Managing money – indian financial treasures for entrepreneurs

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This material is for PGPSE / CSE students of AFTERSCHOOOL. PGPSE / CSE are free online programme - open for all - free for all - to promote entrepreneurship and social entrepreneurship PGPSE is for those who want to transform the world. It is different from MBA, BBA, CFA, CA,CS,ICWA and other traditional programmes. It is based on self certification and based on self learning and guidance by mentors. It is for those who want to be entrepreneurs and social changers. Let us work together. Our basic idea is that KNOWLEDGE IS FREE & AND SHARE IT WITH THE WORLD

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<ul><li> 1. MANAGING MONEY INDIAN FINANCIAL TREASURES FOR ENTREPRENEURSby :DR. T.K. JAIN AFTERSCHO OLcentre for social entrepreneurshipsivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR PGPSE/CSEPARTICIPANTSmobile : 91+9414430763 </li></ul><p> 2. My words.... Ours is a great country with immense entrepreneurial potential. However, our legal system and taxation system is so cumbersome that our creativity and talent is wasted / unnecessarily diverted in these sectors. I wish that these are simplified so that an ordinary entrepreneur can understand these without help from any expert. Here I present an outline of Indian financial system forentrepreneurs.I wish that more people should become entrepreneurs. An ordinary Indian entrepreneur wishes to remain an honest entrepreneur and contribute to the development of nation, but our systems and processes... 3. How do SEBI ensure that the company has someone to implement all the rules and regulations ?Every company making a public issue is required to appoint a compliance officer and intimate the name of the compliance officer to SEBI. The compliance office will ensure that all the laws are implemented 4. What is the difference between book building and market making ?Book Building means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is build up and a Fair Price and Quantum of securities to be issued is finally determined. Book building is done at the time of issue. Market making starts after the issue has been subscribed by people. In market making, the market maker tries to stabilise the market prices by giving 2 quotes 5. When do stock exchanges delist shares ?where trading has been suspended for a minimum period of 6 months as per the norms provided in Schedule III of Delisting Guidelines on representations received from aggrieved persons before delisting they will give a time period of 15 days within which representation may be made by aggreivedbefore delisting they will issue public notice through newspapers / website 6. What is the composition of the committee constituted to study the issue of delisting ?Two directors/officers of the stock Exchange (one director to be a public representative) One representative of the investors One representative from the Central Government (Department of Company Affairs)/Regional Director/Registrar of Companies Executive Director/Secretary of the stock Exchange. 7. What is the exit route of shareholder in case of delisting? the promoter of the company shall be liable to compensate the security-holders of the company by paying them the fair value of the securities held by security-holders and acquiring their securities. 8. How can a promotor apply for delisting ?The promotor should obtain prior approval of shareholders of the company by a special resolution the promotor should give a public announcement the promotor should make an application to the stock exchange The promotor should make an application to the stock exchange the promotor should open an escrow account promotor should give advertisement with contents as per information specified in Schedule I to the Delisting Guidelines, 2003. 9. How does promotor decide delisting price (exit route)?By book building as per Schedule III of delisting guidelines 2003orthe average of 26 weeks traded price quoted on the stock exchange where the shares of the company are most frequently traded during preceding 26 weeks from the date of the public announcement and without any ceiling of maximum price. 10. 11. What is the minimum standard for a company for going for IPO ?net tangible assets of atleast Rs. 3 crore in each of the preceeding 3 full years of which not more than 50% is held in monetary assets distributable profits in terms of Section 205 of the Companies Act, 1956 for atleast three out of immediately preceeding five years.net worth of atleast Rs. 1 crore in each of the preceding 3 full years issues made in the same financial year in terms of sizeshould not exceed five times its pre-issue net worth 12. Can a company which doesnt fulfill any one conditions still go for IPO?YESit will have to issue only through book building route It must allot 50% of the issue size to the Qualified Institutional Buyers (QIBs) minimum post-issue face value capital of the company must be Rs. 10 crore ORthere should be a compulsory market-making for at least 2 years 13. What are the requirements, if a company wants to have denomination of its shares other than 10 or 100?the shares shall not be issued in the denomination of decimal of a rupee the denomination of the existing shares shall not be altered to a denomination of decimal of a rupee at any given time there shall be only one denomination for the shares of the company the companies seeking to change the standard denomination may do so after amending the Memorandum and Articles of Association, if required; the company shall adhere to the disclosure and accounting norms specified by SEBI from time to time. 14. How are retail investors encouraged in public issues in case of oversubscription?A minimum 50% of the net offer mustbe made available for allotment to retail individual investorsThe balance net offer of securities to the public shall be made available for allotment to a individual applicants other than retail individual investors, and b other investors including Corporate bodies/institutions irrespective of the number of shares, debentures, etc. applied for;The unsubscribed portion of the net offer may be made available for allotment to applicants in the other category 15. What are the due dates for submission of post issue monitoring reports?3rd day from the date of allocation in the book built portion or one day prior to the opening of the fixed price portion whichever is earlier. OR3rd day from the date of closure of the issue. 16. Rules relating to allotment of shares?allotment to the public must be made within 30 days of the closure of public issue.interest @15% per annum has to be paid if the allotment letters/ refund orders are notdespatched to the applicants 17. In how much time should the company send allotment letters after allotment ?despatch of share certificates/ refund orders and demat credit and submission of the allotment and listing documents (to the stock exchanges) should be completed within 2 working days of the date of allotment. 18. What are commercial papers?It is an unsecured money market instrument issued in the form of a promissory note. It is a privately placed instrument. It was introduced in India in 1990 to enablehighly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors. 19. What is Certificate of deposit ?It is a negotiable money market instrument and is issued in dematerialised form or as a Usance Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period. 20. What are the methods of issue of government securities ?(a) Auctions (b) On-tap issue (sale of securities already issued by RBI for those who couldng buy in auction) (c) Fixed coupon issue(d) Private Placement(e) Open Market Operations (OMO) (sale / purchase by RBI to control liquidity in the market) 21. What are long term instruments in Indian capital market ?Pure Instruments:Equity shares, preference shares and debentures/bonds which were issued with their basic characteristics in tact without mixing features of other classes of instruments. Hybrid instruments :those instruments which are created by combining the features of equity with bond /preference Examples : Convertible preference shares derivatives: Futures and options which derive their value from other instruments 22. What is tracking stock ?Dr. J.J. Irani Expert Committee recommended Tracking Stocks. A Tracking stock is a type of common stock that tracks or depends on the financial performance of a specific business unit or operating division of a company, rather than the operations of the company as a whole. 23. What is Easy Exit Bond?This instrument covers both bonds which provide liquidity and an easy exit route to the investor by way of redemption or buy back where investors can get ready encashment in case of need to withdraw before maturity. 24. What is Participating Preference Share? These shares will have the right to fully participate in the profits of the company and also be eligible for bonus shares. These are irredeemable so they are not allowed at present. As per sec. 80 only redeemable preference shares can be issued. 25. What are Participating Debentures?These debentures are profit sharing debentures which are unsecured with a right to participate in the profits of companies. These debentures can be issued upto a maximum of 50% of the voting equity shares. They shall have a maturity period of 3-10 years, and shall be listed separately on the stock exchanges. 26. What isfutures?It is contract to buy or sell an underlying financial instrument at a specified future date at a price when the contract is entered. Underlying assets for the purpose include equities, foreign exchange, interest bearing securities and commodities. 27. What are the various types of futures ?Interest Rate Futures Treasury Bill Futures Euro-Dollar Futures Treasury Bond Futures Stock Index Futures Currency Futures. 28. What is an option contract ? It conveys the right to buy or sell a specific security or commodity at specified price within a specified period of time. The right to buy is referred to as a call option whereas the right to sell is known as a put option. An option contract comprises of its type a put or call, underlying security or commodity expiry date, strike price at which it may be exercised. Options are generally described by the nature of underlying commodity. An option on common stock is said to be stock option 29. When is a put out of money? A put option is said to be out of the money when the commodity price exceed the exercise price. Suppose on 1/1/10 you buy a put to sell Reliance at 1000 after 3 months. On 1/4/10 reliance is at 1100, you are out of money as you will not get any benefit if you exercise your put. If Reliance is 900 on this day, you are in the money, because you can buy from market at 900 and sell at 1000 (by put). 30. WHAT ARE PARTICIPATORY NOTES? Participatory notes are derivative instruments which are issued by FIIs to foreign investors. Underlying securities in participatory notes are Indian Stocks 31. What is Fund of Funds (FoFs)? Itis a mutual fund scheme, which invests in the schemes of same mutual funds or other mutual funds,instead of investing in securities . ICICI was the first to launch FoFs in 2003. 32. What is the rating process- when a credit rating company rates a company / instrument ?1. Company gives a mandate to rating agency 2. Information gathering/analysis 3. Meetings with Management 4. analysis and preparation of reports 5 preview meeting6. credit rating meeting7. communicate the ratings8. acceptance / non-acceptance 33. Which company can become a member of a stock exchange ?a majority of the directors of this company are shareholders of this company and also members of that stock exchange; and the directors of this company, who are members of that stock exchange, have ultimate liability in such company 34. What are the main rules governing security contracts and matters incidental ?SECURITIES CONTRACTS (REGULATION) (PROCEDURE FOR HOLDING INQUIRY AND IMPOSING PENALTIES BY ADJUDICATING OFFICER) RULES, 2005 35. What are the various activities that a broker (member of a stock exchange) can do ?A member can act as a Badla Financier, Commission Broker, Dealer in Odd lots, Dealer in Government Securities, Jobber, Market Maker or Underwriter. 36. What are cash shares?Shares of companies which are not in the spot list are known as cash shares or B Category shares. They are traded on cash basis or delivery basis and cannot be traded on settlement basis. The actual delivery of securities and payment has to be made on or before the settlement date fixed in the case of cash basis trading. 37. What is the delivery period in the case of spot delivery?48 hours of the contract 38. Which is the clearing company for NSE?National Securities Clearing Corporation Limited was incorporated as a wholly owned subsidiary of the National Stock Exchange of India Limited to carry out clearing and settlement of the trades executed in the capital market segment of National Stock Exchange. 39. What is straddles?Itis a combination of one put and one call option with a common striking price and common expiry date. 40. What are the two types of options with regard to flexibility of exercising option?(i) European options system: On the expiry dateand(ii) American option system: anytime before the expiry of specified time 41. What is the meaning of premium in option trading ?It is the price the buyer pays to the writer for an option contract at the time of buying the option. The term premium is often synonymous with the word price in option transactions. 42. What are the advantages of options ?It is a tool to manage their risk under volatile conditions.There is no default because clearing house is counter-party to all transactions and guarantor for payment and deliveries.There is opportunity to maintain position without margin calls. realistic forecast of pricesestimation in advance of total risk in future transactions. integration of the Indian capital market with the developed capital markets. 43. What are the means to establish a good options market?Standardised terms of contract Careful selection of underlying securities. Appointment of market-makers options clearing house central market with regulation, surveillance and price dissemination. 44. What are Floating Rate Bonds?Theseare bonds with variable interest rate with a fixed percentage over a benchmark rate they are issued at face value, in comparison to deep discount bonds, which are issued at a discount in comparison to face value. 45. What are Bonds with Call/Put Option?that holder of these bond can sell back (put option) bond to bond issuer after specified duration the bond issuer can buy back (call option) bond from holder at a specified time before maturity 46. What are Capital Indexed Bonds? Capital Indexed Bonds are bonds where interest rate is a fixed percentage over the wholesale price index 47. What is SGL account ?Banks, Primary Dealers and Financial Institutions can hold government securities with the Public Debt Office of Reserve Bank of India in dematerialized form which is known as Subsidiary General Ledger (SGL) Accounts. 48. What is the minimum investment required in government securities ?government dated securities can be purchased for a minimum amount of Rs....</p>

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