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  • 1. Introduction Meaning of Financial Statement Financial statements refer to such statements which contains financial information about an enterprise. They report profitability and the financial position of the business at the end of accounting period. The team financial statement includes at least two statements which the accountant prepares at the end of an accounting period. The two statements are: - The Balance Sheet Profit And Loss Account They provide some extremely useful information to the extent that balance Sheet mirrors the financial position on a particular date in terms of the structure of assets, liabilities and owners equity, and so on and the Profit and Loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial position and operations of a firm Meaning of Financial Analysis The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusions. Financial statement is the process of selection, relation and evaluation. Features of Financial Analysis To present a complex data contained in the financial statement in simple and
  • 2. understandable form. To classify the items contained in the financial statement inconvenient and rational groups. To make comparison between various groups to draw various conclusions. Purpose of Analysis of financial statements To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of mgt. To provide useful information to mgt Tools of Financial Statement Analysis Various tools are used to evaluate the significance of financial statement data. Three commonly used tools are these: Ratio Analysis Funds Flow Analysis Cash Flow Analysis
  • 3. Ratio Analysis: Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative) factors of a company. The other side considers tangible and measurable factors (quantitative). This means crunching and analyzing numbers from the financial statements. If used in conjunction with other methods, quantitative analysis can produce excellent results. Ratio analysis isn't just comparing different numbers from the balance sheet, income statement, and cash flow statement. It's comparing the number against previous years, other companies, the industry, or even the economy in general. Ratios look at the relationships between individual values and relate them to how a company has performed in the past, and might perform in the future. Meaning of Ratio: A ratio is one figure express in terms of another figure. It is a mathematical yardstick that measures the relationship two figures, which are related to each other and mutually interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is an expression relating one number to another. It is simply the quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “so many times”. As accounting ratio is an expression relating two figures or accounts or two sets of account heads or group contain in the financial statements. Meaning of Ratio Analysis: Ratio analysis is the method or process by which the relationship of items or group of items in the financial statement are computed, determined and presented. Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial health and profitability of business enterprises. Ratio analysis can be used
  • 4. both in trend and static analysis. There are several ratios at the disposal of an analyst but their group of ratio he would prefer depends on the purpose and the objective of analysis. While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on a technique, which is easy to use. It can provide you with a valuable investment analysis tool. Objective of Ratios: Ratios are worked out to analyze the following aspects of business organization- A) Solvency- 1) Long term 2) Short term 3) Immediate B) Stability C) Profitability D) Operational efficiency E) Credit standing F) Structural analysis G) Effective utilization of resources H) Leverage or external financing Forms of Ratio: Since a ratio is a mathematical relationship between two or more variables / accounting figures, such relationship can be expressed in different ways as follows – A] As a pure ratio: For example the equity share capital of a company is Rs. 20, 00,000 & the preference share capital is Rs. 5,00,000, the ratio of equity share capital to
  • 5. preference share capital is 20,00,000: 5,00,000 = 4:1. B] As a rate of times: In the above case the equity share capital may also be described as 4 times that of preference share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit sales are Rs. 30,00,000. So the ratio of credit sales to cash sales can be described as 2.5 [30,00,000/12,00,000] = 2.5 times are the credit sales that of cash sales. C] As a percentage: In such a case, one item may be expressed as a percentage of some other items. For example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs. 10,00,000, then the gross profit may be described as 20% of sales [ 10,00,000/50,00,000] Steps in Ratio Analysis The ratio analysis requires two steps as follows: 1] Calculation of ratio 2] Comparing the ratio with some predetermined standards. The standard ratio may be the past ratio of the same firm or industry‟s average ratio or a projected ratio or the ratio of the most successful firm in the industry. In interpreting the ratio of a particular firm, the analyst cannot reach any fruitful conclusion unless the calculated ratio is compared with some predetermined standard. The importance of a correct standard is oblivious as the conclusion is going to be based on the standard itself.
  • 7. Accounting ratios express the relationship between figures taken from financial statements. Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of classification of ratios is based upon the sources from which are taken. 1] Balance sheet ratio: If the ratios are based on the figures of balance sheet, they are called Balance Sheet Ratios. E.g. Ratio of current assets to current liabilities or Debt to equity ratio. While calculating these ratios, there is no need to refer to the Revenue statement. These ratios study the relationship between the assets & the liabilities, of the concern. These ratios help to judge the liquidity, solvency & capital structure of the concern. Balance sheet ratios are Current ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio, Debt equity ratio, and Stock working capital ratio. 2] Revenue ratio: Ratio based on the figures from the revenue statement is called revenue statement ratios. These ratios study the relationship between the profitability & the sales of the concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net profit ratio, Net operating profit ratio, Stock turnover ratio. 3] Composite ratio: These ratios indicate the relationship between two items, of which one is found in the balance sheet & other in revenue statement. There are two types of composite ratios- a) Some composite ratios study the relationship between the profits & the investments of the concern. E.g. return on capital employed, return on proprietors fund, return on equity capital etc. b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend payout ratios, & debt service ratios
  • 8. Based on Function: Accounting ratios can also be classified according to their functions in to liquidity ratios, leverage ratios, activity ratios, profitability ratios & turnover ratios. 1] Liquidity ratios: It shows the relationship between the current assets & current liabilities of the concern e.g. liquid ratios & current ratios. 2] Leverage ratios: It shows the relationship between proprietors funds & debts used in financing the assets of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary ratios. 3] Activity ratios: It shows relationship between the sales & the assets. It is also known as Turnover ratios & productivity ratios e.g. stock turnover ratios, debtors‟ turnover ratios. 4] Profitability ratios: a) It shows the relationship between profits & sales e.g. operating ratios, gross profitratios, operating net profit ratios, expenses ratios b) It shows the relationship between profit & investment e.g. return on investment, return on equity capital. 5] Coverage ratios: It shows the relationship between the profit on the one hand & the claims of the outsiders to be paid out of such profit e.g. dividend payout ratios & debt service ratios. Based on User:
  • 9. 1] Ratios for short-term creditors: Current ratios, liquid ratios, stock working capital ratios 2] Ratios for the shareholders: Return on proprietors fund, return on equity capital 3] Ratios for management: Return on capital employed, turnover ratios, operating ratios, expenses ratios 4] Ratios for long-term creditors: Debt equity ratios, return on capital employed, proprietor ratios. Liq uid ity Ratio: -
  • 10. Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios, which indicate the liquidity of a company, are Current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below Current Ratio Meaning:
  • 11. This ratio compares the current assets with the current liabilities. It is also known as „working capital ratio‟ or „solvency ratio‟. It is expressed in the form of pure ratio. E.g. 2:1 Formula: Current assets Current ratio = Current liabilities The current assets of a firm represents those assets which can be, in the ordinary course of business, converted into cash within a short period time, normally not exceeding one year. The current liabilities defined as liabilities which are short term maturing obligations to be met, as originally contemplated, with in a year. Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities (CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank credit, and provision for taxation, dividends payable and outstanding expenses. This ratio measures the liquidity of the current assets and the ability of a company to meet its short-term debt obligation. CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL. The higher the current ratio, the greater the short-term solvency. This compares assets, which will become liquid within approximately twelve months with liabilities, which will be due for payment in the same period and is intended to indicate whether there are sufficient short-term assets to meet the short- term liabilities. Recommended current ratio is 2: 1. Any ratio below indicates that the entity may face
  • 12. liquidity problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is under utilizing its current assets. Liquid Ratio: Meaning: Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g. 1:1. The term quick assets refer to current assets, which can be converted into, cash immediately or at a short notice without diminution of value. Formula: Quick assets Liquid ratio = Quick liabilities Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those current assets that can be converted into cash immediately without any value strength. QA includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required. QR indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current assets, which are highly liquid. Inventories are excluded from the numerator of this ratio because they are deemed the least liquid component
  • 13. of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts and payments. Cash Ratio: Meaning: This is also called as super quick ratio. This ratio considers only the absolute liquidity available with the firm. Formula: Cash + Bank + Marketable securities Cash ratio = Total current liabilities Since cash and bank balances and short term marketable securities are the most liquid assets of a firm, financial analysts look at the cash ratio. If the super liquid assets are too much in relation to the current liabilities then it may affect the profitability of the firm. Investment/ Shareholder EA
  • 14. RNING PER SHARE:- Meaning: Earnings per Share are calculated to find out overall profitability of the organization. Earnings per Share representearning of the company whether or not dividends are declared. If there is only one class of shares, the earning per share are determined by dividing net profit by the number of equity shares. EPS measures the profits available to the equity shareholders on each share held. Formula: Net Profit after Tax Earnings per share = Number of equity share The higher EPS will attract more investors to acquire shares in the company as it indicates that the business is more profitable enough to pay the dividends in time. But remember not all profit earned is going to be distributed as dividends the company also retains some profits for the business Dividend Per Share:- Meaning: DPS shows how much is paid as dividend to the shareholders on each share held. Formula: Dividend Paid to Ordinary Shareholders Dividend per Share = Number of Ordinary Shares
  • 15. Dividend Payout Ratio:- Meaning: Dividend Pay-out Ratio shows the relationship between the dividends paid to equity shareholders out of the profit available to the equity shareholders. Formula: Dividend per share Dividend Payout ratio = *100 Earning per share D/P ratio shows the percentage share of net profits after taxes and after preference dividend has been paid to the preference equity holders. Gearing
  • 16. CAPITAL GEARING RATIO:- Meaning: Gearing means the process of increasing the equity shareholders return through the use of debt. Equity shareholders earn more when the rate of the return on total capital is more than the rate of interest on debts. This is also known as leverage or trading on equity. The Capital-gearing ratio shows the relationship between two types of capital viz: - equity capital & preference capital & long term borrowings. It is expressed as a pure ratio. Formula: Preference capital+ secured loan Capital gearing ratio = Equity capital & reserve & surplus Capital gearing ratio indicates the proportion of debt & equity in the financing of assets of a concern. Profitability These ratios help measure the profitability of a firm. A firm, which generates a substantial amount of profits per rupee of sales, can comfortably meet its operating expenses and provide more returns to its shareholders. The relationship between profit and sales is measured by profitability ratios. There are two types of profitability ratios: Gross Profit Margin and Net Profit Margin.
  • 17. GROSS PROFIT RATIO:- Meaning: This ratio measures the relationship between gross profit and sales. It is defined as the excess of the net sales over cost of goods sold or excess of revenue over cost. This ratio shows the profit that remains after the manufacturing costs have been met. It measures the efficiency of production as well as pricing. This ratio helps to judge how efficient the concern is I managing its production, purchase, selling & inventory, how good its control is over the direct cost, how productive the concern , how much amount is left to meet other expenses & earn net profit. Gross profit Gross profit ratio = * 100 Net sales Net Profit Ratio:- Meaning: Net Profit ratio indicates the relationship between the net profit & the sales it is usually expressed in the form of a percentage.
  • 18. Formula: NPAT Net profit ratio = * 100 Net sales This ratio shows the net earnings (to be distributed to both equity and preference shareholders) as a percentage of net sales. It measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Jointly considered, the gross and net profit margin ratios provide an understanding of the cost and profit structure of a firm. Return on Capital Employed:- Meaning: The profitability of the firm can also be analyzed from the point of view of the total funds employed in the firm. The term fund employed or the capital employed refers to the total long-term source of funds. It means that the capital employed comprises of shareholder funds plus long-term debts. Alternatively it can also be defined as fixed assets plus net working capital. Capital employed refers to the long-term funds invested by the creditors and the owners of a firm. It is the sum of long-term liabilities and owner's equity. ROCE indicates the efficiency with which the long-term funds of a firm are utilized. Formula: NPAT Return on capital employed = *100 Capital employed Financial These ratios determine how quickly certain current assets can be converted into cash. They are also called efficiency ratios or asset utilization ratios as they measure
  • 19. the efficiency of a firm in managing assets. These ratios are based on the relationship between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. The important turnover ratios are debtors turnover ratio, average collection period, inventory/stock turnover ratio, fixed assets turnover ratio, and total assets turnover ratio. These are described below: DEBTORS TURNOVER RATIO (DTO) Meaning:
  • 20. DTO is calculated by dividing the net credit sales by average debtors outstanding during the year. It measures the liquidity of a firm's debts. Net credit sales are the gross credit sales minus returns, if any, from customers. Average debtors are the average of debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are collected. The higher the DTO, the better it is for the organization. Formula: Credit sales Debtors turnover ratio = Average debtors Inventory or Stock Turnover Ratio (ITR) Meaning: ITR refers to the number of times the inventory is sold and replaced during the accounting period. Formula: Cost of Goods Sold Stock Turnover Ratio = Average stock ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also result from a low level of inventory, which may lead to frequent stock outs and loss of sales and customer goodwill. For calculating ITR, the average of inventories at the beginning and the end of the year is taken. In general, averages may be used when a flow figure (in this case, cost of goods sold) is related to a stock figure (inventories).
  • 21. Fixed AssetsTurnover (FAT) The FAT ratio measures the net sales per rupee of investment in fixed assets. Formula: Net sales Fixed assets turnover = Net fixed assets This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominator of the ratio is very low). Proprietors Ratio: Meaning: Proprietary ratio is a test of financial & credit strength of the business. It relates shareholders fund to total assets. This ratio determines the long term or ultimate solvency of the company. In other words, Proprietary ratio determines as to what extent the owner‟s interest & expectations are fulfilled from the total investment made in the business operation. Proprietary ratio compares the proprietor fund with total liabilities. It is usually expressed in the form of percentage. Total assets also know it as net worth. Formula: Proprietary fund Proprietary ratio = OR Total fund Shareholders fund
  • 22. Proprietary ratio= Fixed assets + current liabilities Stock Working Capital Ratio: Meaning: This ratio shows the relationship between the closing stock & the working capital. It helps to judge the quantum of inventories in relation to the working capital of the business. The purpose of this ratio is to show the extent to which working capital is blocked in inventories. The ratio highlights the predominance of stocks in the current financial position of the company. It is expressed as a percentage. Formula: Stock Stock working capital ratio = Working Capital Stock working capital ratio is a liquidity ratio. It indicates the composition & quality of the working capital. This ratio also helps to study the solvency of a concern. It is a qualitative test of solvency. It shows the extent of funds blocked in stock. If investment in stock is higher it means that the amount of liquid assets is lower. Debt Equity Ratio: Mening: This ratio compares the long-term debts with shareholders fund. The relationship between borrowed funds & owners capital is a popular measure of the long term financial solvency of a firm. This relationship is shown by debt equity ratio. Alternatively, this ratio indicates the relative proportion of debt & equity in financing the assets of the firm. It is usually expressed as a pure ratio. E.g. 2:1 Formula: Total long-term debt Debt equity ratio = Total shareholders fund
  • 23. Debt equity ratio is also called as leverage ratio. Leverage means the process of the increasing the equity shareholders return through the use of debt. Leverage is also known as „gearing‟ or „trading on equity‟. Debt equity ratio shows the margin of safety for long-term creditors & the balance between debt & equity. Return on Proprietor Fund: Meaning: Return on proprietors fund is also known as „return on proprietor‟s equity‟ or „return on shareholders‟ investment‟ or „investment ratio‟. This ratio indicates the relationship between net profits earned & total proprietor‟s funds. Return on proprietors fund is a profitability ratio, which the relationship between profit & investment by the proprietors in the concern. Its purpose is to measure the rate of return on the total fund made available by the owners. This ratio helps to judge how efficient the concern is in managing the owner‟s fund at disposal. This ratio is of practical importance to prospective investors & shareholders. Formula: NPAT Return on proprietors fund = * 100 Proprietor’s fund Creditors Turnover Ratio: It is same as debtors turnover ratio. It shows the speed at which payments are made to the supplier for purchase made from them. It is a relation between net credit purchase and average creditors Net credit purchase Credit turnover ratio = Average creditors Months in a year Average age of accounts payable =
  • 24. Credit turnover ratio Both the ratios indicate promptness in payment of creditor purchases. Higher creditors turnover ratio or a lower credit period enjoyed signifies that the creditors are being paid promptly. It enhances credit worthiness of the company. A very low ratio indicates that the company is not taking full benefit of the credit period allowed by the creditors. Purpose of Ratio Analysis: 1] To identify aspects of a business‟s performance to aid decision making 2] Quantitative process – may need to be supplemented by qualitative factors to get a complete picture. 3] 5 main areas- Liquidity – the ability of the firm to pay its way Investment/shareholders – information to enable decisions to be made on the extent of the risk and the earning potential of a business investment Gearing – information on the relationship between the exposure of the business to loans as opposed to share capital Profitability – how effective the firm is at generating profits given sales and or its capital assets Financial – the rate at which the company sells its stock and the efficiency with which it uses its assets Role of Ratio Analysis: It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the same figure & information, which is already appearing in the financial
  • 25. statement. At the same time, it is true that what can be achieved by the technique of ratio analysis cannot be achieved by the mere preparation of financial statement. Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of performance, either individually or in relation to those of other firms in the same industry. The process of this appraisal is not complete until the ratio so computed can be compared with something, as the ratio all by them do not mean anything. This comparison may be in the form of intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper comparison of ratios may reveal where a firm is placed as compared with earlier period or in comparison with the other firms in the same industry. Ratio analysis is one of the best possible techniques available to the management to impart the basic functions like planning & control. As the future is closely related to the immediate past, ratio calculated on the basis of historical financial statements may be of good assistance to predict the future. Ratio analysis also helps to locate & point out the various areas, which need the management attention in order to improve the situation. As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e. liquidity, solvency, activity, profitability & overall performance, it enables the interested persons to know the financial & operational characteristics of an organisation & take the suitable decision. Fund Flow Analysis Fund may be interpreted in various ways as (a) Cash, (b) Total current assets, (c) Net working capital,
  • 26. (d) Net current assets. For the purpose of fund flow statement the term means net working capital. The flow of fund will occur in a business, when a transaction results in a change i.e., increase or decrease in the amount of fund. According to Robert Anthony the funds flow statement describes the sources from which additional funds were derived and the uses to which these funds were put. In short, it is a technical device designed to highlight the changes in the financial condition of a business enterprise between two balance sheets. Different names of Fund-Flow Statement A Funds Statement A statement of sources and uses of fund A statement of sources and application of fund Where got and where gone statement Inflow and outflow of fund statement Objectives of Fund Flow Statement The main purposes of FFS are:] To help to understand the changes in assets and asset sources which are not readily evident in the income statement or financial statement. To inform as to how the loans to the business have been used. To point out the financial strengths and weaknesses of the business. Format of Fund Flow Statement Sources Applications Fund from operation Fund lost in operations
  • 27. Non-trading incomes Non-operating expenses Issue of shares Redemption of redeemable preference share Issue of debentures Redemption of debentures Borrowing of loans Repayment of loans Acceptance of deposits Repayment of deposits Sale of fixed assets Purchase of fixed assets Sale of investments (Long Term) Purchase of long term investments Decrease in working capital Increase in working capital Steps in Preparation of Fund Flow Statement. 1. Preparation of schedule changes in working capital (taking current items only). 2. Preparation of adjusted profit and loss account (to know fund from or fund lost in operations). 3. Preparation of accounts for non-current items (Ascertain the hidden information). Preparation of the fund flow statement. Cash Flow Analysis Cash is a life blood of business. It is an important tool of cash planning and control.
  • 28. A firm receives cash from various sources like sales, debtors, sale of assets investments etc. Likewise, the firm needs cash to make payment to salaries, rent dividend, interest etc. Cash flow statement reveals that inflow and outflow of cash during a particular period. It is prepared on the basis of historical data showing the inflow and outflow of cash. Objectives of CFS 1. To show the causes of changes in cash balance between the balance sheet dates. 2. To show the actors contributing to the reduction of cash balance inspire of increasing of profit or decreasing profit. Uses of CFS 1. It explaining the reasons for low cash balance. 2. It shows the major sources and uses of cash. 3. It helps in short term financial decisions relating to liquidity. 4. From the past year statements projections can be made for the future. 5. It helps the management in planning the repayment of loans, credit arrangements etc. Objective of Study To understand the information contained in financial statements with a view to know the strength or weaknesses of the firm and to make forecast about the future prospects of the firm and thereby enabling the financial analyst to take different decisions regarding the operations of the firm.
  • 29. Research Methodology Research is defined as a systematic, gathering recording and analysis of data about problem relating to any particular field. It determines strength reliability and accuracy of the project. 1. Research Design: Research Design pertains to the great research approach or strategy adopted for a particular project. A research project has to be the conducted scientifically making sure that the data is collected adequately and economically. The study used a descriptive research design for the purpose of getting an insight over the issue. It is to provide an accurate picture of some aspects of market environment. Descriptive research is used when the objective is to provide a systematic description that is as factual and accurate as possible. 2. Method of Data Collection: Secondary Data: Through the internet and published data Limitation of the study Significant business decisions are frequently made using one or more of the analytical tools illustrated in this term paper. But, one should be aware of the limitations of these tools and of the financial statements on which they are based. Company profile: COMPANY PROFILE
  • 30. Stock Holding Corporation of India ltd (SHCIL) was incorporated under the companies Act, 1956 on July 28, 1986 at the initiative of the Government of India, with an authorized capital of Rs.25 cores and a paid up capital of Rs.10.5 cores, subscribed by seven All India financial and investment institutions and insurance companies, viz. Industrial Development Bank of India (IDBI) Unit Trust of India (UTI) Life insurance corporation of India (LIC) ICICI Ltd Industrial finance corporation of India Ltd (IFCI) Industrial Investment Bank of India (IIBI) General Insurance corporation of India and its subsidiaries, viz.  Oriental insurance co ltd  New India insurance co ltd  National insurance co ltd  United India insurance co ltd. SHCIL was incorporated as a public limited company on July 28, 1986 and provides custodial services to institutional investors and depository services to retail investors. SHCIL commenced operations in August 1988 and has been providing custodial and related services of international standards for nearly a decade to the promoter and other institutions, foreign institutional investors (FIIs), commercial banks and mutual funds. Other auxiliary services provided by SHCIL include derivatives clearing, PF fund accounting, SGL constituent account services and distribution of mutual funds and other capital market instruments, besides distribution of life and non-life insurance policies. SHCIL works in a highly computerized environment and employs the state of the art technology to facilitate its business and to minimize risk. SHCIL has been awarded a citation by the Smithsonian Institution, Washington D.C. for the visionary use of IT and by the Computer Society of India for the Best IT usage. SHCIL has a network of more than 200 branches spread across the country providing services at customer s doorstep. They can select state to locate the nearest branch
  • 31. address and contact details. By calling up any of SHCIL’s nearest branch for information on Products and Services. SHCIL is the first and the only Indian custodian to have received a ‘NO ACTION OF LETTER’ from the securities exchange commission, U.S.A. under section 17(f) of the US Investment company Act, 1940 and rule 17 f-5 framed there under, which enables it to provide custodial and related services to US-based funds as well. With the introduction of the depository system in the country, SHCIL commenced offering depository related services to the retail segment and over the last few years, it has come to acquire the stature of being one of the largest depository participants besides being the country s largest custodian. The total value of assets held in the custody of the corporation as on March 31, 2005 were Rs.2847 billion. Handling such large volume of securities would not have been possible but for the state-of-the-art technology in use at SHCIL. SHCIL has been earning profit consistently and declaring and dividend right from its inception. With a share capital of Rs.211 Million, SHCIL s tangible net worth reached Rs.1721 million as on March 31, 2005. SHCIL’s CREDENTIAL SHCIL, apart from being the country’s premier Custodian and Depository Participant, SHCIL is also the largest Professional Clearing Member; backed by an immense capacity to process volumes with precision. To give an idea of our capability, every year we process around….  40% of number of transaction on NSE & BSE  20% of the market capitalization of all scrip’s listed transaction on BSE, in terms of value processed SHCIL also provides Derivatives clearing, PF fund accounting, SGL constituent account services, distribution of mutual funds and other capital market instruments, besides distribution of life and non-life insurance policies. Other offerings added to the bouquet are online net trading, loan against shares, Western Union Money Transfer & E-stamping. In the pipeline are a host of services that will complement the range of services offered by SHCIL.  WHY SHCIL? Why customer would choose SHCIL as a preferred Service Provider?
  • 32.  Well integrated front and back office, paper and electronic systems. A focused Client Relation Team to manage your needs & queries. A single point contact for your comfort.  In-house capability to address all IT needs in terms of software development, maintenance, back office processing, database administration, network maintenance, backups and disaster recovery.  Multilevel security is maintained in software, applications and guards to access to various data, client and internal reports.  Expertise in running processes utilizing digital signatures.  Regular Audits internal and external, by SEBI, Depositories, Clients and compliance to rules and regulations  Constant review and benchmarking of processes to ensure adherence to global best practices  Insurance cover with international re-insurance  Full Confidentiality of business operations VALUES OF SHCIL  Safety & Efficiency of Operations is a hallmark of SHCIL  Professionalism & Integrity  Customer First  Relationship building  Commitment to Quality irrespective of asset size SHCIL at a Glance Type Public Industry Stock markets & financial services Founded 1986, Mumbai Headquarters Mumbai, Maharashtra , India Area served Custodial services, Depository Services, E- Stamping, Share Broking Key people Ashok Motwani ( Current MD)
  • 33. Services Depository, Broking, Derivatives & E-Stamp Website Official Website Board of Directors Shri. Ashok Motwani Chairman Shri. Sanjeev Vivrekar MD & CEO Shri. G.S.P. Sinha Director Shri. R.H.Mewawala Director Shri. L. Viswanathan Director Shri. Jagdish Thakur Director Shri. Umesh Punde Director Executive teams Ms. Jyoti Katira Head (Finance) Ms. P.Sreelakshmi Chief Operating Officer Mr. Mandar Vasmatkar Company Secretary & Legal Mr. Rajendra More Deputy Manager - Marketing(West Zone) Ms. Sophiya Raj Business Development Manager Mr. E R Subramanian Manager - Operations Mr. Placid Miranda Deputy Manager - Operations Ms. G.Vijaylakshmy Deputy Manager - I.T. ACCOLADES AND CERTIFICATION BOARD OF DIRECTORS AND EXECUTIVE TEAM MEMBERS
  • 34. Citation and Medal from Smithsonian Institute, Washington D.C, U.S.A. for " Visionary and Innovative use of Technology in Finance, Insurance and Real Estate". First South Asian Corporate to receive this.  Computer Society of India Award for best IT usage in the Country.  Our software processes have been assessed at SEI CMM Level 3.  Accepted industry leader and pioneer in Custodial Systems. PRODUCTS AND SERVICES:- The corporation has always been striving to direct its product and services for the all-round benefit of the investors or the end-users. Making available more and more financial services under one roof has always been a priority while safety and investor friendliness have been the hallmark of SHCIL products and services. SHCIL orient its various products and services to be more and more customer oriented to result inquantum benefits with safety of operations to its clients in all the segments. RETAIL SEGMENT Products and services offered by SHCIL for the retail segment can be broadly divided into four categories, viz., the plain vanilla depository service, securities related products, distribution products and auxiliary services. Since 1998, SHCIL has been extending depository related services to the retail segment. The services offered SHCIL include account opening, dematerialization and dematerialization of securities, transaction processing and creation/closure of pledge. Securities related products offered by SHCIL include Stock Direct & Equibuy. The corporation distributes Mutual Funds Equities / Debt IPO s , Government of India saving and fixed deposits of institutions, Life & non-Life insurance product and loan against dematerialized shares. Other auxiliary services provided by SHCIL include extension of professional clearing member services in future and option (F&O) segment of stock exchanges and
  • 35. commodity exchanges and PF accounting services. SHCIL is one the largest professional clearing members of the country. INSTITUTIONAL SEGMENTS Services rendered by SHCIL to the institutional segment includes custodial services, SGL constituents account services and securities lending services. Custodial services provided by SHCIL include post trade settlement, safekeeping, corporate action and reporting. SHCIL s online trading product Stock Direct has been modified to make it more investor friendly while Equibuy compliments SHCIL s Depositary participant activities. Both products have been received good response from the clients. The securities lending activity has also registered steady growth. SHCIL s distribution activity includes add shares arranging (loans against dematerialized shares), fund investment (Distribution of Units of Mutual Funds, Infrastructure Bonds, Capital Gain Bonds, Private Placements, Fixed Deposit ) and GOI Relief Bond. A phenomenal growth was witnessed in the fund mobilized by the corporation for GOI Relief Bonds. WEB INITIATIVE The corporate web site www.shcil.com provides a host of value added features to its clients. End of the day (EOD) reports, intra-day statements and other time-critical settlement report like Delivery Out and Pay Out receipt reports are made available to all registered clients through the website .clients can access personalized portfolio tracker, which tracks changes in their portfolio valuation updated to the hour. The corporate actions tracker alert forthcoming corporate events relevant to their holdings. An IPO alert system provides alerts and details pertaining to ongoing and forthcoming IPO s. As before, the website continues to the offer livestock-quotes and various updated capital market and company related information. Besides, the website also provides various capital market and company related information of use to the investors. The website receives 2, 00,000 to 2, 20,000 pages impressions a day.
  • 36. INFORMATION TECHNOLOGY SHCIL has in-house capability to address all IT needs in terms of software developed and network maintenance, back-office processing, database administration and network maintenance. The IT wing of SHCIL has been certified for CMM level-III for Development & maintenance methodologies. The Corporations Disaster Recovery center has become operational in institutional segment and will become fully operational by the year- end. Beside, a new updated Data center was also set at Mumbai during the year. OTHER INFORMATION SHCIL offers the facility of operating beneficiary account for individuals and corporate as well as clearing account for brokers. Being a premier custodian, SHCIL today holds more than 90000 cores worth of client s assets. SHCIL already has securities worth 30000 cores in electronic form. SHCIL is currently holding more than 20 million certificates in its custody. As the largest custodian, SHCIL accounts for more than 50% of institutional business in the country. AUTOMATION Handling such large volume of paper-based securities has been facilitated mainly by the state of the art technology in use at SHCIL. All the branches and facilitations centers of SHCIL are connected through a VSAT network. SHCIL s innovative automated custodial services has won acclaim from all those concerned. The Smithsonian institute has honored the achievement of SHCIL by conferring a medal and citation for its visionary use of information technology. SHCIL is the first Indian company to receive this prestigious award. SHCIL has been honored by the computer society of India with national it award for best it usage. VARIOUS PRODUCTS PROVIDED BY SHCIL 1. EQUIBUY Even after payments have been made, Company have to wait patiently to see those shares reflected in the Demat account. With the odd surprise of not seeing them at all
  • 37. which you cannot discount! As customer s depository participant, SHCIL assures you of safe delivery of shares every time you buy on the exchange. Company has lined up a panel of reputed brokers who process customer s orders on priority. Their position as the clearing corporations of leading stock exchanges ensures smooth and sure credits into customer s account. An initial advance and timely replenishments into the Purchase Advance account take care of the payment for customer s purchases. Go through the detailed Equibuy procedure and you will see how Equi buy is a one stop shop for customer s share purchases. Features  An Equibuy instruction from you gets the shares credited into customer’s account the next day of payout.  Payment for customer s purchase made from a running account called purchase advance into which you remit an initial advance of Rs.1000 and maintain a minimum balance of Rs.250 at all times.  Choose one or more brokers from a list of 77 brokers empanelled with SHCIL. Registration with broker is not necessary if you are already registered under any of SHCIL s other product schemes.  Purchase on BSE or NSE.  Available at 120 plus SHCIL centers across the country. 2. FUND INVESTS Fund Invest is a basket of financial products, ranging from fixed income securities like fixed deposits, Infrastructure bonds and Capital Gain Bonds to variable income securities like Initial Public Offers (IPO s) of Equities and Mutual Funds. It is an attempt to offer financial products that cater to the various investment needs of SHCILs esteemed clients. An effort to guide the investor to a product portfolio that best suits his risk- returns profile. Applications for investments can be source from any of the SHCIL offices. Apart from guiding SHCIL s investor to pick up the right combination of investment instruments, Company help them 'after-sales' service, by acting as an interlocutor between the investor and the issuer of the securities. SHCIL is an AMFI Registered Mutual Fund Advisor (ARMFA).
  • 38. Features At present, SHCIL is distributing schemes of 25 different Mutual Funds. All these Funds offer a wide variety of investment option depending on the risk appetite of the investor. Some of the major categories are: Debt Funds: The Debt Funds have the mandate of investing primarily in Debt papers. Equity Funds: The Equity Funds have the mandate of investing primarily in Equities. Balanced Funds: The Balanced Funds have the mandate of investing both in Equities as well as Debt papers. Capital Gains Bonds come under 54 EC Capital Gains Bonds, where investors get exemption from Capital Gain tax. These are 'on -tap ' issues. At present, SHCIL is distributing Capital Gain Bonds of Rural Electrification Corporation, National Housing Bank, Small Industries Development Bank of India and National Highway Authority of India. Infrastructure Bonds are issued by ICICI Bank and IDBI, with Section 88 as the main feature. 3. GOI BONDS A government bond is a bond issued by a national government, generally promising to pay a certain amount (the face value) on a certain date, as well as periodic interest payments. Bonds are debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to a company or country. Government bonds are usually denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds, although the term "sovereign bond" may also refer to bonds issued in a country's own currency. 8.0% Taxable Bond These bonds are held in electronic form in an account called Bond Ledger Account (BLA). Bond Ledger Accounts can be opened and operated with RBI designated receiving
  • 39. offices. Savings bonds being sovereign in nature are absolutely safe and an attractive investment option in the current volatile market situation. ADVANTAGES Hassle-free maintenance: The GOI Bonds are held in electronic form in an account called Bond Ledger Account. This ensures smooth investing minus paperwork. Easy access: You can apply for subscriptions into these bonds in any SHCIL center across the country. Electronic Clearing Services: You can avail of electronic clearing system (ECS) services. This ensures automatic credit of benefits and redemptions when they accrue. Feature 8.0 % Taxable Investment Limit Minimum investment is Rs.1000 and there is no maximum Limit Interest option Payable half yearly on 1st Feb, 1st Aug or cumulative on Maturity. Tax benefit Interest is taxable under IT Act 1961. Exempt from Wealth Tax under Wealth Tax Act 1957 Transferability Non-transferable, non-tradable and cannot be used as collateral for borrowings Nomination Available. Only sole holder or surviving holder can Nominate Repayment Repayable on expiry of 6 years from date of issue. No interest would accrue after maturity Premature Encashment Not available STOCK DIRECT:
  • 40. STOCK direct has changed the way you look at trading in securities. From customers desktop you can now send instructions for buying/selling shares. A three-way handshake between leading brokers, national and international banks and SHCIL is the crux of STOCK direct. STOCK direct - India's first online trading platform was launched in 1999. Today STOCK direct is the most secure online trading platform which combines encryption technology / digital signature as well as Smart Card security features. A few clicks will seamlessly check customer s funds and security positions, route the order to the broker of customer s choice and do the necessary fund and share movements for you. For people who are not inclined to trading on the net, Company have Request Transmitting Machines (RTMs) placed at specified SHCIL centers. This is an electronic touch screen kiosk where you can insert customer s smart card and trade effortlessly. Features  A single instruction enables you to combine customer s trading, fund and share transfers with SHCIL taking care of the settlement.  Trade from home on the Internet with a floppy containing the STOCK direct software or use the Smart Card to trade through the Request Transmitting Machines (RTMs) placed at specified SHCIL centers and partner banks' designated branches.  Security measures based on encryption and digital signature coupled with smart card technology make customer s online deals 100% secure. INSURANCE SHCIL, a company promoted by Insurance majors & Financial Institutions, is a Corporate Agent of LIC for Life Insurance products and NIA for General Insurance products. SHCIL has a dedicated team of IRDA Certified Insurance Advisors to provide all services relating to Insurance. They also provide Free Professional advice to clients on need base
  • 41. insurance. SHCIL has 100 odd Branches all over India to take care of all customer s Insurance related queries and needs. Features: An insurance policy compensates you against the financial impact that can arise following loss, damage or destruction of customer s property (such as home or vehicle) or customer s health or life. A fundamental principle of insurance is to put you in the same financial position after a loss or accident that you enjoyed before the loss. This is relatively easy with repair or replacement of (say) a car, but is much more difficult with the loss of a life. The insurance policy is a contract and like any contract contains clauses and conditions. Claims are settled in accordance with the conditions detailed in the policy. SHCIL distributes Life insurance policies of LIC and Non-Life insurance policies of NIA. ADD SHARES SHCIL arranges loan against demat shares. Tie up with reputed banks which offer you the most competitive interest rates in the market. Customer can use the shares in customer s free account as collateral and take a loan from any of SHCIl’s empanelled banks. SHCIL complete customer s documentation and processing and give you the cheque within 48 hours of application. This is a pure value-add to customer s depository account with them. ADD shares are available at SHCIL centers in all the major cities. Feature  Loan against demat shares held in the DP account with SHCIL  Competitive interest rates from a range of Banks SHCIL have tied up with.  SHCIL processes the entire paperwork required with the bank The service is available at any of over 100 branches of SHCI VARIOUS SERVICES PROVIDED BY SHCIL
  • 42. A.DP SERVICES SHCILs Depository Participant services address customers individual investment needs. With a parentage of leading financial institutions and insurance majors and a proven track record in the Custodian business, Company have reiterated their past success by establishing ourselves as the first ever and largest Depository Participant in India. From a tentative foray in 1998 into the individual investor arena to servicing around seven lakh accounts, it have endeavored to constantly add and innovate to make business a pleasure for you. Over 100 of SHCIL s networked branches ensure they are available where you look out for company. Across the country, fourteen Depository Participant Machines (DPMs) connected to NSDL and seven connected to CDSL ensure fast and direct processing of customers instructions. Matching of customers scanned signature on every debit instruction with a digitally scanned original in SHCIL s system makes all customers trading transactions absolutely secure. Proactive backup of customer s instructions prior to execution in the Depository makes them oblivious to system crashes. At SHCIL, company places a very high premium on client reporting. Periodic statements sent to you keep you informed of customers account status. Dedicated Customer Care lines manned by trained staff answer customer queries on demat / trades / holdings. The latest in client response at SHCIL is Interactive Voice Response (IVR) system for round the clock information on customers account. Registration on companies website, SHCIL Interactive, enables you to check customer s account-related information, stock market reports and statistics, Corporate benefits declared by companies, real-time quotes of scripts on BSE and NSE and so much more online. B.DEMAT Dematerialization is the process of conversion of shares from physical form to the electronic mode. Companies dedicated demat team enable you to convert customer s physical holdings into electronic mode in a quick and hassle-free manner. C. CM SERVICES SHCIL's long-standing association with Clearing Members has enabled it to develop services based on an understanding of their working and their requirement for timely and accurate
  • 43. information It accepts deposits of base capital and Additional base capital requirements stipulated by NSE for clearing members trading on its capital market segment. Besides, SHCIL s new products with a broker empanelment clause ensure a mutually beneficial tie-up. Clearing members stand to earn a steady income from SHCIL s product transactions and new add to their client-base, while they capitalize on their rapport with the market. It currently offers Depository services to more than 680 clearing members of various exchanges connected with NSDL and CDSL. SHCIL s Customer Care lines answer all customers DP queries while the Interactive Voice Response (IVR) system gives you information on customers account and other valuable data like CC calendar details, tariff, ISIN information, etc. via telephone, fax and e-mail. ADVANTAGE  For Institutional & Retail clearing members SHCIL have customized tariff for clearing members benefiting. 1. Brokers having very high average trade value. 2. Brokers with big retail clientele.  Special tariffs for : 1. CM Principal Accounts 2. NSCCL CM Accounts 3. Unified Settlement Pool Accounts on CDSL.  SHCIL s Customer Care help line gives timely and accurate information to CMs. The Interactive Voice Response (IVR) system at SHCIL gives round the clock information on holdings & transactions Pay in / Pay out details, overdue cum holding details, etc. via telephone, fax or e-mail  Updated Transaction Statements are available on the website FREE of any charge whatsoever. Members have a choice of accessing their statements date-wise for the
  • 44. last one month or settlement-wise for the same period. Current trading day transactions are also made available , updated to the hour  Besides the transaction statements, the Delivery-Out report, which is an extremely critical report for Clearing Members, is also made available on the website, updated to the hour. 4. DERAVATIVE SERVICE SHCIL provides Clearing Services for derivative segment of BSE/NSE and Commodity segment of MCX/NCDEX.  STOCK DERIVATIVE SHCIL is a Custodian/Professional Clearing Member of derivative segment at the Bombay Stock Exchange and at the Futures & Options Segment of the NSEIL respectively.  COMMODITY DERIVATIVE SHCIL is the first Professional Clearing Member of Commodity segment on the Multi Commodity Exchange (MCX) and National Commodity & Derivative Exchange (NCDEX). SHCIL has a full-fledged in-house back office systems and procedures to cater to the needs of trading members and other institutional / corporate clients in this segment. A dedicated team of professionals handles derivative operations and assists its clients. As a professional clearing member, SHCIL performs the following functions; Clearing - Computing obligations of all his TM s i.e. determining positions to settle Settlement - Performing actual settlement. Collateral Management - Collection of collateral (cash and cash/cash equivalents and setting up exposure limits for TMs and Institutional clients
  • 45. Risk Management - Setting position limits based on upfront deposits/margins for each TM and monitoring positions on a continuous basis. ADVANTAGE SHCIL has always been a pioneer in clearing and settlement services in the cash and F & O segment on NSE and BSE. SHCIL has the capability to handle large volumes of business with greatest accuracy, keeping customer interests as the top priority. SHCIL in its endeavor to serve various entities in the Commodity segment has developed indigenous solution keeping in view the strict regulatory requirements. Privacy of each TM's operations strictly maintained: SHCIL being a professional clearing member has no trading interests in the Commodity segment. There is strictly no dissemination of information on trading or any other operation of any of its clients. One-point contact for all the activities: SHCIL's Commodity segment is centralized and all operations are handled by an exclusive Commodity team. Dedicated team of professionals to handle Commodity operations: SHCIL has a well-trained team of professionals supported by best systems, to handle Commodity operations at MCX and NCDEX. Clients can approach the team for troubleshooting, conceptual understanding or any other operational issue related to derivatives trading. Collateral Management: SHCIL has excellent system to manage cash and cash equivalents deposited as collateral for derivatives trading. Clients are informed as and when expiry of any instrument approaches. Continuous Patronage from Institutional clients:
  • 46. SHCIL being a custodian clearing member having major institutional clients, provides more credibility. Tie-up with banks having nation-wide reach for banking activities: Since settlement in derivatives trading takes place daily. Funds movement has to be fast. SHCIL has tie up with new generation banks having wide reach and modern facilities like TT anywhere banking etc. to contain the time lag in banking transactions. Competitive service charges: SHCIL is the pioneer in introducing Derivatives Clearing and Settlement services in the country. Service charges are so competitively structured to facilitate any entrant. Low investments: The clearing function in the Commodity derivative segment requires huge investment in back office systems and requires strict compliance to the regulatory framework By choosing a PCM like SHCIL, a trading member need not deploy huge resources for post trading functions. Confidentiality of Trades: Since SHCIL has no trading rights, the business details of a trading member are not likely to be misused. There is no overlapping of business interests. Focus: Due to highly competitive nature of the market, SHCIL's service charges are normally very low and it makes more business sense for a TM to outsource the clearing and settlement activities and focus on the core business of trading BROKING Stock Holding Corporation of India Ltd. (SHCIL) in its endeavour to provide one stop shop to its large retail & institutional clients has promoted SHCIL Services Limited (SSL) as its broking arm. SHCIL has been promoted by All India Public Financial Institutions and Insurance Majors. SHCIL is known for its Security, Integrity, wide network and focus on technology. SHCIL Services Ltd will continue this tradition.
  • 47. SSL has a well-established research team, which will be used to provide advisory services to institutional & retail investors in Capital market. SSL is providing broking services through BSE from March 14, 2006. NSE operations will commence shortly, after necessary regulatory approvals. NRI SERVICES:- Over the years, SHCIL has grown to become a major player in the capital market. With a network of more than 120 offices operating across the country and franchisees operating abroad, SHCIL provides Depository Participant and related services close to 0.7 million satisfied investors out of which over 6000 are NRI Clientele. SHCIL has a full-fledged NRI cell operating specifically to cater needs pertaining to Depository account opening and maintenance. NRI cell co-ordinates with prospective NRI customers, collects and assists in obtaining the relevant documents and ensures the Depository Account is opened hassle free. NRI Cell collects physical certificates to be sent for demat and ensures that the certificates are in order and can be sent for dematerialization under the existing guidelines issued by the depositories. Instructions for trade are accepted by fax on request by NRI Cell to ensure timely settlement of trades. In this case later on the client needs to regularize by sending the original trade delivery instruction. Any tariff and billing related query are addressed by NRI Cell. CUSTODIAL SEGMENT: Since its commencement in 1988 as the first dedicated Custodian in the country, SHCIL has been providing Custodial Services of international standards to Domestic Mutual Funds, Financial Institutions and Foreign Institutional Investors With almost 70% of the Institutional business in its fold, SHCIL has evolved over the times to meet the changing requirements of dynamic markets and demanding clients. A dedicated pool of trained and highly experienced professionals work literally round the clock on state of the art computer systems, dedicated communication channels, well connected to Client institutions, Stock Exchanges, Clearing houses,
  • 48. Depositories and leading Institutional brokers. In terms of collective man-years, SHCIL has the most experienced team in the entire Industry. E-STAMPING This is one of the latest service provided by the SHCIL.The corporation has been authorized by the ministry of finance, Government of India to act as Central Record-keeping Agency (CRA) to design and implement an electronic method of stamp duty collection. E-stamping is a based solution for payment and collection of non-judicial stamp duty. SHCIL is the sole CRA for e-stamping in India. The corporation has entered into agreements and implemented e-stamping system in the states of Gujarat, Karnataka, NCT of Delhi, Maharashtra, Assam and Tamil Nadu. SHCIL has signed agreement with the government of Bihar. SHCIL is in discussion with other State Governments.