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Factors Affecting Investment Decisions and Competitive Advantages of Indiabulls
Factors Affecting Investment Decisions and Competitive Advantages of Indiabulls
A REPORT ON
SUBMITTED BY:
SHIKHA SINHA
11BSPHH010767
Submitted to:
FACULTY GUIDE
COMPANY GUIDE
DR. P SHASHIKALA
IBS HYDERABAD
V.P., INDIABULLS
Date of submission:
2 | Page
AUTHORIZATION
Sincerely,
Dr. P Shashikala
(Faculty Guide, IBS Hyderabad)
Dated:
3 | Page
ACKNOWLEDGEMENT
Thanking You,
Shikha Sinha,
11BSPHH010767
4 | Page
EXECUTIVE SUMMARY
5 | Page
TABLE OF CONTENTS
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CONTENTS
Authorization
Acknowledgement
Executive summary
Introduction- Background and Literature review
Objective of project
Methodology
Scope and Limitations of study
Financial industry overview
Introduction to brokerage industry
Porters 5 factor model of industry
Demand drivers of the industry
Supply drivers of the economy
Domestic economic conditions
Global economic conditions
Critical success factors of the industry
Measures taken by Indian government
PESTEL analysis of industry
Fiscal and monetary policies (legal issues)
Company overview-History
Business life cycle
Indiabulls group of companies
Company financials
Mission and vision
Strategies and focus
Marketing mix of Indiabulls
SWOT of Indiabulls
BCG of Indiabulls
Porters 5 factor model of Indiabulls
Indiabulls in News
Recent CSR done by Indiabulls
Customer relationship
Affect of market dynamics
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CONTENT
Research Methodology
Methodology
Products of financial market
Classification of financial market
Brokerage terminals in various areas
Percentage of branches in each region
Percentage of sub brokers in various regions
Analysis of Porters 5 factor model of the industry
Indian economys growth factors
Stable and robust growth in face of global
challenges
Critical success factors of the industry
Various measures taken by Indian Government
PESTEL analysis
PESTEL analysis of the industry
Indiabulls at glance
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METHODOLOGY
This is a two dimensional project focusing on two aspects, as already
mentioned (objectives). For my project work I have focused on both
primary and secondary data as well.
Basically any research work proceeds as:
Fig: 1
For this project my challenge was to find out the factors and the
competitive advantages. For which I conducted a descriptive
research.
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Fig: 2
This project has been a great insight for me as I came to know about
stock market, demat accounts, buying and selling of dematerialized
securities, who are brokers, how to make investment and how to track
portfolio of investments.
The project is aimed to cover maximum factors affecting the demand
drivers and competitiveness.
Nowadays even the government is taking up steps to find such factors
to give a boost to the Indian financial system.
LIMITATIONS OF STUDY
INDUSTRY OVERVIEW
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Banks
Credit card issuers
Investment companies
Investment bankers
Securities traders
Financial planners
Security exchanges
Products of the financial market:
Fig: 3
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The major crises that have shaped the modern financial industry
are:
Fig: 4
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Fig: 5
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Fig: 6
Fig: 7
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CP o o t
mew n p t i
eae tlr i t i
oo nf
ins n u e
twp h p e
iel ni e n d t
ur as s n t r
yt s
TP
ho r
ew
ae t r
o f
sc u
bu s
is t t
uo t
em s
e r
s
P o w e r P o C t f o e s m n u t p p i a p e l lt i o i e t f i r o s n n e i w n e t h n e t r i a n n d t u s s t r y
oT
wh
re e r a
ot
f o
cf u s su t bo
sm i t eu
rt se
Fig: 8
Competition
The industry is now in a fairly high growth phase. However the
brokerage industry is very cyclical and is impacted by activity levels
in the markets. During the downturns such as 2008-2009 periods, the
smaller players were squeezed out of the business. As a result there is
a contrast consolidation happening in the industry.
Potential of new entrants
A new entrant in addition to the above also needs a reasonable level of
capital to fund the working requirements of the business (finance to
customers, deposits with exchanges, etc).
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Fig: 10
Critical Success Factors of the Industry
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Fig: 11
Seeing the overall brokerage as a single unit, the key success factors
or the winning strategy of Indian Brokerage Industry is a mixture of:
People
Process
Technology
There are the three ingredients that together create value for both
international and domestic customers.
By people it indicates to the service providers or the employees of the
various firms of this industry, who day in and day out interact with the
customers and provide them services and satisfy them.
Transparency of the process followed and disclosure method is yet
another success factor. The settlement of transactions is generally
done in a process of T+2 days. And the government support even still
plays a very vital role in forming the rules and norms of such
processes.
Technology enables to stay competitive and on edge with the
competitors; facilitating the ease of processes and speed and to
maintain and be up to date. This serves as a great success of the
brokerage industry.
All these factors together help create value to the customer.
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MEASURES
OBJECTIVES
To ensure transparency.
Investor protection.
Provide a standard framework for operations.
Deregulation.
Reduces the conflict of interest.
Fig: 12
PESTEL ANALYSIS OF BROKERAGE INDUSTRY
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Fig: 13
Political factors are how and to what degree a government
intervenes in the economy. Specifically, political factors include
areas such as tax policy, labour law, environmental law, trade
restrictions, tariffs, and political stability.
Economic factors include economic growth, interest rates,
exchange rates and the inflation rate. These factors have major
impacts on how businesses operate and make decisions. For
example, interest rates affect a firm's cost of capital and
therefore to what extent a business grows and expands.
Social factors include the cultural aspects and include health
consciousness, population growth rate, age distribution, career
attitudes and emphasis on safety. Trends in social factors affect
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Fig: 14
inflation by raising and lowering the discount rate affects long term
interest rates, which have a significant impact on the securities
market.
Securities Exchange Commission
The Securities Exchange Commission (SEC) is the primary regulatory
agency that oversees the securities industry. The SEC is an
independent bipartisan, quasi-judicial agency of the government. The
laws administered by SEC deal with securities and finance and seek to
provide protection for investors in their securities transactions.
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currencys (OCC) principal
function is supervising the national banking system. The OCC must
approve the establishment of new national banks, bank mergers
involving national banks, and the liquidations of national banks.
COMPANY OVERVIEW
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Fig: 15
History of Indiabulls
In middle of 1999, when e-commerce was just about starting in India,
Sameer Gehlaut and his close IIT Delhi friend Rajiv Rattan got
together and bought a defunct securities company with a NSE
membership and started offering brokerage services. A Few months
later, their friend Saurabh Mittal also joined them. By December
1999, the company embarked on its journey to build one of the first
online platforms in India for offering internet brokerage services. In
January 2000, the 3 founders incorporated Indiabulls Financial
Services and made it as the flagship company.
In mid 2000, Indiabulls Financial Services received venture capital
funding from Mr. L.N. Mittal & Mr. Harish Fabani. In late 2000,
Indiabulls Securities, a subsidiary of Indiabulls Financial Services
started offering online brokerage services and simultaneously opened
physical offices across India. By 2003, Indiabulls securities had
established a strong pan India presence and client base through its
offices and on the internet.
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Fig: 16
The business life cycle is a model that enables businessmen to
identify the level of performance at which their business is operating
and to determine exactly what needs to be done to move to the next
level.
The various levels of a business life cycle are:
Start up
Rapid Growth
Maturity
Decline
Re-birth/ death
Maturity stage
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JOURNEY OF INDIABULLS
Fig: 17
INDIABULLS GROUP OF COMPANIES
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Fig: 18
COMPANY FINANCIALS
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Fig: 19
ASSET GROWTH
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Fig: 20
Assets have grown at a quarterly average of Rs. 2000 Crs,
over last 9 quarters with a decrease in non-performing assets.
Long duration mortgage loans have lead to steady asset
growth and increase in Net Asset Income.
Company continues to grow its branch networks and now has
170 branches across the country.
Company has well trained in house direct sales team, over
1300 people to promptly attend to prospective customers.
MISSION:
Rapidly increase the number of client relationships by providing a
broad array of products offering to emerge as a clear market leader.
VISION:
To be the largest and most profitable financial services organization in
Indian market and become one stop shop for all non banking financial
products and services for the retail customers.
CONSOLIDATION
Aim to be among the top 3 players in existing products within next 3
years.
NO NEW PRODUCTS
Focus on gaining size and scale in existing core products.
NO CAPITAL MARKET FUND RAISING
All businesses are well funded to achieve growth and size. Avoiding
excessive debt from the capital market.
GOAL
FY 2013/2014, target of US $ 1.4 bn in cash generation from 3
companies (real estate, finance and power).
Being a service industry Indiabulls will have 7Ps rather than 4, they
are:
PRODUCTS
Fig: 21
a) Power India bulls (PIB)
PIB is the advanced online trading platform from Indiabulls
Securities Limited. PIB provides the best in the class internet
trading features and delivers a seamless and rich online trading
experience for its users. PIB comes with a whole host of online
features for the internet trading users ranging from real-time stock
prices, to live trading reports, charting, News Room. PIB provides
an integrated online trading platform for the internet trading
community to invest in equity, F&O, Online IPOs and base their
decision on sound fundamental research and technical analysis. It
also provides various kinds of trading reports, each developed to
cater to internet trading users distinct needs.
b) Indiabulls Signature account
Indiabulls Signature account caters to remain on top of your
investments. It provides you the platform to trade in Equity and
Derivatives. With an unmatched service and nationwide presence, the
Indiabulls Signature account comes bundled with a variety of
exclusive features.
c) Depository Services
Indiabulls is a depository participant with the National Securities
Depository Limited and Central Depository Services (India) Limited
for trading and settlement of dematerialized shares. Indiabulls
performs clearing services for all securities transactions through its
accounts. We offer depository services to create a seamless transaction
platform execute trades through Indiabulls Securities and settle
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PRICE
Indiabulls has various models at different price ranges targeted at a
particular market segment. It caters to both the service and enterprise
segment of customers.
Indiabulls charges Rs. 1350 for opening a demat account (900 account
opening charges + 450 DP charges + 750 for software (optional)). It
charges brokerage of: 0.3% to 0.2% (delivery) and 0.2% (intraday).
The brokerage ranges from 1paise to 20paise or 3paise to 30paise.
Indiabulls provides home loans @ 10.75 (fluctuating) to salaried
people and 12% (fluctuating) to non-salaried professionals.
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Fig: 22
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PROMOTION
Indiabulls does its promotion through news papers, magazines,
through websites and television ads.
Fig: 23
PEOPLE
This includes the employees of the organization. The employees of
Indiabulls have expertise in the field and are well versed in all the
tricks of the trade. The employees are given importance in the
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WS treea k n ge sseth s
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OT hppor e a ut sr t u n i t i e s
Fig: 24
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Fig: 25
Question Marks
Indiabulls Retail and Indiabulls Securities
Indiabulls Retail (Now known as Store One) can be classified as
question mark as it is new to the market and need to compete with
established retailers like Future Group and K Raheja Group to gain
market share. Indiabulls Securities also comes in this category due to
pertinent competitors like Sharekhan, Karvy Stock Broking and
others. Though broking industry is expanding by 12-15% annually,
Indiabulls Securities is not able to cope with this high pace.
Stars
Indiabulls Real Estate and Indiabulls Financial Services
Indiabulls Real Estate can be considered to be in the Star category. It
is considered star as it has a high market growth rate and enjoys a
high market share as well. Real Estate sector in India is growing at
34% annually
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(www.sethassociates.com/Real_estate_sector_in_india.php) while
growth of Indiabulls Real Estate has surged to 97%. Its profit rose to
Rs. 201.32 Crores in 2010-2011 from 6.75 Crores in the preceding
year. (www.indiabulls.com/ibgroup/media.htm). Financial services
sector in India grew at 8 % last year but had a steady growth rate of
15% for the last few years. For FY 2011, net profits of Indiabulls
Financial more than doubled to Rs. 743 Crores.
Cash Cows
None of the companies of Indiabulls comes in this category.
Dogs
None of the companies of Indiabulls comes in this category
PORTERs 5 FACTOR MODEL OF INDIABULLS
Named after Michel E. Porter, this model identifies and analyses 5
competitive forces that shape every industry and determines
industrys weaknesses and strength. They are:
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Fig: 26
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Fig: 27
Bargaining Power of supplier means how strong is the position of a
seller. Suppliers are more powerful when:
Suppliers are concentrated and well organized
Few substitutes available to suppliers
Their product is most effective or unique
Switching cost, from one suppliers to another, is high
You are not an important customer to Supplier
Power of customers
Customer is the king of the market. They have a lot of options while
planning to purchase products. Products offered by Indiabulls are
unsought in nature and are industry dependent. The threats which lies
here are:
Too many goods chasing too few consumers.
Buyer purchases in bulk quantities and are mostly corporate
clients.
Product is not much differentiated.
Buyers cost of switching to a competitors product is low.
Shopping cost is low.
Credible Threat of integration.
Threat of substitutes
Indiabulls poses great threat of substitutes like people of low risk
appetite would like to invest in bank rather than in share market, real
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Fig: 28
RECENT CORPORATE SOCIAL RESPONSIBILITY
BY INDIABULLS
THE NOA PROGRAM
Indiabulls CSR Initiative - Drug Access Program for cancer
patients in partnership with Novartis
As a part of its deep commitment to social causes, Indiabulls has
taken up this noble project named Novartis Oncology Access, in
partnership with Novartis (drug manufacturing company) and Max
Foundation (NGO). Indiabulls as financial partner is helping them
access actual income of the patient and their families, and based on
the accessed income; recommend the drug donation slabs as per
approved guidelines.
Novartis are the developers & makers of Glivec- a medication for the
treatment of Ph+ chronic myeloid leukemia (CML) in chronic phase,
accelerated phase and blast crisis for both pediatric and adult patients.
This drug is also indicated for adult patients with specific conditions.
NOA program:
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The NOA program is a drug access program for to help patients who
have been prescribed Glivec and Tasigna but cannot afford to pay for
the entire treatment cost. This program is run by Novartis along with
its partner Physicians- enrolls patient under this program after
diagnosis, The MAX Foundation- independent NGO Assist
patient throughout the program in completing formalities &
procurement of medicines, Indiabulls Financial Services independent body for financial evaluation of patient, collection &
safekeeping the submitted documents with confidentiality and outlets
Independent pharmacist, dispenses drugs to patients & manage drug
inventory.
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CUSTOMER RELATIONSHIP
With a great team of highly motivated staff, Indiabulls maintains a
great customer. Customer retention being of great importance in such
market where margin is usually low and profit mainly comes due to
scale of operations.
The dedicated workforce is always at the service of the customer at
the very first call. There are always schemes, discounts and
exemptions to existing customers.
Also if there is any new product or scheme old customer is always
called before sales call is made to the new ones. There is guidance at
each step.
Not only customer retention important but clients new to the market
are also given great importance. Relationship managers are always
there to take care of all such affairs. Continuous follow ups call are
made time to time to remind customers for any kind of dates or
investments is to be made.
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MARKET DYNAMICS
The pricing signals that are created as a result of changing supply and
demand level in a given market. Market dynamics describe the
dynamic, or changing, price signals that result from the continual
changes in both supply and demand of any particular product or group
of products. Market dynamics is a fundamental concept in supply,
demand and pricing economic models.
There is great shift in the Indian consumption pattern that is being
observed like:
69% of the population is less than 35 years of age and has
spurred consumption demand.
54% of the population is in the working group.
High savings and investment rate (over 35% of GDP).
Indias manufacturing growth is amongst the fastest in the
world. Indias manufacturing base is the fourth largest globally.
The growth potential of the services sector in India is enormous
at $200 billion offering employment to 40 million people. The
confidence of a robust growth in the services sector is the
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consistent annual payouts, such as those from bonds and dividendpaying stocks. Of course, many individuals may want a blending of
the two some current income, but also some growth.
Investment Time Horizon
The time horizon starts when the investment portfolio is implemented
and ends when the investor will need to take the money out. The
length of time you will be investing is important because it can
directly affect your ability to reduce risk. Longer time horizons allow
you to take on greater risks with a greater total return potential
because some of that risk can be reduced by investing across different
market environments. If the time horizon is short, the investor
has greater liquidity needs some attractive opportunities of earning
higher return has to be sacrificed and the result is reduced in return.
Tax Exposure
Investors in higher tax brackets prefer such investments where the
return is tax exempt, others will have no such preference.
Management Outlook
lf the management is progressive and has an aggressively marketing
and growth outlook, it will encourage innovation and favor capital
proposals which ensure better productivity on quality or both. In some
industries where the product being manufactured is a simple
standardized one, innovation is difficult and management would be
extremely cost conscious. In contrast, in industries such as chemicals
and electronics, a firm cannot survive, if it follows a policy of 'makedo' with its existing equipment. The management has to be
progressive and innovation must be encouraged in such cases.
Competitors Strategy
Competitors' strategy regarding capital investment exerts significant
influence on the investment decision of a company. If competitors
continue to install more equipment and succeed in turning out better
products, the existence of the company not following suit would be
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Market Forecast
Both short and long run market forecasts are influential factors in
capital investment decisions. In order to participate in long-run
forecast for market potential critical decisions on capital investment
have to be taken.
Fiscal Incentives
Tax concessions either on new investment incomes or investment
allowance allowed on new investment decisions, the method for
allowing depreciation deduction allowance also influence new
investment decisions.
Cash Flow Budgets
The analysis of cash-flow budget which shows the flow of funds into
and out of the company may affect capital investment decision in two
ways. 'First, the analysis may indicate that a company may acquire
necessary cash to purchase the equipment not immediately but after
say, one year, or it may show that the purchase of capital assets now
may generate the demand for major capital additions after two years
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Fig: 29
The factor analysis stands to be appropriate as KMO is 0.891 i.e.
more than 0.5.
Variables
(sign
used)
V1
V2
V3
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Income
Market Situation
Company
V4
V5
V6
V7
V8
V9
V10
V11
Risk Appetite
Management Outlook
Market forecast
Financial Incentives
Cash-flow Budgets
Non-economic Factors
Age Factor
Other Factors
Fig: 30
Communalities:
Fig: 31
Extraction Method: Principal Component Analysis
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Fig: 32
Extraction Method: Principal Component Analysis.
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Fig: 33
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
Rotation is converged in 3 iterations.
Factor
Personal/Internal Factors
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What it explains
Income
Risk appetite
Financial incentives
Non-economic factors
Age factor
Others
Market Situation
Market forecast
Management outlook
Company
Cash flow budgets
External Factors
Fig: 34
Thus there are some internal and external factors that affect a persons
investment decisions.
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FIRMS
HDFC
FACTOR
SHAREK
HAN
MOTILA
L
OSWAL
ICICI
KOTAK
INDIABULLS
BROKERAG
E
5p to 50p
5p to 25p
5p to50p,
1p-10p ( min)
3p to 25p
4p to 40p
2p to 20p or
1p to 10p (min)
MINIMUM
AMOUNT
Rs 10000,
Rs 0
(for big
corporate
clients)
Rs 10000
Rs 50000
Rs 0
Rs 10000
Rs 0
Rs 799
Nil
Rs 200
Rs 555
Rs 550
Rs 1350
-Equity, features
and options,
ETF, IPO,
mutual funds.
-Do it yourself
systematic
investment
planning, and
-NRI offerings,
loans, FD.
Trade
Tigers,
IPO, MF
online,
contract note
on paper, and
ODIN
Software.
ETF, IPO,
mutual
funds, and
NRI
offerings.
IPO,
Mutual
Funds,
and
Commod
ities
K-25 and
T-25.
Brokerage,
IPO,
Mutual
Funds,
Commodit
ies.
IPO, Mutual
Funds, Real
Estate, Home
loans, Commodity,
and Derivatives.
-J2 ME
windows,
blackberry,
android, iphone.
- Call and trade,
online and
offline services
for different time
zones.
Brokerage
services,
trade on
mobile,
online, call
and trade,
dedicated
dealer desk
at every city.
Call and
trade.
Brokerag
e-e and
banking
services.
Brokerage
and
banking
services.
Brokerage, Online
and Offline
Trading available
on all phones, No
extra charges on
calls from clients.
Good
Good
Good
Good
Good
Good
T+2 days
T+2 days
T+2 days
T+2 days
T+2 days
T+2 days
MINIMUM
OPENING
CHARGES
PRODUCTS
SERVICES
QUALITY OF
SALESPERSO
N
PROCESS
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Fig: 36
Fig: 37
In the above price band, Indiabulls is facing somewhat strong
competition from Sharekhan, as it is more or less near to what
Indiabulls is charging. At the same time Kotak Securities also poses a
threat because of the improved technology used by them and constant
research and development. Where ICICI Direct is a little below
Kotak. Motilal Oswal and HDFC both are commodity side of the
graph with relatively higher prices charged for their product. Thus
with its current pricing Indiabulls enjoys price leadership as far as
brokerage is concerned.
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SWOT OF SHAREKHAN
SW t eaknr e n g tesseh s
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OT hp rp e oa ut sr t u n i t i e s
Fig: 38
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OT hp r e oa ut sr t u n i t e s
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Fig: 39
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SW t r ea nk g tehs e s
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OT hp r e oa u sr t u n it e s
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Fig: 40
SWOT OF MOTILAL OSWAL
SW t r ea nk g tehs e s
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OT hp r e oa u sr t u n it e s
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Fig: 41
SWOT OF ANGEL BROKING
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SW t r ea nk g te hs e s
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OT hp r e oa ut sr t u n i t e s
Fig: 42
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Fig: 43
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COMPETITION IN HOMELOANS
In earlier days, Nationalized and Public Sector Banks were the sole
providers of Home Loans but the entry of the Public Sector Banks
marked a change in the interest rates, which came down considerably.
The decrease in Interest Rates in turn, enhanced the borrowing power
of customers.
Some competitors in the market who also provide also provide home
loans are:
Fig: 44
Some Housing Finance Companies which provide home loans and fall
in Indiabulls competitor league are:
Fig:45
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CONCLUSION
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Indiabulls, the young bull on the run, within some years of its
inception has established itself as a business super brand. The
company which began as a simple brokerage firm has now spread its
wings in real estate, home loans, power, etc.
The arch of the bull, Indiabulls Financial Services Limited (IBFSL)
which is the flagship company of the group, offers consumer finance,
including secured and unsecured personal loans; commercial vehicle
and tractor financing; loan against property and housing loans; retail
IPO financing; loans against shares; and commercial credit to small
and medium scale industries.
Breaking free, Indiabulls Securities Limited, (ISL) before its
demerger in 2008, was a subsidiary of IBFSL. ISL provides securities
brokerage services including equities, futures, commodities, and
options; depositary services; research services; insurance, initial
public offering (IPO), and mutual fund distribution.
RECOMMENDATIONS
While working in the real time and while making this project many
things came into scene, they are:
Sales call made to new customers should be made promptly as
immediate calling and customer move to competitors easily.
Services of Indiabulls are available on all phones except on iphones, which is in trend now.
Indiabulls has tie-ups with all banks except SBI. This can be a
reason why customers move away.
Indiabulls should go for aggressive advertising, as most of its
products and the brand itself is not much advertised.
OUTCOME AND CONTRIBUTION
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A factor analysis was conducted to find out the factors affecting the
investment decisions. A total of 11 factors were considered, on a
population of 110, out of only two dominant factors came out. Which
the help of which it can be explained that there are some external and
personal/internal factors that affect a persons investment decision.
Another part of the project was a competitive analysis to find out
competitive advantage that Indiabulls has over its competitors.
My task at Indiabulls was to bring sales leads and to do sales calling
to them to convert them into sales. Another task assigned to me was to
call the existing customers and explain them about what Indiabulls
could offer them at that point of time.
My projects data collection on different kind of rates prevailing in the
market of different competitors is of great importance and time to
time help for the company. Also the factors affecting investment
decisions can be help in future when deciding on the various demand
drivers.
REFERENCES
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Sites:
www.indiabulls.com
www.secgov/investor/pubs/financialnavigating.html
www.tradestreaming.com/2010/06/04/investment decisions
economicstimes.indiatimes.com>opinion
en.wikipedia.org/wiki/marketing_research
www.quickmba.com/strategy/matrix/bcg
www.smallbusiness.wa.gav.au/business-life-cycle
www.valueline.com/stock/industry
en.wikipedia.org/wiki/porters-five-factor
Books:
Kotler Philip et al, 2009. Marketing Management. A South
Asian Perspective. New Delhi: Dorling Kindersley (India) Pvt
Ltd. Pearson Education
Al Ries and Jack trout, 1972. Principles of Marketing
Management.
APPENDIX
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No:
Risk appetite:
Management outlook:
Market forecast:
Fiscal incentives:
Cash flow budgets:
Non-economic factors:
Age factor:
Others (specify):
7. Do you invest in more than one of the above?
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------8. Name:
9. Salaried/ Non-salaried
10.
Occupation:
11.
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