Nfo Process in Mutual Funds at India Infoline
Nfo Process in Mutual Funds at India Infoline
AT
INDIA INFOLINE
Submitted by:
RANJITH KUMAR.P
Bearing Roll No.0240-60-141
1
DECLARATION
I also declare that this report has to my knowledge is my own and is neither
submitted to any other university nor published any time before.
(RANJITH KUMAR P)
2
ACKNOWLEDGEMENT
(C.VINAY VARMA)
3
FOREWORD
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. With objectives defying any range , it is obvious that the
products required will vary as well.
Indian Mutual Funds industry offers a plethora of schemes and
serves broadly all tupe of investors. The range of products includes equity
funds, debt, liquid, gilt and balanced funds. There are also funds meant
exclusively for young and old, small and large investors. Moreover, the setup
of a legal structure, which has enough teeth to safeguard investors intersts,
ensures that the investors are not cheated out of their hard earned money.
All in all, benefits provided by them cut across the boundaries of investor
category and thus create for them, a universal appeal.
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,
The study is an attempt in that direction.
ABSTRACT
4
The purpose of this project creates a design in relation to
process of NFO (NEW FUND OFFER) and how this process is carried out till
the end.
The data for his study is colleted from various sources like
magazines, Books, Websites, and from the staff of Indian Info Line.
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. .
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CONTENTS
TITLE PAGE NO
INTRODUCTION 1
REVIEW OF LITERATURE 7
COMPANY PROFILE 23
QUESTIONNAIRE 52
BIBLIOGRAPHY 60
6
INTRODUCTION
7
Introduction to the study:
8
This is due to the wide spread awareness created among the urban and
gigantic task, it is in fact not needed by a mutual fund firm to create such a
vast organizational structure when it is seen from the point of view scale of
economies. Further to this problem, the mutual fund industry does not know
where it stands in the current volatile and turbulent environment. This may
be The reason they prefer to hire the services of professionals firm with
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range of options to invest in various types of funds according to his interests
and capabilities.
the mutual funds just start from a minimum amount of investment of RS.
5000 hence even a small investor can invest into a mutual fund and reap
returns in the same proportions as the other big time investors. This shows
that mutual fund industry is one which aims at every section of the society.
To deal with this large population of investors and the competition, the asset
management company has been forced to develop and design new schemes
the scheme which is thereby called NFO, till the stage of investing the
amount raised in accordance with the norms stipulated with offer document
and distributing the returns to the investor by way of dividend, after making
adequate provision for taxation and other operating costs. All this process is
well organized and performed in a specific order. There are various related
10
It is therefore felt expedient to examine the various intricacies involved in
the new fund offer (NFO). Specifically the various documents that are being
dissertation would help to come out with a comprehensive report which may
serve as a guide for the prospective entrants into mutual fund investment
Fund.
Methodology of study:
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To fulfill the objective of the study both primary and secondary data has
been collected. Primary data is the data collected specifically for the study.
In this study primary data was collected through interaction with staff of
India info line Pvt Ltd. and the applications of Reliance equity fund.
Secondary data is the data collected previously by someone else for some
* Reconciliation statements.
Limitations of study:
12
* Analysis of the applications is carried out by taking the
* NFO process may not be same for all mutual funds that are
13
REVIEW OF LITERATURE
14
When a mutual fund asset management company announces Public issue of
When a mutual fund company plans for a new fund offer it first informs to
the registrar or the back office functions provider like INDIA INFO LINE
coordinator of the INDIA INFOLINE. In this Mail the fund manager will ask
the NFO coordinator to get ready for the new fund with the required man
Later they send the sample application form, the key information
memorandum (KIM) and offer document to INDIA INFO LINE. This offer
document sets forth concisely, necessary information about the scheme for a
scheme described. The offer document contains the salient features of the
scheme like NFO opening date, NFO closing date, Scheme name, Scheme
fresh purchase, expected number of applications, entry load and exit load.
The unit manager or the NFO coordinator will arrange a meeting where the
AMC team, NFO experts team, Data entry team, Reconciliation team and the
dispatch team will discuss and fix the target dates by which the work has to
be completed accordingly.
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What is a mutual fund?
and sectors and thus the risk is reduced, Diversification reduces the risk
because all stocks may not move in the same direction in the same
proportion at the same time. Mutual fund issues units to the investors in
investment. The mutual funds normally come out with a number of schemes
with different investment objectives which are launched from time to time. A
of India (SEBI) which regulates securities markets before it can collect funds
stocks, bonds and other securities. Each investor owns shares, which
decreasing bank interest rates, mutual funds are gaining popularity day by
day Now-a- days mutual funds are performing well will high returns to the
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investors. There are various types of schemes and plans available to all type
of investors.
Let us assume that you inertia million rupees over night and want
to invest the same to get better returns you can consider the following
investment avenues that are popular in Indian context
Company shares
Fixed deposits in banks
Government bonds
Fixed deposits in NBFC
Chit fund
Real estate
Other local money lending options
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If the fund sells the securities that have increased in price, the fund has a
capital gain Most of the funds also pass on these gains to investors in a
distribution.
If fund holdings increase in price but are not sold by the fund manager, the
funds shares increase in price. You can then sell your mutual fund units for
profit. Funds will also usually give you a choice either to receive a check for
pays out nearly all income it receives over the year to fund owners in the
form of a distribution.
Types of Funds:
Mutual funds also come in various sizes and shapes. There are about dozen
fund classes but all of them are derivatives of three basic classes are as
follows.
Growth
Income
Liquidity
Growth: Long term growth, since these funds invest in equities, they are
also called as equity funds. Their risk level is high so is the return.
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investment, they are also called debt schemes. Their risk and return levels
are medium.
In addition to the above type there are other derivative classes as listed
below.
Instruments
comprising of an index
technology etc.
benefits.
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open ended mutual fund. On the contrary, if the fund is open only for a
particular period, it is called closed ended fund.
Open ended funds gained popularity because of their flexibility and variety of
features they offer. For this reason, majority of the mutual funds are open
in nature.
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They are the owners of the mutual funds and forms trustees who in turn
appoint AMC and manage the mutual fund.
SEBI regulations require that at least two at least two thirds of the directors
of trustee company or board of trustees must be independent i.e. they
should not be associated with the sponsors. Also, 50% of the directors of
AMC must be independent. All mutual funds are required to be registered
with SEBI before they launch any scheme.
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In a bank, you will In a mutual fund
Open an account with initial You subscribe in a scheme and
deposit buy units
Deposit money Do additional purchases
With draw money You redeem units
Opt for a recurring deposit Start a systematic investment
plan
Since mutual fund offers many more options to investors, it will have many
more transaction types as well. Let us see some popular transactions in
mutual funds
As you must have noticed, we always talk about units in a mutual fund and
not money itself. A unit is basic measure of investment n a mutual fund.
22
Each scheme / plan will have a different market value is called the Net asset
value or simply NAV. Since market value of the underlying securities changes
every day, NAV of a scheme also varies on a day to day basis.
such scheme is approved by the trustees and a copy of the offer document
(2) Every mutual fund shall along with the offer document of each scheme
(1) The offer document shall contain disclosures which are adequate in order
(2) The Board may in the interest of investors require the asset management
fit.
document within 21 [working] days from the date of filing, the asset
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(4) No one shall issue any form of application for units of a mutual fund
3. Advertisement material:
(2) The advertisement for each scheme shall disclose [investment objective
4. Misleading statements:
within six months from the closure of the subscription Provided that listing of
(a) If the said scheme provides for periodic repurchase facility to all the unit
(b) if the said scheme provides for monthly income or caters to special
at regular intervals; or
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(c) If the details of such repurchase facility are clearly disclosed in the offer
document; or
(d) If the said scheme opens for repurchase within a period of six months
(1) The asset management company may at its option repurchase or reissue
(2) The units of close ended schemes referred to in the proviso to regulation
maximum and minimum amount of sale or redemption of the units and the
document.
(3) The units of close ended scheme may be converted into open ended
scheme.
(a) If the offer document of such scheme discloses the option and the period
of such conversion; or
(b) The unit holders are provided with an option to redeem their units in full.
(4) A close ended scheme shall be fully redeemed at the end of the maturity
period [Provided that a close ended scheme may be allowed to be rolled over
if the purpose, period and other terms of the roll over and all other material
before the roll over, the net assets and net asset value of the scheme, are
25
disclosed to the unit holders and a copy of the same has been filed with the
Board.
Provided further, that such roll over will be permitted only in case of those
unit holders who express their consent in writing and the unit holders who
do not opt for the roll over or have not given written consent shall be
allowed to redeem their holdings in full at net asset value based price.
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
(1) The Asset management company shall specify in the offer document
(a) The minimum subscription amount it seeks to raise under the scheme
and
(2) The mutual fund and asset Management Company shall be liable to
(i) If the mutual fund fails to receive the minimum subscription amount
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(ii) If the moneys received from the applicants for units are in excess of
(4) In the event of failure to refund the amounts within the period specified
expiry of six weeks from the date of closure of the subscription list.
but not later than six weeks from the date of closure of the [initial
subscription list and or from the date of receipt of the request from the unit
the asset management company shall issue the unit certificates to the
applicant within six weeks of the receipt of request for the certificate.
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(2) 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. Provided that if the units are with the depository such
1996.
(a) Dispatch to the unit holders the dividend warrants within [30 days] of
such rate as may be specified by Board for the period of such delay.
(d) Aside payment of such interest to the unit holders under sub-clause (c)
the asset management company may be liable for penalty for failure to
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should mention his/her permanent account number (PAN) allotted under the
Income Tax Act, 1961 or where the same has not been allotted, the GIR
case where neither the PAN nor the GIR number has been allotted, the fact
application form without these details should not be accepted by the mutual
filing offer document for launching a new scheme/revising and filing existing
offer document with SEBI, the mutual funds should highlight and clearly
mention the page number of the offer document on which each of the
documents.
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COMPANY PROFILE
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COMPANY PROFILE:
One fine morning in early 1999, a colleague had a crazy idea that if
the company made all the research available free on the web, the number of
users may well jump from 250 to 2.5 million. To make it true, the business
required a reincarnation. And the pre-requisite was a death. It meant that
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the company put up all the information free on the website and let go of all
the revenues and profits. Worse, if the new avatar failed, there would be no
comebacks.
There was a core group who never lost hope. They cut all possible costs and
worked on a bare bones structure. They survived against all odds and
started capturing market share. 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.
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Launched stock messaging service in May 2003.
Acquired commodities broking license in March 2004.
Launched portfolio management services in August 2004.
Listed on NSE and BSE on May 17, 2005.
Acquired 75% stake holding in Money tree Consultancy services, which
is a distributor of Mortgages and other Loan products, in October
2005.
Acquired 100% equity of March Mont Capital Advisors Pvt Ltd in
December 2005 through which we have ventured into Merchant
Banking.
DSP Merrill Lynch Capital subscribed to convertible bonds aggregating
Rs.80crores in December 2005. Their current stake in India Info Line is
a little over 14 % as on 31st March 2007.
Bennett Coleman & Co Ltd (BCCL) invested Rs.20crores in India Info
line by way of preferential allotment in December 2005.
Became a depository participant of CDSL in June 2006.
Merger of India Info line Securities Private Limited with India Info line
Limited in January 2007.
Entered into an alliance with Bank of Baroda for Baroda e-trading in
February 2007.
IRDA license for Insurance Broking April 2007.
Nirmal Jain is the founder and Chairman of India Info line Ltd.
He holds an MBA degree from IIM Ahmedabad, and is a Chartered
Accountant (All India Rank 2) and a Cost Accountant.
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Mr. R.Venkataraman (Executive Director)
Mr. Sat Pal Khattar joined the Board with effect from April 20, 2001.
Mr. Sat Pal Khattar is a lawyer by profession.
He is a director of a number of public companies in Singapore and
India.
Mr. Sanjiv Ahuja joined the Board with effect from August 28, 2002.
Mr. Ahuja graduated from National University of Singapore with a
degree in Computer Science and is also a Certified Public Accountant.
He started his own investment advisory and consulting company in
2001, named Centennial Management Consultants Private Limited.
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Mr. Nilesh Shivji Vikamsey joined the Board with effect from February
11, 2005.
Mr. Vikamsey qualified as a Chartered Accountant in 1985 and has
been a member of the Institute of Chartered Accountants of India
since 1985.
Mr. Kranti Sinha joined the Board with effect from January 27, 2005.
Mr. Sinha graduated from the Agra University with a Masters degree.
Mr. Sinha is also on the Board of Directors of Hindustan Motors
Limited, Larsen & Turbo Limited & LICHFL Care Homes Limited.
Our Vision:
Its vision will not be accomplished only by maintaining high growth alone.
Our 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.
Knowledge:
Technology:
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By technology, we mean that as an organization, we leverage
technology to deliver best service to our clients at the least cost.
Our trading interface for broking is absolutely world class.
We expect our employees to be comfortable with and confident of
using technology.
Service:
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ANALYICAL FRAME
WORK
37
NFO process:
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Technology team
Data entry team
Verification team
External audit team
Scanning team
Franking and dispatching team
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40
41
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Description of NFO process:
The India info line branches collect the applications of the investors across
India and abroad for all the branches of the bank that is involved in this
NFO. These applications are sent to India info line processing center,
Hyderabad. After receiving, these applications are segregated bank wise and
branch wise.
IH Numbering:
IH numbering is also called as In house Numbering. India info line gives this
doing back office functions easily. All the data on the application is entered
into systems through software developed by India info line technology team
Binding:
All the applications that are received are given for binding. Binding of
fro which they are received. India info line does this Binding because to keep
First Entry:
After finishing binding of applications they are sent to Date Entry team.
Here the first time entry is done. All the information or date of an investor
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that is available on the application like name of the applicant, age, Address,
PAN, Bank details, broker code, sub broker code, email addresses, guardian
name, amount invested, name of the scheme or plan invested in, etc., are
Second Entry:
After first entry the data is again sent for the second entry. Here in second
entry, the data that is entered in first entry is checked and the information
Online Matching:
After entering the data like applicant, age, Address, PAN, Bank details,
broker code, sub broker code, email addresses, guardian name, amount
invested, name of the scheme or plan invested in, etc., in the first entry and
once again in the second entry it is sent to the online matching. Here in
online matching the physical form of application are kept side by an checking
of data that was entered in the first entry and second entry is done.
Data from online matching is sent to the verification team. This team verifies
mistakes that are left in online matching. Mistakes like blank address, PAN
blank for amount greater than or equal to 50000 RS. Name blank, bank
details blank, invalid or blank broker code etc., are rectified in the first time
verification.
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First time check clearing list is in short is called as first time CCL. First Time
CCL is prepared based on the data that is provided after first time
verification.
External Audit:
First time check-clearing list is sent to an external audit team. India info line
appoints this team before the NFO processes. They are nowhere related to
the organization. This external audit team will mainly check name of the
scheme/plan and mode of holding (MOH). But in total they will check more
than 30 characters
If the external auditing is not satisfied and if they find any mistakes or
missing information they will send the first time CCL for second time
verification. Here they verify the check list once again and mistakes like
invalid mode of folding (MOH), invalid email address, status minor without
guardian name, invalid date of birth for minor, invalid existing account
number, blank/null application number, NRI with blank account type, saving
Second check the verification team prepares clearing after verifying the
mistakes that are pointed out by the external audit team. After preparing
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Check clearing list will be given by the external audit team to the NFO team
in India info line This NFO team in India info line will once again check
further mistakes like spelling mistakes in the name of the applicant etc., and
rectify them.
After integrity check by the NFO team it is once checked by the internal
Cheques of the investors are sent are sent by the balk to India info line
Reconciliation team. Here this team will verify bank details of the investor
like PAN number, bank a/c number, comparing the amount invested with that
of the minimum amount that has to be invested cheques with out hue
signature of the investor bounced cheques etc., and they are rejected. These
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Entire data after getting filtered at each and every step will be handing over
to mutual fund services team. This MFS team will once again verify the data
and the final data will come out any mistakes and default values.
data that they got after filtering the mistakes and default values is ported in
Allotment of units:
They will avail the units taking the Net Asset Value (NAV) of that particular
scheme as base.
Statement of accounts (SOA) is picked up randomly from a huge lot and the
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* Name of the investor
* Address
* Bank details
* Pan Number
* Guardian name
* Broker code
* Sub broker code
* Nominee name
* Nominee addresses
* Amount invested
* No. Of units allotted
* Fund name, Scheme Name, Plan Name & A/c no
* Transaction type details
* Mode of redemption payment
* Mode of dividend payment
* Mode of dispatch
* Status, occupation.
* Current balance, average price, current cost, current NAV etc.,
Dispatch of SOA:
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India info line will finally prepare New Fund Report. This new fund report has
to be submitted to the AMC. Then AMC will submit a copy of the same to the
SEBI, which is mandatory. The new fund report details like
1) Scheme details
* Scheme name
* Scheme type
* Date of opening
* Target amount
6) Distribution schedule
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Particulars Single Joint Anyone Total
% of applicants 74 0 26 100
Interpretation:
It can be seen that majority of the applicants prefer to hold the allotted units
individually and 26% prefer to hold anyone/survivors. This corroborates with
the age profile of the applicants.
Occupation profile of applicants:
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Particular Business Service Student Professional Retired Housewife Others Total
No. of 34 46 2 4 7 23 5 120
applicants
% of 28 38 2 3 6 19 4 100
applicants
Interpretation:
Majority of the applicants are from services personnel at 38%, next comes
business People are 28%. The housewife occupy 3rd highest at 19%. It is found
that professionals and retired are at the lowest.
STATUS:
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Particulars Resident NRI Total
No. of applicants 104 4 108
% of applicants 96 4 100
Interpretation:
It can be observed from the table and the chart that the majority of
applicants are resident individuals constituting 96% the applicants and
remaining 4% are the Non-resident Indians.
b) Status of non-individuals:
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Particulars Company Society Fl SME Others Total
No. of applicants 1 0 0 10 0 0
% of applicants 10 0 0 80 0 0
Interpretation:
In the non-individuals category HUF occupied the highest at 80% and next
10% is for partnerships. In others category 10% is found and all other non-
individual entities have recorded zero applications.
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% of 0 25 60 15 100
applicants
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 60.
This is followed by the age Group 18-30 years and 15% of the applicants
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% of applicants 65 27 3 5 100
Interpretation:
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Interpretation:
Majority of the applicants Opted the growth option and the option of
dividend reinvestment is 31%. This means that 80% of the applicants are
not investing for income sake rather they look at the accumulation
of profits.
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Interpretation:
57
applicants
Interpretation:
Majority of the payments have been made from Savings Bank account (SB).
No payments have been found from NRO, NRE, and FCNR even though 4%
of the applicants are NRI s
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Interpretation:
The female participation in the NFO is low at 26%. The male applicants are
very high at 76% as is not normally found in found in institutional
investments.
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Particulars Madhya Maharastra Rajasthan Punjab Uttar Tamilnadu
Pradesh Pradesh
No. of 1 48 2 2 5 6
applicants
% of 1 40 2 2 4 5
applicants
Interpretation:
A predominant feature is that 40% of the applications are from Maharastra
and next highest 14% is registered for Delhi. Lowest numbers of applications
are from Bihar and Chandighar.
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QUESTIONNAIR
61
QUESTIONNAIR
(From the above chart we can understand the age group 55-65 people
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3. WHAT IS YOUR OCCUPATION
(A)PRIVATE EMPLOYEE
(B)GOVERNMENT EMPLOYEE
(C)BUSINESS PERSON
(D)RETIRED
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5. WHAT PERCENT OF RETURN DO YOU EXPECT
(A) 10-15
(B) 20-25
(C) 30-40
(D) DOUBLING YOUR AMOUNT
(Here many investors are love to invest in 100 percent equity fund
Allocation scheme.)
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7. IN WHICH OF THE UTI SCHEME YOU HAVE INVESTED
(A)UTI WEALTH BUILDER FUND
(B)UTI INFRASTRUCTURE ADVANTAGE FUND
(C)UTI LONG TERM ADVANTAGE FUND
(D)NONE
situation many people are quite satisfied with the return they are
Getting.)
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(B)J M FINANCIAL
(C)FEDILITY MUTUAL FUNDS
(D)HSBC
(As people are specialized in market more the investors they all are
Investing in HSBC if not in UTI because HSBC is the worlds local bank
NOTE:
As mutual funds is the subject to market so people generally does not
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FINDINGS
AND
CONCLUSIONS
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Findings and conclusions:
for NFO.
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SUGGESTIONS
AND
RECOMMENDAIONS
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Suggestions and recommendations:
authority and should be made mandatory for all funds to use the
* The NFO process is very complex and there is a need to simplify the
instead of carrying out audit for three times and appropriate internal
check system maybe devised to keep the errors within the tolerance
limits.
corporate.
NFO rather than one or two states applying for a loin share of the
option.
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BIBILOGRAPHY
Bibliography
* www.Indiainfoline.com
* www.sebi.com
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* www.amfiindia.com
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