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The Indian Capital Markets
 

The Indian Capital Markets

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    The Indian Capital Markets The Indian Capital Markets Presentation Transcript

    • The Indian Capital Markets
      This Presentation aims at disseminating information about & giving an Insight into the participants & their workings in the Capital Markets
      Chrys Gonsalves
      RR Financial Consultants Ltd.
      9224675432
      chrys@rrfcl.com
    • Table of Contents
      What is a Capital market?
      The Indian Capital Markets
      What is Debt / Equity?
      Case Study 01: My Moms Chocolate Shoppe
      Analysis of the Balance Sheet
      Case Study 02: HFCL
      Shareholding Pattern
      Raising Capital
      Term sheets: Bonds / Debentures
      Term sheets: Issue Shares through IPO
      Case Study 03: Reliance IPO
      Case Study 04: NABARD Bond Issue
      Lenders & Borrowers
      Liquidity Crisis
      Capital Market Participants
      The Stock Exchanges
      Primary Issues V/s Secondary Markets
      Listing of Securities
      Sensex & the Wholesale Debt Market
      Sensex V/s Bond Yields
      Investment Havens
      Case Study 05: Mutual Funds
      Case Study 06: IndiaBulls REITS
      What are Portfolios
      Case Study 07: Reliance Mutual Fund
      Case Study 08: SIDBI VC Fund
      History of the Capital Markets
      Current Market Scenario
      What to look out For
      Case Study 09: Sample Research Reports
      Some Investment Gurus
      Some Fund Managers
      Some Celebrities
      Some Politicians
      Visit some Websites
      Career Options
    • What is a Capital Market?
      A comparison between the Capital Markets & the Fish Market
      A Fish Market
      A Capital Market
      A Fish Market is a marketplace for fish, where fishermen can raise money by selling their fish
      The capital market is the marketplace for securities, where companies and governments can raise capital/money by selling or pleading their assets
    • The Indian Capital Markets
      Cash Flows between the Firm and the Capital Markets
      Total Value of the Firm to investors in the Financial Markets
      Total Value of Firms Assets
      A. Firm Issues Debt/Equity Securities
      B. Firms Assets
      Current Assets
      Fixed Assets
      Financial Markets
      Short Term Debt
      Long Term Debt
      Equity Shares
      E. Reinvested Cash flows
      F. Dividend & Debt Payments
      C. Cash Flows from Firms Assets
      D. Government & Other Stakeholders
      Firm Issues Securities to raise Cash
      Firm Invests in Assets
      Firms Operations Generates Cash Flow
      Cash is paid to government as taxes. Other stakeholders may receive cash
      Re-invested cash flows are invested in firm
      Cash is paid out to investors in the form of interest and dividends
    • What is Debt & Equity?
      Debt is an obligation to pay interest. Equity is a share in a company
      DEBT CAPITAL
      A basic loan is the simplest form of debt
      It consists of an agreement to lend a principal sum for a fixed period of time, to be repaid by a certain date.
      Debt capital differs from equity or share capital because subscribers to debt capital do not become part owners of the business, but are merely creditors, and the suppliers of debt capital usually receive a contractually fixed annual percentage return on their loan, and this is known as the coupon rate
      EQUITY CAPITAL
      Equity capital generally is composed of funds that are raised by a business in exchange for an ownership interest in the company. In addition to taking an ownership interest in the company, equity investors may also participate as a member of the company's board of directors and take an active role in managing your company.
    • Case Study – 01 My Moms Chocolate Shoppe
      My Mom, the Borrower. The Bank & my Dad, the Lenders
      My mom issues Security on Fixed Assets for Loan
      Bank Loan of Rs. 50,000 @ 14% p.a. for 5 years
      Assets
      Repayment of Interest
      Government (CBDIT)
      Tax
      Issuance of Shares
      Assets
      5000 Equity Shares of Face Value Rs. 10 Issued to my father
      Payment of Dividend
      Dividend
      Re-investment of cash flows
      (Internal Accruals)
      Earnings
      Interest
      Tax
      Dividend
    • Analysis of the Balance Sheet
      A balance sheet is often described as a snapshot of a company's financial condition.
      The balance sheet is divided into two parts that, based on the following equation, must equal (or balance out) each other. The main formula behind balance sheets is:
      The three parts are represented under the heads SOURCES OF FUNDS & APPLICATION OF FUNDS where both sides must balance out.
      assets = liabilities + shareholders' equity
      SOURCES
      OF
      FUNDS
      APPLICATION OF
      FUNDS
    • CASE STUDY – 02 HFCL
      Balance Sheet Analysis of Hindustan Futuristic Solutions Ltd.
    • Share Holding Pattern
      It refers to the Number of Shares & percentage of shares held by Investors in a Company
    • Raising Capital
      Various modes of raising capital through Debt and Equity
      DEBT
      Loans
      Bonds
      Debentures
      Commercial Papers
      Certificate of Deposits
      Inter-Corporate Deposits
      External Commercial Borrowings
      Foreign Currency Convertible Bonds
      EQUITY
      Public Issue (IPO) / Rights Issue
      Private Placement
      Qualified Institutional Placement
      Bonus Issue
      Employee Stock Options (ESOPS)
      Warrants
      ADR/GDR
    • TERMSHEETS:Bonds / Debentures
      A Term sheet is a basic Performa that gives a gist of security Issued
    • TERMSHEETS: Issuing Shares through IPO
      A Snapshot of the Issue
    • CASE STUDY – 03 Reliance Power IPO
      Breaking News during the Public Issue of RELIANCE POWER
      Power on to India On!!!!
      Feb 24,2008 Reliance Power Bonus - Declares 3:5 Bonus
      Feb 17,2008 Reliance Power Bonus - To issue Bonus Shares
      Feb 11,2008 Reliance power Down by 21 percent on the Listing day
      Feb 11,2008 Reliance Power is a Big Flop on listing day
      Feb 08,2008 Reliance Power IPO Listing Details
      Jan 31,2008Reliance Power IPO Allotment
      Jan 28,2008 Reliance Power IPO Money Refund
      Jan 19,2008 Reliance Power IPO Listing Date
      Jan 18,2008 Reliance Power IPO Final subscription Details
      Jan 18,2008 Reliance Power IPO Retail portion subscribed by 9 times
      Jan 17,2008 Reliance Power IPO subscribed by 24.29 times on the end of 3rd day
      Jan 16,2008 Reliance Power IPO Subscribed by 13 times on the 2nd day
      Jan 15,2008 Reliance Power IPO subscribed 9.5 times on the first day
    • CASE STUDY – 04 NABARD Bond Issue
    • Lenders & Borrowers
      The Capital Markets basically constitute of two members, i.e. the Lenders & Borrowers
      • The Capital Markets basically constitute of two members, i.e. the lenders & Borrowers, without which the markets wouldn’t function.
      • Lending & Borrowing of capital is nothing but supply & demand of money
      • The function of lending & borrowing should balance out itself to maintain growth & stability in the economy
      • Following indications are affected of a mismatch in lending & borrowing
      Liquidity
      Growth
      Cost Of Capital
      Inflation
      Credit
      Gold Prices
      Bond Yields
      Interbank Call Rates
      Market Sentiment
    • Lenders & Borrowers
    • Liquidity Crisis
      The Liquidity Matrix
      SENSEX / NIFTY
      WHOLESALE DEBT MARKET
      Positive returns (gain)
      At high premiums
      Low bond yields
      Low interest rates
      Bonds traded at premiums
      LIQUIDITY
      }
      Negative returns(loss)
      Shares traded at low premiums or at discount
      High bond yields
      High interest rates
      Bonds traded at discounted prices
      RISK/RETURN
    • Capital Market Participants
      In Inclusive list of Participants in the Indian Capital Primary & Secondary Market
      Credit Rating Agencies
      Private Equity , Hedge & Venture Capital Funds
      Foreign Institutional investors
      Mutual Funds
      Reserve Bank of India
      Insurance Companies
      The Depository Participants
      Securities Exchange Board of India
      The Stock Exchanges
      Reserve Bank of India
      Primary Dealers
      Public & Private Financial Institutions
      Regional Rural Banks
      Co-operative Banks
      Commercial Banks
      Public Sector Undertakings
      Provident Fund Trusts + EPFO
      Corporates
    • The Stock Exchanges
      Acorporation which provides "trading" facilities for stock brokers
      The role of stock exchanges;
      Raising capital for businesses
      Mobilizing savings for investment
      Facilitating company growth
      Redistribution of wealth
      Corporate governance
      Creating investment opportunities for small investors
      Government capital-raising for development projects
      Barometer of the economy
      Remember the Fish Market!!!
    • Primary Issue V/s Secondary Market
      The two types of markets in the Indian capital market
      Primary Issue
      A Primary Issue is a fresh issue of securities to the investor at a fixed price (issue price).
      Secondary Market
      A Secondary Market is where the securities can be traded at a premium or discount from the issue price
      Company
      Listed shares
      Issuance of shares
      All classes of investors
      All classes of investors
    • Listing of Securities
      Layout/Process of issuing Debentures/Bonds
      Issuing Company
      Merchant Banker
      Credit Rating Agency
      appoints
      appoints
      Issues
      who rates the
      Instrument
      appoints
      Listed on
      through
      Placement Agent
      Debenture Trustee
      Stock Exchange
      with the
      who trades on the
      whose security lies with the
      Investor
      SEBI REGULATIONS
    • SENSEX & The Wholesale Debt Market
      SENSEX is a Basket of Stocks & WDM is a platform to trade bonds on BSE
      SENSEX
      • Sensex is an Index where a group/portfolio of stocks are included
      • These stocks are mainly large cap & said to be an interpretation of the economy
      • That is if the Sensex performs well it would directly mean the Economy is good
      • There are 50 stocks in the SENSEX Index
      • The SENSEX ‘Basket’ can be traded on Bombay Stock Exchange just as the NIFTY can be traded on the National Stock Exchange
      WDM
      • The Wholesale Debt Market also known as the WDM is a platform where bonds are listed & traded in order to buy or sell.
      • All Bonds these days are listed on the WDM because the WDM just like the SENSEX is a part of the BSE.
      • The BSE is a recognizes & well respected Stock Exchange across the world.
    • Sensex V/s Bond Yields
      A Comparison between the performance of Sensex & Bond Yields
    • Investment Havens
      Various Options for Investor to Invest in
      7
      Property
      6
      Stocks & Equity Funds
      RETURNS
      5
      Hybrid Funds
      4
      Debt Funds
      3
      Liquid Funds
      2
      Bank Fixed Deposits & Govt. Bonds
      1
      National Saving Schemes & Post office Saving Schemes
    • CASE STUDY – 05 Mutual Funds
      Mutual Fund is a Pool of Money that is invested in a portfolio of stocks
    • CASE STUDY – 06 Indiabulls REITs
      A recent Issue of REITs in Singapore due to tight liquidity in India
      UNITHOLDERS
      Distribution In Form Of Dividend & Other Distributions
      Investment In REIT
      Managers Fee
      Trustees Fee
      REAL ESTATE INVESTMENT TRUST
      REIT FUND MANAGERS
      REIT TRUSTEES
      Management Services
      Act On Behalf Of Unit holders
      Ownership Of Assets (Vested In Trustee)
      Rental Income
      Property Management Company Fee
      POOL of REAL ESTATE ASSETS
      PROPERTY MANAGEMENT COMPANY
      Property
      Management Services
    • What are Portfolios?
      A Statement showing Investments
      A Portfolio is a Statement of various groups of Securities that an Investor/Lender has invested in.
    • CASE STUDY – 07 Reliance Mutual Fund - DEBT
      A Portfolio of Bonds/Debentures in a Debt Fund
    • CASE STUDY – 07 Reliance Mutual Fund -EQUITY
      A Portfolio of Stocks in an Equity Fund
    • CASE STUDY – 08 SIDBI VC Fund
      A Portfolio of companies where SIDBI VC holds an Equity Stake
    • History of the Capital Markets
    • Current Market Scenario
    • What to look out for as a Participant
      Various Indicators to watch out for in a CapitalMarket
      Liquidity in the Debt & Equity Markets
      Growth Rate of the Country & various industries
      Inflation Rate
      Credit Ratings (Weather upgraded or downgraded)
      Gold Prices
      Bond Yields
      Interbank Call Rates
      Market Sentiment
      Oil prices
      Commodity Prices
      Forex Reserves & Rupee to Dollar Prices
      Interest rates
      Lending & Borrowing Capacity across industries
      Global Indices
    • CASE STUDY – 09 Sample Research Reports
      Some research reports published by RR Financial, a Domestic Investment Bank.
    • Some Investment Gurus
      Some of the most remarkable investors who have seen the test of time.
      David einhorn
      Warren Buffet
      David Einhorn
      Donald Trump
    • Some Fund Managers
      The Background of a Fund Manager & the experience he brings with him
      Pankaj Gupta – Fund ManagerPankaj has done his B.Com (Hons), PGDBM, C.S and PGDBM IIM – Lucknow. He has experience of over 4 years in Mutual Fund, Equity Research and Corporate Banking. His last assignment was ICICI Bank Ltd. and has been with SBI Funds Management Pvt. Ltd. since December 2005. JayeshShroff – Fund ManagerJayesh has done his B.Com and PGD (MBFS) – ICFAI. He has experience of over 5 years as Fund Manager. He also has wide experience in investment banking activities including M&A activities, venture capital funding, preparation of business plans, project reports etc. His last assignment was with BOB Mutual Fund and has been with SBI Funds Management Pvt. Ltd. since March 2006.
      VivekPandey – Fund ManagerVivek is a Science graduate and has done his CFA from ICFAI. He has about 7 years of experience in the industry. He is currently placed in Investment Department as a Junior Fund Manager since June 2007.
    • Some Celebrities
      A Quiz: Tick the right option
      Salman Khan
      Aamir Khan
      Shah Rukh Khan
      Investor
      Not an Investor
      Investor
      Not an Investor
      Investor
      Not an Investor
    • Some Politicians
      A Quiz: Tick the right option
      P. Chidambaram
      L. K. Advani
      ShibuSoren
      The Good
      The Bad
      The Ugly
    • Visit some Websites
      Websites that would give you an incisive knowledge about the capital markets
      www.bondclass.com
      www.takeovercode.com
      www.sebi.gov.in
      www.indiabondwatch.com
      www.researchandmarkets.com
      www.nenonline.com
      www.vcccircle.com
      www.rbi.org.in
      www.dnb.co.in
      www.india.smetoolkit.org/india
      www1.ximb.ac.in/users
      www.eventsindia.com
      www.caclubindia.com
      www.techno-prenuer.com
      www.indiape.com
      www.privateequity.com
      www.pehub.com
      www.investing.businessweek.com
      www.amfi.com
      www.mint.com
      www.money.cnn.com
      www.companylaw.com
    • Career Options
      www.careerage.com
      MBA Finance
      Chartered Accountant – ICAI
      Company Secretary – ICSI
      Cost & Works Accountant - ICWAI
      Chartered Financial Analyst - ICFAI
      Securities LAW – Government Law College
      Tax Consultant
      Debt/Equity Dealer – FTKMC/ BSE
      Thank You