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INTRODUCTION
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INTRODUCTION
Introduction to the study:
Mutual Fund Industry which is a relatively of a post-economic reforms phenomena in
India, has been expanding during this Period in branch and bound Many commercial banks,
insurance companies entered into mutual fund industry apart from foreign players. In the early
years of evolution of mutual fund industry in the Indian financial market it was a monopoly and
continued to be the same till very recent time. Then many players both foreign and Indian entered
in the Mutual Fund Industry.
This increased the competition between the various firms working in the mutual fund
Industry The need for developing various new
schemes arises so as to attract investors towards the firm and equally encouraging them to invest.
This growth in the Mutual Fund Industry and scope of increasing markets has further increased
the competition between the firms in the industry.
The competitions had given raise to demand for specialized products and skills of
various individuals who can contribute towards the containment and growth of individual firms in
the mutual firm industry. This gave rise to various related organizations and individuals working
as specialized teams in the various areas of mutual funds. One such organization is INDIA INFO
LINE PVT LTD it comes into pictures where the investors apply for the units in a Mutual Fund
schemes and verify the validity and eligibility of the investor and allots the units. The mutual fund
companies now receive millions of applications if a new scheme is launched.
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This is due to the wide spread awareness created among the urban and rural Population of India. It
therefore becomes a Herculean task to Manage the flooding applications However it should be
noted that this is a One time activity similar to that of a short run project It is needless to State that
a given mutual fund firm will not be possessing. The technological, human and knowledge
resources to take up such a gigantic task, it is in fact not needed by a mutual fund firm to create
such a vast organizational structure when it is seen from the point of view scale of economies.
Further to this problem, the mutual fund industry does not know where it stands in the current
volatile and turbulent environment. This may be The reason they prefer to hire the services of
professionals firm with specialized knowledge and Expertise.
These developments have led to an outcome that today, launching of mutual fund scheme has
become a well organized activity which is accomplished through the coordinated endeavors of
task groups.
The asset management companies have designed various schemes in accordance with the
requirements of the various sections on investors on basis of equity linked, debt instruments
linked, commodities linked and specific industry linked instruments. The investor today is given
a wide range of options to invest in various types of funds according to his interests and
capabilities.
Mutual funds enable even a small investor to investor to invest, as most of the mutual funds just
start from a minimum amount of investment of RS. 5000 hence even a small investor can invest
into a mutual fund and reap returns in the same proportions as the other big time investors. This
shows that mutual fund industry is one which aims at every section of the society. To deal with
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this large population of investors and the competition, the asset management company has been
forced to develop and design new schemes and hire the services of professionals.
mutual fund industry involves various operations from the stage of identification of the target
group or defining a market segment, designing a scheme which comes up to the expectations and
aspirations of the target group or market segment, reaching the selected market through launching
the scheme which is thereby called NFO, till the stage of investing the amount raised in
accordance with the norms stipulated with offer document and distributing the returns to the
investor by way of dividend, after making adequate provision for taxation and other operating
costs. All this process is well organized and performed in a specific order. There are various
related organizations which specialize in the activities at various stages of the functioning of the
mutual funds.
It is therefore felt expedient to examine the various intricacies involved in the new fund offer
(NFO). Specifically the various documents that are being processed, the parameters evolve either
customarily or by legal mandate to scrutinize the applications. Various stages involved in the
scrutiny, the rejection criteria, the creation of human organization to monitor the activities, the
communication channel and the structure of the organized activities and the legal environment of
NFO to some extent. Such a dissertation would help to come out with a comprehensive report
which may serve as a guide for the prospective entrants into mutual fund investment and to the
existing mutual fund investors to some extent.
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Limitations of study:
* Analysis of the applications is carried out by taking the applications from
Reliance equity Fund. The data available is therefore restricted by the design of
the application.
* The inspection of applications is done on the basis of a sample of 120
applications. Though the sample is drawn randomly, the possibility of sampling
fluctuations affecting the findings cannot be ruled out.
* Numerical data like number of applications received, total subscription amount
received, statement of accounts, investor details, etc are not available and
therefore a description of these aspects is given.
* NFO process may not be same for all mutual funds that are released. It may
differ from one fund to other depending upon the size like the no. of
applications received, subscription amount received, etc.
New fund offer (NFO):
When a mutual fund asset management company announces Public issue of units of a new
fund/scheme it is called a New Fund Offer (NFO).
When a mutual fund company plans for a new fund offer it first informs to the registrar or the
back office functions provider like INDIA INFO LINE through email. This is called as “NFO
Launching Information Mail” send by the fund manager of the asset management company to the
NFO coordinator of the INDIA INFOLINE. In this Mail the fund manager will ask the NFO
coordinator to get ready for the new fund with the required man power and software.
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Later they send the sample application form, the key information memorandum (KIM) and offer
document to INDIA INFO LINE. This offer document sets forth concisely, necessary
information about the scheme for a prospective investor to make an informed investment decision
on the scheme described. The offer document contains the salient features of the scheme like
NFO opening date, NFO closing date, Scheme name, Scheme class, reopening date, plans
available banks involved, number of bank branches involved, minimum amount – fresh purchase,
maximum amount – fresh purchase, expected number of applications, entry load and exit load.
The unit manager or the NFO coordinator will arrange a meeting where the AMC team, NFO
expert’s team, Data entry team, Reconciliation team and the dispatch team will discuss and fix the
target dates by which the work has to be completed accordingly.
What is a mutual fund?
Mutual fund is a mechanism for pooling the resources by issuing to the investors and investing
funds in securities in accordance with objectives as disclosed in offer document.
Investments in securities are spread across a wide cross-section of industries and sectors and thus
the risk is reduced, Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at the same time. Mutual fund issues units to the investors in
accordance with quantum of money invested by them. Investors of mutual funds are known as
unit holders.
The profits or losses are shared by the investors in proportion to their investment. The mutual
funds normally come out with a number of schemes with different investment objectives which
are launched from time to time. A mutual fund is required to be registered with Securities and
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Exchange Board of India (SEBI) which regulates securities markets before it can collect funds
from the public.
Mutual fund is a collection of stocks and / bonds. A mutual fund as a company brings together a
group of people and invests their money in stocks, bonds and other securities. Each investor owns
shares, which represent a portion of the holdings of the fund.
With increased uncertainties or fluctuations in the primary market and decreasing bank interest
rates, mutual funds are gaining popularity day by day Now-a- day’s mutual funds are performing
well will high returns to the investors. There are various types of schemes and plans available to
all type of investors.
Let us assume that you inertia million rupees over night and want to invest the same to
get better returns you can consider the following investment avenues that are popular in Indian
context
Company shares
Fixed deposits in banks
Government bonds
Fixed deposits in NBFC
Chit fund
Real estate
Other local money lending options
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Pros and con’s of the investments:
SNO. Investment
avenue
Risk Return Effort required to
track/maintain
investment
1. Company shares and
stocks
High High High
2. Fixed deposits in
banks
Low Low Low
3. Govt. bonds Medium Medium Medium
4. Fixed deposits in
NBFC
High Medium Medium
5. Chit funds High Medium Medium
6. Real estate Medium Medium Medium
7. Other money lending
options
Medium Medium Depends
How you can make money from a mutual fund?
If the fund sells the securities that have increased in price, the fund has a capital gain Most of the
funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the funds shares increase
in price. You can then sell your mutual fund units for profit. Funds will also usually give you a
choice either to receive a check for distributions or to reinvest the earnings and get more shares.
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Income it earned from dividends on stocks and interest on bonds. A fund pays out nearly all
income it receives over the year to fund owners in the form of a distribution.
Types of Funds:
Mutual funds also come in various sizes and shapes. There are about dozen fund classes but all of
them are derivatives of three basic classes are as follows.
Growth
Income
Liquidity
Growth: Long term growth, since these funds invest in equities, they are also called as equity
funds. Their risk level is high so is the return.
Income: This type of fund provides regular income by investing in debt instruments like bonds,
debentures etc., Because of their nature of investment, they are also called debt schemes. Their
risk and return levels are medium.
Liquidity: These are primarily invested in money market instruments and thus most volatile,
safer and give lower returns. These funds are also known as cash or money market funds.
In addition to the above type there are other derivative classes as listed below.
This type of fund... Invest in this area
Balanced fund Is an investment blend of equity and dept
Instruments
Index fund Invests in the companies that participate in stock market
indices in the same weight age comprising of an index
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Sector fund Invests in companies pertaining to specific sectors like
health care, banking, FMCG, technology etc.
Ells / Tax funds Invests is Government bonds and generally long term in
nature. They provide tax benefits.
These are called mutual fund schemes. It is based on the investment objective. There is another
Classification based on the capitalization of funds. If the fund offers purchase or selling on a
Continuous basis it is called open ended mutual fund. On the contrary, if the fund is open only for
a particular period, it is called closed ended fund.
Differences: Open ended and Closed ended funds
SNO. Feature Open ended Closed ended
1. Capitalization Unlimited Limited
2. Any time entry Yes No
3. Any time exit Yes No
4. Tax advantage Yes No
5. Available for a fixed period No
(with exemption of
FMP schemes)
Yes
6. Listed on the exchange Generally No Yes
Open ended funds gained popularity because of their flexibility and variety of features they offer.
For this reason, majority of the mutual funds are ‘open’ in nature.
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Arms of a mutual fund:
Primarily mutual fund is formed as a trust by a group of sponsors. They are the owners of the
mutual funds and forms trust by a group of sponsors. They are the owners of the mutual funds and
forms trustees who in turn appoint AMC and manage the mutual fund.
SEBI regulations require that at least two at least two thirds of the directors of trustee company or
board of trustees must be independent i.e. they should not be associated with the sponsors. Also,
50% of the directors of AMC must be independent. All mutual funds are required to be registered
with SEBI before they launch any scheme.
This entity… Does this…
Sponsor Forms Mf as a trust. Registers with
SEBI.
Trustees Holds funds invested in a form of units.
Ensure compliance with SEBI. Appoints
AMC
Asset management company Floats MF Schemes, Manages funds and
cash.
Registrar Holds investor data. Do services to
investors
Distributors Market various schemes of MF
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Transaction types (commercial & non-commercial):
Let’s compare various transactions of mutual funds with those of banks.
In a bank, you will… In a mutual fund…
Open an account with initial deposit You subscribe in a scheme and buy units
Deposit money Do additional purchases
With draw money You redeem units
Opt for a recurring deposit Start a systematic investment plan
Since mutual fund offers many more options to investors, it will have many more transaction
types as well. Let us see some popular transactions in mutual funds
SNO. Transaction Description
1. New purchase New investment. Buying
units in a scheme
2. Additional purchase Buying additional units in
a scheme
3. Redemption Selling units and getting
money back.
4. Switch/shift Transferring investment
from one scheme to other.
5. Dividend When AMC announces
dividend in a scheme.
6. Systematic investment Investing fixed amounts
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periodically like a
recurring deposit.
7. Systematic with drawl Reverse of systematic
investment Selling units
periodically
Rest are relating to general maintenance only. So they are non-commercial transactions.
Net asset value:
As you must have noticed, we always talk about ’units’ in a mutual fund and not money itself. A
unit is basic measure of investment n a mutual fund.
Each scheme / plan will have a different market value is called the Net asset value or simply
NAV. Since market value of the underlying securities changes every day, NAV of a scheme also
varies on a day to day basis.
SEBI Guidelines on New Fund Offer:
1. Procedure for launching of schemes:
(1) No scheme shall be launched by the asset management company unless such scheme is
approved by the trustees and a copy of the offer document has been filed with the Board.
(2) Every mutual fund shall along with the offer document of each scheme pay filing fees as
specified in the Second Schedule.
2. Disclosures in the offer document:
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NAV = Total assets – Total liabilities/Number of units
(1) The offer document shall contain disclosures which are adequate in order to enable the
investors to make informed investment decision [including the disclosure on maximum
investments proposed to be made by the scheme in the listed securities of the group companies of
the sponsor].
(2) The Board may in the interest of investors require the asset management company to carry out
such modifications in the offer document as it deems fit.
(3) In case no modifications are suggested by the Board in the offer document within 21
[working] days from the date of filing, the asset management company may issue the offer
document.
(4) No one shall issue any form of application for units of a mutual fund unless the form is
accompanied by the memorandum containing such information as may be specified by the Board.
3. Advertisement material:
(1) Advertisements in respect of every scheme shall be in conformity with the Advertisement
Code as specified in the Sixth Schedule and shall be submitted to the Board within 7 days from
the date of issue.
(2) The advertisement for each scheme shall disclose [investment objective for each scheme]
4. Misleading statements:
The offer document and advertisement materials shall not be misleading or contain any statement
or opinion, which are incorrect or false.
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5. Listing of close ended schemes:
Every close ended scheme shall be listed in a recognized stock exchange within six months from
the closure of the subscription Provided that listing of close ended scheme shall not be mandatory.
(a) If the said scheme provides for periodic repurchase facility to all the unit holders with
restriction, if any, on the extent of such repurchase; or
(b) if the said scheme provides for monthly income or caters to special classes of persons like
senior citizens, women, children, widows or physically handicapped or any special class of
persons providing for repurchase of units at regular intervals; or
(c) If the details of such repurchase facility are clearly disclosed in the offer document; or
(d) If the said scheme opens for repurchase within a period of six months from the closure of
subscription.
6. Repurchase of close ended scheme:
(1) The asset management company may at its option repurchase or reissue the repurchased units
of a close ended scheme.
(2) The units of close ended schemes referred to in the proviso to regulation may be open for sale
or redemption at fixed pre-determined intervals if the maximum and minimum amount of sale or
redemption of the units and the periodicity of such sale or redemption has been disclosed in the
offer document.
(3) The units of close ended scheme may be converted into open ended scheme.
(a) If the offer document of such scheme discloses the option and the period of such conversion;
or
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(b) The unit holders are provided with an option to redeem their units in full.
(4) A close ended scheme shall be fully redeemed at the end of the maturity period [Provided that
a close ended scheme may be allowed to be rolled over if the purpose, period and other terms of
the roll over and all other material details of the scheme including the likely composition of assets
immediately before the roll over, the net assets and net asset value of the scheme, are disclosed to
the unit holders and a copy of the same has been filed with the Board.
Provided further, that such roll over will be permitted only in case of those unit holders who
express their consent in writing and the unit holders who do not opt for the roll over or have not
given written consent shall be allowed to redeem their holdings in full at net asset value based
price.
7. Offering Period:
No scheme of a mutual fund other than the [initial] offering period of any equity linked savings
schemes shall be open for subscription for more than 45 days
8. Allotment of Units and refund of money:
(1) The Asset management company shall specify in the offer document
(a) The minimum subscription amount it seeks to raise under the scheme and
(b) In case of over subscription the extent of subscription it may retain Provided that where the
asset management company retains the over subscription referred to in clause (b), all the
applicants applying up to five thousand units shall be given full allotment subject to the
oversubscription mentioned in clause (b).
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(2) The mutual fund and asset Management Company shall be liable to refund the application
money to the applicants-
(i) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a)
of sub-regulation (1);
(ii) If the moneys received from the applicants for units are in excess of subscription as referred
to in clause (b) of sub-regulation (1).
(3) Any amount refundable under sub-regulation (2) shall be refunded within a period of six
Weeks from the date of closure of subscription list, by Registered A.D and by cheque or Demand
Draft marked "A/C Payee" to the applicants.
(4) In the event of failure to refund the amounts within the period specified in sub-regulation (3),
the asset management company shall be liable to pay interest to the applicants at a rate of fifteen
percent per annum on the expiry of six weeks from the date of closure of the subscription list.
9. Unit certificates or Statement of Accounts:
The asset management company shall issue to the applicant whose application has been accepted,
unit certificates or a statement of accounts specifying the number of units allotted to the applicant
as soon as possible but not later than six weeks from the date of closure of the [initial subscription
list and or from the date of receipt of the request from the unit holders in any open ended
scheme].Provided that if an applicant so desires, the asset management company shall issue the
unit certificates to the applicant within six weeks of the receipt of request for the certificate.
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10. Transfer of units:
(1) A unit certificate unless otherwise restricted or prohibited under the scheme, shall be freely
transferable by act of parties or by operation of law.
(2) The asset management company shall, on production of instrument of transfer together with
relevant unit certificates, register the transfer and return the unit certificate to the transferee within
thirty days from the date of such production. Provided that if the units are with the depository
such units will be transferable in accordance with the provisions of the Securities and Exchange
Board of India (Depositories and Participants) Regulations, 1996.
11. Dispatch of warrants and proceeds:
Every mutual fund and asset management company shall,
(a) Dispatch to the unit holders the dividend warrants within [30 days] of the declaration of the
dividend.
(b) Dispatch the redemption or repurchase proceeds within 10 working days from the date of
redemption or repurchase.
(c) In the event of failure to dispatch the redemption or repurchase proceeds within the period
specified in sub-clause (b), the asset management company shall be liable to pay interest to the
unit holders at such rate as may be specified by Board for the period of such delay.
(d) Aside payment of such interest to the unit holders under sub-clause (c) the asset management
company may be liable for penalty for failure to dispatch the redemption or repurchase proceeds
within the stipulated time.
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Wherever an application for a total value of RS. 50,000 or more, the applicant or in the case of
application in joint names, each of the applicants, should mention his/her permanent account
number (PAN) allotted under the Income Tax Act, 1961 or where the same has not been allotted,
the GIR number and the income-tax Circle/Ward/District should be mentioned. In case where
neither the PAN nor the GIR number has been allotted, the fact of non-allotment should be
mentioned in the application form. Any application form without these details should not be
accepted by the mutual fund. The above clarification is being issued in accordance with
Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996.
12. Instructions for filing scheme offer document with SEBI:
As advised in SEBI circular MFD/CIR/06/275/2001 dated July 9, 2001, while filing offer
document for launching a new scheme/revising and filing existing offer document with SEBI, the
mutual funds should highlight and clearly mention the page number of the offer document on
which each of the following observation has been incorporated. In case of any amendment to
Regulations, the new provisions should be incorporated in the offer documents.
ANALYICAL FRAME WORK
NFO process:
When a mutual fund Assets Management Company (AMC) announces a public issue of units of
& new fund/scheme, it is called a new fund offer (NFO).
The new fund is planned and sources from where it should be collected and where the amount
should be invested is planned by the AMC.
According to the SEBI rules any new fund launched should be approved by SEBI. Once the AMC
get the approval of SEBI for the fund it does the marketing of the fund by it self or through
brokers. The investors who are willing to invest in a particular fund deposit the amount they plan
to invest in the bank as directed by the AMC.
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These banks collect the application and amount and direct it towards the registrar specified by the
AMC. From this point India info line came into the picture as the registrar.
The role, responsibilities, activities, forms and reports involved in this process of NFO is general,
are AMC, fund manager, SIP I/c, Switches I/c., NFO Coordinator. Internal auditor, Systems(S/W)
dept. IPO Centre coordinator, IPO-RTI, IPO-EDP, Scanning and Printing & Dispatching.
Teams involved in the NFO process-
Mutual fund unit
Technology team
Data entry team
Verification team
External audit team
Scanning team
Franking and dispatching team
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Description of NFO process:
Bank wise segregation:
The India info line branches collect the applications of the investors across India and abroad for
all the branches of the bank that is involved in this NFO. These applications are sent to India info
line processing center, Hyderabad. After receiving, these applications are segregated bank wise
and branch wise.
IH Numbering:
IH numbering is also called as In house Numbering. India info line gives this IH numbering to
those applications. This is done for their convenience in doing back office functions easily. All
the data on the application is entered into systems through software developed by India info line
technology team called K-Bolt. Later on, we can get any information of a particular application
or investor that we require by entering this IH number.
Binding:
All the applications that are received are given for binding. Binding of application is done by
segregating them according to the bank and branch fro which they are received. India info line
does this Binding because to keep all these applications safe, out of any damage and miss-place.
First Entry:
After finishing binding of applications they are sent to Date Entry team. Here the first time entry
is done. All the information or date of an investor that is available on the application like name of
the applicant, age, Address, PAN, Bank details, broker code, sub broker code, email addresses,
guardian name, amount invested, name of the scheme or plan invested in, etc., are entered into the
systems of India info line.
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Second Entry:
After first entry the data is again sent for the second entry. Here in second entry, the data that is
entered in first entry is checked and the information what ever is missing is entered.
Online Matching:
After entering the data like applicant, age, Address, PAN, Bank details, broker code, sub broker
code, email addresses, guardian name, amount invested, name of the scheme or plan invested in,
etc., in the first entry and once again in the second entry it is sent to the online matching. Here in
online matching the physical form of application are kept side by an checking of data that was
entered in the first entry and second entry is done.
First time verification:
Data from online matching is sent to the verification team. This team verifies mistakes that are
left in online matching. Mistakes like blank address, PAN blank for amount greater than or equal
to 50000 RS. Name blank, bank details blank, invalid or blank broker code etc., are rectified in
the first time verification.
First time CCL:
First time check clearing list is in short is called as first time CCL. First Time CCL is prepared
based on the data that is provided after first time verification.
External Audit:
First time check-clearing list is sent to an external audit team. India info line appoints this team
before the NFO processes. They are nowhere related to the organization. This external audit team
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will mainly check name of the investor, amount invested, bank details PAN number, name of the
scheme/plan and mode of holding (MOH). But in total they will check more than 30 characters
Second time verification:
If the external auditing is not satisfied and if they find any mistakes or missing information they
will send the first time CCL for second time verification. Here they verify the check list once
again and mistakes like invalid mode of folding (MOH), invalid email address, status minor
without guardian name, invalid date of birth for minor, invalid existing account number,
blank/null application number, NRI with blank account type, saving or current, investor signature
missing are rectified.
Second time CCL:
Second check the verification team prepares clearing after verifying the mistakes that are pointed
out by the external audit team. After preparing second time CCL it is again sent to external audit
team.
Integrity Check (NFO team):
Check clearing list will be given by the external audit team to the NFO team in India info line
This NFO team in India info line will once again check further mistakes like spelling mistakes in
the name of the applicant etc., and rectify them.
Integrity Check (by Audit):
After integrity check by the NFO team it is once checked by the internal audit team of India info
line.
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Scanning Default Values, Verification of Mismatch cases:
Entire data is filtered at each and every step and finally it is given to the scanning team for
scanning here scanning team will detect and rectify any further default values and mismatch
cases.
Reconciliation, Rejections and Cheque returns:
Cheques of the investors are sent are sent by the balk to India info line Reconciliation team. Here
this team will verify bank details of the investor like PAN number, bank a/c number, comparing
the amount invested with that of the minimum amount that has to be invested cheques with out
hue signature of the investor bounced cheques etc., and they are rejected. These rejected cheques
are dispatched to the investors. A sample statement of accounts (SOA) is prepared by this
reconciliation team.
Handling over the data to MFS:
Entire data after getting filtered at each and every step will be handing over to mutual fund
services team. This MFS team will once again verify the data and the final data will come out any
mistakes and default values.
Porting in Task MF:
Task MF is the software developed by India info line Technology team. It is prepared according
to the suggestion given by AMC. This Task MF will resemble the style or Performa or outlook of
the statement of accounts. Final data that they got after filtering the mistakes and default values is
ported in the task MF.
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Allotment of units:
Allotment of units is done as per the amount that is invested by investors. They will avail the units
taking the Net Asset Value (NAV) of that particular scheme as base.
Sample SOA verification by audit:
Statement of accounts (SOA) is picked up randomly from a huge lot and the audit team does
verification. This verification will result in preparing a statement of accounts which in cent
percent correct and exact.
This SOA contains data like:
* Name of the investor
* Address
* Bank details
* Pan Number
* Guardian name
* Broker code
* Sub broker code
* Nominee name
* Nominee addresses
* 2nd and 3rd applicant name
* Amount invested
* No. Of units allotted
* Fund name, Scheme Name, Plan Name & A/c no
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* Transaction type details
* Mode of redemption payment
* Mode of dividend payment
* Mode of dispatch
* Status, occupation.
* Current balance, average price, current cost, current NAV etc.,
Dispatch of SOA:
Statement of accounts (SOA) once prepared is dispatched to the investor. SOA’s are neatly
packed in an envelope and dispatched to the investors by the dispatch team through courier.
New Fund Report:
India info line will finally prepare New Fund Report. This new fund report has to be submitted to
the AMC. Then AMC will submit a copy of the same to the SEBI, which is mandatory. The new
fund report details like
1) Scheme details
* Scheme name
* Scheme type
* Date of opening
* Date of closing the scheme / initial subscription period
* Target amount
* Minimum amount to be raised
2) Subscription / Allotment details
* Number of applications received with in the country
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* Number of NRI applications received
* Subscription amount received with in the country
* Subscription amount received form NRI
* Date of allotment of units
3) Initial issue expenses
4) Date of dispatch of refund of refund orders
5) Unit holding pattern
6) Distribution schedule
7) Geographical Dispersion list
COMPANY PROFILE:
Circa1995. A group of professional formed a company called Probity Research & Services
Pvt Ltd. The name was later changed to India Info line Ltd. The Objective was to provide
unbiased and independent information to market intermediaries and investors. The quality of
research soon caught the imagination of all major participants in the financial market. In a span of
2 to 3 years the client list read like the who’s who of Indian Financial market. The list included
consulting firms like Mc Kinsey, companies like Hindustan Lever, Banks like Citibank, Rating
agencies like CRISIL, D&B, FIS, foreign brokers as well as leading Indian brokers.
One fine morning in early 1999, a colleague had a crazy idea that if the company made all
the research available free on the web, the number of users may well jump from 250 to 2.5
million. To make it true, the business required a reincarnation. And the pre-requisite was a death.
It meant that the company put up all the information free on the website and let go of all the
revenues and profits. Worse, if the new avatar failed, there would be ‘no comebacks’.
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The company became heavily dependent on its e-broking business for survival. The odds
were against them. There was no money available from the private equity investors at any
valuation. The core promoters of the company had little experience of broking. To add to it, the
market was hit by a scam. They also had their share of price to pay and lessons to learn. It was
difficult to retain people. Although devastating for morale, but not surprising, most market
observers had written them off.
There was a core group who never lost hope. They cut all possible costs and worked on a bare
bones structure. They survived against all odds and started capturing market share. The company
rose from strength to strength to become the leading corporate agent in life insurance and among
the top retail players in mutual fund and broking space.
Our Key Milestones:
Incorporated on October 18, 1995 as Probity Research & Services.
Launched Internet portal www.indianinfoline.com in May 1999.
Commenced distribution of personal financial products like Mutual Funds and RBI Bonds
in April 2000.
Launched online trading in shares and securities branded as www.5paisa.com in July
2000.
Started life insurance agency business in December 2000 as a Corporate Agent of ICICI
Prudential Life Insurance.
Became a depository participant of NSDL in September 2001.
Launched stock messaging service in May 2003.
Acquired commodities broking license in March 2004.
Launched portfolio management services in August 2004.
31
Listed on NSE and BSE on May 17, 2005.
Acquired 75% stake holding in Money tree Consultancy services, which is a distributor of
Mortgages and other Loan products, in October 2005.
Acquired 100% equity of March Mont Capital Advisors Pvt Ltd in December 2005
through which we have ventured into Merchant Banking.
DSP Merrill Lynch Capital subscribed to convertible bonds aggregating Rs.80crores in
December 2005. Their current stake in India Info Line is a little over 14 % as on 31 st
March 2007.
Bennett Coleman & Co Ltd (BCCL) invested Rs.20crores in India Info line by way of
preferential allotment in December 2005.
Became a depository participant of CDSL in June 2006.
Merger of India Info line Securities Private Limited with India Info line Limited in
January 2007.
Entered into an alliance with Bank of Baroda for Baroda e-trading in February 2007.
IRDA license for Insurance Broking April 2007.
Our Management Team:
Mr.Nirmal Jain (Chairman and Managing Director)
Nirmal Jain is the founder and Chairman of India Info line Ltd.
He holds an MBA degree from IIM Ahmedabad, and is a Chartered Accountant (All
India Rank 2) and a Cost Accountant.
Mr. R.Venkataraman (Executive Director)
32
R. Venkataraman is the co-promoter and Executive Director of IndiaInfoline Ltd.
He holds a B tech degree in Electronics and Electrical Communications Engineering
from IIT Kharagpur and an MBA degree from IIM Bangalore.
He has held the position of Assistant Vice President with G E Capital Services India
Limited in their private equity division.
The Board of Directors:
Mr. Sat Pal Khattar (Non Executive Director)
Mr. Sat Pal Khattar joined the Board with effect from April 20, 2001.
Mr. Sat Pal Khattar is a lawyer by profession.
He is a director of a number of public companies in Singapore and India.
Mr. Sanjiv Ahuja (Independent Director)
Mr. Sanjiv Ahuja joined the Board with effect from August 28, 2002.
Mr. Ahuja graduated from National University of Singapore with a degree in Computer
Science and is also a Certified Public Accountant.
He started his own investment advisory and consulting company in 2001, named
Centennial Management Consultants Private Limited.
Mr. Nilesh Vikamsey (Independent Director)
Mr. Nilesh Shivji Vikamsey joined the Board with effect from February 11, 2005.
33
Mr. Vikamsey qualified as a Chartered Accountant in 1985 and has been a member of the
Institute of Chartered Accountants of India since 1985.
Mr. Kranti Sinha (Independent Director)
Mr. Kranti Sinha joined the Board with effect from January 27, 2005.
Mr. Sinha graduated from the Agra University with a Masters degree.
Mr. Sinha is also on the Board of Directors of Hindustan Motors Limited, Larsen & Turbo
Limited & LICHFL Care Homes Limited.
Our Vision:
Its vision will not be accomplished only by maintaining high growth alone. Our vision is to
emerge as the most respected financial services company in India. Needless to emphasize that it is
imperative for all us to align our personal goals and values to this vision.
Knowledge:
Always keep yourself up-to-date by reading newspapers like Economics Times, Business
standard and Business Line daily. Passing NCFM, AMFI, IRDA exams also help you to
get basic domain understanding.
We are in a knowledge industry and hence we cannot afford to go to a client and appear
ignorant and foolish by not even knowing basic things.
Technology:
34
By technology, we mean that as an organization, we leverage technology to deliver best
service to our clients at the least cost.
Our trading interface for broking is absolutely world class.
We expect our employees to be comfortable with and confident of using technology.
Service:
Our customer service is warm, friendly and responsive that media cannot help but rave
about. Today, service is the key driver for growth in financial services. We take pride in
our ability to add value that our customers can feel and appreciate.
Remember we have to always ensure that simple things like ensuring customer problems
are solved, requests are catered to, giving him investment ideas etc. Basically, whatever it
takes to keep him served.
35
OBJECTIVES
36
OBJECTIVES OF THE STUDY
* To study the technical, procedural, legal dimensions of the NFO
* To examine briefly the organizational structure, communication network,
resource requirements to launch a new fund
* To study a sample of application drawn from Reliance Mutual Fund.
37
RESEARCH METHODOLOGY
38
RESEARCH METHODOLOGY
Methodology of study:
To fulfill the objective of the study both primary and secondary data has been collected. Primary
data is the data collected specifically for the study. Data is collected directly from people and
organizations via questionnaires or surveys before being analyzed to reach conclusions
concerning the issues covered in the questionnaire or survey.
In this study primary data was collected through interaction with staff of India info line Pvt Ltd.
and the applications of Reliance equity fund.
Secondary data is the data collected previously by someone else for some other purpose which
can be analyzed and interpreted according to requirements. For example, sources of secondary
data are government publications, newspapers, worldwide web etc.
In this study the Secondary data is mainly taken from
* The company’s training material.
* Reconciliation statements.
* Other documents generated with in the organization
Which have to Access?
* www. indiainfoline.com, www.amfiindia.com,www.sebi.com.
Type of Research
Research methodology is a way to systematic solve the research problem. It is a procedure, which
is followed step by step to solve a particular research problem. There are basically four types of
researches
39
EXPLORATIVE RESEARCH
DESCRIPTIVE RESEARCH
DIAGNOSTIC RESEARCH
HYPOTHESIS TESTING RESEARCH
Explorative Research
To gain familiarity with the phenomenon or to achieve an insight into it.
Descriptive Research
To poetry accurately the characteristic of the particular individual situation or a group.
Diagnostic Research
To determine the frequency with which something occurs or with which it is associate with
something else.
Hypothesis Testing Research.
To test a hypothesis of casual relationship between variables.
The present project is Descriptive in nature. It is done to poetry accurately the characteristic of a
particular individual situation or a group. The major purpose is descriptive research is the
description of the state of the affairs as it exits at presents. The main characteristics of this method
are that the researcher has no control over the variables; he can only report what has happened or
what is happening.
Statement of research problem
A research problem, refers to some difficulty which a researcher experiences in the context of
either a theoretical or practical situation and wants to obtain a solution for the same.
40
Here the research problem is mutual funds.
Statement of research objectives
It aims at getting an insight in to Retail loan. It also aims at familiarized with the customer during
the market survey help me a lot in understanding the practical aspect of the loan as a whole .
To know the awareness among the common man about loan which they want to take.
RESEARCH DESIGN AND METHODOLOGY
Research is a systemic and objective process of gathering recording and anayzing data for aid of
making decision regarding a particular problem.
RESEARCH DESIGN
The research design is a master plan specifying the methods and procedures for collecting and
analyzing the needed information the research design of my dissertation is.
DESCRIPTIVE RESEARCH
Descriptive research includes surveys and facts findings inquiries of different kinds.
RESEARCH INSTRUMENTS
QUESTIONNAIRE
SAMPLE DESIGN
target population people of industries
sample size 100 people
Sampling technique convenience and judgmental
41
DATA ANALYSIS
&
INTERPRETATION
42
DATA ANALYSIS AND INTERPRETATION
Occupation profile of applicants:
Particular Business Service Student Professional Retired Housewife Others TotalNo. of applicants
34 46 2 4 7 23 5 120
% of applicants
28 38 2 3 6 19 4 100
Interpretation:
Majority of the applicants are from services personnel at 38%, next comes business People are 28%. The
housewife occupy 3rd highest at 19%. It is found that professionals and retired are at the lowest.
STATUS:
a) Residential status of individual applicants :
43
Particulars Resident NRI TotalNo. of applicants 104 4 108% of applicants 96 4 100
Interpretation:
It can be observed from the table and the chart that the majority of applicants are resident
individuals constituting 96% the applicants and remaining 4% are the Non-resident Indians.
b) Status of non-individuals :
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Particulars Partnership AOP/BOI Trust HUF Fll BanksNo. of applicants 1 0 0 10 0 0% of applicants 10 0 0 80 0 0
Particulars Company Society Fl SME Others TotalNo. of applicants 1 0 0 10 0 0% of applicants 10 0 0 80 0 0
Interpretation:
In the non-individuals category HUF occupied the highest at 80% and next 10% is for
partnerships. In others category 10% is found and all other non-individual entities have recorded
zero applications.
Age profile of the applicants:
Particulars Below 18 18-30 31-60 Above 60 Total
45
No. of applicants
0 30 72 18 120
% of applicants
0 25 60 15 100
Interpretation:
The age profile of the applicants shows that the majority of the applicants fall into the age Group
31-60 years and the percentage of them being 60. This is followed by the age Group 18-30 years
and 15% of the applicants are above 60 years.
Investment profile of the applicants:
46
Particulars 5000-25000
25001-50000
50001-100000
Above 100000
Total
No. of applicants 78 32 4 6 120
% of applicants 65 27 3 5 100
Interpretation:
Amount of investment is high at 65% in the range 5000-25000 and it is very low at 3% in 50001-
100000, but the next slab. Above 100000 has registered 5%.
Scheme profile of applicants:
47
Particulars Growth option
Bonus option
Dividend reinvestment
Dividend payout
Total
No. of applicants 59 4 37 20 120% of applicants 49 3 31 17 100
Interpretation:
Majority of the applicants Opted the growth option and the option of dividend reinvestment is
31%. This means that 80% of the applicants are not investing for income sake rather they look at
the accumulation of profits.
Analysis of mode of payment:
Particulars Cheque DD TotalNo. of applicants 119 1 120% of applicants 99 1 100
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Interpretation:
The mode of payment reflects upon the quality of applicants. On an average 99% have paid
through cheques and therefore the NFO is able to attract good quality retail investors.
Analysis of type of account:
Particulars SB Current NRO NRE FCNR TotalNo. of applicants
119 1 0 0 0 120
% of 99 1 0 0 0 100
49
applicants
Interpretation:
Majority of the payments have been made from Savings Bank account (SB). No payments have
been found from NRO, NRE, and FCNR even though 4% of the applicants are NRI s
Gender profile of the applicants:
Particulars Male Female TotalNo. of applicants 89 31 120% of applicants 74 26 100
50
Interpretation:
The female participation in the NFO is low at 26%. The male applicants are very high at 76% as
is not normally found in found in institutional investments.
Geographical distribution of applicants:
Particulars Andhra
Pradesh
Bihar Chandighar Delhi Gujarat Karnataka
No. of applicants 4 1 1 17 11 5
% of applicants 3 1 1 14 9 4
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Particulars Madhya
Pradesh
Maharastra Rajasthan Punjab Uttar
Pradesh
Tamilnadu
No. of applicants 1 48 2 2 5 6
% of applicants 1 40 2 2 4 5
Particulars West Bengal Others total
No. of applicants 10 6 120
% of applicants 8 5 100
52
Interpretation:
A predominant feature is that 40% of the applications are from Maharastra and next highest 14%
is registered for Delhi. Lowest numbers of applications are from Bihar and Chandighar.
FINDINGS
53
54
FINDINGS
A predominant feature is that 40% of the applications are from Maharastra and next
highest 14% is registered for Delhi. Lowest numbers of applications are from Bihar and
Chandighar.
The female participation in the NFO is low at 26%. The male applicants are very high at
76% as is not normally found in found in institutional investments.
Majority of the payments have been made from Savings Bank account (SB). No payments
have been found from NRO, NRE, and FCNR even though 4% of the applicants are NRI s
The mode of payment reflects upon the quality of applicants. On an average 99% have
paid through cheques and therefore the NFO is able to attract good quality retail investors.
Majority of the applicants Opted the growth option and the option of dividend
reinvestment is 31%. This means that 80% of the applicants are not investing for income
sake rather they look at the accumulation of profits.
Amount of investment is high at 65% in the range 5000-25000 and it is very low at 3% in
50001-100000, but the next slab. Above 100000 has registered 5%.
The age profile of the applicants shows that the majority of the applicants fall into the age
Group 31-60 years and the percentage of them being 60. This is followed by the age
Group 18-30 years and 15% of the applicants are above 60 years.
In the non-individuals category HUF occupied the highest at 80% and next 10% is for
partnerships. In others category 10% is found and all other non-individual entities have
recorded zero applications.
55
It can be observed from the table and the chart that the majority of applicants are resident
individuals constituting 96% the applicants and remaining 4% are the Non-resident
Indians.
Majority of the applicants are from services personnel at 38%, next comes business People
are 28%. The housewife occupy 3rd highest at 19%. It is found that professionals and
retired are at the lowest.
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CONCLUSION
57
CONCLUSION
* The NFO is found to be a complex activity calling for creating an organization polling
the knowledge and expertise of people in different areas.
* The NFO process is simple and well structured as long as it is to investor to investor,
but thereafter the process is lengthy time consuming and found to be overlapping at
some stages.
* The SEBI regulations governing NFO are comprehensive and protect investor's
interest at each level.
* Different funds have been designing different forms of applications for NFO.
* An analysis of sample of applications revealed the following
O Majority applicants prefer to hold the units individually.
O Majority of the applicants are in service.
O NRI s share is about 4% of the total.
O More than 2/3 rd of the applicants are HUF s.
O The model age group is 31-60.
O The most common investment amount is 5000-25000.
O About half of the applicants prefer Growth option.
O Almost all applicants make the payments by cheques.
O There were no NRO, NRE and FCNR accounts.
O Majority the applicants are male, and.
O Majority applications are from state of Maharastra
58
RECOMMENDATIONS
59
RECOMMANDATIONS
* Different funds have been using different forms of applications. A standardized form of
application maybe designed by the competent authority and should be made mandatory
for all funds to use the standard application form.
* The NFO process is very complex and there is a need to simplify the process by
eliminating certain unnecessary steps in the process ie instead of carrying out audit for
three times and appropriate internal check system maybe devised to keep the errors
within the tolerance limits.
* The NRI subscribers to the fund maybe encouraged to make the payments from NRO,
NRE and FCNR accounts.
* The application from institutional investors and foreign institutional investors are to be
encouraged through a package of incentives.
* The participation of senior citizens in the NFO s may be encouraged as they are likely
to hold more surpluses compared to others.
* The holding of units in joint names shall be encouraged.
* There is a need to investigate the reasons for HUF s occupying more than 2/3rd share in
the non-individual applications as its not a body corporate.
* A savings from all channels of India / World are to be tapped by the NFO rather than
one or two states applying for a loin share of the option.
60
BIBLIOGRAPHY
61
BIBLIOGRAPHY
Bibliography
* www.Indiainfoline.com
* www.sebi.com
* www.amfiindia.com
* NFO propeller of India info line.
* NFO records of Reliance Mutual Fund.
* Mutual Funds in India by H SADHAK.
62
QUESTIONNAIRE
63
QUESTIONNAIRE
NAME ……………………………….
DEPARTMENT ……………………..
DESIGNATION……………………...
AGE ………………………………….
GENDER……………………………..
1. ARE YOU INTERESTED IN MUTUAL FUNDS
(A)YES
(B)NO
2. WHAT IS YOUR AGE GROUP
(A)25-35
(B)35-45
(C)45-55
(D)55-65
3. WHAT IS YOUR OCCUPATION
(A)PRIVATE EMPLOYEE
(B)GOVERNMENT EMPLOYEE
(C)BUSINESS PERSON
(D)RETIRED
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4. IN WHICH TYPE OF MUTUAL FUND DO YOU LIKE TO INVEST
(A)CLOSE ENDED
(B) OPEN ENDED
5. WHAT PERCENT OF RETURN DO YOU EXPECT
(A) 10-15
(B) 20-25
(C) 30-40
(D) DOUBLING YOUR AMOUNT
6. WHICH TYPE OF FUND ALLOCATION DO YOU LIKE
(A) 100 PERCENT EQUITY
(B) 80 PERCENT EQUITY & 20 PERCENT DEBT
(C) 70 PERCENT EQUITY 20 PERCENT DEBT & 10 PERCENT MONEY MARKET
(D) 100 PERCENT DEBT
7. IN WHICH OF THE UTI SCHEME YOU HAVE INVESTED
(A)UTI WEALTH BUILDER FUND
(B)UTI INFRASTRUCTURE ADVANTAGE FUND
(C)UTI LONG TERM ADVANTAGE FUND
(D)NONE
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8. ARE YOU SATISFIED WITH THE RETURNS OF WHICH UTI IS GIVING
(A)YES
(B)NO
(C)CANNOT SAY
9. HAD YOU INVESTED IN ANY OTHER MUTUAL FUNDS
(A)RELIANCE MUTUAL FUNDS
(B)J M FINANCIAL
(C)FEDILITY MUTUAL FUNDS
(D)HSBC
10. DO YOU ADVICE PEOPLE TO INVEST IN MUTUAL FUNDS
(A)YES
(B)NO
(C)CANNOT SAY
66
