Académique Documents
Professionnel Documents
Culture Documents
PROJECT REPORT
ON
AN INTRODUCTION TO IPO”
IN PARTIAL FULFILMENT
OF
FOR
Karvy Consultancy Ltd, PUNE.
BY
PUNE-411 058.
-1-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
KNOWLEDGEMENT
I take immense pleasure in completing this project and submitting the final
project report.
-3-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
IND EX
1 EXCUTIVE SUMMARY 5
2 OBJECTIVE AND SCOPE OF REPORT 7
3 COMPANY PROFILE 9
4 FINANCIAL SYSTEM OF INDIAN MARKRT 14
7 OTHER SCHEMES 26
8 WHY INVEST IN MUTUAL FUND 29
9 TYPES OF MUTUAL FUNDS 30
10 ADVANTAGES AND DISADVANTAGE OF 39
MUTUAL FUNDS
11 INITIAL PUBLIC OFFER (IPO) 46
12 RESEARCH METHODOLOGY 50
14 BIBLIOGRAPHY 57
-4-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
EXECUTIVE SUMMARY
-5-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
EXECUTIVE SUMMARY
-7-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
OBJECTIVE AND SCOPE
SC OP E
The Indian securities market is the scope of this project and funds floated
therein. The whole project was based with the agenda to analyze existing
mutual funds and determine their performance factors .In depth analysis of
individual fund is not the scope but on the other hand performance of funds
and finding their reasons as in general is the primary motive behind this
project
-8-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
COMPANY PROFILE
-9-
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
COMPANY PROFILE
KARVY, is a premier integrated financial services provider, and
ranked among the top five in the country in all its business segments,
services over 16 million individual investors in various capacities, and
provides investor services to over 300 corporate, comprising the who is
who of Corporate India.
Karvy has a professional management team and ranks among the best
in technology, operations and research of various industrial segments.
The birth of Karvy was on a modest scale in 1981. It began with the
vision and enterprise of a small group of practicing Chartered
Accountants who founded the flagship company …Karvy Consultants
Limited.
- 10 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
1985. Since then, they have utilized their experience and superlative
expertise to go from strength to strength…to better their services, to
Provide new ones, to innovate, diversify and in the process, evolved
Karvy as one of India’s premier integrated financial service enterprise.
Thus over the last 20 years Karvy has traveled the success route,
towards building a reputation as an integrated financial services provider,
offering a wide spectrum of services.
And its employee has made this journey by taking the route of quality
service, path breaking innovations in service, versatility in service and
finally…totality in service.
- 11 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Kar vy Inve stor s Se rv ice Ltd
- 12 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
4. Largest Network of Branches & Business Associates
5. ISO 9002 certified operations by DNV
6. Among top 10 Investment bankers
7. Largest Distributor of Financial Products
8. Adjudged as one of the top 50 IT uses in India by MIS Asia
9. Full Fledged IT driven operations
- 13 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
FINANCIAL SYSTEM OF
INDIAN MARKET
- 14 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Financial sy st em - an ov er vie w:
- 15 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
FINA NCIA L MAR KE TS ;
A financial market can be defined as the market in which financial assets are
created or transferred. Financial assets represent a claim to the payment of a
sum of money some time in the future and/or periodic payment in the form
of interest or dividend.
The primary markets deal in new financial claims and securities and
hence are known as new issue markets .The secondary markets deals in
securities already issued, existing or outstanding.
- 16 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
CLASSIFICATION OF
FINANCIAL MARKETS
- 17 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
CLASSIFICATION OF FINANCIAL
MARKETS
The class if icat ion of Fi nanci al Ma rke ts can be su mm ar ize d as
fo ll ows :
• Money Market
• Debt Market
• Forex Market
• Capital Market
MON EY MA RK ET S:
The money market can be defined as the market for short-term money
and financial assets that are near substitutes for money. One of the
important functions of a well-developed money market is to channel saving
in to short-term productive investments like working capital.
- 18 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
techniques. It is a wholesale market and the volume of funds or financial
assets traded are very large i.e. in Crores of rupees.
DEB T MA RK ET :
In India, the key participants in the Forex markets are RBI, banks and
business under takings. Business under taking can participate in the Forex
markets only to the extend that they need cover for exchange exposure
One reason justified for the existence of foreign exchange market is that
each nation has decided to keep their sovereign right to have control on
their own currency .if every country had the same currency, than there will
be no need for a foreign exchange market.
CAP IT AL MA RK ET S:
- 20 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
CO MM ER CIA L PA PE R (C P) :
They have a buy back facility and no prior approval of RBI is needed
for the issue of commercial paper. The main advantage of investing in
commercial paper is that it offers return as per the prevailing market rate.
But they are not liquid and are taxed and hence not very lucrative
investment avenue.
The cost of funds for a corporate is much higher than a bank. Hence the
rates in this market are higher than those in the other markets. Inter
corporate deposit are unsecured, and hence the risk is high. The inter
corporate deposit market is not well organized with very little information
available publicly about transaction details. Also the interest from inter
corporate deposit is taxed.
- 21 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
TERM S DE PO SI TS :
Banks accepts term deposit for period ranging from 7 days to 5years. The
interest rate on the term deposit varies from 3.5% to 5.7%. The interest rate
rises sharply as period of deposit increases from 30 days to 180days. Most
banks currently offer about 5.5% for a one-year deposit. Beyond one year
the interest rate tapers off.
The government securities come prices securities issued by the govt. of India
and state govt. this are the lowest risk category instruments in the economy.
These securities are issued through auctions conducted by RBI. Where the
central bank decides the coupon or discount rate based on the response
received. Most of the securities are issued as fixed interest baring securities,
though the govt. sometime issues zero coupon instrument and floating rate
securities also.
- 22 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
BOND S:
Investments in rest of public sectors unit bonds are tax like any other
bonds. The rates in these markets differ for different issuer categories.
While top rated private corporate and public sector units are
treated as on par, financial institutions pay fewer coupons on the
issues.
The advantages of investing in bonds are that, even though over the long
run stocks out perform bonds. Bonds perform well when stocks lag, hence
diversifying the portfolio helps keep returns high during bad times. Also,
bonds provide a secure and predictable income.
If rates decline, bond will increase in Value, and they can be sold at a
premium. But, if interested rate rise, the bonds loses value.
- 23 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
WHAT IS MUTU AL FUN D?
Like most developed and developing countries the mutual fund cult
has been catching on in India. There are various reasons for this. Mutual
funds make it easy and less costly for investors to satisfy their need for
capital growth, income and/or income preservation.
- 24 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
For the individual investor, mutual funds provide the benefit of
having someone else manage your investments and diversify your money
over many different securities that may not be available or affordable to you
otherwise. Today, minimum investment requirements on many funds are
low enough that even the smallest investor can get started in mutual funds.
- 25 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
OTHER SCHEMES
OTHE R S CHE ME S :
- 26 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
• Ind ustr y spec if ic an d sect or al sche mes :
Industry specific scheme invest only in the industry specified in
the offer document such as InfoTech, FMCG and pharmaceutical etc. sect
oral scheme invest exclusively in a specified industry or a group of
industries or various segment such as ‘A’ group shares or IPO’S.
• Index scheme:
Short-term plans keep the principal intact and allow parking for
medium term. These plans have more of debt instruments (85%)and a
negligible percentage in G-sec’s. It also has a sizable component of
treasury bills that provide liquidity to these scheme an also ensure the
returns to be at least above the call money rate.
- 27 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
OTH ER FE ATUR E:
All the mutual fund schemes provide the investors with growth,
dividend and dividend re-invest options. Growth schemes provide the
investor with capital appreciation where as in case of dividend schemes,
the dividend periodically distributed to the investor.
Short-term capital gains are taxed at the normal tax rate. Mutual fund
do have a scheme that offer tax rebates to the investors under specific
linked saving scheme (ELSS) and pension scheme are allowed deduction
under sec 88 of income tax act, 1961.
- 28 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
WH Y INVEST IN MUTU AL FUN DS
- 29 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
TYPES OF MUTUAL
FUNDS
- 30 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
TYPE S O F MUTU AL FUN DS
Getting a handle on what's under the hood helps you become a better
investor and put together a more successful portfolio. To do this one must
know the different types of funds that cater to investor needs, whatever the
age, financial position, risk tolerance and return expectations.
Op en-en de d s ch emes
- 31 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Open-ended schemes do not have a fixed maturity period. Investors
can buy or sell units at NAV-related prices from and to the mutual fund on
any business day.
Open-ended schemes are preferred for their liquidity. Such funds can
issue and redeem units any time during the life of a scheme. Hence, unit
capital of open-ended funds can fluctuate on a daily basis. The advantages of
open-ended funds over close-ended are as follows:
Any time exit option, the issuing company directly takes the
responsibility of providing an entry and an exit. This provides ready
liquidity to the investors and avoids reliance on transfer deeds, signature
verifications and bad deliveries.
Any time entry option, An open-ended fund allows one to enter the
fund at any time and even to invest at regular intervals.
- 32 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Close-ended schemes have fixed maturity periods. Investors can buy
into these funds during the period when these funds are open in the initial
issue. After that such schemes cannot issue new units except in case of bonus
or rights issue. However, after the initial issue, you can buy or sell units of
the scheme on the stock exchanges where they are listed. The market price
of the units could vary from the NAV of the scheme due to demand and
supply factors, investors’ expectations and other market factors
3] While funds that invest in a combination of both stocks and bonds are
called Balanced Funds.
- 33 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Gro wt h Funds
They are not suitable for investors who must conserve their principal
or who must maximize current income.
- 34 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Growth and income funds seek long-term growth of capital as well as
current income. The investment strategies used to reach these goals vary
among funds.
Fi xed-Inco me F un ds
- 35 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Fixed income funds primarily look to provide current income
consistent with the preservation of capital. These funds invest in corporate
bonds or government-backed mortgage securities that have a fixed rate of
return. Within the fixed-income category, funds vary greatly in their
stability of principal and in their dividend yields. High-yield funds, which
seek to maximize yield by investing in lower-rated bonds of longer
maturities, entail less stability of principal than fixed-income funds that
invest in higher-rated but lower-yielding securities.
Balanc ed Funds
The Balanced fund aims to provide both growth and income. These
funds invest in both shares and fixed income securities in the proportion
indicated in their offer documents. Ideal for investors who are looking for a
combination of income and moderate growth.
- 36 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Mone y Ma rke t Fu nds/L iq ui d Fu nds
For the cautious investor, these funds provide a very high stability of
principal while seeking a moderate to high current income. They invest in
highly liquid, virtually risk-free, short-term debt securities of agencies of the
Indian Government, banks and corporations and Treasury Bills. Because of
their short-term investments, money market mutual funds are able to keep a
virtually constant unit price; only the yield fluctuates.
Specialty/Sector Funds
- 37 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Sector funds offer the opportunity for sharp capital gains in cases where
the fund's industry is "in favor" but also entail the risk of capital losses when the
Index funds generally buy shares in all the companies composing the BSE
Sensex or NSE Nifty or other broad stock market indices. They are not
suitable for investors who must conserve their principal or maximize current
income.
- 38 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
ADVANTAGE AND DIS
ADVANTAGE OF
MUTUAL FUND
- 39 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
A single mutual fund can hold securities from many issuers. This
diversification sharply reduces the risk of serious loss due to problems in
a particular company or industry.
Low Co st
- 40 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
A mutual fund let's you participate in a diversified portfolio for as
little as Rs.5, 000, and sometimes less. And with a no-load fund, you pay
little or no sales charges to own them.
Investing in mutual funds has its own convenience. While you own
just one security rather than many, you still enjoy the benefits of a
diversified portfolio and a wide range of services. Fund managers decide
what securities to trade collect the interest payments and see that your
dividends on portfolio securities are received and your rights exercised. It
also uses the services of a high quality custodian and registrar. Another big
advantage is that you can move your funds easily from one fund to another
within a mutual fund family.
Liq ui dit y
In open-ended schemes, you can get your money back promptly at net
asset value related prices from the mutual fund itself.
Tr anspa renc y
- 41 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
where your money is going. In addition to this, you get regular information
on the value of your investment.
Va ri et y
- 42 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Mutual funds also suffer from drawbacks. Unlike fixed income
products such as bonds and treasury bills, mutual funds experience price
fluctuations. The professional management offered by mutual fund comes
at a cost that reduces the over all pay out. These costs include shareholder
fees, annual fund operating fees etc.
• No Guar ante es :
• Tax es :
- 43 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If
your fund makes a profit on its sales, you will pay taxes on the income
you receive, even if you reinvest the money you made.
• Manag em en t ri sk :
- 44 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
MUT UALFU ND VS/S OT HE RS
INSTRUMENT RETURN SAFETY VOLATILITY LIQUIDITY
Equity High Low High High/low
Bonds Moderate High Moderate Moderate
Debenture Moderate Moderate Moderate Low
Bank Deposits Low High Low High
Mutual funds High High Moderate High
• The post tax returns are higher as compared to the other avenues.
- 45 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
INITIAL PUBLIC OFFER
- 46 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
INITIAL PUBLIC OFFER
On the hot issue that got through in the offering, the shares are
LIMITED AND THE DEMAND MIGHT BE HIGH. Generally a firm that has
shares to sell will allot shares to its top brokers. It’s a sort of reward if there
are no effective dates the broker will allocate the portion of the issues to the
costumers. They want them to hold the security for a longer duration of
time .if the client sells quickly the probability the broker wont get his
commission. And if you do that don’t expect the broker to call you back
with another hot offer.
The company, its advisors, and the underwriter, will determine the
amount of money, which can be raised. Once the amount is determined, the
price per share and the no. Of share is determined that is to be offered to the
public the company’s financial projections also needs to be weighted. This
includes the current trend in the investment community as to what is selling
and what isn’t selling right now.
Many times there are no real good direct comparison to other companies in
your industry. When this happens there are other things, which will be
looked at. This includes.
• Account ing po lici es th em se lf an d t hei r e ff ect o n re po rt ing
• Assets
• Back or de rs
• Co st o f cap ital
• Gene ra l an d a dm inist rat ive expense
• Lon g te rm debt
• Pro fi t m ar gi n
• Receiv able
- 47 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
• Ind ustr y lo ok
• Is i t a re gi onal or na tion al co mpan y.
It a lso a ccount s fo r
• Mar ket s ha res
• Ne w p ro duct de velop ment
• Pe rcent ag e of s ale
• Pa tents , tr ad ema rks , or p ro per ty kno wle dge .
The average shareholder will send less than 5 minutes reading the
annual reports. Infact a well-crafted current shareholder invest lot. A well
design annual report is also potentially possible to be passed on to the next
potential shareholder.
- 48 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Among other things the annual report is a communication tool.
Make it readable. Use in to get your magazine out. Subsequently to their
initial public offering, most companies don’t realize that they need to
structure the annual report to appeal to difference.
- 49 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
RESEARCH
METHODOLOGY
- 50 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
METH OD OL OG Y
This project is the result of an extensive study carried out by
various methods which includes surfing sites such of R B I, ICICI prudential,
Karvy, Sharekhan.com, Investments.com, indiatimes.com.
Re sea rc h M et ho do lo gy :
ASSUM PTI ON S:
- 51 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Lite ra tur e Surv ey :
- 52 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Pro ba bility sa mpling :
Sa mpling si ze :
Large sample gives reliable result than small sample. However, it is not
feasible to target entire population or even a substantial portion to achieve a
reliable result. So, in this aspect selecting the sample to study is known as
sample size. Hence, for my project my sample size was 100.
The Sample Size of 100 is not enough to draw a conclusion but as per the
time assigned it was difficult to take a sample size more than 100.
The Sample Size consists of both the Professional and Business class people.
IT peoples, Doctors, Jewelers, Timber Merchants & Real estate Agents are
taken as Sample.
- 53 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
Ex ec ution of t he pr oj ec t:
a. Preparation of questionnaire.
- 54 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
PRO JE CT FINDI NGS
- 55 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
REC OMME ND ATION
- 56 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
BIBLIOGRAPHY
WEB SITE
WWW.KARVY.COM
http:// Mutualfundindia.com
www.equitymaster.com
- 57 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
- 58 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
- 59 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
- 60 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
- 61 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING
- 62 -
COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING