NFO PROCESS IN MUTUAL FUNDS

AT

INDIA INFOLINE

Project report submitted in

Partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION

Submitted by:
RANJITH KUMAR.P
Bearing Roll No.0240-60-141

PRINCETON P.G. COLLEGE

(Affiliated to Osmania University)
RAMANTHAPUR, HYDERABAD
(2006-2008)

1
 DECLARATION

I hereby declare that the project titled “NFO PROCESS IN MUTUAL

FUNDS” done at India Info line submitted by me as part of partial fulfillment
for the award of the Masters of Business Administration, at Princeton P.G College,
OSMANIA University, Hyderabad is a record of Bonafide work done by me.

I also declare that this report has to my knowledge is my own and is neither
submitted to any other university nor published any time before.

(RANJITH KUMAR P)

2
 ACKNOWLEDGEMENT

The presentation of this project has given me an opportunity to

express myprofound gratitude to all concern in guiding me. Foremost I

would like to thank GOPAL SIR (Manager of Indiainfoline) for giving me

an opportunity to undertake this projectwork.

I would like to thank the INDIAINFOLINE staff for giving me

support and the required material on time.

Iwould also thank the principal of our college,

P.G.R.R CENTER FOR DISTNACE EDUCATION,OSMANIA UNIVERSITY

Hyderadad. For providing an opportunity to undergo a project study

program. I would like to thankMOHD.ABDUL NAYEEM for assisting

and guiding me to complete the project work.

(C.VINAY VARMA)

3
 FOREWORD
Investments goals vary from person to person. While
somebody wants security, others might give more weightage to returns
alone. Somebody else might want to plan for his child's education while
somebody might be saving for the proverbial rainy day or even life after
retirement. With objectives defying any range , it is obvious that the
products required will vary as well.
Indian Mutual Funds industry offers a plethora of schemes and
serves broadly all tupe of investors. The range of products includes equity
funds, debt, liquid, gilt and balanced funds. There are also funds meant
exclusively for young and old, small and large investors. Moreover, the setup
of a legal structure, which has enough teeth to safeguard investors intersts,
ensures that the investors are not cheated out of their hard earned money.
All in all, benefits provided by them cut across the boundaries of investor
category and thus create for them, a universal appeal.
Investors of all categories could choose to invest on their own in
multiple options but opt for Mutual Funds for the sole reason that all benefits
come in a package.The Mutual Fund industry is having its hands full to cater
to various needs of the investors by coming up with new plans, schemes and
options with respect to rate of returns, dividend frequency and liquidity.
In view of the growing competition in the Mutual Funds
industry, it was felt necessary to study the investors orientation towards
Mutual Funds i.e. their pattern of risk apetite and preferences in various
schemes, plans and options in order to provide a better service,
The study is an attempt in that direction.

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 ABSTRACT

The purpose of this project creates a design in relation to

process of NFO (NEW FUND OFFER) and how this process is carried out till
the end.

The school work of this project is based on the procedure

takes place in indiainfoline while going through the NFO.

To schoolwork the technical procedure, legal dimensions of

NFO at India info line and examine briefly the organizational structure,
communication network, resource, requirements to launch a new fund.

The analysis is made by carrying the applications of reliance

equity fund

The data for his study is colleted from various sources like
magazines, Books, Websites, and from the staff of Indian Info Line.

It generates an Idea to the investors in knowing the

technical procedure in carrying a NFO by the Organization.

New Fund Offer process may not be same for all Mutual
funds that are released. It may differ from one fund to other depending up
on the size like NO .of Applications received, Subscriptions amount received
etc. .

5
 CONTENTS

TITLE PAGE NO

 INTRODUCTION 1

 REVIEW OF LITERATURE 7

 COMPANY PROFILE 23

 ANALYTICAL FRAME WORK 29

 QUESTIONNAIRE 52

 FINDINGS AND CONCLUSIONS 57

 SUGGESTIONS & RECOMMENDATIONS 58

 BIBLIOGRAPHY 60

6
INTRODUCTION

7
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

9
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 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.

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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.

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.

11
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.

12
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.

13
REVIEW OF LITERATURE

14
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.

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

15
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 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.

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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

Pros and con’s of the investments:

SNO. Investment Risk Return Effort required

avenue to
track/maintain
investment
1. Company shares High High High
and stocks
2. Fixed deposits in Low Low Low
banks
3. Govt. bonds Medium Medium Medium
4. Fixed deposits in High Medium Medium
NBFC
5. Chit funds High Medium Medium
6. Real estate Medium Medium Medium
7. Other money Medium Medium Depends
lending options

17
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.

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.

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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

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.

19
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 No Yes
period (with exemption
of FMP schemes)
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 You subscribe in a scheme and
deposit 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 Investing fixed
investment amounts
periodically like a
recurring deposit.
7. Systematic with Reverse of
drawl systematic
investment Selling
units periodically
Rest are relating to general maintenance only. So they are non-commercial
transactions.

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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.

NAV = Total assets – Total liabilities/Number of units

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:

(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.

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(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.

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

24
(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

(b) The unit holders are provided with an option to redeem their units in full.

25
(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).

26
(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,

27
the asset management company shall issue the unit certificates to the

applicant within six weeks of the receipt of request for the certificate.

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

28
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.

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.

29
30
 COMPANY PROFILE

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

31
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’.

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.

32
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.
 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 31st 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.

33
  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)

 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.

34
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.
 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:

35
  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:

 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.

36
37
 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.

38
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

39
40
41
42
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

43
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.

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:

44
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 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):

45
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.

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:

46
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.

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:

47
 * 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
* 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:

48
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

* 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

Holding profile of applicant:

49
Particulars Single Joint Anyone Total

No. of applicants 89 0 31 120

% of applicants 74 0 26 100

Interpretation:

It can be seen that majority of the applicants prefer to hold the allotted units
individually and 26% prefer to hold anyone/survivors. This corroborates with
the age profile of the applicants.
Occupation profile of applicants:

50
Particular Business Service Student Professional Retired Housewife Others Total
No. of 34 46 2 4 7 23 5 120
applicants
% of 28 38 2 3 6 19 4 100
applicants

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:

51
Particulars Resident NRI Total
No. 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:

Particulars Partnership AOP/BOI Trust HUF Fll Banks

No. of applicants 1 0 0 10 0 0
% of applicants 10 0 0 80 0 0

52
Particulars Company Society Fl SME Others Total
No. 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

No. of 0 30 72 18 120
applicants

53
% of 0 25 60 15 100
applicants

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:

Particulars 5000- 25001- 50001- Above Total

25000 50000 100000 100000
No. of applicants 78 32 4 6 120

54
 % 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:

Particulars Growth Bonus Dividend Dividend Total

option option reinvestment payout
No. of applicants 59 4 37 20 120
% of applicants 49 3 31 17 100

55
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 Total

No. of applicants 119 1 120
% of applicants 99 1 100

56
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 Total

No. of 119 1 0 0 0 120
applicants
% of 99 1 0 0 0 100

57
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 Total

No. of applicants 89 31 120
% of applicants 74 26 100

58
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 Bihar Chandighar Delhi Gujarat Karnataka

Pradesh
No. of 4 1 1 17 11 5
applicants
% of 3 1 1 14 9 4
applicants

59
Particulars Madhya Maharastra Rajasthan Punjab Uttar Tamilnadu
Pradesh Pradesh
No. of 1 48 2 2 5 6
applicants
% of 1 40 2 2 4 5
applicants

Particulars West Bengal Others total

No. of applicants 10 6 120
% of applicants 8 5 100

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.

60
QUESTIONNAIR

61
 QUESTIONNAIR

1. ARE YOU INTERESTED IN MUTUAL FUNDS

(A)YES
(B)NO

(From the sampling of 100 people 70 percentage of people are really

Interested in mutual funds.)

2. WHAT IS YOUR AGE GROUP

(A)25-35
(B)35-45
(C)45-55
(D)55-65

(From the above chart we can understand the age group 55-65 people

are more investing in to the mutual funds).

62
3. WHAT IS YOUR OCCUPATION
(A)PRIVATE EMPLOYEE
(B)GOVERNMENT EMPLOYEE
(C)BUSINESS PERSON
(D)RETIRED

(Here Number of Retired employees are investing more as they are

concerns about their future).

4. IN WHICH TYPE OF MUTUAL FUND DO YOU LIKE TO INVEST

(A)CLOSE ENDED
(B) OPEN ENDED

(Here open ended schemes are more flexible compare to close so

Many people are interested into open ended schemes).

63
5. WHAT PERCENT OF RETURN DO YOU EXPECT
(A) 10-15
(B) 20-25
(C) 30-40
(D) DOUBLING YOUR AMOUNT

(Here Number of people likes to double their 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

(Here many investors are love to invest in 100 percent equity fund

Allocation scheme.)

64
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

(Here the investors are likely to invest in infrastructure advantage

fund as this sector is in a booming stage.)

8. ARE YOU SATISFIED WITH THE RETURNS OF WHICH UTI IS GIVING

(A)YES
(B)NO
(C)CANNOT SAY

(The above chart is clearly saying that today according to market

situation many people are quite satisfied with the return they are

Getting.)

9. HAD YOU INVESTED IN ANY OTHER MUTUAL FUNDS

(A)RELIANCE MUTUAL FUNDS

65
(B)J M FINANCIAL
(C)FEDILITY MUTUAL FUNDS
(D)HSBC

(As people are specialized in market more the investors they all are

Investing in HSBC if not in UTI because HSBC is the world’s local bank

And international old more than 200 year old company)

10. DO YOU ADVICE PEOPLE TO INVEST IN MUTUAL FUNDS

(A)YES
(B)NO
(C)CANNOT SAY

NOTE:
As mutual funds is the subject to market so people generally does not

Like to give advice to others as it is a risky business.

66
 FINDINGS
AND
CONCLUSIONS

67
Findings and conclusions:

* 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.

68
O There were no NRO, NRE and FCNR accounts.

O Majority the applicants are male, and.

O Majority applications are from state of Maharastra

SUGGESTIONS
AND
RECOMMENDAIONS

69
Suggestions and recommendations:

* 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.

70
* 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.

71
BIBILOGRAPHY

72
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.

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74