depository systems

CHAPTER-1

INTRODUCTION

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INTRODUCTION TO DEPOISITORY SYSTEM

Technology is revolutionizing every field of human endeavor and

activity. Indian capital market is barrow meter of Indian economy; one of

them is introduced technology into capital market. A major development in

the Indian capital market has been setting up of Depository system. The rapid

growth in number, volume and value of securities in the Indian capital market

exposed the limitations of handling and dealing securities in the physical /

paper mode; the short coming of the market became in the manifest in terms

of bad deliveries, delays in transfer and irregular settlement etc. depository

used as elixir, bringing solution for all those problems.

The main objective’s of depository systems are to accelerate scrip less

trading, to make trust in individual investors participation in depository

system and to create a competitive environment and be responsive to user’s

interest and concern.

A depository holds securities in electronics form and provides all

services related to transaction of shares/ debt instruments. A depository

interacts with clients through a depository participant with who the client has

to maintain a dmat account.

Thus an investor who wishes to avail of all depository services has to

open a dmat account. A depository participant is an agent of depository and is

authorized offer depository services to investors.

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MEANING OF DEPOSITORY

Depository means “one place where something is deposited for

safe keeping; one who receives a deposit money, securities, investments or

other property; a person to whom something is entrusted; a trustee; a person

or group entrusted with preservation or safe keeping of something”

The Act defines Depository as:

An organization where the securities of shareholders are held in

the form of electronic accounts in the same way as bank holds money. The

holds electronic custody of securities and also arranges for transfer of

ownership of securities on the settlement dates.

According to section-2(e) of Depository Act:

“Depository means a company formed and registered under the

companies act, 1956 and which has been granted a certificate of registration

under section-12(1a0 of Securities and Exchange Board of India act, 1992”.

A depository can not act as depository unless it obtains a

certificate of commence of business from the board (SEBI).

The objective of depository system is accelerate the growth of

scrip less trading and to make the individual investors participation in

depositories to create competitive environment and to enhance liquidity and

improving capital market efficiency.

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NEED OF THE STUDY

The rapid growth in number, volume and value of securities in Indian

Capital Market is taking place, large number of companies issuing shares

through IPO’s, which requires the services of the Depository system. It will

take much time of allotment, refund in physical form of transactions. To

reduce the delay in transactions and to eliminate malpractices Depository

system helps allot.

The present study provides the overview of Depository System in India.

There is a need to study what extent the depository services has benefits to

the investors.

OBJECTIVES OF THE STUDY

The objectives of the study are:

To analyze the services of depositories to investor through depository

participants.

To know the awareness of investors towards Depository system.

To present suggestions for improving efficiency

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SCOPE OF STUDY

It covers the depository system of India i.e. how the depository evolved in

India, functions and regulations of depositories various institution and

individuals which will be participated in the process

(DPS, CCS, R&T Agent, companies, Investors etc,)

The process of various activities and special services of depository and it

covers NSDL.

METHODOLOGY OF THE STUDY

In order to archive the above objectives both the primary and

secondary data one considered.

Primary data:

The primary data collected through a structured questionnaire from the

investors in Twin cities and through interviews with the employees .

Sample size: 100 investors

Sampling method: Random sampling method.

Secondary data:

The secondary data has been gathered from published books,

periodicals, journals, and annual reports and through Internet.

REFERENACE PERIOD

The scope of the study is limited for a particular period of time i.e. 45

days

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LIMITATIONS OF THE STUDY

1.. The study is confined to only depository participant’s services

through depositories and awareness of investors about depository system only

in twin cities.

1. By not considering the entire depository participants

implications relating to the pattern of trading may have been

missed in this stud

2. Some of the investors may show lack of interest in providing

the response which might lead to biased information.

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CHAPTER-2

REVIEW OF LITERATURE

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TOOLS AND TECHNIQUES

To analyze the data tables and graphs are used.

INTRODUCTION

India has a capital market, which is more than a century old; the paper

– based settlement of trades caused substantial problems like bad delivery

and delayed transfer of title and so on. Therefore, with the objective of

improving the market efficiency, enhancing transparency, checking unfair

trade practices and bring the India up to liberalize, regulate and to develop

the securities market was introduced in 1990s. The enhance of Depositories

Act in August- 1996 paved the way for establishment of Depositories in

India. NSDL was inaugurated as first Depository in India in November 1996.

Depositories are promoted by institutions of statute have been

responsible for economic development of the country. National infrastructure

of international standards that handles most of the trading and settlement in

dematerialized (scrip-less) from in Indian capital market has been

established.

Depository’s aims at ensuring safety and soundness of the Indian

market places by developing settlement solutions that maximize efficiency,

minimize risk and minimize cost as compared to the physical transfer.

Depositories are concerned with conversion of securities from physical

to electronic custody of securities. These are identical in all respects and are

thus tangible.

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In depository system ownership transfer of securities electronically by

book entry without making securities move from person to person. The Act

had made the securities of all public limited companies freely transferable,

restricting the company’s right to use discretion in effecting the transfer of

securities and the transfer deed and other procedural requirements under the

Companies Act have been dispensed with.

NEED FOR SETTING UP DEPOSITORY SYSTEM:

Indian securities market has grown exponentially during the last

decade. So the problems associated with the settlement of trade are also on

rise.

The technology has changed the face of Indian stock markets in the

post-liberalized era. Competition amongst the stock exchanges, increase in

the number of players and changes in the trading system led to a clearing

system proved to be inadequate due to operational in efficiency. Hence, there

emerged a need to replace the traditional system with a new system called the

“Depository System”.This need was realized in the 1990s due to various

reasons. The reasons are:

i. Large-scale irregularities in the securities scam of 1992 exposed

the imitations of the prevailing settlement system.

ii. A lot of time was consumed in the process of allotment and

transfer of shares, impending healthy growth of the capital

market.

iii. With the opening up of the Indian economy, there was a wide

spread equity cult which resulted in an increased volume of

transactions.

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iv. Mounting the fiscal deficit made the Government to realize the

foreign investment for the growth of the economy and that was

being restricted due to non-availability of Depositories.

v. There are various problems associated with dealing in physical

shares, such as…

a).Unwanted delay in transfer of shares.

b).Various problems such as theft, fake and/or forgery

transfer.

c).Paper work involved in buying selling and transfer

leading to costs of handling, storage, transportation and

other back office stocks.

All these problems served as barriers to the entry of investors

into the market. To overcome these problems the Government of India

programulated the Depository in sept-1995. Thus paying the way for setting

of the Depository system in the country.

OVERVIEW OF NSDL

Frame Work of NSDL:

NSDL:

NSDL is the first depository in India, established in August 1996

and promoted by institutions of national stature, responsible for economic

development of the country has since established a national infrastructure of

international standard that handles most of the trading and settlement in

dematerialized form in Indian capital market.

The Industrial Development Bank of India (IDBI), The Unit Trust of India

(UTI) and The National Stock Exchange (NSE) to provide electronic

10

depository facilities for securities traded in equity and Debt market promoted

NSDL.

CDSL:

CDSL is the other Indian depository promoted by stock exchange, Mumbai

in association with Bank of India, Bank of Baroda, and State Bank of India

and HDFC Bank. The Central Depository Services Limited (CDSL)

commenced operations in the year 1999.

SERVICES OF NSDL :

NSDL carries out its operations through various functionaries

called Business Partners, NSDL electronically linked it’s Business Partners

viz., depository participants, Registrar and Transfer Agents, Clearing

Corporations / Clearing Houses. They are National Stock Clearing

Corporation Limited (NSCCL) and Bank of India Stock Limited (BOISL).

This is done on order to facilitate settlement of trades and to

perform a daily reconciliation of all account balances held with a

NSDL/CDSL. The entire system is called NEST (National Electronic

Settlement & Trading) system. Thus, a highly integrated set up for

maintenance of investor accounts have been developed and implemented.

Depositories and its Business Partners are regulated by SEBI

and

Governed by SEBI (Depositories & Participants) Regulations, 1996. The

functioning and operations of NSDL are governed by provisions of NSDL

/CDSL byelaws and business rules framed in accordance with the regulations.

Basic functions:

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The main functions of Depositories (NSDL) are:

Dematerialization

Re materialization

Dematerialization:

It is the process by which a client can get physical certificates

converted into electronic balances maintained in its account with the agent

called Depository Participant. In simple terms the conversion of holding from

physical to electronic form.

The securities held in dematerialized from are fungible. They do

not bear any distinguishable features like distinctive numbers, folio numbers

or certificate numbers.

Process of Dematerialization:

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INVESTORDEPOSITORYPARTICIPANT

R & TAGENT

NSDL/CDSL

PROCESS:

1. THE INVESTORS ARE SUBMITS THE Demat Request From

(DRF) duly filled to his Depository Participant along with

physical certificate.

2. The Depository Participant informs depository (NSDL) of the

investors request for dematerialization.

3. The Depository Participant sends the physical certificates to the

Registrars of the company.

4. The NSDL confirms the request to the Registrars.

5. After sufficient scrutiny, the Registrars accept the request by

giving electronic credit. This is conveyed to the NSDL.

(The Registrar updates to the NSDL of the Electronic credit)

6. The NSDL apprises of the credit to Depository Participant.

7. Subsequently, the investor is apprised of his credit in his

account.

Rematerialization:

Dematerialization is the exact reverse of dematerialization. It refers to the

process of issuing physical securities in the place of the securities held

electronically in book-entry form with a Depository. Under this process,

depository account of a beneficial owner is debited for the securities sought

to be rematerialized and physical certificates for the equitant number of

securities are issued.

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PROCESS:

1. The investors request for Rematerialized Request Form (RRF) to its

Depository Participant.

2. If RRF is found in order, the Depository Participant should accept RRF

and issue an acknowledgement to the client.

3. The Depository Participant in turn will also apprise the Registrar &

Transfer Agent.

4. The depository will appraise the Registrar/Transfer Agents.

5. The Issuer or its Registrar & Transfer Agent should verify that RRF

and after that printing the physical certificates will update the


6. The Issuer or its Registrar & Transfer Agent should then proceed to

issue the physical security certificates and dispatch them to the

Beneficial Owner.

7. The Depository Participant, on receiving conformation of debit entry in

DPM, should inform the client accordingly. This entire process takes a

maximum of 30 days.

Thus NSDL play a major role in this process. They also provide basic

services as follows

Account maintenance:

NSDL interfaces their investors through its agents called

Depository Participants. The investors are open a account with a

Depository Participant is similar to the opening of a bank

account.

Settlement of trades through market transfer:

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In India the stock exchanges have established electronic

connectivity with NSDL to facilitate settlement is respect of

dematerialized securities.

The NSDL provides investors to buy or sell their share in any of

the stock exchanges linked to NSDL through a broker of his

choice.

The NSDL includes the facilities like

Off market transfers

Inter depository transfer

Distribution of non – corporate actions

Nomination / transmission

DEPOSITORY PARTICIPANTS :

Depository services are extended through its agents called

Depository Participants (DPs). The Depository Participant is the link

between the shareholder, the Company and the Depository. Banks,

Financial Institutes, Custodians, Stock Brokers etc. can become DPs

subject to their meeting certain requirements prescribed by the

depositories and SEBI.

An investor can open his/her account with one or more

DPs as he/she likes. The procedure for opening an account with the

Depository Participant is similar to opening a saving bank account with

a bank. After having opened the account, an investor can hold shares of

many numbers of companies in his/her account, provided all such

companies have entered the depository system.

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ELIGIBILITY:

Persons belonging to one of the following categories are eligible to

become a Depository Participant.

A Public Financial Institute as defined as section 4A of the

Companies Act.

A Bank included for the time begin in the second schedule to the

Reserve Bank of India Act. 1934.

A Foreign Bank operating in India with approval of Reserve

Bank of India.

A State Financial Corporation established under the provisions

of section 3 of State Financial Corporation Act, 1951.

An Institution engaged in providing financial services promoted

jointly or ever by any of the institutions mentioned in the four

mentioned clauses.

A Non – banking Financing Company.

A Clearing Corporation or Clearing house of a stock exchange.

A stock broker who has been granted a certificate of registration

by SEBI.

Depository participant Services:

The depository participant is the link between the shareholder, the

company and NSDL and provides the following services.

Account Opening

To utilize the services offered by a depository, any person

having investment in any security or intending to invest in

securities needs to have a d-mat account with a Depository – DP.

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This holder of such d-mat account is called as “Beneficial

Owner (BO)”. A BO can maintain a d-mat account with zero

balance in such account. A BO can open more than one account

with the same or multiple Depository Participants, in the same

name/s and order, if he/she desires so. The investor can approach

any Depository Participant/s of his/her choice to open d-mat

account.

Dematerialization

Dematerialization is a process by which physical certificates (of

shares/debentures/other securities) are converted into electronic

balances. A BO has to submit the request for dematerialization

by submitting the d-mat request form (DRF) duly completed

along with the concerned physical certificates, to his/her


Processing Delivery & Receipt Instructions

To settle trades done on a stock exchange (on – market trades)

and trades, which are directly settled between tow BOs (off –

market trades), BOs submit duly completed delivery instructions

in the prescribed from to Depository Participant. For receipt of

securities into his/her account, a BO can give one time “standing

instruction” to depository participant. Once such a standing

instruction is given to the Depository Participant, there is no

need to submit separate instructions for receipt every time the

investor busy securities.

Account Statement

Generally a Depository Participant sends to the BO, a statement of his

account, monthly, if there is any transaction in the account or every

quarter if the account is not operated during that period.

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Rematerialization

Rematerialization is the process by which the electronic balances held I the d-

mat account can be converted back into physical certificates.

Pledging

If the BO decides to pledge any securities in his BO account, he can avail of

the same by submitting the pledge creation form duly complete, to his


Nomination

BO accounts also have a facility for nomination in favor of any person.

Transmission of securitie

NSDL offers a facility for transmission of balances held in BO

account/s (to other BO account/s) if so required due to death, lunacy,

bankruptcy, and insolvency or required due to operation of any law

Changes in Address

A BO who wishes to register his change in address submits his/her request in

writing to his/ her depository Participant. The changes entered by the

Depository Participant in the CDSL system will be automatically downloaded

to all the companies in which the BO is holding securities. This facility

offered by CDSL saves money, time and effort for the BO.

Bank Account Details

SEBI has made it mandatory for companies to print details of bank account of

the BOs on dividend/interest warrants etc. to prevent possibilities of misuse

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of the warrants. All BOs should submit a request in writing to the Depository

Participant if they wish to record/challenge their bank account details.

Role of Depository participants:

Depository participants are described as an agent of the depository. They are

the intermediaries between the depository and the investors. The relationship

between the depository participants and the depository is governed by an

agreement made between the two under the depositories act. In a strictly legal

sense a depository participant is an entity that is registered as such with SEBI

under the provisions of the SEBI Act. NSDL offers a host services to the

investors through its network of depository participants.

Issuer / R & T Agent:

Corporate / companies which issue any kind of security are known as

“Issuer” in the Depository System. Only those securities, which are admitted

into the depository system are available for dematerialization to the holders

of such securities or can be allotted in electronic record form by the Issuer.

It is necessary for the issuer to establish an electronic electivity with

NSDL either directly or through a Registrar and Transfer Agent, who was

already established connectivity with CDSL.

Role of Issuer / R & T Agent in Dematerialization of securities:

The depository electronically intimates on a daily basis all Dematerialization

requests to respective issuer or it’s R&T agency. The issuer are its R&T

Agent have to verify the validity of security certificates as well as the fact

that demat request has been made by the person recorded as member in its

registrar members. After such verification, issuer or its R&T agent intimates

NSDL & authorizes an electronic credit for that security in favor of the client.

In the event of an intimation being received by the depository from

issuer or R&T Agency to credit the account of the client with securities,

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which don’t match, with the details the client or depository participant, the

balance is held in suspense account

i. Role of Issuer/R&T Agent in Rematerialization of Securities:

A client may withdraw its security balances with NSDL at any

point of time by making an application for Rematerialization to NSDL

through its depository participant. When the investor submits the RRF ,

the issuer and/or its R&T agent.

ii. Role of Issuer/R&T Agent in Corporate benefits:

It’s the function of issuer/R&T agent inform NSDL about the

corporate action relating to prescribing dates for book closers, record

dates, and dates for redemption or maturity of security, dates of

conversion of debentures, warrants, call money dates and such other

action from time to time.

The Issuer/R&T agent may, if the benefits in the form of

securities, distributes such benefits clients through NSDL.

Clearing Corporation/Clearing House :

This term applies to any entity engaged in the activity of clearing and

settlement of trades on any recognized stock exchange may be admitted as

user on NSDL subject to its entering into an agreement as raid down in the

bye-laws of NSDL.

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A different agreement has to be drawn up if a clearing house of a

stock exchange is not a legal counter party to the trades on the exchange and

the trade/settlement guarantee fund is held and managed by the exchange. A

third kind of agreement has to be entered into if the members/dealers of the

exchange are not the clearing members of the clearing house.

Admission criteria:

i. The clearing corporation or a clearing house of stock exchange

has adequate hardware and software systems to interact with

NSDL as specified in the business rules.

ii. NSDL is satisfied that the clearing corporation or a clearing

house stock exchange operates in such manner that it ensures

payment against delivery or guarantee settlement.

iii. The clearing corporation or a clearing house of stock exchange

under takes to corporation at all times to redress the grievances

of clients & depository participants on respect of its operation

in relation to NSDL.

Clearing members/Brokers:

Clearing Members/Brokers are the members of the clearing

corporation/clearing houses, who facilitate settlement of trades done on stock

exchanges. They could be a broker or custodian registered with SEBI as such

is an important intermediary in the capital market and essential link in the

depository participant

Role of clearing members/Brokers:

Clearing members/ Brokers are continuously monitor the

deliveries received for pay – in or from pay – out for the subsequent

reconciliation of trade settlements very easily.

They subsequently reduce const of his operations for himself as well as

for his clients.

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Clearing members/Brokers are also offering one-stop services to clients in

respect of trading and Depository service, not only the increases his business

but also can effectively monitor client account position and insulate from

failure in settlement

Some features of Depository Ordinance are as follows:-

a) The depository is registered owner of share while the shareholders is the

beneficial owner (BO) retaining all the economic and voting rights arising out

of share ownership.

b) Shares in the Depository will be fungible.

c) Transfer pertaining to sale and purchase will be indemnified be the

depository.

d) If trades are routed through depository; there is no need to pay stamp

duty.

KEY FEATURES OF DEPOSITORY SYSTEM IN INDIA

Multi-Depository System:

The depository model adopted in India provides for a competitive multi-

Depository system. There can be various entitles providing depository

services.

DEMATERIALISATION AS AGAINST IMMOBILIZATION The model

adopted in India provides only for dematerialization of securities. This is a

significant step in the direction of achieving a complete paper-free securities

market. Many of the developed countries have opted for immobilization (e.g.

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Hong Kong) or both immobilization and dematerialization (e.g. Japan) of

securities.

Immobilization:

Immobilization of securities is done by sorting or lodging the

physical security certificates with one organization that acts as a custodian-a

securities depository. All subsequent transactions in such immobilized

securities take place book entries. The actual owners have right to with draw

the physical securities from custodial agent whenever required by them.

Dematerialization:

Dematerialization of securities occurs when securities issued

physical form are destroyed and equivalent number of securities are credited

into the beneficiary owner’s account. India has adopted dematerialization

route to depository.

In a Depository system the investors stand to gain by way of

efficient settlements, lower costs and lower risk of theft or forgery, etc. But

the implementation of the system has to secure and well governed. All the

players have to be conversant with rules and regulations as well as with the

technology for processing. The intermediaries in this system have to obey the

rules and regulations laid by the regulatory Authorities.

Depository Services through Depository Participants:

The Depository can provide their services to investors through

their agents called Depository participants. These agents are appointed

subject to the conditions prescribed under SEBI (Depository & participants)

regulations, 1996 and other applicable conditions.

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Fungibility:

In the Depository System, the securities dematerialized are not

identified by distinctive number or certificate numbers as in physical

environment. These all securities in the same class are identical and

interchangeable.

Registered owner / Beneficial Owner (BO):

In depository system, the ownership of securities dematerialized is bifurcated

registered Owner and Beneficial Owner. For the securities dematerialized,

NSDL is the Registered Owner in the books of the issuer, but ownership

rights and liabilities rest with Beneficial Owner. All the rights, duties and

liabilities underlying the securities are on the beneficial owner of the security.

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NSDL /CDSL ISSUER R & T AGENT

CLEARINGCORPORATION

CLEARINGMEMBER

DEPOSITORYPARTICIPANT

STOCKEXCHANGE

TRADINGMEMBER INVESTOR

Free Transferability of Shares:

Transfer of shares held in dematerialized form takes place freely through

electronic book – entry system.

DESIGN OF DEPOSITORY:

NSDL carries out its operations through various functionaries called Business

Partners. The depository interface with the interface and these business

partners represented above:

NSDL is electronically linked it’s business partners, viz., the Issue of

company and / or it’s Registers & Transfer agents and clearing corporations,

clearing house of the stock exchange. This is done on order to facilitate

settlement of trades and to perform a daily reconciliation of all the account

balances held with NSDL. The entire system is called NEST (National

Electronic Settlement & Transfer) system. Thus, a highly integrated setup for

maintenance of investor accounts has been developed and implemented.

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A Depository very much like a Bank in operations:

NSDL-BANK- AN Analogy

S.No. BANK NSDL

1.Holds funds in accounts Holds securities in accounts

2.Transfer funds between the

accounts

Transfer securities between

accounts

3.Transfer without holding cash

Transfer without handling

physical securities

4.Safe keeping of money Safe keeping of securities

NSDL – BANK – The Difference:

S.N

O.BANK NSDL

1. Either of holders can sign instruction All joint holders to sign

2. Minimum balance to be maintained No minimum balance required

3.

Entitled for interest

Interest can be earned only by

participating in stock leading

scheme

4.Uses balance in accounts

Does not move balances in account

holders authorization

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5.Nomination is kept confidential

Signature and photograph of

nominee to provide

FUNCTIONS OF DEPOSITORY:

Dematerialization:

One of the primary functions of the depository is to eliminate or

minimize the movement of physical securities in the market. This is achieved

through dematerialization of securities. Dematerialization is the process of

converting securities held in physical form into holding in book entry form.

Account Transfer:

The depository gives effect to all transfers resulting form the settlement of

trades and other transactions between various beneficial owners by recording

entries in the accounts of such beneficial owners.

Transfer and Registration:

A transfer is the legal change of ownership of security in the records of the

issuer. For affecting a transfer, certain legal steps have to be taken like

endorsement, execution of a transfer instrument and payment of stamp duty.

The depository accelerates the transfer process by registering the ownership

of entire issue in the name of the depository. Under a depository system,

transfer of security occurs merely be passing book entries in the records of

the depositories, on the instructions of the beneficial owners.

Corporate Actions:

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A depository may handle corporate actions in two ways. In the first case, it

merely provides information to the issuer about the persons entitled to receive

corporate benefits. In the other case, depository itself takes the responsibility

of distribution of corporate benefits.

Pledge and Hypothecation:

Depositories allow the securities place with them to be used as collateral to

secure loans and other credits. In a manual environment borrowers are

required to deliver ledged securities in physical form to the lender or its

custodian. These securities are verified for authenticity and often need to be

transferred in the same of lender. This has a time and money cost by way of

transfer fees or stamp duty. If the borrow wants to substitute the pledged

securities, these steps have to be repeated. Use of depository services for

pledging/hypothecating the securities make the process very simple and cost

effective. The securities pledged/hypothecated are transferred to a segregated

or collateral account through book entries in the records of the depository.

Linkage with clearing system:

The clearing system performs the functions of ascertaining the pay-in

(sell) or pay-out (buy) of brokers who have traded on the stock exchange.

Actual delivery of securities from the clearing system to the buying broker to

is done by the depository. To achieve this, depository and clearing system

should be electronically linked.

28

CHAPTER-3

COMPANY PROFILE

29

COMPANY PROFILE:

In the world of financial services and India's financial multiplex, IL&FS

Invests mart Limited (IIL) is a premier financial service organization

providing individuals and corporates with customized financial management

solutions. IL & FS work towards understanding customer’s financial goals

and helping them to their goals. Our institutional expertise, combined with a

thorough understanding of the financial markets results in appropriate

investment solutions for investors. At IL&FS Investsmart, we recognize that

investors dreams, needs, aspirations, concerns and resources are unique. This

is reflected in the approaches of the company towards there investors. IL&FS

concentrates at having a deep appreciation for the value and building a long

term paticipant with their investors.

Divisions of IL&FS Investsmart Limited

o The Investment Advisory and Broking Division

o Merchant Banking Division

o The Project Syndication Division

o Institutional Equity Broking Division

o Institutional Debt Broking Division

The Investment Advisory and Broking Division (IAB)

30

The Investment Advisory and Broking Division (IAB) of IIL,

provides end to end personalized investment management services, which

includes planning, advisory, execution and monitoring. IAB has a presence

across asset classes – equities, fixed-income, mutual funds, derivatives, and

insurance, with offline as well as online equity execution capabilities. It is a

partners in planning its customer’s complete investment decisions towards

wealth generation, retirement planning and capital built up at different stages

of their life. IAB has pioneered the concept of life cycle investing though its

specialized life cycle investment advisory plans. It’s strong team of

Relationship Managers, Customer Service Executives, Advisory Managers

and Research Analysts, offers efficient execution backed by in-depth

research, knowledge and expertise to its customers across the country,

through its network of more than 150 outlets in over 61 cities and its content

rich transactional website www.investsmartindia.com.

The Investment Advisory and Broking Division (IAB) of IIL, provides

end to end personalized investment management services, which includes

planning, advisory, execution and monitoring. IAB has a presence across

asset classes – equities, fixed-income, mutual funds, derivatives, and

insurance, with offline as well as online equity execution capabilities. It

partners in planning its customer’s complete investment decisions towards

wealth generation, retirement planning and capital built up at different stages

of their life. IAB has pioneered the concept of life cycle investing though its

specialized life cycle investment advisory plans. It’s strong team of

Relationship Managers, Customer Service Executives, Advisory Managers

and Research Analysts, offers efficient execution backed by in-depth

research, knowledge and expertise to its customers across the country,

through its network of more than 150 outlets in over 61 cities and its content

rich transactional website www.investsmartindia.com

31

Merchant Banking Division

The Merchant Banking function of IL&FS Investsmart comprising of

the Equity Capital Market division, offers a complete range of services. This

includes management of IPO’s, rights issues, buy back offers, open offers,

and private placements of equity. Its extensive contact base and strong

relationships developed with Venture Capital Funds and Private Equity Funds

for equity placements contributes to an effective delivery platform for its

clients.

The Project Syndication Division:-

The Project Syndication Business of IL&FS Investsmart has been

inherited from IL&FS. The syndication desk has so far worked on Debt

Syndication of large Infrastructure Projects being implemented by IL&FS.

The mandate includes Debt structuring of highly complex and difficult

projects. Project Syndication focuses on the role of an Arranger of Project

and Structured loans. While fund mobilization services are provided across

various areas, infrastructure sectors remain key focus area for syndication

activity. The services under Project Syndication include project loan

syndication, structured debt syndication and debt restructuring. The

syndication business thrives on its extensive contact base and strong

relationships developed over the years with Banks and Financial Institutions.

Institutional Equity Broking Division:-

32

Institutional Equity Business of IL&FS Investsmart (IEB}thrives on

strong relationships it has built among domestic mutual funds, banks,

financial institutions, insurance companies and private sector funds over the

past few years. IEB also has well-developed relationships among corporates,

leveraged from its institutional pedigree. Efficient execution, quality research

and high degree of compliance with stock exchange regulations and ethical

business standards back IEB’s services to institutional investors through

IPO’s, Equities, Derivatives and Mutual Funds. IEB is well positioned to

offer support to the complete range of investment banking services to

corporates

Institutional Debt Broking division:-

The Debt division has an active presence in the secondary and primary

debt placement markets. It deals in various products including Govt.

Securities, Treasury Bills, Bonds and Debentures, State guaranteed papers

and Commercial papers. It has strong relationship with Institutional clients

like Banks, Primary Dealers, Mutual Funds, Provident Funds and Corporates.

Debts on Net address all Fixed Income participants with attendant advantages

of Speed, Transparency and lower costs in the primary Market. It also offers

one of its kinds, complex and robust investment valuation tools, in addition to

value research and information on the debt and money markets in India

PEDIGREE: IL&FS Limited

IL&FS Invest smart leverages on its pedigree of IL&FS, which has the

core competency of institutional and retail financial services. Infrastructure

Leasing and Financial Services Limited (IL&FS), the promoters of IL&FS

Investsmart Limited, is a multi-faceted organization providing a range of

33

fund and non-fund based financial services. IL&FS was incorporated in 1987

and is amongst the few Institutions in the country specifically mandated to

implement infrastructure projects on a commercial format.

Promoters and Shareholdings

IL&FS was promoted as a joint venture between Central Bank of India,

(CBI), Unit Trust of India, (UTI) and Housing and Development Finance

Corporation (HDFC) With the objective of extending its reach & resources &

the broad base its shareholding, IL&FS inducted reputed domestic & foreign

investors such as International Finance Corporation, Washington, ORIX

Corporation, Japan, Credit Commercials de France (CCF), State Bank of

India and the Government of Singapore as its shareholders. Within a short

span, IL&FS has grown into a multifaceted company with a net worth of over

Rs 6700 million and an asset base of over Rs 39000 million.

Activities of IL&FS

Broadly the activities of IL&FS include:

Financial Services including Investment Banking, Asset Financing.

Commercialization of Infrastructure Projects.

Asset Management Services to wide range of funds.

Capital Markets & Merchant Banking Services.

Securities brokerage including distribution of Financial

34

Securities & Investment

Management planning services.

PRODUCTS AND SERVICES

Not everybody is an investment professional there is always a need for

someone who can guide investors through the complex maze of investment

options with unbiased and expert advice. Someone, who can be a friend and

an expert who would understand the needs of the investor and help him

achieve his financial goals.

IL&FS Investsmart is one such financial service organization, catering to

requirements of individuals & institutions by providing a broad spectrum of

value added products and services for both of them.

Here is our range of financial solutions for both individuals as well as

institutions

Retail Offering Institutional Offering

Wealth Management Services

Portfolio Management Services

Securities Broking - Equities &

Derivatives

Depository & Custodial Services

Distribution of Financial

Merchant Banking

Product Syndication

Institutional Equity Broking

and Sales

Institutional debt Broking and

sales

35

http://www.investsmartindia.com/aboutus/#Rdiv1

http://www.investsmartindia.com/aboutus/#div4



http://www.investsmartindia.com/aboutus/#Div1






Products

Investment Advisory and Wealth Management Services – Managing

your money:-

At IL&FS Investsmart, we believe in partnering your investments all

the way through. This distinguishing feature is implemented through

InvestSaathi, Wealth Management Solutions. Most of us require some

assistance in making selections appropriate to our individual needs. We need

sound advice from people who have the expertise to decipher the financial

jargon of investment options available today. InvestSaathi is like the Smart

Friend that you can rely on, who will help you maximize your investments

and reach your financial goals. Our relationship managers interact with you

on a periodic basis to discern your changing needs. In tune with the changing

environment. Accordingly, they will also help you review, re-evaluate and

restructure your existing portfolio, as and when needed.

Our experienced team’s customized plans are based on your investment objectives, your risk profile, time horizon

and financial needs. We assist you through the process of maximizing your wealth. Research is the fundamental basis of

all sound investment decisions and superior research allows us to deliver superior solutions. Our investment solutions are

backed by in-depth research generated by a top-drawer research

Portfolio Management Services:

Extending our expertise to personal financial advisory services, we also offer

portfolio management services to our investors. The primary focus of our

portfolio management services is to provide individualized portfolio

management through personalized portfolios, designed to fit your specific

investment parameters. You can choose your own securities, ensuring

36



transparency and flexibility in all operations. We have a range of portfolio

management services to suit your individual needs.

Securities Broking – Equities and Derivatives

Equity Trading:-

Personal, transparent, prompt and convenient, trading through IL&FS

Investsmart is simple and effective. Being member of the National Stock

Exchange (NSE), Bombay Stock Exchange (BSE) and an institutional

promoted broking house, we cater to your trading needs, through a network

of experienced dealers across the country & our comprehensive website

www.investsmartindia.com.

Derivatives Trading:-

We also offer you derivative trading in equities, in the NSE Futures

and Options segment, through specialist dealers in this division. Under

derivatives trading, we recommend trading on futures, strategies and options,

hedging with Nifty and other products and opportunities of risk less arbitrage

between various segments.

Depository & Custodial Services:-

IIL facilitates the entire process of “dematerializing” shares through its parent

company IL&FS. IL&FS DP provides personalized service with the highest

standards of efficiency. For your convenience you will continue to deal with

Investsmart.

We also arrange to open Custodial Accounts for the safe keeping of

your securities through our parent company IL&FS. This service keeps track

and takes care of all your shares related activities, ranging from: share

transfer, issues of dividends and interest payments, to monitoring

announcements of rights / bonus issues etc.

Distribution of Financial Products:-

37

Investsmart, with its expertise in delivering complete investment

solutions to its clients, offers various different financial products into

categories like Mutual Funds, Fixed Income Products, Home Loans,

Insurance etc.

Mutual Funds:-

Our experts help you to select the right scheme from over 500 offerings,

which will match your needs, goals and risks. In addition to this, they also

help you constantly monitor your MF portfolio, making changes to adapt to

your changing needs or the market scenario, in order to make your money

work for you more.

Fixed Income Products

A gamut of fixed deposits, bonds and debt instruments make up this section

of investments. Our managers evaluate these options thoroughly, to match

your individual liquidity requirements.

Home Loans

Our facilities also extend to Home Loans Consultancy, to help you

select the scheme that is best suited to your financial profile. Prompt and

convenient loan processing procedures help you realize your dreams later.

Insurance Advisory

Our Insurance team assesses your insurance needs and then advises you

on the choices that match your requirements. We offer a range of insurance

products, including pension plans through our subsidiary companies

Merchant Banking Services

The Merchant Banking function of IL&FS Investsmart comprising of the

Equity Capital Market division, offers a complete range of services. This

includes management of IPO’s, rights issues, buy back offers, open offers,

38

and private placements of equity. Its extensive contact base and strong

relationships developed with Venture Capital Funds and Private Equity Funds

for equity placements contributes to an effective delivery platform for its

clients.

The Project Syndication Services

The Project Syndication Business of IL&FS Investsmart has been inherited

from IL&FS. The syndication desk has so far worked on Debt Syndication of

large Infrastructure Projects being implemented by IL&FS. The mandate

includes Debt structuring of highly complex and difficult projects. Project

Syndication focuses on the role of an Arranger of Project and Structured

loans. While fund mobilization services are provided across various areas,

infrastructure sectors remain key focus area for syndication activity. The

services under Project Syndication include project loan syndication,

structured debt syndication and debt restructuring. The syndication business

thrives on its extensive contact base and strong relationships developed over

the years with Banks and Financial Institutions

Institutional Equity Broking and Sales

Institutional Equity Business of IL&FS Investsmart (IEB), thrives on

strong relationships it has built among domestic mutual funds, banks,

financial institutions, insurance companies and private sector funds over the

past few years. IEB also has well-developed relationships among corporates,

leveraged from its institutional pedigree. Efficient execution, quality research

and high degree of compliance with stock exchange regulations and ethical

business standards back IEB’s services to institutional investors through

IPO’s, Equities, Derivatives and Mutual Funds. IEB is well positioned to

39

offer support to the complete range of investment banking services to

corporates.

Institutional Debt Broking and Sales

The IL&FS Investsmart Institutional Debt division deals in primary

and secondary debt placement and distribution. DebtonNet, a part of the IIL

Institutional Debt division is an internet enabled platform, which has been

promoted as a transparent electronic marketplace for primary debt market

products, through its website, www.debtonnetindia.com. The website

addresses all issuers, investors and intermediaries with the attendant

advantages of speed, transparency and lower costs. It also offers one of its

kind, complex and robust investment valuation tools, in addition to value

research and information on the debt and money markets in India

PRESENCE & REACH

Investsmart currently caters to over 80,000 retail customers through

more than 200 outlets across 80 locations encompassing almost every Indian

state. Here is a view of our presence across the country.

40

CHAPTER-4

DATA ANALYSIS

&

INTERPRETATION

41

Awareness of share market TABLE-1

Options Yes No Total

Investors 84 16 100

Percentage 84.00 16.00 100

0102030405060708090

INVESTORS %

Yes No

OPINION

Investors

Percentage

Interpretatio n

The above table reveals that 84% of the investor’s are aware about the share

market and 16% of the investors are not aware about the share market.

42

Investor’s awareness of depository system TABLE 2


Investors 72 12 84

Percentage 86.00 14.00 100

86%

14%

Yes

No

Interpretation

The above table reveals 86% of investors know about depository system

remaining 14% investors are not aware of depository system.

43

Participation in Depositories TABLE 3


Investors 43 29 72

Percentage 60.00 40.00 100

0

50

100

150%

OF

INVESTO

RS

Yes No

OPINION

PercentageInvestors

Interpretation

In the table 60% of the investors are participants in depository system

remaining 40% of investors are not participants in depository system.

44

Above analysis present days most of the investors are look into

security and less time consume for trading of shares through electronic mode.

Motivational factors TABLE 4

Options Security Transparenc

y

Regulation Total

Investors 24 9 10 43

Percentage 56.00 21.00 23.00 100

0%

20%

40%

60%

80%

100%%

OF IN

VESTORS

Security Regulation

OPINION

PercentageInvestors

Interpretation

Above table shows that 56% of investors preferred depositories for security

reasons and 21% of investors interested for transparency remaining 23% are

preferred for regulation.

45

Above analysis most of the investors interested in security because

the benefit of security is elimination of bad deliveries and all risks associated

with physical certificates, such as loss, theft etc.,

Services offered by depository system TABLE 5

Options HSE IL & FS NSE TOTAL

Investors 19 12 12 43

Percentage 44.00 28.00 28.00 100

010203040506070%

OF IN

VESTOR

S

HSE IL & FS NSE

OPINION

Percentage

Investors

Interpretation

Above table observed that 44% investors are interest through HSE and

28% of investors are interest through IL & FS remaining 28% of investors are

interest through NSE.

46

According above table tells most of the investors are interest of trading

activities through HSE . NSE and IL & FS are equal importance of trading

activities with investors and depository participants.

Satisfaction of the investors in depository system TABLE 6


Investors 38 5 43

Percentage 88.00 12.00 100

38

5

88

12

Yes No

Interpretation

Above table observed that 88% of investors are satisfaction of

depository system and 12% of the investors are not satisfaction of depository

system.

47

Above analysis most of the investors satisfied because in depository

system all tractions are made in electronic mode. When investors trade in

depository system shares, there is no more need for delivery and receipt of

scripts.

Instead, seller’s account is debited and the buyers account is credited.

Company of the depository participant TABLE 7

Options NSDL CDSL TOTAL

Investors 28 15 43

Percentage 65.00 35.00 100

020

4060

80100

%O

F INVESTO

RS

NSDL CDSL

OPINION

Percentage

Investors

Interpretation

In the above table reveals 65% of investors are investment in NSDL

Ltd and 35% of investors are interest in CDSL Ltd.

Above analysis most of the investors investment in NSDL Ltd because

they provide good services like Maintenance of beneficiary holdings through

Dps, dematerialization, settlement in dematerialized form and

rematerilisastion.

48

Satisfaction with company’s depository procedures TABLE 8


Investors 23 5 28

Percentage 82.14 17.86 100

Investors

23

5

YesNo

Interpretation:-

Above table reveals that 82% of investors satisfied with company depository

procedures and 17.86% of investors are not satisfied with company

depository procedures.

49

Above analysis observed that investors are interest in dematerialization

means physical shares convert into electronic mode this is used for investors

in pledging and hypothecation facilities, freezing/locking of investors account

and stock lending and borrowing facilities.

Level of satisfaction of investors TABLE 9

Options Fully satisfied Partly satisfied Total

Investors 22 6 28

Percentage 79.00 21.00 100

0%

20%

40%

60%

80%

100%%

OF

INVESTO

RS

Fully satisfied Partly satisfied

OPINIONS

PercentageInvestors

Interpretation:-

Above analysis 79% of investors are fully satisfied with procedures of

the company and 21% of the investors are partly satisfied with procedure of

the company.

50

Most of the people are fully satisfied in company procedure because

company provides carries out settlement of trades not done on the stock

exchange, transfer securities and maintains investor holding in the electronic

form etc.,

Provide up-to-date information in depository system TABLE 10


Investors 33 10 43

Percentage 76.74 23.26 100

0

20

40

60

80%

OF

INVESTO

RS

Yes No

OPINION

InvestorsPercentage

Interpretation:-

Above survey observed that 76% of investors are satisfied for

depository system provide up-to –date information and 24% of investors are

not satisfied regarding depository system not providing up-to-date

information.

51

Effective source of you are depository system TABLE 11

Particulars No of Investors Percentage

Magazines 05 12%

Brokers 04 9%

Friends 23 53%

Dp 11 26%

No of Investors

MagazinesBrokersFriendsDp

INTERPRETATION

It is found in the survey that 12% of the investors know about Depository

System through magazines and Depository Participants. 9% of investors

52

know about Depository System through brokers and 53% investors know

through friends remaining investors known through Dps.

It is the friends who are playing a major role in creating awareness

about Depository System among the investors.

Mode of communication between Dp and Investors TABLE 12

Particulars No. of investors Percentage

E-mail 18 42%

Post 22 51%

Personnel

information03 07%

05

10152025

E-mail Post PersonnelinformationOPINION

%O

F IN

VEST

OR

S

Percentage

No.of investors

INTERPRETATION

53

The above table reveals that 42% of Depository Participants are communicating

with the investors through E-Mail. 51% of investors are informed through post and 7% are

informed personally.

Above analysis most of the investors communicating with

company and depository participant through E-mail services.

Type of investment TABLE 13

No of investors

31

84

43

Equity

PreferencesharesDebentures

Total

Particular No of

investors

Percentage

Equity 31 72%

Preference

shares

8 19%

Debentures 4 09%

Total 43

54

INTERPRETATION

It is found in the survey that majority of the investors are investing in a

combination of instruments. The below table explains the pattern of

investments of investors.

Few of the investments are dealing with all the varieties of

instruments such as Equities, Debentures and Mutual Funds etc….

Above analysis most of the investors interested in dematerialized in equity.

CHAPTER -V

FINDINGS&

SUGGESTIONS

55

FINDINGS

In this study found that most of the investors investing in the share market,

most of them are aware about the depository system

The investors are managing their funds mostly through brokers and online

trading.

The study reveal that most of the investors are know about Depository

System through brokers and friends followed by the Depository Participants

and magazines.

The investors are opening the Depository Participant account because of

dmat and settlement of market trades and electronic form account.

The investor communicating their Depository Participant services mostly

through E-Mail and personal intimation as compare to post and others.

The investors are comfortable with their Depository Participant service and

these are accessible to the investors.

56

The awareness of the serves provided by NSDL is not reaching the investors

who are below 25 age group.

SUGGESTIONS

The minimum balance for opening an account maintenances charges should

be minimized to attract the great volumes of investors.

It is suggested to Depository Participant and other regulatory authorities

success SEBI to conduct awareness programs in rural area.

In the survey it was found that only high-income group investors are familiar

with Depositary system. it was succeed in attracting middle and lower

income group it will improve the inflow of funds.

Educating the investors about Depository Services that will creates awareness

about Depository Services. This will enhance the number of investors.

The Depository Participants are suggested to advertise in regional language,

it will facilitate the investors to understand easily.

Now the awareness is restricted to only above 25 years age.

Depository Participants have to concentrate on below 25 years age investors

57

BIBLIOGRAPHY

58

BIBLIOGRAPHY

WWW.BSE.COM

WWW.NSE.COM

WWW.NSDL.COM

WWW. ILFSINDIA.COM

MANAGEMENT ACCOUNTING & FINANCIAL ACCOUNTING

Sharma

59

http://WWW.NSDL.COM/

http://WWW.NSE.COM/

http://WWW.BSE.COM/

APPENDECIES

60

QUESTIONNAIRE TO UNDERSTAND INVESTORS AWARENESS OF DEPOSITORY SYSTEM

NAME :

AGE : -

QUALIFICATION :

PROFESSION :

ANNUAL INCOME :

1). Are you aware of share market?

a) Yes b) No

2). If yes do you know about depository system?

a) Yes b) No

61

3). Are you client of any depository participant?

a) Yes b) No

4). If yes what motivated you to opt for depository system?

a) Security b) Transparency c) Regulations

5). In which company you are the depository participant?

a) HSE b) IL & FS

6). Are you satisfied with the services provided by depository system?

a) Yes b) No

7). In which company you are the depository participant?

a) NSDL b) CDSL

8). Are you satisfied with the company’s depository procedure?

a) Yes b) No

62

9). If yes what is your level of satisfaction?

a) Fully satisfied b) Partly satisfied

10). Does your Depository system provide up to date information

regarding the changes in your depositary account?

a) Yes b) No

11). By which source you came to know about your depository system?

a) Magazine b) Brokers

c) Friends d) Depository participants

12). what is the medium of communication between

Depository participants & Investors?

a) E-mail b) Post c) Personal Information

13). which of these you want to investment in dematerialized form?

a) Equity b) preference shares c) Debentures

14). If no please give suggestions

63

___________________________________________________________________

____________________________________________________________________

_

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depository systems

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