CHAPTER-1

INTRODUCTION

1.1

Industry profile

The Indian broking industry is one of the oldest trading industries that have been
around even before the establishment of BSE in 1875 Inception- The roots of a stock
market in India began in the 1860s during the American Civil War that led to a sudden
surge in the demand for cotton from India resulting in setting up of a number of joint
stock companies that issued securities to raise finance. Bubble burst- The early stock
market saw a boom till 1865, and then in Jul 1865, what was then used to be called
the share mania ended with burst of the stock market bubble. In the aftermath of the
crash, banks, on whose building steps share brokers used to gather to seek stock tips
and share news, disallowed them to gather there, thus forcing them to find a place of
their own, which later turned into the Dalal Street. A group of about 300 brokers
formed the stock exchange in Jul 1875, which led to the formation of a trust in 1887
known as the Native Share and Stock Brokers Association Beginning of a new
phase- A new phase in the Indian stock markets began in the 1970s, with the
introduction of Foreign Exchange Regulation Act (FERA) that led to divestment of
foreign equity by the multinational companies, which created a surge in retail
investing. Growth supporting factors-The early 1980s witnessed another surge in
stock markets when major companies such as Reliance accessed equity markets for
resource mobilization that evinced huge interest from retail investors. A new set of
economic and financial sector reforms that began in the early 1990s gave further
impetus to the growth 7 of the stock markets in India. Setting up of SEBI- the
Securities and Exchange Board of India (SEBI), which was set up in 1988 as an
administrative arrangement, was given statutory powers with the enactment of the
SEBI Act, 1992. The broad objectives of the SEBI include- to protect the interests of
the investors in securities to promote the development of securities markets and to
regulate the securities markets Incorporation of NSE- NSE was incorporated in Nov
1992 as a tax paying company, the first of such stock exchanges in India, since stock
exchanges earlier were trusts, being run on no-profit basis. NSE was recognized as a
stock exchange under the Securities Contracts (Regulations) Act 1956 in Apr 1993. It
commenced operations in wholesale debt segment in Jun 1994 and capital market
segment (equities) in Nov 1994. The setting up of the National Stock Exchange
brought to Indian capital markets several innovations and modern practices and

procedures such as nationwide trading network, electronic trading, greater

transparency in price discovery and process driven operations that had significant
bearing on further growth of the stock markets in India. To speed the securities settl e
ment process, T h e Depositories A ct 1 9 96 w a s p a s s ed that allowe for
dematerialization (and dematerialization) of securities in depositories and the transfer
of securities through electronic book entry. The National Securities Depositor y
Limited (NSDL) set u p b y leading financial institutions, commenced operations in
Oct 1996. Despite passing through a number of changes in the post liberalization
period, the industry has found its way towards sustainable growth. A stock Broker is a
regulated professional who buys and sells shares and other securities through market
makers or Agency Only Firms on behalf of investors. To work as a broker a certificate
of registration 8 from SEBI is mandatory after satisfying all the terms and conditions.
FINANCIAL MARKETS The financial markets have been classified as Cash market
(spot market) largest traded, the spot market or cash market is a commodities or
securities market in which goods are sold for cash and delivered immediately.
Derivatives market after cash market, the derivatives markets are the financial
markets for derivatives. The market can be divided into two that for exchange traded
derivatives and that for over-the-counter derivatives. Debt market - The bond market
(also known as the debt, credit, or fixed income market) is a financial market where
participants buy and sell debt securities. Commodities market after commodities
market, Commodit y markets are markets where raw or primary products are
exchanged. These raw commodities are traded on regulated commodities exchanges,
in which they are bought and sold in standardized contracts. NEED OF A BROKER A
broker is a person or firm that facilitates trades between customers. It is advisable to
conduct transactions through an intermediary. For example one needs to transact
through a trading member of a stock exchange if they intend to buy or sell any
security on stock exchanges. One needs to maintain an account with a depository if
they intend to hold securities in demat form. You need to deposit money with a banker
to an issue if you are subscribing to public issues. One gets guidance if you are
transacting through an 9 intermediary. A broker acts as a go between and, in doing so,
does not assume any risk for the trade. The broker does, however, charge a
commission. A broking firm acts as an intermediary between NSE and Client. Stock
Brokers come under the category of Market Players. The membership in the stock
exchange can be granted as individual membership and corporate membership. B The
4

market intermediaries play an important role in the development of Securities Market

by providing different types of services. There are two major stockexchanges NSE
(composition of 50 stocks) and BSE (Composition of 30 stocks)
1.2 Company

Profile

Edelweiss is one of Indias leading diversified financial services Group. Edelweiss

offers a large range of products and services spanning across asset classes and
consumer segments.
Its businesses are broadly divided into Credit including Retail Finance and Debt
Capital Markets, Commodities, Financial Markets, Asset Management and Life
Insurance.
The groups research driven approach and proven history of innovation has enabled it
to foster strong relationships across corporate, institutional and individual clients. The
Life Insurance, Retail Finance including Housing Finance, Mutual Fund and Retail
yBroking businesses both online and offline formats, have paved the way for
Edelweiss to cater to the large retail client segment. Edelweiss presence now covers
240 offices in 125 cities including eight international offices with 5,555 employees
catering to over 572,000 clients across various businesses in retail and wholesale
segments.

APPROACH
Edelweiss is future-ready. The company has already made proactive business
investments to service emerging customer needs on the one hand, and enhance
stakeholder value on the other.
Diversification:
Over the years, Edelweiss progressively widened its services basket by moving into
adjacent business spaces. Edelweiss was a purely capital market-focused player a few
years ago; this business accounts for only about a third of its revenues today. As

Edelweiss continues to broad base revenues, a rising proportion of growth will be

derived from its Credit, Asset Management,
Commodities and Insurance businesses.
Strong and liquid balance sheet:
Edelweiss possessed a balance sheet size at the end of FY 12 of over INR 145 Bn with
a net worth of over INR 28 Bn. Edelweiss focuses on low gearing that provided the
organisation with sufficient headroom to fund growth without comprising its balance
sheet integrity.
Risk management:
Edelweiss risk mitigation practices are strengthened through timely investments in
people, processes and IT capabilities on the one hand, and credible governance
practices stewarded by an industry-renowned Board on the other.
People:
Edelweiss cultivates a culture of entrepreneurship and ownership among its people.
The Group continues to invest in developing leadership and managerial talent across
the organization through a four-tier system of identifying, nurturing and mentoring
leaders. Fountainhead, Edelweiss state-of-the-art leadership centre in Alibaug, is
among few such centres in the Indian Financial Services industry, promoting among
others, a culture of training and development across the group.

Processes:
Edelweiss has undertaken a significant restructuring of its business to enhance
operational efficiencies, dividing the organization into two operational clusters;
Wholesale and Retail and SBU groupings that provide the scale and ergonomic
growth. The company has carried out a visioning exercise with a roll-down across the
organization to ensure clear articulation of its growth aspirations.
Execution expertise:
Edelweiss focus on error free and timely execution across businesses represent the
core of its success. It possesses strong project teams that focus on processes, reviews
6

and deliverables. Whenever necessary, it re-engineers processes and innovates stateof-the-art technology solutions that enhance efficiency.
Brand:
The Edelweiss brand is a much respected brand enjoying widespread recognition due
to consistent investment in diverse set of brand building efforts spanning both
conventional and unconventional channels. The Ideas create, values protect tagline
underlines all branding efforts. A testament to the quality of the reputation being
enjoyed by Edelweiss is the fact that Superbrands India has recognized Edelweiss as
the Business Superbrand in the year 2011.

GUIDING PRINCIPLES
Since inception, Edelweiss operations have been governed by a set of guiding
principles that have clarified and eased decision-making, however challenging the
circumstances. These set of ten principles ensure that the company does the right
things for the right reasons without compromising on the long-term vision.
The Edelweiss brand, built over the past decade enjoys a high degree of awareness,
respect and recognition. Ideas Create, Values Protect, epitomizes our belief that
every idea, however profitable or attractive, must always be reinforced by a strong
and sustainable set of values.
We will be a Thinking Organization. We will constantly bring thought to
everything we do. Our clients and our own success depends on our ability to use
greater ideation and more imagination in our approach.
We will be Fair to our clients, our employees and all stake holders. We want our
clients and our employees to be richer for their relationship with us.
We will take care of our People seriously. Our policies - in spirit and in letter will ensure transparency and equal opportunity for all. We will go beyond the
normal goals of attracting, recruiting, retaining and rewarding fine talent. We will
ensure that every individual in Edelweiss has an opportunity to achieve their fullest
potential.
We will operate as a Partnership, internally and externally. Though individuals

are very often brilliant, we believe teamwork and collaboration will always ensure a
better and more balanced organization. We will also treat our clients as partners and
show them the same respect and consideration that we would our internal team
members.
We will focus on the Long Term. Though the world will change a lot in the coming
years and our assumptions for the future may not hold up, we will reflect on the
long-term implications of our actions. Even when making short-term decisions we
will be aware of the long-term implications.
We will focus on Growth for our clients, employees and shareholders.
Our Reputation and Image is more important than any financial reward.
Reputation is hard to build and even harder to rebuild. Our reputation will be
impacted by our ability to think for our clients, maintain confidentiality and by our
adherence to our value system.
We will Obey and Comply with the rules of the land. We will maintain the
highest standard of integrity and honesty. When we are unclear we will seek
clarifications.
We will respect Risk. Our business is going to be a constant challenge of balancing
risk and reward. Our ability to constantly keep one eye on risk will guide us through
this fine balance.
Our Financial Capital is a critical resource for growth. We will endeavor to
grow, protect, and use our financial capital wisely.

Organizational structure

The Board comprises of four independent and two non-executive directors out of a
total of eight directors, each of whom brings in his own expertise in diverse areas. The
focus is on strong corporate governance. There is an Independent Risk Committee
headed by an external director.
BOARD OF DIRECTORS
The Board comprises of four independent and two non-executive directors out of a
total of eight directors, each of whom brings in his own expertise in diverse areas. The
focus is on strong corporate governance. There is an Independent Risk Committee
headed by an external director.

Mr. Rashesh Shah, Chairman & CEO

Mr. Venkat Ramaswamy, Executive Director

Mr. Himanshu Kaji, Executive Director

Mr. Rujan Panjwani, Executive Director

Ms. Vidya Shah, Non- Executive Director

Mr. Kunnasagaran Chinniah, Independent Director

Mr. P N Venkatachalam, Independent Director

Mr. Berjis Desai, Independent Director

Mr. Sanjiv Misra, Independent Director

Mr. Sunil Mitra, Independent Director

Mr. Navtej S. Nandra, Independent Director

Mr. Biswamohan Mahapatra, Independent Director

Financial Performance at a Glance

Edelweiss over the past few years has delivered strong operating and financial
performance. It has a strong track record of high growth and profitability. Our
revenues have grown at a 4-year CAGR of 149% while our net profits have increased
at a 4-year CAGR of 143% upto March 08. As on March 31, 2008 Edelweiss Group
Net worth stood at over Rs. 23 billion including minority interest, indicating a strong
balance sheet. Equity capital is the primary source of funding for the company besides
debt. The leverage as on 31st March 2008 is below 1:1 indicating the healthy position
whereby the balance sheet can be further levered easily for improving the ROEs.
Consolidated Financial Performance of Edelweiss Capital Limited

10

Business Overview
Edelweiss operations are broadly divided into Agency and Capital business lines. The
strategies employed ensure that the divide would broadly remain equal among the
two. The Agency business line includes Investment Banking, Broking - both
Institutional and HNI, Asset management and Investment advisory services. The
Capital business line includes Lending and Treasury Operations.
Investment Banking
Edelweiss has one of the most extensive product offerings within Investment Banking
in India, catering to different market and client segments. The verticals within
Investment Banking include Equity Capital Markets, Mergers & Acquisitions
Advisory, Private Equity Syndication, Structured Finance Advisory, Real Estate
Advisory and Infrastructure Advisory.

Broking
Institutional Equities
Edelweiss has one of the leading institutional equities businesses in India backed by a
large and experienced research team and a large and diversified client base. Intense
servicing, seamless execution and innovative research products have helped
Edelweiss build strong relationships with over 300 institutional investors, including
FIIs and domestic institutional investors. Research coverage presently extends to over
200 companies across 19 sectors.
Private Client Broking
Edelweiss offers dedicated brokerage services to high net-worth individuals with a
strong emphasis on building long-term relationships with clients. Product offerings
include specialized trading execution for active trading clients and structured products
like equity linked capital protection products.
Wealth Management
11

The Primary focus is on understanding each HNI client's profile including life style,
risk appetite, growth expectations, current financial position and income requirements
to create comprehensive and tailored investment strategies. Edelweiss offers
customized products along with practice models and advisory teams specializing in
servicing the underserved NRI segment. The broad range of offerings includes asset
allocation
advisory to Structured Products, Portfolio Management, Mutual Funds, Insurance,
Derivatives Strategies, Direct Equity, Private Equity, and Real Estate Funds etc.

Asset Management
Alternative Asset Management focuses on advisory/management expertise for
Private Equity Fund, India focused Multi-Strategy Fund, Real Estate Fund and a
Bonds Fund. Recent Initiatives that have been announced include setting up an ARC
and a Distressed Assets Fund. On the Domestic AMC side, Edelweiss Mutual Fund
has launched two Debt Funds, one Liquid Fund and one ELSS Fund.
Treasury
The Treasury Operations in Edelweiss is similar to that of a Treasury in a Commercial
Bank and focuses on liquidity management and yield optimization. This division has
adopted a multistrategy/multi-book approach to diversify and grow its portfolio
while imparting liquidity in the balance sheet. The Company follows a disciplined and
conservative approach to cash management with emphasis on strong risk policies and
capital preservation.
Lending
With a deep knowledge and understanding of capital markets, the Companys primary
offering in the lending business includes products such as promoter funding, loan
against shares, IPO financing, Loan against ESOPs etc. Its prudent inancing norms
and a conservative margin of safety ensures low or nil nonperforming loans.

12

Financial Products Distribution

Among the recent initiatives, Financial Products Distribution focuses on giving advice
and analyzing the best financial product options available in the market. It involves
the distribution of the full range of third party financial products and services for the
retail customer.

Investment Account It is a product which provides the investors with a platform of

getting a Demat account, trading account, informations regarding mutual funds
floating in the market and information regarding the various insurance floating in the
market

13

Facilities included in investment account:

It includes Mutual fund investment

Annual maintenance cost free for two years

Online portal- www.edelblue.com

Offline trading facilities

Toll free number

Personalized Dealer

Relationship manager (RM)

Free mobile tips

Daily market report, weekly report and monthly report

Transaction charges nil in Intraday and delivery

No depository participant charges

75% margin holding.

14

CHAPTER-2
LITERATURE REVIEW

15

2.1 LITERATURE REVIEW

Source: Banerjee, R., Kearns, J., & Lombardi, M. J. (2015).
Abstract:
In spite of very easy financing conditions globally, investment has been rather weak in
the aftermath of the Great Recession. What explains this apparent disconnect? The
evidence suggests that, historically, uncertainty about the future state of the economy
and expected profits play a key role in driving investment, and financing conditions
less so. As a result, investment after the Great Recession appears to have been broadly
in line with what could have been expected based on past relationships. A stronger
recovery of investment would seem to depend on a reduction in economic uncertainty
and expectations of stronger future growth
(Why) is Investment Weak?. BIS Quarterly Review March.

Source: Fama, E. F., & French, K. R. (2015)

Abstract
Variables with strong marginal explanatory power in cross-section asset pricing
regressions typically show less power to produce increments to average portfolio
returns, for two reasons. (1) Adding an explanatory variable can attenuate the slopes
in a regression. (2) Adding a variable with marginal explanatory power always
attenuates the values of other explanatory variables in the extremes of a regressions
fitted values. Without a restriction on portfolio weights, the maximum Sharpe ratios in
the GRS statistic of Gibbons, Ross, and Shanken (1989) provide little information
about an incremental variables impact on the portfolio opportunity set.
Incremental variables and the investment opportunity set. Journal of Financial
Economics.

16

Source:Bekaert, G., & Harvey, C. R. (2014)

Abstract:
Given the dramatic globalization over the past twenty years, does it make sense to
segregate global equities into developed and emerging market buckets? We argue
that the answer is still yes. While correlations between developed and emerging
markets have increased, the process of integration of these markets into world markets
is incomplete. To some degree, this accounts for the disparity between emerging
equity market capitalization in investable world equity market benchmarks versus
emerging market economies in the world economy. Currently, emerging markets
account for more than 30% of world GDP. However, they only account for 12.6% of
world equity capitalization. This incomplete integration along with the relatively
small equity market capitalization should be taken into account in portfolio allocation.
Other asset classes within emerging markets (such as corporate bonds and currencies)
are also viable.
Emerging equity markets in a globalizing world. Available at SSRN 2344817.

Source:Kothari, S. P., Lewellen, J., & Warner, J. B. (2014).

Abstract:
We study the behavior of aggregate corporate investment from 1952-2010. Investment
grows rapidly following high profits and stock returns but, contrary to standard
predictions, is largely unrelated to recent changes in market volatility, interest rates, or
the default spread on corporate bonds. At the same time, high investment predicts
negative profit growth going forward and is associated with low stock returns when
investment data are publicly released, suggesting that a jump in investment coincides
with bad news. Our analysis also shows that the investment decline following the
financial crisis of 2008 was not unusual given the drop in GDP and profits at the end
of 2008.
The behavior of aggregate corporate investment. Available at SSRN.

17

Source:Firth, M., Malatesta, P. H., Xin, Q., & Xu, L. (2012).

Abstract
We investigate the relation between the internally generated cash flows and fixed
asset investments of Chinese firms and find that it is U-shaped. Cash flow and
investment are negatively related for low levels of cash flow but positively related for
high levels of cash flow. We find that government controlled listed firms have greater
investmentcash flow sensitivities than do privately controlled listed companies,
especially on the left-hand side of the U-shaped curve where cash flow is negative.
However, the difference in sensitivities appears only among firms that possess few
profitable investment opportunities. We attribute this finding to the government
having multiple socio-economic objectives, which leads to increased capital
expenditures by the firms it controls when internal funds are abundant and when
internal funds are negative. There is no evidence that access to finance and soft budget
constraints explain the differences between the investmentcash flow sensitivities of
government controlled and privately controlled listed firms.
Corporate investment, government control, and financing channels: Evidence from
China's Listed Companies. Journal of Corporate Finance, 18(3), 433-450.

Source:Kogan, L., & Papanikolaou, D. (2014).

Abstract
We explore the impact of investment-specific technology (IST) shocks on the cross
section of stock returns. Using a structural model, we show that IST shocks have a
differential effect on the value of assets in place and the value of growth
opportunities. This differential sensitivity to IST shocks has two main implications.
First, firm risk premia depend on the contribution of growth opportunities to firm
value. Second, firms with similar levels of growth opportunities comove with each
other, giving rise to the value factor in stock returns and the failure of the conditional
CAPM. Our empirical tests confirm the model's predictions.

18

Source:Growth opportunities, technology shocks, and asset prices. The Journal of

Finance, 69(2), 675-718.
Abstract
Ozdagli, A. K. (2012). This article rationalizes empirical patterns of market leverage,
book leverage, book-to-market ratios, and stock returns across different book-tomarket portfolios, using a model of firm financing and investment. The model
analytically shows that tax deductibility of interest payments increases effective
investment irreversibility and that investment irreversibility weakens the relation
between book-to-market values and returns. This provides a clear and novel
mechanism showing how financial leverage affects stock returns beyond the standard
Modigliani-Miller paradigm. The article argues that market leverage, rather than
operating leverage or investment irreversibility, explains a major portion of the value
premium. Empirical evidence supports this argument.
Financial leverage, corporate investment, and stock returns. Review of Financial
Studies, hhr145.

Source:Polk, C., & Sapienza, P. (2009).

Abstract
We test a catering theory describing how stock market mispricing might influence
individual firms' investment decisions. We use discretionary accruals as our proxy for
mispricing. We find a positive relation between abnormal investment and
discretionary accruals; that abnormal investment is more sensitive to discretionary
accruals for firms with higher R&D intensity (opaque firms) or share turnover (firms
with shorter shareholder horizons); that firms with high abnormal investment
subsequently have low stock returns; and that the larger the relative price premium,
the stronger the abnormal return predictability. We show that patterns in abnormal
returns are stronger for firms with higher R&D intensity or share turnover.

19

The stock market and corporate investment: A test of catering theory. Review of
Financial Studies, 22(1), 187-217.
Gaver, J. J., & Gaver, K. M. (1993).
Abstract
This paper presents additional evidence on the relation between the investment
opportunity set and financing, dividend, and compensation policies. Our results are
based on a sample of 237 growth firms and 237 nongrowth firms. We find that growth
firms have significantly lower debt/equity ratios and exhibit significantly lower
dividend yields than nongrowth firms. We also find that growth firms pay
significantly higher levels of cash compensation to their executives and have a
significantly higher incidence of stock option plans than nongrowth firms. However,
controlling for firm size, the incidence of bonus plans, performance plans, and
restricted stock plans does not differ between growth and nongrowth samples.
Additional evidence on the association between the investment opportunity set and
corporate financing, dividend, and compensation policies. Journal of Accounting and
Economics, 16(1), 125-160.

20

2.2 ABOUT THE TOPIC

Operations of the company

ESLs operation can be broadly classified into equity brokerage services and
proprietary trading.
ESL focuses on the wholesale equity segment, providing broking services to
Institutional and corporate clients and high net worth individuals.
Fund Requirements
ESLs fund requirements arise mainly on account of working capital requirement on
account of deposits to be maintained with the exchanges for obtaining trading
exposure limits and for meeting funds requirement for institutional clients. The
proceeds of the proposed CP
issue are to be used for the aforesaid purposes. Unutilized margins paid to the
exchanges as on last trading day of the month ranges from 16% to 45% during the
period Apr-04 to Dec-04. However, ESL has to maintain high margins for its intraday
transactions done
on its proprietary book and for its clients.
As on 31st Dec04, ESL has fund based bank limits on 2,400 lacs and
its average utilization level has been around 50%.

BRIEF FINANCIAL
As on/For the
Period ended
31st March
Brokerage
Income
Inc from
Securities
&derivatives
Total Income
Employee Costs
Operating and
Other Expenses
Interest Paid
Total Expenses
PBT
PAT
Networth
Total Capital
Employed

2006

2007

2008

2009

207

151

290

891

36

121

147

295

287
35
166

301
65
171

587
100
286

1394
229
660

64
287
1
-12
537
527

46
289
11
10
536
1355

63
462
126
104
772
1559

63
1030
364
243
1015
2315

21

SOLVANCY RATIOS
Overall
Debt/Equity
Ratio
Interest
Coverage ratio
Current Ratio

1.11

1.47

0.96

1.27

1.01

1.25

2.99

6.77

1.36

1.79

2.96

1.31

0.70

0.79

0.66

0.64

0.22

0.15

0.11

0.05

3.29

17.69

17.42

1.86

15.87

27.18

1.05

7.13

12.54

OPERATING EFFICIENCY
Operating
Expenses/Total
Incom
Interest
Expended/total
Income

PROFITABILITY RATIO
PAT/Total
Income (%)
Return on Net
Worth (%)
Return on
Capital
Employed (%)

-4.20

BROKERAGE INCOME

22

COMMENT
Brokerage income of ESL has grown at CAGR of 63% from Rs. 207 lacs in FY09 to
Rs. 891 lacs in FY06. The growth has been particularly strong in FY06 and H1FY10,
on account of buoyancy in the equity market.
Brokerage income contributed 64% of the ESLs total income in FY09.
Total income has grown at 70% p.a. from Rs.287 lacs in FY01 to Rs.1,394 lacs in
FY04. However, from a loss of Rs.12 lacs incurred in FY01 (on account of prior
period adjustment, PBT was positive), ESL registered a profit of Rs.243 lacs in FY09.

INCOME FROM SECURITIES AND DERIVATIVES

23

COMMENT
The percentage of income from securities and derivatives is higher because
percentages of deleing with securities and derivatives is higher. And the continuous
increasing branches in the country.

PROFIT AFTER TAX

COMMENT
In 2006 company balance sheet shows higher depreciation and reduction of the
fictitious assets and high investment to launch on line web portal.

NET WORTH
24

COMMENT
Company is eager to invest in the Indian market.

News Roundup: Edelweiss To Buy Anagram For Rs 150 Cr

January 13 2010, 16:04:13 IST | TEAM VCC

Edelweiss Capital, one of the largest brokerages in India, is close to buying Anagram Stock Broking for
Rs 150Cr.

Edelweiss To Buy Anagram For Rs 150 Cr - Edelweiss Capital Ltd, one of the largest brokerages in
India, is close to buying Anagram Stock Broking for Rs 150 crore. Anagram has 169 branches and 3000,00

RETURN
ONinNET
WORTH
clients mainly
Gujarat
and Maharashtra. Anagram is owned by Lalbhai group , which has companies like
Arvind Mills. Edelweiss is present in institutional equities, equity financing and investment banking, among
others. (Mint)

COMMENT

25

These ratios shows response from the investors is good and supportive thats why
company showing good returns .

26

PRODUCTS OFFERED BY EDELWEISS BROKING LTD.

1- Equity Trading Platform (Online/Offline).

2- Portfolio Management Service.

REASONS TO CHOOSE EDELWEISS BROKING LIMITED

Experience
EDELWEISS has more than ten year of trust and credibility in the Indian stock
market. In the Asia Money broker's poll held recently, Edelweiss won the 'India's best
research house for 2006' award. Ever since it launched Edelweiss as its retail broking
division in February 2008, it has been providing institutional-level research and
broking services to individual investors.

Technology
With their online trading account one can buy and sell shares in an instant from any
PC with an internet connection. Customers get access to the powerful online trading
tools that will help them to take complete control over their investment in shares.

Accessibility
Edelweiss provides ADVICE, EDUCATION, TOOLS AND EXECUTION services
for investors. These services are accessible through many centers across the country
(Over 650 locations in 150 cities), over the Internet (through the website
www.edelweiss.in) as well as over the Voice Tool.

Knowledge
In a business where the right information at the right time can translate into direct
profits, investors get access to a wide range of information on the content-rich portal,

27

www.sharekhan.com. Investors will also get a useful set of knowledge-based tools

that will empower them to take informed decisions.

Convenience
One can call Edelweisss Dial-N-Trade number to get investment advice and execute
his/her transactions. They have a dedicated call-center to provide this service via a
Toll Free Number 1800-22-750 from anywhere in India.

Customer Service
Its customer service team assist their customer for any help that they need relating to
transactions, billing, demat and other queries. Their customer service can be contacted
via a toll-free number, email or live chat on www.sharekhan.com.

Investment Advice
Edelweiss Broking Ltd. has dedicated research teams of more than 100 people for
fundamental and technical research. Their analysts constantly track the pulse of the
market and provide timely investment advice to customer in the form of daily
research emails, online chat, printed reports etc.

28

Benefits

Free Depository A/c

Instant Cash Tranfer

Multiple Bank Option.

Secure Order by Voice Tool Dial-n-Trade.

Automated Portfolio to keep track of the value of your actual purchases.

24x7 Voice Tool acess to your trading account.

Personalised Price and Account Alerts delivered instantly to your Mobile Phone &
E-mail address.

Live Chat facility with Relationship Manager on Yahoo Messenger

Special Personal Inbox for order and trade confirmations.

On-line Customer Service via Web Chat.

Enjoy Automated Portfolio.

Buy or sell even single share

Anytime Ordering.

29

Edelweiss Broking Ltd. offers the following products:-

FREE ACCOUNT OPENING

This is a User Friendly Product which allows the client to trade through website
www.edelweiss.in and is suitable for the retail investors who is risk-averse and hence
prefers to invest in stocks or who do not trade too frequently.

Features

Online trading account for investing in Equity and Derivatives

www.edelweiss.in

Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE.

Integration of On-line trading, Saving Bank and Demat Account.

Instant cash transfer facility against purchase & sale of shares.

Competitive transaction charges.

Instant order and trade confirmation by E-mail.

Streaming Quotes (Cash & Derivatives).

Personalized market watch.

Single screen interface for Cash and derivatives and more.

Provision to enter price trigger and view the same online in market watch.

30

via

XPRESS
XPRESS is an internet-based software application that enables you to buy
and sell in an instant. It is ideal for active traders and jobbers who transact frequently
during days session to capitalize on intra-day price movement.

Features

Instant order Execution and Confirmation.

Single screen trading terminal for NSE Cash, NSE F&O & BSE.

31

Technical Studies.

Multiple Charting.

Real-time streaming quotes, tic-by-tic charts.

Market summary (Cost traded scrip, highest clue etc.)

Hot keys similar to brokers terminal.

Alerts and reminders.

Back-up facility to place trades on Direct Phone lines.

Live market debts.

Funds Transfer

Transfer funds between your savings account and trading account.

Avail a pay-in and pay-out option where you can transfer funds from and
to your trading account.
Tie ups with HDFC Bank, ICICI Bank and Axis Bank, Yes Bank, Kotak
bank wherein you can easily transfer funds from any of these banks.

ORDER BOOK
Along with enabling access for trade online, the CLASSIC and XPRESS
ACCOUNT also gives Dial-n-trade services. With this service, one can dial
ESELWEISSs dedicated phone lines 1-800-22-7500.

32

Beside this, Relationship Managers are always available on Office Phone and
Mobile to resolve customer queries.

MOBILE TRADING
EDELWEISS had introduced mobile trading, A mobile based software where
one can watch Stock Prices, Intra Day Charts, Reasearch & Advice and Trading Calls
live on the Mobile.
(As per SEBI regulations, buying-selling shares through a
mobile phone are not yet permitted.)

33

www.edelweiss.in

MOBILE
WEBSITE

KEY FEATURES
Instant Market Updates

All Company Stock Quotes

Smart Financial Snapshots

Trading Strategies

Portfolio Tracker

Equity Watchlist

ADVANCED BROKERAGE ACCOUNT

Global Indices Update

Customers pay Advance Brokerage on trading Account and enjoy uninterrupted

a lot more...
trading in their Account. Beside this, great effective And
brokerages
are also available (up
to 50%) on brokerage.
IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite hasslefree, paperless and time saving. Simply allocate fund to IPO Account, Apply for the
IPO and Sit Back & Relax.

Mutual Fund Online

34

Investors can apply to Mutual Funds of Reliance, Franklin Templeton

Investments, ICICI Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch,
PRINCIPAL and TATA with Edelweiss.

Zero Balance ICICI Saving Account

Edelweiss had tied-up with Yes bank for Zero Balance Account for
Edelweisss Clients. Now their customers can have a Zero Balance Saving Account
with Yes Bank after your demat Account creation with Edelweiss.

CHARGE STRUCTURE
Plan

Advance

Validity

Brokerage

Period

Brokerage Rates

Turnover limit

Fee

EBSPN01

Rs 2450

EBSPN02

Deliver

Futures and

Intraday Cash

12

0.033%

months
Rs 4950

Equivalent delivery

750000

0.33%

12

0.27%

0.027%

1800000

Months
EBSPN03

Rs 9950

12 Months

0.22%

0.022%

4500000

EBSPN04

Rs 15000

12 Months

0.17%

0.017%

9000000

EBSPN04

Rs.
50000

EBCRB06

12
month

Rs

12

1,10,000

month

Rs

0.11%

3 month

35

0.011%

45000000

0.09%

0.009%

125000000

0.05%

0.005%

200000000

EBCRB07

1,11,111

EXPOSURE: 6 TO 7 TIMES (ON MARGIN MONEY)

MAJOR PLAYERS IN THE REGION
1. Karvy
2. Indiainfoline
3. ICICI direct
4. HDFC security
5. Indiabulls
6.Religare
7.Edelweiss Broking Ltd.

36

CHAPTER-3
RESEARCH METHODOLOGY

37

3.1 PURPOSE OF THE STUDY

Each research study has its own specific purpose. It is like to discover to Question
through the application of scientific procedure. But the main aim of our research to
find out the truth that is hidden and which has not been discovered as yet. Our
research study has two objectives:-

PRIMARY OBJECTIVE: -How EDELWEISS BROKING LTD is best services

providers as a stock broker in the metros.
SECONDARY OBJECTIVE: 1. To know about the awareness towards stock brokers and share market.
2. To study about the competitive position of Sharekhan Ltd in Competitive Market.
3. To study about the effectiveness & efficiency of Edelweiss Broking Ltd in relation
to its competitors
4. To study about whether people are satisfied with Edelweiss Services &
Management System or not
5. To study about the difficulties faced by persons while Trading in Edelweiss.
6. To study about the need of improvement in existing Trading system.

38

Sample Design

SAMPLING UNITS
Sampling unit may be a geographical one, such as Metros etc. The researcher will
have to decide one or more of such units that he has to select for his study.
In my research study Delhi NCR as a sampling unit.

SIZE OF SAMPLE
This refers to the number of items to be selected from the universe to constitute a
sample
In our research sample size is 500.
But we also study the 5 stock broker companies related to security & commodity
market like India-infoline, ICICI direct, HDFC securities, Karvy consultant ltd. for
the appropriate collection of the information.

39

DATA COLLECTION TECHNIQUES

While deciding about the method of data collection to be used for the study the
researcher should keep to types of data.
1. Primary
2. Secondary Data.
We use in our research primary data, as well as secondary data. Primary means
collected a fresh, and the first time data and secondary means which are already
available like annual report, magazines etc.

Survey Method: - Survey refers to the method of securing information concerning

phenomena under study from all or selected number of respondents of the concerned
area. In a survey the investigator examines those phenomena which exist in the
universe independent of his action. We used the Scheduling Method.

Scheduling: - In this method the enumerators along with schedules, go to

respondents, put to them the questions from the Performa in the order the
questions are listed and recorded the replies in the space meant for the same in the
Performa.

40

Method Of DATA COLLECTION

Instrument of data collection
DATE:

NAME
OCCUPATION
AGE
CONTACT NO.

1) Do you know about Investment options available?

a) Yes

b) No

2) Do you know about the different types of investment alternatives?

a) Insurance & mutual funds

b) Banks

c) Real estate

d) Share market

e) Commodity

f) Others

3) What is the basic purpose of your investment?

a) Liquidity
c) Capital appreciation

b) Returns

e) Tax benefits

d) Risk covering

4) What are the most important things you take into account, while
investment?
a) Risk

b) Returns

c) Both
41

making any

5) Do you have any knowledge of share markets?

a) Partial

b) Complete

c) Nil

6) Do you have any D-mat & Trading account?

a) Yes

b) No

7) In which company you have D-mat & Trading account?

a) Sharekhan Ltd

b) Karvy

c) Indiainfoline

d) ICICI direct

e) Indiabulls

f) HDFC securities

g) Others

8) Are you satisfied with you present broking company?

a) Yes

b) No

42

9) What is the reason? Please specify.

a) Services _______________________________________
b) Brokerage _____________________________________
c) Operating expenses ______________________________
d) Others ________________________________________

10) What is your trading exchange preference?

a) NSE

b) BSE

c) MCX

d) NCDEX

12) Do you know about Sharekhan Ltd?

a) Yes

b) No

Suggestion:-

43

LIMITATIONS
As only Delhi dealt in survey so it does not represent the view of the total
Indian market.
Size of the research may not be substantial.
There was lack of time on the part of respondents.
The survey was carried through questionnaire and the questions were based
on perception.
There may be biasness in information by market participant.
Complete data was not available due to company privacy and secrecy.

44

CHAPTER-4
DATA ANALYSIS

45

Data analysis is the next step after the field survey is over. This portion of
the research requires a lot of attention and patience, as the project may be distracted
from its objectives very easily if the analysis has not been performed with due care
and diligence. In this process all the information received is transformed in to some
meaningful form of presentation such as tables or charts.
As I took sample size of 100 people. According to their gender, age, salary,
professionalism, interest of invest, which firm they would like to invest and further
questions asked according to need of research study.
As Sample size 100 out of which 90 are male and 10 are female:Male

Female

90

10

Following graph shows the age of respondents and the target respondents were
only those individuals whose age is above 25 years:-

<25 yr

25-30 yr

30-40 yr

40-50 yr

>50 yr

10%

20%

25%

30%

15%

46

Following graph shows the occupation of the Respondents:Self Employed

Businessman

Salaried

Professionals

9%

20%

54%

17%

Graph below shows the annual income of the respondents. Only those
respondents are considered whose annual income is above 3 lakh rupees per
annum. Even the target customers for the company were only those individuals
whose annual income is above Rs. 300000
>300000Rs.

3-6 lac

6-10lac

<10 lac

7%

56%

35%

3%

47

Graph below shows the preferred sectors for investment in equities. The most
preferred sector is financial sector as it is expected that this sector will grow very
fast. The second most preferred sector is Oil & Gas sector because in this sector
the major players are the Government owned industries and as the economy will
develop the consumption of oil and gas will increase. The third most preferred
sectors are FMCG and TELECOM sectors. FMCG sector stocks are the
defensive stocks and TELECOM sector is one of the fast growing sectors.
IT

8%

Telecom

13%

FMCG

12%

Pharma

10%

Oil

& Real

Gas

Estate

12%

10%

48

Power

Financial

10%

25%

Following graph shows the different preferred tools of investment by the

individuals. The most preferred tool is the Mutual Funds. After the financial
crisis and the collapse of stock market many investors had lost their money and
their confidence is shacked. Moreover mutual funds are more safer investment
instruments in comparison to others and also the rate of return on them is high
and even the risk is lower than equities and they are preferred because investing
in them exempted from taxation. Mutual funds are followed by the bonds which
are risk free and also the rate of return is good.

Derivatives

Mutual Funds

Bonds

Insurance

10%

3%

20%

15%

Equity
18%

Share Khan is the most preferred broking house followed by the India Bulls and
then Motilal Oswal broking house. Edelweiss is least preferred because earlier it
was catering only to the HIGH NET WORTH INDIVIUALS (HNIs).

49

Questionnaire through which I came to know Psychology of people towards

Share Trading.
Q. Through which of the channels do you usually buy a financial product?
Internet

Broker

Direct from Company

5%

75%

20%

When it comes to channels of buying a financial product most of the people prefer
to buy it from a broker as it is the most trusted source and they have a good market
and product knowledge. Many people like to inquire themselves directly from the
company while 5% of the people look for internet as a medium. This graph shows

50

that broking business is a profitable one as it attracts the large volume of potential
customers.

Q. How Do You Come Know About Edelweiss?

Internet

Print & electronic

Reference Group

By Chance

13%

21%

27%

39%

The above responses shows that most of the people came to know about
Edelweiss by chance while many through reference group. This shows that the
company needs to work a lot towards creating Brand Awareness. Reference
group is a good source of information about the company.

Q. Are you aware of broking facilities given by Edelweiss Broking Ltd.?

yes

No

75

25

51

25 % of people are not aware of the share market facilities given by the Edelweiss
Company and 75% of people are aware of it.
Q. Are you using Demat Account from Edelweiss?
Yes

No

60%

40%

People who knows Demat Account facilities of Edelweiss, out of which 75% people
are using these facility and 25% are not and moving towards other companies.

Q. Best company in Broking according to you?

ICICI

Share

Direct

Khan

Motilal

India

India

Info

Bulls

Religare

Edelweiss

line
30

15

15

12

11

52

According to survey carried by me through questionnaire ICICI direct is more

preferable for most of the people. When it comes to the option they slightly move
towards companies which are well known to them.
Q. Factors affecting the choice of company?

Through this question we can say that Brand image of any company that does
matters for customer. After that customer will go with low broking charges by any
company. And third and most important factor is Research & Development
department of company.

Analysis of questionnaire with existing clients:Same questions were asked to the existing clients of the company. And following is
their analysis.
A sso ciation with the co mpany

53

Most of the customers are new to the company. It can be conclude that company has
done good job in case of sales.
Satisfaction Level of Customer

49% of the customers are satisfied and 8% dissatisfied. The company needs to
work on these customers and minimize their dissatisfaction.
Expectation of Customer

54

Most of the customers want the brokerage to be reduced and services to

be improved.

SWOT Analysis of Edelweiss Financial Services Ltd.

Strengths:

Large Workforce
Diversity in Experience
Young and Energetic
Ownership of New Technology

Weakness:

Limited Facilities
Poor coordination
Low Productivity
Lack of Competency and Skill
Unrealistic Contract Duration
Labour Problem

Opportunities:

Utilization of Latest Construction Technology Method

Association with Large Projects Like Real Estate
Geographical Focus
55

Threats:

Defects in Design
Changes in Specification
Slow Verification
Late Issue of Instruction
Delay of Work Approval
Proceeding Pending
Any Failure will affect company
Loss of Key people

Pros:

1. Sure money returns

People can benefit from better returns from an active stock trading that just
buying and holding the investment.

2. Popularity
Before choosing one or another trading stock, you must be popular with it. Try
to find as much information as you can in order to understand each of them.
Then, choose.

3. A variety of choices
There is a variety of stocks people may choose between but the most
important is how to make the best choice. Try to find stocks that have moving
prices.
Cons:-

1. Leverage
Leverage means a flaw of stock trading. The flaw for this trading is lower than
compared with future trading or with Forex.

56

2. The costs
While the price cannot be compared to other types of trading, the stock trading
virtually becomes impossible for those people who dont get some money
before they can start investing.

3. Rule on short selling

The traders have to wait for a quite long time before the stock price ticks up
and theyll get a chance to short selling it. This way, the profits of a trader will
be limited. The Forex trading does not have such a policy.

But, remember that all of the trading systems like Forex, Stock or Future also
have their advantages and disadvantages.

Conclusion: So if you are a wise trader, then its just up to you to think about
these aspects. It would be better if you can estimate it properly before choosing
any of those systems.

Online trading benefits:1) fees and commissions are much lower in comparison with traditional ways of
trading;
2) an opportunity to act on price movement immediately;
3) direct access to information on real time prices and charts;
4) absence of broker gives any trader an opportunity to take his/her own decisions
without

hurry;

5) completing or denying a trade can be performed within a few seconds so it's easier
to manage your investments and shorten your losses.

57

CHAPTER-5
FINDINGS & SUGGESTIONS

58

5.1 - Findings

The Management Efficiency ratios indicate that since Edelweiss moved into
retail in 2007, it has been doing well in terms of profit but after 2008 due to
recession profit of Edelweiss has reduced but still the company is in a better

position than some of its competitors.

Edelweiss hasnt been financially stable according to the financial stability
ratios. The assets of Edelweiss increased in the year 2008 and then
immediately decreased to a great extent in 2009.The funds borrowed have
reduced in 2009 in comparison to 2008 which shows a slight improvement for

Edelweiss.
According to the profitability ratios, Edelweiss displays a trend of reducing net
profit through the three years. This is due to increase in the shareholders funds

and also due to recession which affected the net profit of Edelweiss in 2009.
Edelweiss has been efficient with respect to certain ratios but hasnt been up to
the standards. It has been able to collect it debts efficiently but then due to
recession this ability suppressed. Also the market price per share of Edelweiss
had a reducing trend which lowered the earnings per share and the price
earnings ratio. But at the same time Edelweiss increased the dividend and

reduced the debts making it efficient in certain areas.

Even though companies net profit has been decreased than also there is a
increase in Dividend Per Share over a period of time, which means company is

attracting its shareholders.

The debt equity ratio doesnt show much variation. This indicates that every
year the increase or decrease in the debt and equity has more or less been

proportionate.
Current ratio is on a brighter side though it has declined. This brings the

company in a better position as far as the creditors are concerned.

Debtors ratio had increased in 2014 but came down in 2015, this is result of

the declined sales of the company.

A decline in interest coverage ratio is an indicator of the facts that the profit
before interest and tax of the company has reduced. Though it has improved in
2015 as compared to 2014, the improvement is not substantial.

59

An obvious impact of decline in sales is on the profits ratios of the company.

Inspite of a 17.18% decline in sales in 2015 as compared to 2014, the
company has been able to maintain a positive and a reasonably good profit

position.
Return on capital employed by the company is showing reducing trend. The
capital base of the company has increased in 2014 and has remained constant
in 2015. However, the ROE ratio has been reduced by 50%. This is not good
news for the owners of the company, as profitability of their investment in the
company has been reduced dramatically. Similar analysis can be made for net

worth ratio as it has also declined drastically.

Despite of not so favorable result in 2015 as compared to 2013 and 2014, the
company has declared a good dividend for the shareholders. This shows that
the company is more interested in pleasing the shareholders than accumulating
funds for the future plans of the company. This policy is further indicated by

an improved dividend payout ratio of the company.

A decline in the earning per share is as a result of decline in the profits of the

company. Thus amount of profit available per share has gone down.
Increase in the debt collection ratio is not a good sign, as it means that the
companys collection department is taking more time to recover funds from
the debtors. This is even worse as the companys sales have reduces. Thus the
company has not been able to manage the debtors properly, despite of

reduction decline in sales.

Proprietary ratio is showing an improvement. This indicates that the company

has enough assets to cover the proprietary funds (owners fund).

Capital gearing ratio indicates the risk taking capacity of the company. Higher
ratio is risky, but profitable for the equity shareholders. On the other hand
lower ratio is safe, but not preferred by the equity shareholders. In the present
case a decline in this ratio indicates that the risk to the company has reduced,
but this might not go well with the shareholders.

5.2 - Suggestions

60

Edelweiss has been doing well for quite some time now but lately due to
recession its net profit has been affected, so certain measures much be taken

by Edelweiss to cut down on its expenses.

Edelweiss has been repaying the debts borrowed efficiently, therefore it must
continue to do so even in tougher times when the funds borrowed are of higher

amount.
Through retail Edelweiss is doing average profit, hence Edelweiss can think
about going in for new ventures. They can introduce mutual funds and allow it

be handled online like their other features on the online trading portal.
Attracting customers is more of a concern for Edelweiss because of lot of
competition, so they need to come up with various schemes and plans which
will pool in more customers. These plans must be beneficial for the customers
which will make them give more references, thus increasing customers for

Edelweiss which in turn gives the company more revenue.

The companys customer service is very poor, as their main focus is attraction
of customers. The company prefers only target rather than welfare for

employees.
The companys stock price once reached to a peak height of Rs.1,500 per
share but at present it down to Rs.520 per share it shows the company has
doing well in past but because of recession the FIIs (Foreign Institutional

Investors) pull out lot of money, still it was able to sustain its market image.
There are many facilities provided by Edelweiss to improve its market value

and it is more helpful for customer in satisfaction point of view.

As Edelweiss team is doing well to get the business and why this happening
because their more intention towards satisfaction of customer. Customer is a
person where ever he gets satisfaction he will go towards it and that what

Edelweiss is doing.
If Edelweiss is continue with this performance, It will not take much time to
be a famous broking firm.

61

CHAPTER-6
CONCLUSION

62

Edelweiss Capital Ltd. as a company has been successful since it moved into
retail in 2007 but post-recession in 2008 the company suffered a setback as a
result of reduction in profit. On a positive note the company always focuses on
long term goals and more focus on customer satisfaction that helped Edelweiss
to grow in market.

In the last three years the earnings per share of Edelweiss Capital Ltd has
shown very good growth due to aggressive and passionate sales trading team,
they are able to seamlessly execute complex trades, across the entire spectrum
off trading strategies. Their more concentration towards customer satisfaction
and they are doing it brilliantly.

Edelweiss Capital Ltd. has been performing well when compared with some of
its competitors. Some of the products and services offered by Edelweiss are
quite unique which gives them an upper edge over other competitors. And this
is the reasoned why they are successful in broking market. They came to know
what customer wants and how can they satisfied them

There are many pros and cons and customer now understand importance of
share trading through which they can earn money by doing easy task whether
it is online or off line.

63

BIBLOGRAPHY

64

BIBLIOGRAPHY

WEBSITE

www. edelweiss.com

www.google.com
www.scribd.com
www.wikipedia.com

NEWSPAPER & MAGAZINES

Philip Kotlers Marketing Management. Twelfth edition
Business & Economics(September/October)
India times
Hindustan times
India today
Business today

65