WINTER PROJECT REPORT

ON
STUDY ON NEW FUND OFFER PROCESS
AT
INDIA INFOLINE

Project report submitted in

Partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED TO: SUBMITTED BY:

Ms. SMITA DRON MAM Abhinav Singh

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 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 STEP-HBTI, KANPUR 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.

(
Abhinav Singh)

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 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 INDIA INFOLINE staff for giving mesupport and the
required material on time. I would also thank the principal of our college,
STEP-HBTI Kanpur. For providing an opportunity to undergo a project study
program. I would like to thank Ms. Smita Dron for assisting and guiding me to
complete the project work.

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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 India
Infoline 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. .

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 CONTENTS

TITLE PAGE NO

 INTRODUCTION 6

 OBJECTIVE OF THE STUDY 9

 METHODOLOGY OF THE STUDY 10

 COMPANY PROFILE 29

 ANALYTICAL FRAME WORK 37

 FINDINGS AND CONCLUSIONS 61

 SUGGESTIONS & RECOMMENDATIONS 63

 BIBLIOGRAPHY 66

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INTRODUCTION

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 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.

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

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similar to that of a short run project It is needless to State that a given mutual
fund firm will not be possessing. The technological, human and knowledge
resources to take up such a gigantic task, it is in fact not needed by a mutual
fund firm to create such a vast organizational structure when it is seen from the
point of view scale of economies. Further to this problem, the mutual fund
industry does not know where it stands in the current volatile and turbulent
environment. This may be The reason they prefer to hire the services of
professionals firm with specialized knowledge and Expertise.These
developments have led to an outcome that today, launching of mutual fund
scheme has become a well organized activity which is accomplished through the
coordinated endeavors of task groups.The asset management companies have
designed various schemes in accordance with the requirements of the various
sections on investors on basis of equity linked, debt instruments linked,
commodities linked and specific industry linked instruments. The investor today
is given a wide range of options to invest in various types of funds according to
his interests and capabilities.Mutual funds enable even a small investor to
investor to invest, as most of the mutual funds just start from a minimum amount
of investment of RS. 5000 hence even a small investor can invest into a mutual
fund and reap returns in the same proportions as the other big time investors.
This shows that mutual fund industry is one which aims at every section of the
society. To deal with 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

8
making adequate provision for taxation and other operating costs. All this
process is well organized and performed in a specific order. There are various
related organizations which specialize in the activities at various stages of the
functioning of the mutual funds.It is therefore felt expedient to examine the
various intricacies involved in the new fund offer (NFO). Specifically the
various documents that are being processed, the parameters evolve either
customarily or by legal mandate to scrutinize the applications. Various stages
involved in the scrutiny, the rejection criteria, the creation of human
organization to monitor the activities, the communication channel and the
structure of the organized activities and the legal environment of NFO to some
extent. Such a dissertation would help to come out with a comprehensive report
which may serve as a guide for the prospective entrants into mutual fund
investment and to the existing mutual fund investors to some extent.

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 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

10
 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

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 Limitations of study:

*Analysis of the applications is carried out by taking the applications from

Reliance equity Fund. The data available is therefore restricted by the design of
the application.

*The inspection of applications is done on the basis of a sample of 120

applications. Though the sample is drawn randomly, the possibility of sampling
fluctuations affecting the findings cannot be ruled out.

*Numerical data like number of applications received, total subscription amount

received, statement of accounts, investor details, etc are not available and
therefore a description of these aspects is given.

*NFO process may not be same for all mutual funds that are released. It may
differ from one fund to other depending upon the size like the no. of
applications received, subscription amount received, etc.

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 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 dispatch team will discuss and fix
the target dates by which the work has to be completed accordingly.

What is a mutual fund?

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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.

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.

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Let us assume that you inertia million rupees over night and want to invest the
same to get better returns you can consider the following investment avenues
that are popular in Indian context
Company shares
Fixed deposits in banks
Government bonds
Fixed deposits in NBFC
Chit fund
Real estate
Other local money lending options

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Pros and con’s of the investments:

SNO. Investment 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

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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.

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.

17
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.

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.

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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
Transaction types (commercial & non-commercial):

Let’s compare various transactions of mutual funds with those of banks.

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In a bank, you will… In a mutual fund…
Open an account with initial You subscribe in a scheme and buy
deposit units
Deposit money Do additional purchases
With draw money You redeem units
Opt for a recurring deposit Start a systematic investment plan

Since mutual fund offers many more options to investors, it will have many
more transaction types as well. Let us see some popular transactions in mutual
funds

SNO. Transaction Description

1. New purchase New investment.
Buying units in a
scheme
2. Additional purchase Buying additional
units in a scheme
3. Redemption Selling units and
getting money back.
4. Switch/shift Transferring
investment from one
scheme to other.
5. Dividend When AMC
announces dividend in
a scheme.
6. Systematic investment Investing fixed
amounts periodically
like a recurring
deposit.
7. Systematic with drawl Reverse of systematic

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 investment Selling
units periodically
Rest are relating to general maintenance only. So they are non-commercial
transactions.
Net asset value:

As you must have noticed, we always talk about ’units’ in a mutual fund and not
money itself. A unit is basic measure of investment n a mutual fund.
Each scheme / plan will have a different market value is called the Net asset
value or simply NAV. Since market value of the underlying securities changes
every day, NAV of a scheme also varies on a day to day basis.

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

(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

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(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.

(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.

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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).

(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:

25
The asset management company shall issue to the applicant whose application
has been accepted, unit certificates or a statement of accounts specifying the
number of units allotted to the applicant as soon as possible but not later than
six weeks from the date of closure of the [initial subscription list and or from
the date of receipt of the request from the unit holders in any open ended
scheme].Provided that if an applicant so desires, the asset management
company shall issue the unit certificates to the applicant within six weeks of the
receipt of request for the certificate.

10. Transfer of units:

(1) A unit certificate unless otherwise restricted or prohibited under the scheme,
shall be freely transferable by act of parties or by operation of law.

(2) The asset management company shall, on production of instrument of

transfer together with relevant unit certificates, register the transfer and return
the unit certificate to the transferee within thirty days from the date of such
production. Provided that if the units are with the depository such units will be
transferable in accordance with the provisions of the Securities and Exchange
Board of India (Depositories and Participants) Regulations, 1996.

11. Dispatch of warrants and proceeds:

Every mutual fund and asset management company shall,

(a) Dispatch to the unit holders the dividend warrants within [30 days] of the
declaration of the dividend.

(b) Dispatch the redemption or repurchase proceeds within 10 working days

from the date of redemption or repurchase.

(c) In the event of failure to dispatch the redemption or repurchase proceeds

within the period specified in sub-clause (b), the asset management company

26
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.

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 COMPANY PROFILE :

Circa1995. A group of professional formed a company called Probity Research

& Services Pvt Ltd. The name was later changed to India Info line Ltd. The
Objective was to provide unbiased and independent information to market
intermediaries and investors. The quality of research soon caught the
imagination of all major participants in the financial market. In a span of 2 to 3
years the client list read like the who’s who of Indian Financial market. The list
included consulting firms like Mc Kinsey, companies like Hindustan Lever,

28
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.

29
 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.

30
 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.
 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.

31
 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.

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)

32
 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:

 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.

33
 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.

34
 ANALYTICAL 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.

35
 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.
These banks collect the application and amount and direct it towards the
registrar specified by the AMC. From this point India info line came into the
picture as the registrar.
The role, responsibilities, activities, forms and reports involved in this process
of NFO is general, are AMC, fund manager, SIP I/c, Switches I/c., NFO
Coordinator. Internal auditor, Systems(S/W) dept. IPO Centre coordinator, IPO-
RTI, IPO-EDP, Scanning and Printing & Dispatching.

Teams involved in the NFO process-

 Mutual fund unit
 Technology team
 Data entry team
 Verification team
 External audit team
 Scanning team
 Franking and dispatching team

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37
38
39
Description of NFO process:

Bank wise segregation:

The India info line branches collect the applications of the investors across India
and abroad for all the branches of the bank that is involved in this NFO. These
applications are sent to India info line processing center, Hyderabad. After
receiving, these applications are segregated bank wise and branch wise.

IH Numbering:

IH numbering is also called as In house Numbering. India info line gives this IH
numbering to those applications. This is done for their convenience in doing
back office functions easily. All the data on the application is entered into
systems through software developed by India info line technology team called
K-Bolt. Later on, we can get any information of a particular application or
investor that we require by entering this IH number.

Binding:

All the applications that are received are given for binding. Binding of
application is done by segregating them according to the bank and branch fro
which they are received. India info line does this Binding because to keep all
these applications safe, out of any damage and miss-place.

First Entry:
After finishing binding of applications they are sent to Date Entry team. Here
the first time entry is done. All the information or date of an investor that is
available on the application like name of the applicant, age, Address, PAN,
Bank details, broker code, sub broker code, email addresses, guardian name,
amount invested, name of the scheme or plan invested in, etc., are entered into
the systems of India info line.

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Second Entry:

After first entry the data is again sent for the second entry. Here in second entry,
the data that is entered in first entry is checked and the information what ever is
missing is entered.

Online Matching:

After entering the data like applicant, age, Address, PAN, Bank details, broker
code, sub broker code, email addresses, guardian name, amount invested, name
of the scheme or plan invested in, etc., in the first entry and once again in the
second entry it is sent to the online matching. Here in online matching the
physical form of application are kept side by an checking of data that was
entered in the first entry and second entry is done.

First time verification:

Data from online matching is sent to the verification team. This team verifies
mistakes that are left in online matching. Mistakes like blank address, PAN
blank for amount greater than or equal to 50000 RS. Name blank, bank details
blank, invalid or blank broker code etc., are rectified in the first time
verification.

First time CCL:

First time check clearing list is in short is called as first time CCL. First Time
CCL is prepared based on the data that is provided after first time verification.

External Audit:

First time check-clearing list is sent to an external audit team. India info line
appoints this team before the NFO processes. They are nowhere related to the
organization. This external audit team will mainly check name of the investor,

41
amount invested, bank details PAN number, name of the scheme/plan and mode
of holding (MOH). But in total they will check more than 30 characters

Second time verification:

If the external auditing is not satisfied and if they find any mistakes or missing
information they will send the first time CCL for second time verification. Here
they verify the check list once again and mistakes like invalid mode of folding
(MOH), invalid email address, status minor without guardian name, invalid date
of birth for minor, invalid existing account number, blank/null application
number, NRI with blank account type, saving or current, investor signature
missing are rectified.

Second time CCL:

Second check the verification team prepares clearing after verifying the
mistakes that are pointed out by the external audit team. After preparing second
time CCL it is again sent to external audit team.

Integrity Check (NFO team):

Check clearing list will be given by the external audit team to the NFO team in
India info line This NFO team in India info line will once again check further
mistakes like spelling mistakes in the name of the applicant etc., and rectify
them.

Integrity Check (by Audit):

After integrity check by the NFO team it is once checked by the internal audit
team of India info line.

Scanning Default Values, Verification of Mismatch cases:

42
Entire data is filtered at each and every step and finally it is given to the
scanning team for scanning here scanning team will detect and rectify any
further default values and mismatch cases.

Reconciliation, Rejections and Cheque returns:

Cheques of the investors are sent are sent by the balk to India info line
Reconciliation team. Here this team will verify bank details of the investor like
PAN number, bank a/c number, comparing the amount invested with that of the
minimum amount that has to be invested cheques with out hue signature of the
investor bounced cheques etc., and they are rejected. These rejected cheques are
dispatched to the investors. A sample statement of accounts (SOA) is prepared
by this reconciliation team.

Handling over the data to MFS:

Entire data after getting filtered at each and every step will be handing over to
mutual fund services team. This MFS team will once again verify the data and
the final data will come out any mistakes and default values.

Porting in Task MF:

Task MF is the software developed by India info line Technology team. It is

prepared according to the suggestion given by AMC. This Task MF will
resemble the style or Performa or outlook of the statement of accounts. Final
data that they got after filtering the mistakes and default values is ported in the
task MF.

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Allotment of units:

Allotment of units is done as per the amount that is invested by investors. They
will avail the units taking the Net Asset Value (NAV) of that particular scheme
as base.

Sample SOA verification by audit:

Statement of accounts (SOA) is picked up randomly from a huge lot and the
audit team does verification. This verification will result in preparing a
statement of accounts which in cent percent correct and exact.

This SOA contains data like:

* Name of the investor

* Address
* Bank details
* Pan Number
* Guardian name
* Broker code
* Sub broker code
* Nominee name
* Nominee addresses

* 2nd and 3rd applicant name

* Amount invested
* No. Of units allotted
* Fund name, Scheme Name, Plan Name & A/c no
* Transaction type details
* Mode of redemption payment
* Mode of dividend payment

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* Mode of dispatch
* Status, occupation.
* Current balance, average price, current cost, current NAV etc.,

Dispatch of SOA:

Statement of accounts (SOA) once prepared is dispatched to the investor. SOA’s

are neatly packed in an envelope and dispatched to the investors by the dispatch
team through courier.

New Fund Report:

India info line will finally prepare New Fund Report. This new fund report has
to be submitted to the AMC. Then AMC will submit a copy of the same to the
SEBI, which is mandatory. The new fund report details like

1) Scheme details
* Scheme name
* Scheme type
* Date of opening
* Date of closing the scheme / initial subscription period
* Target amount
* Minimum amount to be raised
2) Subscription / Allotment details
* Number of applications received with in the country
* 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

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4) Date of dispatch of refund of refund orders
5) Unit holding pattern
6) Distribution schedule
7) Geographical Dispersion list

Holding profile of applicant:

Particulars Single Joint Anyone Total

No. of 89 0 31 120
applicants
% of applicants 74 0 26 100

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 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.

Particular Busines Service Student Professional Retired House Others Total

s wife
No. of 34 46 2 4 7 23 5 120
applicants
% of 28 38 2 3 6 19 4 100
applicants
Occupation profile of applicants:

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 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:

Residential status of individual applicants:

Particulars Resident NRI Total

No. of applicants 104 4 108
% of applicants 96 4 100

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 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.

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

Particulars Company Society Fl SME Others Total

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

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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
% of 0 25 60 15 100
applicants

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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
% of applicants 65 27 3 5 100

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 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

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

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of profits.

Analysis of mode of payment:

Particulars Cheque DD Total

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

120

99
100

80
% of applicants

60

40

20

1
0
Cheque DD
Mode of payment

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.

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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
applicants

120

99
100

80
% of applicants

60

40

20

1 0 0 0
0
SB Current NRO NRE FCNR
Type of account

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

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Gender profile of the applicants:

Particulars Male Female Total

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

80 74
70
60
% of applicants

50
40

30 26

20

10
0
Male Female
Gender

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:

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 Particulars Andhra Biha Chandighar Delh Gujara Karnatak
Pradesh r i t a
No. of 1`4 ` 1 17 11 5
applicants
% of 3 1 1 14 9 4
applicants

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

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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.

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FINDINGS AND CONCLUSIONS

58
 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
 Majority applicants prefer to hold the units individually.
 Majority of the applicants are in service.
 NRI s share is about 4% of the total.

 More than 2/3 rd of the applicants are HUF s.

 The model age group is 31-60.
 The most common investment amount is 5000-25000.
 About half of the applicants prefer Growth option.
 Almost all applicants make the payments by cheques.
 There were no NRO, NRE and FCNR accounts.
 Majority the applicants are male, and.

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 Majority applications are from state of Maharastra

SUGGESTIONS
AND
RECOMMENDATIONS

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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.
*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.

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*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.

BIBLIOGRAPHY

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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, Author: H SADHAK.
* Bogle on Mutual Funds, Author: John C. Bogle

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