A INTERIM REPORT ON

“FINANCIAL ANALYSIS AT RELIANCE

MONEY”

By

Saurabh Sharma
07BS-3882
Organization
Reliance money private lmt.
4 Abhishilp complex
opp. Keshav bagh party
plot off 132 ft Ring
road, satellite, Ahmedabad

FACULTY GUIDE COMPANY GUIDE

Prof. Suneel Arora Mr. Hardik
Mathur
IBS Ahmedabad Center manager
(vastrapur branch)
Reliance money, Ahmedabad
 Reliance money
Introduction
The Reliance – Anil Dhirubhai Ambani Group is among India’s top three
private sector business houses on all major financial parameters, with a
market capitalisation of Rs 100,000 crore (US$ 22 billion), net assets in
excess of Rs 31,500 crore (US$ 7 billion), and net worth to the tune of Rs
27,500 crore (US$ 6 billion).

Reliance Money Limited has been promoted by Reliance Capital Limited a

part of Anil Dhirubhai Ambani Group with the Net-worth – Rs. 4500 cr.,
amongst the top 3 banking & financial services companies in the private
sector.

The Indian Financial Services Scenario…

Equity investing

Equity basis

N on
P ro m o te r
2%

P u b lic
25% P ro m o te r
46%

M u tu a l
Fu n d
15% FII
12%
Equity is a share in the ownership of a company. It represents a
claim on the company's assets and earnings.

Income From Equity Investing

1. Capital appreciation: Equity shares of companies are listed and

traded on a stock exchange ( BSE or NSE). The market prices of these
shares are continuously moving up or down depending on the interest
in the company’s stock, it’s business potential, etc.

2. Bonus shares: Company declares a bonus in the ratio of 1:2 (this

means it will issue one share for every two shares you hold) and if you
hold 100 shares, you will be entitled to 50 shares as a bonus.

3. Rights shares: Company will offer fresh equity shares to its

existing shareholders at a price, which is lower than the current market
price of the share. For instance, if the current market price of the
company’s share is Rs 35, it will offer shares at below this price, say Rs
25.

4. Dividend income: Based on the quantum of profits, companies

declare dividends to distribute a portion of these profits to their
shareholders. Dividends are declared as a percentage of the share’s
face value

Reasons For Issuing Equity

To expand its business, a company, at some point, needs to raise money. To
do this, it can either borrow by taking a loan or raise funds by offering
prospective investors a stake in the company --- which is known as issuing
stock. A company usually borrows from banks and/or financial institutions.
This is called ‘debt financing’.

Characteristics of equity
1. Equity is unsecured and a high risk-return investment

2. Equity remains in perpetual existence

3. Limited liability
Stock Selection Guidelines
1. Prospects of the company- Order Size, Execution Capacity, Industry Growth

2. Assess the Stock price - ROCE, EBITDA, P/E ratio & EPS

Equity Investing Strategies

1. Diversification : A risk management technique that mixes a wide variety
of investments within a portfolio. The rationale behind this technique
contends that a portfolio of different kinds of investments will, on average,
yield higher returns and pose a lower risk than any individual investment
found within the portfolio.

Diversification strives to smooth out unsystematic risk events in a portfolio so

that the positive performance of some investments will neutralize the
negative performance of others. Therefore, the benefits of diversification will
hold only if the securities in the portfolio are not perfectly correlated. Equity,
debt, mutual funds, gold, property, etc

2. Growth Investing: A strategy whereby an investor seeks out stocks with

what they deem good growth potential. In most cases a growth stock is
defined as a company whose earnings are expected to grow at an above-
average rate compared to its industry or the overall market.

3. Value Investing: Value investing means investing in companies that are

believed to be currently undervalued but whose worth will be recognized by
the market eventually.

4. Rupee Cost Averaging / Value Averaging: To buy ‘low’ and sell ‘high’ is
very difficult to do, especially in volatile markets. One investment strategy
that helps overcome this volatility and take advantage of it by averaging out
cost of investment.

5. Investing in Dividend Yield Stocks: Companies, which offer high

dividend yields, are usually ‘value’ companies, which ‘value investors’ look
for.

Risks Associated with Equity Investing

1. Systemic risk ( Whole Market )

a) Inflation risk
 b) Interest risk

c) Exchange rate risk

d) Political risk

2. Non systemic risk ( Industry / Company )

a) Technology risk

b) Risk of employee Strike

c) Industry risk

While systemic risks are not in one’s control, non-systemic risks can be
assessed for each company before one makes an investment decision

Monitoring Your Equity Investments

1. Business cycles

2. Mergers & acquisitions

3. New business developments

4. Changes in managements

5. Information on the economy and news on the global markets are

available in daily business publications and websites of foreign
business publications

Investing in Equity – The Procedure

Step 1: Open the necessary accounts

 Broking account.

 Demat account

 Bank account
Step 2: Decide your mode of transacting – in cash or with
margins
a) By making purchases in cash and taking delivery of the shares

b) By undertaking margin trading (you pay only a portion of the cost for
purchases and your broker funds the balance) and squaring off your
positions you don’t take delivery of the shares. You simply book your
profit or loss

Step 3: Deciding on which mediums to use for transacting

• Visits to the broker’s office/branches

• Your telephone

• The Internet

• Kiosks

Costs of Investing in Equity

 Brokerage charges

 Demat charges

 Payment of Securities Transaction Tax (STT)

 Payment of Service Tax (ST) and Education Cess (EC)

Computing Returns on your Equity Investments

Once you sell your shareholding, you should compute the returns you have
earned on your investment. To do so, you should take into consideration the
sale value, your cost, dividends received and rights/bonuses.

Also take into consideration the time element of all your inflows and outflows
and use the ‘Internal Rate of Return’ (IRR) formula (available in the MSExcel
program) to compute your returns. IRR is the rate at which your cash
outflows and inflows over different time periods are equal.

Tax Impact on Equity Investment

 Tax impact on your dividend income - Nil

  Tax impact on your capital gains (sale of shares at a profit)

• 10% on Short Term

• Nil on Long Term

 Setting off capital losses

Portfolio Management Services (PMS)

Reliance portfolio managers endeavor that every portfolio created by them
reflects the values on which Reliance ADA Group has been built. A
commitment towards transparency and service. Add to that, a strong
research driven investment process.

Thy personal portfolio reflects your investment style and profile, but requires
considerable amount of your time and efforts to manage. Anticipating &
analyzing market movements, financial statements and studying
macroeconomic variables is becoming increasingly complex. You may not
have required time to devote to your investments.

Under Portfolio Management Services, you delegate the responsibility of

managing your portfolio to a team of specialists who understands your
investment objectives.

Our team of Portfolio Managers, Research Analysts and Relationship

Managers are working continuously to create and actively manage your
portfolio to provide you the best returns in the forever-changing market
dynamics.

Investment Strategy
 Reliance money follows a robust and disciplined investment process and
endeavor to generate absolute returns consistently over a long term.

 Reliance money believes in active management of portfolios to generate

superior returns and regular review of portfolios help in better risk
measurement to ensure consistent performance.

 An efficient asset allocation with flexibility to apportion 100% to cash and use
the cash to grab market opportunities when they arise.

 Selective use of derivatives as an investment tool for hedging and portfolio

re-balancing.

 Our research team has the capability to value the companies based on their
current and expected future potential which helps us in generating better &
consistent returns.

 Invest in relatively concentrated portfolio of not more than 15 – 20 stocks of

what we believe as excellent picks.
Investment Process

Investment Considerations

Quantitative

1. Value

2. EPS

3. EPS growth
 4. Momentum

5. Price

Fundamental

 Volume growth

 Free cashflows

 Management

 Sustainability

 Pricing authority

Thematic

• Macroeconomic factors

• Themes

• sectoral implications

Benefits of PMS
1. Flexibility

o Efficient switch between Cash & Equities

o Focused portfolio of select stocks / sector concentrations

o Professional Management with the objective of delivering consistent

long-term performance while controlling risks.

a. Operations efficiency – PMS provider gives the client a customised

service. The company takes care of all the administrative aspects of
the clients portfolio with periodic reporting.

b. Transparency

• Investors get regular statements and updates of his investments.

• Web enabled access will ensure that client is just a click away
from all information related to his investments ( i.e. securities
 you hold, cost & current value, securities purchased & sold,
dividends received, performance of portfolio, market
commentary, etc).

• Customized advice that suits individual requirement to achieve

his financial & investment objectives.

• Easy Access to dedicated Relationship Managers / Financial

Advisors with whom the client can interact and discuss concerns
on his portfolio.

• The Portfolio Manager will provide audited statement of accounts

at the end of financial year to aid the investor in assessing the
tax liabilities on his portfolio including Capital Gains Report. ( The
PMS provider is a trustee acting in a fiduciary capacity on behalf
of the investor. Therefore, the tax liability for a PMS investor
would remain the same as if the investor is accessing the capital
market directly.).

• Reliance endeavour's to deliver competitive returns through

diligent fund management framework, that is supported by
rigorous analysis and a proven investment methodology. Our
investment beliefs from the core of what we do.

Systems & Processes

Reliance money operations team takes care of the systems, MIS &
related back office activity. The account details and portfolio valuation
can be viewed on our website with the help of special used id &
password for each client.

Deutsche Bank has been appointed as Custodian & Fund Accountant -

The banking, accounting, settlement & clearing operations will be done
by Deutsche Bank AG, thereby providing total transparency to the
whole system.

They have dedicated team of Advisors, Relationship Managers and

operations team whom you can contact for any specific information
related to your investment.
Financial Markets

 Equity Trading
 Derivatives Trading
 Commodities Trading
 Offshore Investments

Distribution

 Mutual Funds
 Life Insurance
 General Insurance
 Credit Card
 Consumer Loans

Other Services
  Money Changing (FFMC)
 Money Transfer (Western Union)
 Gold Coin retailing

EQUITY
Features:-

 Cost-effective: Pay a flat fee of just Rs. 500/- valid for 2 months or
specified transactional value.
 Convenience: Go online, through your broker/agent, Call & Trade or
Kiosk
 Security: Dynamic password - keeps the account extra secure
 Widest product range: Equity, Commodities, Derivatives, Offshore,
Mutual Funds, IPOs, Insurance
 Other value-adds:Live news from Dow Jones, research, expert views,
etc available free and in real time

Account opening fee & other charges:-

 The initial account opening charges are Rs. 750/- which are lifetime
account opening charges. These charges have been waived off for
corporate clients.

 AMC charge of Rs. 50/- is applicable which is the lowest in the industry.

 For additional Rs. 500/- a client can trade in volumes upto Rs. 5 lakh
with time validity of maximum 1 year. There is a Rs. 500/- waiver for
general clients (individuals).

 Also certain prepaid coupon systems are provided which provide the
customer different trading volume limits along with different time
validity limits as suited to different clients as per their needs. These
coupon systems have been mentioned below:-
 Brokerage Structure for Reliance Money

ONLINE OFFLINE
BUY SELL BUY SELL
1 paisa 1 paisa 1 paisa 1 paisa
Rs. 12 (D.P. Rs. 12 (D.P.
charge)* charge)#
Rs. 12 Rs. 12 (assistance
(assistance charge)*
charge)**

* The Rs. 12/- D.P. charges as shown above are flat per transaction per scrip
per day irrespective of the volume of shares traded.

# The Rs. 12/- assistance charges are also flat irrespective of the volume of
shares traded out of which Rs. 10/- is the commission the franchisee receives
for the services offered by him and Rs. 2/- is what Reliance Money gets.

Additional Demat A/C details

 Tie up with banks such as HDFC, IDBI, Axis Bank and ICICI Bank

 Intraday margin – 5 times same day square off

  Delivery completely cash based

PRODUCTS & SERVICES OFFERED BY DIFFERENT BROKERS

Produ Equity & IPOs Commod Credit Cards Loan LI & PMS &
cts Derivativ & ity & Gold s GI other
Equity Offere es MFs Coins benefit
Houses d s

India Infoline Yes Yes Yes No No Yes Yes

Religare Yes Yes Yes No No Yes Yes

Reliance Money Yes Yes No Yes Yes Yes Yes

Angel Broking Yes Yes Yes No No Yes Yes

ICICI Direct Yes Yes Yes Yes Yes Yes Yes

Kotak Secu. Yes Yes Yes Yes Yes Yes Yes

HDFC Secu. Yes Yes Yes Yes Yes Yes Yes

Anagram Yes Yes Yes No No Yes Yes

Sharekhan Yes Yes Yes No No Yes Yes

Indiabulls Yes Yes Yes No Yes Yes Yes

Analysis-
All the broking houses offer almost all types of main products and
services. They are providing ‘Portfolio Management Services’ and other
value-added benefits along with their basic offerings so that to cater
more and more customers. Other than banks like ICICI, HDFC etc.,
Reliance Money is the only broker which provides credit cards and gold coins
to the customers. It is also a distribution house where you can find
products or services of various companies. Its concept is simple, “All under
one roof.” Now, it is going to offer ‘commodities’ also as one of its products
as there is enough potential in the same.

In today’s scenario, each and every major broking house is trying to

include almost all the products in its umbrella so that their
customers have not to go at different places for their different
financial needs.

BROKERAGE, AMC & OTHER CHARGES LEVIED BY DIFFERENT

BROKERS

Charg Account AMC Brokerage Tie-up with

es Opening Intra-day Delivery Major banks
Equity (
(Demat +
Houses Rs.) (Paise)
trading)
(Paise)
(Rs.)

India Infoline 555 Nil 04 40 Icici, Hdfc,

Axis

Religare 500 Nil 03 30 Icici, Hdfc,

Bob, Axis,
Abn, Sbi

Reliance Money 750 50 01 01 Icici, Hdfc,

(500 for (online) & (online) & Axis & Idbi
corporate) Rs. 12 Rs. 12
(offline) (offline)
per trade per trade

Angel Broking 772 300 03 30 Icici, Hdfc,

Axis

ICICI Direct 750 500 05 75 Icici

Kotak Secu. 750 250 04 40 Kotak

HDFC Secu. 799 500 04 40 Hdfc

Anagram 550 200 05-10 50 Hdfc, Icici

Sharekhan Nil 275 10 50

Indiabulls 900 Nil 03 30 Icici, Hdfc,

Axis
Analysis-
The charges for account opening and AMC are different at different
broking houses but those who are keeping these very low or nil, are
collecting the same in form of brokerage. Except reliance, all are charging
brokerage on volume, which varies from 03 to 10 paise (intra-day) and 30 to
70 paise (delivery). But, the brokerage structure is flexible at most of the
places. Reliance money is charging only 01 paisa per trade (online),
regardless of volume which is very beneficial for big clients. It has
introduced ‘Voucher system’ for brokerage on account of its aggressive
launching. ICICI Direct is very costly in terms of brokerage yet it is at no.
1 position among online brokers. The reason behind this is its dedicated
customer service.

In today’s scenario, all the broking houses are trying to associate

with major banks for the requirement of demat account. This benefits to
both, the banks as well as the brokers. The banks are getting new
products to offer and the brokers are getting huge customer base of
banks. The popular banks in this category are ICICI, HDFC, Axis, Sbi etc. The
broking houses like ICICI Direct, Kotak Secu. and HDFC Secu. are in
association with single bank only i.e. ICICI Bank, Kotak Bank and HDFC Bank
respectively, because of same group.

VALUE ADDED FACILITIES PROVIDED BY DIFFERENT BROKERS

Extra Benefits BTST or Credit Off Loans

faciliti or ATST facility market for trading
Equity es discounts trading in IPOs
Houses on high-
 volume

India Infoline Yes Not Yes Yes Yes

right
now

Religare Yes Yes Yes Yes Yes

Reliance Money Yes Yes No Yes Yes

Angel Broking Yes Yes Yes Yes No

ICICI Direct Yes Yes No Yes No

Kotak Secu. Yes Yes No Yes Yes

HDFC Secu. Yes Yes Yes Yes Yes

Anagram Yes Yes Yes No Yes

Sharekhan Yes Yes Yes Yes Yes

Indiabulls Yes Yes Yes Yes Yes

Analysis-
Any benefits or discounts in case of high volume traders

In today’s scenario, it is very necessary to provide additional benefits or

special discounts to high volume traders or HNIs because it is very important
to retain the same as they are the source of big revenues.

BTST/ ATST facility

BTST or ATST stands for Buy Today, Sell Tomorrow or Acquire Today, Sell
Tomorrow. This facility has started few months back as an additional product
to attract customers. In this, one can buy shares during the trading hours
and then sell the same next morning when market gets open.
Delivery cash based or credit facility provided

Most of the brokers provide the facility of credit to its customers for few days
and later on interest but this generates an additional head-ache of
collecting payment. Now, the trend has somewhat changed as players like
ICICI and Reliance are providing completely cash-based trading. Sebi is also
in favour of the same as there is always a risk of defaulters in case
of credit-based trading.

Provision of off market trading

Almost all the brokers are providing this type of facility for the people who
wants to fill more than one IPO application, legally. So again, this is an
additional benefit given to attract the customers.

Provision of loans for IPO trading

This is again a service for customers who want to invest in IPOs but are not
having the enough capital. So, the brokers are providing the facility of loan
for the same. But very few are considering it as a risk in this ‘Bearish
scenario.’

PORTFOLIO MANAGEMENT SERVICES(PMS)

Schemes at Offer

 Growth

 Value

GROWTH

A Moderate scheme with growth approach and investments

predominantly in large-cap stocks. The objective is to ensure
liquidity and lower impact cost leading to the construction of a
relatively more stable portfolio. The portfolio management
process will also focus on using cash as an investment tool and
derivatives for protection of portfolio.

Investment Objective – Generate capital appreciation in medium to

long term through investments in equities and equity related instruments
comprising predominantly large cap companies. This scheme will be
benchmarked to the Nifty 50 stocks.

Investment Strategy – The portfolio will have 18-20 high quality stocks
and overweight on large Cap stocks. However select mid cap stocks may
also be considered for investment. The portfolio strives to insulate an
investor from cyclical themes by investing in sectors offering secular
growth outlook.

Parameters Driving Investment Decision – The portfolio strives at all

times to achieve an overall 70% allocation to large cap companies. Again
the portfolio will limit the exposure to any sector to be less than 25% of
the portfolio size and to any scrip to be less than 10%.

 No Lock-in Period, No Exit Load

 Maximise post tax returns by concentrating on long-term gains & low

churning of portfolio

 Fixed and Performance based fee structure

 Funds managed on a Pool basis

 Custody & Fund Accounting to be done by Deutsche Bank

Pricing Features

A Moderate scheme with growth approach and investments

predominantly in large-cap stocks. The objective is to ensure
liquidity and lower impact cost leading to the construction of a
relatively more stable portfolio. The portfolio management
process will also focus on using cash as an investment tool and
derivatives for protection of portfolio.

Investment Objective – Generate capital appreciation in medium to

long term through investments in equities and equity related instruments
comprising predominantly large cap companies. This scheme will be
benchmarked to the Nifty 50 stocks.

Investment Strategy – The portfolio will have 18-20 high quality stocks
and overweight on large Cap stocks. However select mid cap stocks may
also be considered for investment. The portfolio strives to insulate an
investor from cyclical themes by investing in sectors offering secular
growth outlook.
 Parameters Driving Investment Decision – The portfolio strives at all
times to achieve an overall 70% allocation to large cap companies. Again
the portfolio will limit the exposure to any sector to be less than 25% of
the portfolio size and to any scrip to be less than 10%.

 No Lock-in Period, No Exit Load

 Maximise post tax returns by concentrating on long-term gains & low

churning of portfolio

 Fixed and Performance based fee structure

 Funds managed on a Pool basis

 Custody & Fund Accounting to be done by Deutsche Bank

Pricing Features

Type Processing Management Fee Performance Brokerage

Upfront

Fixed Fee 1.5 % 3 % p.a. Nil 0.15 %

Returns Upto 8% - NIL

Performance 1 % p.a.
1.5 % 8%-15% - 10% 0.15 %
Based Fee
>15% - 20%

Note: Custody, Service tax, Security transaction Tax & Other Statutory
levies at actuals as applicable

VALUE
A highly flexible investment option, which offers a diversified
investment portfolio across both large-cap and mid-cap stocks.
This option follows a moderately aggressive approach to portfolio
construction. The portfolio management process will also focus
on using cash as an investment tool and derivatives for
protection of portfolio.
 Investment Objective – The objective of this scheme is wealth creation
by delivering superior returns over long term (18 months) through
investments in value & growth stocks. This will be benchmarked with BSE
200. .

Investment Strategy – The portfolio will have 18-20 high quality stocks
and overweight on Mid-Cap stocks. The investments will be made for a
medium to long term horizon. Early identification of stocks to ride through
the entire investment cycle. Timing of investment is important to
generate superior returns.

Parameters Driving Investment Decision – Selection of stocks based

on potential for value unlocking based on key events and strong growth
potential, Scalable business potential, Beneficiary of favourable economic
cycle and Large market / business opportunity

 Lock-in Period – 6 months, Exit Load if redeemed between 6-

12 months: 2%, redeemed between 12-18 months :1%

 Maximise post tax returns by concentrating on long-term gains & low

churning of portfolio

 Fixed and Performance based fee structure

 Funds managed on a Pool basis

 Custody & Fund Accounting to be done by Deutsche Bank

Pricing Features
Type Processing Management Fee Performance Brokerage
Upfront

Fixed Fee 1.5 % 3 % p.a. Nil 0.15 %

Returns Upto 8% - NIL

Performance 1 % p.a.
1.5 % 8%-15% - 10% 0.15 %
Based Fee
>15% - 20%
Note: Custody, Service tax, Security transaction Tax & Other Statutory
levies at actuals as applicable