NFO Process of mutual Fund

1. 1
NFO PROCESS IN MUTUAL FUNDS
AT
INDIA INFOLINE LIMITED
Market Survey Report submitted in
Partial fulfillment of the requirements of
POST GRADUATE DIPLOMA IN MANAGEMENT
Submitted by:
MAYANK GARG
Roll No.: 466
Section: FA
Major Specialization: Finance
NEW DELHI INSTITUTE OF MANAGEMENT
TUGHLAKABAD INSTITUTIONAL AREA,
NEW DELHI
(2015-2017)

2. 2
TABLE OF CONTENTS
1. Acknowledgement
2. Research Objectives
3. Preface
4. Introduction
a) New Fund Offer - NFO
b) Mutual Funds
c) Company Profile – IIFL
d) Statistical Technique
e) NFO Process
f) SEBI Guidelines for NFO
5. Research Methodology
a) Data Collection Techniques
b) Limitations of the Study
6. Data Analysis
a) Data
b) Calculations
c) Interpretation
7. Finding And Conclusion
8. Suggestions And Recommendations
9. Bibliography

3. 3
ACKNOWLEDGEMENT
The presentation of this project has given me an opportunity to express my pro found gratitude to
all concern in guiding me. Foremost, I would like to thank Mr AHUWALIA (Manager of India
Infoline) for giving me an opportunity to undertake this project work.
I would like to thank the INDIA INFOLINE PRIVATE LIMITED staff for giving me support
and the required material on time. I would also thank the principal of our college, New Delhi
Institute Of Management, Tughlakabad Institutional Area, New Delhi, for providing an
opportunity to undergo a project study program.
I would like to thank PROF. CHAND TANDON and PROF. BHARAT SHARMA for
assigning me the project.
Lastly, I want to pay my hearted thanks to my friends and people who gave me their valuable
suggestions and guidance in completing my project.
MAYANK GARG

4. 4
RESEARCH OBJECTIVES
Research is one of the most vital part of the survey and is related to collection of information and
knowledge.
The purpose of this survey creates a design in relation to process of NFO (NEW FUND OFFER)
and how this process is carried out till the end.
To study the technical, procedural, legal dimensions of the NFO
To examine briefly the organizational structure, communication network, resource
requirements to launch a new fund
To study a sample of application drawn from Reliance Mutual Fund.

5. 5
PREFACE
Investments goals vary from person to person. While somebody wants security, others might
give more weightage to returns alone. Somebody else might want to plan for his child's
education while somebody might be saving for the proverbial rainy day or even life after
retirement.
Investors of all categories could choose to invest on their own in multiple options but opt for
Mutual Funds for the sole reason that all benefits come in a package.The Mutual Fund industry is
having its hands full to cater to various needs of the investors by coming up with new plans,
schemes and options with respect to rate of returns, dividend frequency and liquidity.
In view of the growing competition in the Mutual Funds industry, it was felt necessary to study
the investors orientation towards Mutual Funds i.e. their pattern of risk apetite and preferences in
various schemes, plans and options in order to provide a better service,
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.
MAYANK GARG

6. 6
INTRODUCTION
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 NFO, it first informs to the registrar or the back office
functions provider through email. This is called as “NFO Launching Information Mail” send by
the fund manager of the asset management company to the NFO coordinator.
Key Information Memorandum (KIM), offer document contains, necessary information for a
prospective investor to make an investment decision. The offer document contains the 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 will arrange a meeting where the AMC team & NFO expert’s
team team and the dispatch team will fix the target dates by which the work has to be completed.
Mutual Fund
Mutual fund is a mechanism for pooling the resources by issuing to the investors and investing
funds in securities in accordance with objectives as disclosed in offer document.
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.

7. 7
COMPANY PROFILE: INDIA INFO LINE LTD
Probity Research & Services Pvt. Ltd. was later changed to India Info line Ltd.
The Objective was to provide unbiased and independent information to market intermediaries
and investors. The list included consulting firms- McKinsey, companies- HUL, banks- Citibank,
rating agencies- CRISIL, FIS and leading brokers.
The company became dependent on its e-broking business for survival. The core promoters of
the company had little experience of broking. There was a core group who never lost hope. They
cut all possible costs and worked on a bare bones structure. 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.
Company’s Vision:
Its vision will not be accomplished only by maintaining high growth alone. Its 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.
STATISTICAL TECHNIQUE
Histogram:
A histogram is a graphical representation of the distribution of numerical data. It is an estimate
of the probability distribution of a continuous variable (quantitative variable) and was first
introduced by Karl Pearson.

8. 8
SEBI GUIDELINES ON NEW FUND OFFER
1. Procedure for launching of schemes:
a) 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.
b) Every mutual fund shall along with the offer document of each scheme pay filing fees
2. Disclosures in the offer document:
a) The offer document shall contain disclosures which are adequate in order to enable the
investors to make informed investment decision
b) 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.
c) No modifications are suggested by the Board in the offer document within 21 [working]
days, the asset management company may issue the offer document.
3. Advertisement material:
Scheme shall be in conformity with the Advertisement Code and shall be submitted to the
Board within 7 days from the date of issue.
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:
a) scheme provides for periodic repurchase facility to all the unit holders with restriction; or
b) scheme provides for monthly income or caters to special classes of persons like senior
citizens, women, children, widows or physically handicapped providing for repurchase of
units at regular intervals; or
c) Scheme opens for repurchase within a period of six months from the closure of
subscription.
6. Repurchase of close ended scheme:
a) The asset management company may at its option repurchase or reissue the repurchased
units of a close ended scheme.
b) 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
c) The units of close ended scheme may be converted into open ended scheme.
d) If the offer document of such scheme discloses the option; or
e) The unit holders are provided with an option to redeem their units in full.
f) A close ended scheme shall be fully redeemed at the end of the maturity period.
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

9. 9
8. Allotment of Units and refund of money:
a) The Asset management company shall specify in the offer document
b) Over subscription the extent of subscription of all the applicants applying up to five
thousand units shall be given full allotment
c) 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;
(ii) If the moneys received from the applicants for units are in excess of subscription.
d) Any amount refundable shall be refunded within a period of six weeks from the date of
closure of subscription list, by Registered A.D and by Demand Draft marked "A/C
Payee" to the applicants.
e) In the event of failure to refund the amounts within the period 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:
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 closing date.
10. Transfer of units:
a) A unit certificate unless otherwise restricted or prohibited under the scheme, shall be
freely transferable by act of parties or by operation of law.
b) 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.
11. Dispatch of warrants and proceeds:
a) Every mutual fund and asset management company shall,
(i) Dispatch to the unit holders the dividend warrants within [30 days] of the declaration
(ii) Dispatch the redemption or repurchase proceeds within 10 working days
b) 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)
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 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.

10. 10
NFO PROCESS
Collect the applications
all branches of the bank
involved in NFO &
segregated bank &
branch wise.
To keep applications
safe, out of any
damage and miss-
place.
All the information or date of an
investor that is available on the
application
Data that is entered in first entry
is checked & missing is entered.
Physical form of application are
kept side by an checking of data
that was entered
Verifies mistakes that are
left in online matching
Prepared based on the data that is
provided after first time verification.
Report is again sent to
external audit team.
If the external auditing is not
satisfied and if they find any
mistakes & missing are rectified
Check name of the investor,
amount invested, bank details
PAN number, name of the
scheme and mode of holding
Once again check further mistakes
After integrity check by the
NFO team it is once checked
by the internal audit team
This is done for convenience in
doing back office functions easily

11. 11
Prepare New Fund Report and has to be
submitted to the AMC further to SEBI.
SOA once prepared is dispatched to the
investor
Verification of random investor shows
SOA is cent percent correct and exact
Allotment of units is done as per the
amount that is invested by investors
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
MFS team will once again verify the data
and the final data will come out any
mistakes and default values
Cheques without hue sign of investor
bounced cheques etc., are rejected and
dispatched to the investors
Scanning team will detect and rectify any
further default values and mismatch cases

12. 12
RESEARCH METHODOLOGY
Data Collection Technique:
In this study Primary data was collected through interaction with staff of India Info Line Pvt.
Ltd. and the applications of Reliance Equity Fund.
In this study the Secondary data is mainly taken from-
 The company’s training material.
 Reconciliation statements.
 www.iiflmf.com
 www.indiainfoline.com/mutualfunds/iifl-mutual-fund
 www.sebi.com
Limitations of study:
 The data available is therefore restricted by the design of the application.
 The inspection is done on the basis of a sample of 200 applications. 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,
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.

13. 13
DATA ANALYSIS
Holding profile of applicant:
Particulars Single Joint Anyone Total
No. of applicants 140 1 59 200
% of applicants 70 0.5 29.5 100
0
10
20
30
40
50
60
70
Holding Profile
single
joint
anyone
Interpretation:
It can be seen that majority of the applicants prefer to hold the allotted units individually and
29.5% prefer to hold anyone/survivors. This corroborates with the age profile of the applicants.

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Occupation profile of applicants:
Particular Business Service Student Retired Housewife Others Total
No. of
applicants
35 75 15 20 30 25 200
% of
applicants
17.5 37.5 7.5 10 15 12.5 100
0
5
10
15
20
25
30
35
40
Occupation
Business
Service
Student
Retired
House Wife
Others
Interpretation:
Majority of the applicants are from services personnel at 37.5%, next comes business People are
17.5%. The housewife occupy 3rd
highest at 12.5%. It is found that professionals and retired are
at the lowest.

15. 15
Age profile of the applicants:
Particulars Below 18 18-30 31-60 Above 60 Total
No. of applicants 0 35 140 25 200
% of applicants 0 17.5 70 12.5 100
0
10
20
30
40
50
60
70
Age Profile
18-
18-30
31-60
60+
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 70.
This is followed by the age Group 18-30 years and 12.5% of the applicants are above 60 years.

16. 16
Investment profile of the applicants:
Particulars 5000 -
25000
25001 -
50000
50001 -
100000
Above
100000
Total
No. of applicants 100 45 20 30 200
% of applicants 50 22.5 10 17.5 100
0
5
10
15
20
25
30
35
40
45
50
Investment Profile
5000-25000
25001-50000
50001-100000
100000+
Interpretation:
Amount of investment is high at 50% in the range 5000-25000 and it is very low at 10% in 50001-
100000, but the next slab. Above 100000 has registered 17.5%.

17. 17
Scheme profile of applicants:
Particulars Growth
option
Bonus
option
Dividend
reinvestment
Dividend
payout
Total
No. of applicants 110 10 50 30 120
% of applicants 55 5 25 15 100
0
10
20
30
40
50
60
Scheme Profile
Growth
Bonus
Div Reinvest
Div Payout
Interpretation:
Majority of the applicants opted the growth option and the option of dividend reinvestment is
25%. This means that 80% of the applicants are not investing for income sake rather they look at
the accumulation of profits.

18. 18
Gender profile of the applicants:
Particulars Male Female Total
No. of applicants 147 53 200
% of applicants 73.5 26.5 100
0
10
20
30
40
50
60
70
80
Gender
Male
Female
Interpretation:
The female participation in the NFO is low at 26.5%. The male applicants are very high at 73.5%
as is not normally found in found in institutional investments.

19. 19
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 -
i. Majority applicants prefer to hold the units individually
ii. Majority of the applicants are in service
iii. The model age group is 31-60
iv. The most common investment amount is 5000-25000
v. About half of the applicants prefer Growth option
vi. Majority the applicants are male

20. 20
SUGGESTIONS AND RECOMMENDATIONS
Different funds have been using different forms of applications. A standardized form of
application maybe designed by the competent.
The NFO process is very complex and there is a need to simplify the process by
eliminating certain unnecessary steps in the process i.e. 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 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.
A savings from all channels of India / World are to be tapped by the NFO rather than one
or two states applying for a login share of the option.

21. 21
BIBLIOGRAPHY
 www.Indiainfoline.com
 www.sebi.com
 www.amfiindia.com
 NFO propeller of India info line.
 NFO records of Reliance Mutual Fund.
 Mutual Funds in India by H SADHAK.
 “Business Statistics” written by Naval Bajpai