the country. The efficient and quality functioning of the Public Sector Insurance Companies. The untapped potential for mobilizing long-term contractual savings funds for infrastructure. The (Congress) government set up Insurance set u an Insurance Reforms committee in April 1993. The committee submitted its report in January 1994, recommended a phased program of liberalization, and called for private sector entry and restructuring of the LIC and GIC. TRADITIONAL LIFE – AN OVERVIEW The basic and widely used form of design is known as Traditional Life Platform. It is based on the concept of sharing. Each of the policy holder contributes his contribution (premium) into the common large fund is managed by the company on behalf of the policy holders. Administration of that common fund in the interest of everybody was entrusted to the insurance company .It was the responsibility of the company to administer schemes for benefit of the policyholders. Policyholders played a very passive roll. In the course of time, the same concept of sharing and a common fund was extended to different areas like saving, investment etc. Structure of ULIPs ULIPs offered by different insurers have varying charge structures. However the insurers have the right to revise or cancel the fees and charges over a period of time Broadly the different types of fees and charges are given below: 1. Premium Allocation Charge: This is a percentage of the premium appropriated towards charges from the premium received. The balance known as allocation rate constitutes that part of premium which is utilized to purchase (investment) units for the policy. The percentage shall be explicitly stated and could vary interalia by the policy year in which the premium is paid, the premium size, premium payment frequency and the premium type (regular, single or top-up premium). This is a charge levied at the time of receipt of premium. This charge may also include an initial management charge, which is levied on the units created from the first years’ premium, for a specified period. Example: If premium = Rs.1000 & Premium Allocation Charge: 10% of the premium; then the charge is: Rs.100 and Balance amount of premium is Rs.900 and is utilized to purchase units. 2. Fund Management Charge (FMC): This is a charge levied as a percentage of the value of assets and shall be appropriated by adjusting the Net Asset Value This is a charge levied at the time of computation of NAV, which is usually done on daily basis. Example: If Fund Management charge (FMC) is 1% p.a. payable annually; Fund as at 31.3.2004 before FMC is Rs.100/- and Fund after this charge is Rs.99/-. 3. Policy Administration Charge: This charge shall represent the expenses other than those covered by premium allocation charges and the fund management expenses. This is a charge which may be expressed as a fixed amount or a percentage of the premium or a percentage of sum assured. This is a charge levied at the beginning of each policy month from the policy fund by canceling units for equivalent amount. This charge could be flat throughout the policy term or vary at a pre-determined rate. Example: Rs.40/- per month increased by 2% p.a. on every policy anniversary. 4 Surrender Charge: This is a charge levied on the unit fund at the time of surrender of the contract. This charge is usually expressed either as a percentage of the fund or as a percentage of the annualized premiums (for regular premium contracts). 5. Switching Charge: This a charge levied on switching of money from one fund to another available within the product. Example: Rs.100 per switch. 6. Mortality charge: This is the cost of life insurance cover. It is exclusive of any expense loadings levied either by cancellation of units or by debiting the premium but not both. This charge may be levied at the beginning of each policy month from the fund. The method of computation shall be explicitly specified in the policy document. The mortality charge table shall invariably form part of the policy document. 7. Rider premium charge: This is the premium exclusive of expense loadings levied separately to cover the cost of rider cover levied either by cancellation of units or by debiting the premium but not both. This charge is levied at the beginning of each policy month from the fund. 8. Partial withdrawal charge: This is a charge levied on the unit fund at the time of part withdrawal of the fund during the contract period. 9. Miscellaneous charge: This is a charge levied for any alterations within the contract, such as, increase in sum assured, premium redirection, change in policy term etc. The charge is expressed as a flat amount levied by cancellation of units. This charge is levied only at the time of alteration. Example: Rs.100/- for any alteration such as increase in sum assured, change in premium mode etc Table 1.1 ULIPS Vs. Traditional Life Insurance Plans:- S. NoFeaturesULIP’STraditional Plan1PremiumInvested by Policy Holder.Invested by Insurer’s.2ReturnDepends Upon Market momentsFixed3LoansNot ProvidedProvided4BonusNo bonuses, except loyalty addition in some cases.Bonuses are payable5LossLikelyUnlikely6BenefitsVariablePre- Determined7GainsGains likely depending on market movementsGains unlikely except through bonuses8Potential for better returns100% investment in Debt or Equity acc. to wish.At least 85% investment in debt which result low return9Greater transparencyHere we know were over money is invested.Not known where money is to be invested.10Flexibility in investmentFlexibility provided to customer.No Flexibility provided to customer.11Flexibility in insurance coverageOption to choose coverage & to increase risk coverNo option to choose coverage12Higher LiquidityExit option available.No exit option Types of Funds under ULIPs Most insurers offer a wide range of funds to suit one’s investment objectives, risk profile and time horizons. Different funds have different risk profiles. The potential for returns also varies from fund to fund. The following are some of the common types of funds available along with an indication of their risk characteristics. Table 1.2: Types of fund under ULIPs General Description Nature of InvestmentsRisk Category Equity Funds Primarily invested in company stocks with the general aim of capital appreciation Medium to High Income, Fixed Interest and Bond FundsInvested in corporate bonds, govt. securities and other fixed income instruments MediumCash Funds Sometimes known as Money Market Funds - invested in cash, bank deposits and money market instruments Low Balanced Funds Combining equity investment with fixed interest instruments Medium A Unit Link Insurance Policy (ULIP) is one in which the customer is provided with a life insurance cover and the premium paid is invested in either debt or equity products or a combination of the two. In other words, it enables the buyer to secure some protection for his family in the event of his untimely death and at the same time provides him an opportunity to earn a return on his premium paid. In the event of the insured person's untimely death, his nominees would normally receive an amount that is the higher of the sum assured or the value of the units (investments). To put it simply, ULIP attempts to fulfill investment needs of an investor with protection/insurance needs of an insurance seeker. It saves the investor/insurance-seeker the hassles of managing and tracking a portfolio or products. More importantly ULIPs offer investors the opportunity to select a product which matches their risk profile. Unit Linked Insurance Plans came into play in the 1960s and became very popular in Western Europe and Americas. In India The first unit linked Insurance Plan , popularly known as ULIP – Unit Linked Insurance Plan in India was brought out by Unit Trust Of India in the year 1971 by entering into a group insurance arrangement with LIC o provide for life cover to the investors , while UTI , as a mutual was taking care of investing the unit holders money in the capital market and giving them a fair return . Subsequently in the year 1989 , another Unit Linked Product was launched by the LIC Mutual Fund called by the name of “DHANARAKSHA” which was more or less on the line of ULIP of UTI . Thereafter LIC itself came out with a Unit Linked Insurance Product known by name “BIMA PLUS “ in the year 2001-02 . Presently a number of private life insurance companies have launched Unit Linked Insurance Products with a variety of new features TYPES OF ULIP There are various unit linked insurance plans available in the market However, the key ones are pension, children, group and capital guarantee Plans. The pension plans come with two variations — with and without life cover and are meant for people who want to generate returns for their sunset years The children plans, on the other hand, are aimed at taking care of their educational and other needs. Apart from unit-linked plans for individuals, group unit linked plans are also available in the market. The Group linked plans are basically designed for employers who want to offer certain benefits for their employees such as gratuity, superannuation and leave encashment. The other important category of ULIPs is capital guarantee plans. The plan promises the policyholder that at least the premium paid will be returned at maturity. But the guaranteed amount is payable only when the policy's maturity value is below the total premium paid by the individual till maturity However, the guarantee is not provided on the actual premium paid but only on that portion of the premium that is net of expenses (mortality, sales and marketing, administration). Type I vs Type II ULIPs There are basically two types of ULIP plans. Type-I plans pays the higher of the sum assured and fund value to the nominees upon the death of life assured whereas in case of Type II plans both the sum assured and fund value are paid. It is always preferable to opt for Type 2 policies which are more protection (the core aim of insurance) oriented -- although a bit expensive then Type-I policies due to high mortality charges -- because in case of Type-I policies risk exposure/sum at risk (sum assured minus fund value) keeps on decreasing in the later years as your fund value increases which amounts to having inadequate insurance coverage How ULIPs work ULIPs work on the lines of mutual funds. The premium paid by the client (less any charge) is used to buy units in various funds (aggressive, balanced or conservative) floated by the insurance companies. Units are bought according to the plan chosen by the policyholder. On every additional premium, more units are allotted to his fund. The policyholder can also switch among the funds as and when he desires. While some companies allow any number of free switches to the policyholder, some restrict the number to just three or four. If the number is exceeded, a certain charge is levied. Individuals can also make additional investments (besides premium) from time to time to increase the savings component in their plan. This facility is termed quot;
top-upquot;
. The money parked in a ULIP plan is returned either on the insured's death or in the event of maturity of the policy. In case of the insured person's untimely death, the amount that the beneficiary is paid is the higher of the sum assured (insurance cover) or the value of the units (investments) However, some schemes pay the sum assured plus the prevailing value of the investments. ULIP - KEY FEATURES ,[object Object]

As in all insurance policies, the risk charge (mortality rate) varies with Age

The maturity benefit is not typically a fixed amount and the maturity period can be advanced or extended.

Investments can be made in gilt funds, balanced funds, money market funds, growth funds or bonds.

The policyholder can switch between schemes, for instance, balanced to debt or gilt to equity, etc

The maturity benefit is the net asset value of the units.

The costs in ULIP are higher because there is a life insurance component in it as well, in addition to the investment component.

Insurance companies have the discretion to decide on their investment portfolios.

Being transparent the policyholder gets the entire episode on the performance of his fund.

ULIP products are exempted from tax and they provide life insurance.

Provides capital appreciation.

Investor gets an option to choose among debt, balanced and equity funds.USP of ULIPS Insurance cover plus savings-ULIPs serve the purpose of providing life insurance combined with savings at market-linked returns. To that extent, ULIPS can be termed as a two-in-one plan in terms of giving an individual the twin benefits of life insurance plus savings. Multiple investment options-ULIPS offer a lot more variety than traditional life insurance plans. So there are multiple options at the individual’s disposal. ULIPS generally come in three broad variants. Aggressive ULIPS (which can typically invest 80%-100% in equities, balance in debt) Balanced ULIPS (can typically invest around 40%-60% in equities) Conservative ULIPS (can typically invest up to 20% in equities) Although this is how the ULIP options are generally designed, the exact debt/equity allocations may vary across insurance companies. Individuals can opt for a variant based on their risk profile. Flexibility- The flexibility with which individuals can switch between the ULIP variants to capitalize on investment opportunities across the equity and debt markets is what distinguishes it from other instruments. Some insurance companies allow a certain number of ‘free’ switches. Switching also helps individuals on another front. They can shift from an Aggressive to a Balanced or a Conservative ULIP as they approach retirement. This is a reflection of the change in their risk appetite as they grow older. Works like an SIP- Rupee cost-averaging is another important benefit associated with ULIPS. With an SIP, individuals invest their monies regularly over time intervals of a month/quarter and don’t have to worry about ‘timing’ the stock markets Fund Switching Option-There is nil or negligible cost involved. Besides, there is no tax involved. And most of all, it is hassle free. The day mutual funds also start providing this fund switching facility, the only real edge Ulips have over mutual funds will be lost. HURDLES OF ULIP No standardization- All the costs are levied in ways that do not lend to standardization. If one company calculates administration cost by a formula, another levies a flat rate. If one company allows a range of the sum assured (SA), another allows only a multiple of the premium. There was also the problem of a varying cost structure with age. Lack of Flexibility in Life cover-ULIP is known to be more flexible in nature than the traditional plans and, on most counts, they are. However, some insurance companies do not allow the individual to fix the life cover that he needs. These rely on a multiplier that is fixed by the insurer. Overstating the Yield-Insurance companies work on illustrations. They are allowed to show you how much your annual premium will be worth if it grew at 10 per cent per annum But there are costs, so each company also gives a post-cost return at the 10 per cent illustration, calling it the yield. some companies were not including the mortality cost while calculating the yield. This amounts to overstating the yield. Internally made Sales Illustration-During the process of collecting information, it was found that the sales benefit illustration shown was not conforming to the Insurance Regulatory and Development Authority (Irda) format. in many locations30 per cent return illustrations are still rampant. Not all Show the Benchmark Return-To talk about returns without pegging them to a benchmark is misleading the customer. Though most companies use Sensex, BSE 100 or the Nifty as the benchmark, or the measuring rod of performance, some companies are not using any benchmark at all. Early exit Options-The Ulip product works over the long term. The earlier the exit, the worse off is the investor since he ends up redeeming a high-front-load product and is then encouraged to move into another higher cost product at that stage. An early exit also takes away the benefit of compounding from insured. Creeping Costs-Since the investors are now more aware than before and have begun to ask for costs, some companies have found a way to answer that without disclosing too much. People are now asking how much of the premium will go to work. There are plans that are able to say 92 per cent will be invested, that is, will have a front load of just 8 per cent. What they do not say is the much higher policy administration cost that is tucked away inside (adjusted from the fund value). While most insurance companies charge an annual fee of about Rs 600 as administration costs, that stay fixed over time, there are plans that charge this amount, but it grows by as much as 5 per The Insurance Players… ,[object Object]

Birla Sun Life Insurance Company Limited

TATA AIG Life Insurance Company Limited

Max New York Life Insurance Company Limited

Kotak Mahindra Old Mutual Life Insurance Limited

SBI – Cardiff Life Insurance Company Limited

ING Vysya Life Insurance Company Limited

Bajaj Allianz Life Insurance Company Limited

ICICI Prudential Life Insurance Company Limited

MetLife Life Insurance Company Limited

Aviva Life Insurance Company Limited

Reliance Life Insurance Company Limited

Sahara India Life Insurance LimitedIntroduction to Mutual Funds What are Mutual Funds? A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Today, the mutual fund industry in the country manages around Rs 100,000 crore of assets, a large part of which comes from retail investors. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. Fig 1.1: Working of Mutual Fund The history of the mutual fund in India can be divided into 5 important phases: 1963-1987: The Unit Trust of India was the sole player in the industry. Created by an Act of Parliament in 1963, UTI launched its first product, the Unit Scheme 1964, which is even today the single largest mutual fund scheme. UTI created a number of schemes such as monthly income plans, children’s plan, equity oriented schemes and offshore funds during this period. UTI managed assets worth Rs. 6700 crore at the end of this phase. 1987-1993: In 1987 public sector banks and financial institutions entered the mutual fund industry. SBI mutual fund was the first non-UTI fund to be set up in 1987. Significant shift of investors from deposits to mutual fund industry happened during this phase. Most funds were growth oriented close-ended funds. By the end of this period, assets under UTI’s management grew to Rs. 38,247 crore and public sector funds managed Rs. 8750 crore. 1993-1996: In 1993, the mutual fund industry was open to private players, both Indian and foreign. SEBI’s first set of regulations for the industry were formulated in 1993, and substantially revised in 1996. Significant innovations in servicing, product design and information disclosure happened in this phase, mostly initiated by private sector players. 1996-1999: The implementation of the new SEBI regulations and the restructuring of the mutual fund industry led to rapid asset growth. Bank mutual funds were re-cast according to SEBI recommended structure, and UTI came under voluntary SEBI supervision. 1999-2002: This phase was marked by very rapid growth in the industry, and significant increase in the market share of private sector players. Assets crossed Rs. 1,00,000 crore. the tax break offer to mutual funds in 1999 created arbitrage opportunities for a number of institutional players. Bond funds and liquid funds registered the highest growth in this period, accounting for nearly 60% of the assets. UTI’s share of the industry dropped to nearly 50%. Some of the major players in the Indian mutual fund industry: ,[object Object],Benchmark Mutual Fund Birla Mutual Fund BOB Mutual Fund Canbank Mutual Fund Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton Investments HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Financial Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund Prudential ICICI Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund ,[object Object],HOW IS A MUTUAL FUND SET UP? A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor/s that is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is also registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and co

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