SUMMER PROJECT REPORT

“Fundamental Analysis of Edelweiss

Broking Limited”
Prepared for the Mumbai University in the partial fulfillment
of the requirement for the award of the degree in...

MASTERS OF MANAGEMENT STUDIES

Submitted By:
ANISH VYAS
Roll No: 2, MMS: 2009-2011
Under the Guidance of:

Prof. Abhay Singh

SFIMAR

St Francis Institute Of Management And Research,Mt.

Poinsur,S.V.P Road, Borivali (W) Mumbai.
Batch- 2009-2011
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 Company Certificate:

Date:

TO WHOMSOEVER IT MAY CONCERN

This is to certify that Anish Vyas has successfully completed his Summer project
on “Fundamental Analysis of Edelweiss Broking Limited” for a period of two
months. i.e. from May 2010 to June 2010.

During this period, we found him/her sincere, honest & hardworking.

We wish him/her all the best for further assignments.

For Edelweiss Broking Limited.

Signing Authority

Name: Rahul Jain.

Designation: Vice President Sales.

Department: Retail Broking Limited.

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 College Certificate:

This is to certify that the Project work Titled “Fundamental Analysis of Edelweiss
Broking Limited” submitted by me in partial fulfillment of the requirement for the
degree of Master of Management Studies to St. Francis Institute of Management
and Research under Mumbai University, is an original work and the same has not
been submitted either to St Francis Institute of Management & Research (under
Mumbai University) earlier or to any other institution.

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 Acknowledgement:

Any project would be incomplete without felicitating those instrumental in its

successful completion. I honestly feel that the accolades for this project cannot
just belong to one individual because it has been the result of consolidated efforts
of many people whom I would like to express my concern and gratitude.

I am grateful to Edelweiss Broking Limited for having given me this opportunity

which has helped me in gaining an in depth knowledge in financial markets. I
extent my sincere thanks to Mr. Karan Shah for giving me this opportunity to take
up this project.

Special thanks are also due to Mr. Rahul Gandhi (Branch Manager – Retail
Broking- Edelweiss Broking Limited) for giving his valuable inputs at every stage of
project completion. His constant encouragement and words of wisdom have been
very significant in the completion of this project.

I express my deepest gratitude to Prof. Abhay Singh (Faculty of Finance – St.

Francis Institute of Management and Research) under whose guidance I have
successfully completed this project.

I am also very much grateful to Dr. Thomas Mathew (Director – St. Francis
Institute of Management and Research) for providing me with this unique
opportunity.

I would also like to thank all those people whose names have not been mentioned
here, but who were very instrumental in the successful completion of this project.

Anish Vyas.

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 Executive Summary:

The banking scenario in India is itself huge, covering the different facets of the
economy. By and large, investment banks in India are itself an institution which
generates funds in two different ways. The first manner in which it works is by
drawing public funds via the capital market by way of selling stock in their
company. The other way in which it operates is to seek for venture capital or
private equity, as a substitute for a stake in their company.

At the macro level, investment banking is related with the primary function of
assisting the capital market in its function of capital intermediation, i.e., the
movement of financial resources from those who have them (the investors), to
those who need to make use of them for producing GDP (the issuers). Over the
decades, investment banks have always suited the needs of the finance
community and thus become one of the most vibrant and exciting segment of
financial services.

The project emphasises on financial aspects of an investment banking firm

through ratio analysis, and comparison has been done with other investment
banking firm, to see how this firms are growing with respect to its financials.

The study will help to understand the competency between different investments
banking firm. It also emphasises on which company is financially strong as
compared to other firms.

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 Table of Contents:

Sr.No. Particulars Page

No.
1 Title Page 1
2 Company Certificate 2
3 College Certificate 3
4 Acknowledgement 4
5 Executive Summary 5
6 List of Tables 7
7 List of Figures 8
8 Introduction to Company Profile & Organizational 9
Chart
9 Department Introduction & Organizational Chart 13
10 Project Introduction & Need for the Study 15
11 Objectives of the Study 16
12 Research Methodology 16
13 Data Collection & Research Design 16
14 Analysis of Data & Results 20
15 Findings & Interpretations 48
16 Future Scope 51
17 Recommendations & Conclusion 52
18 Bibliography, References, Websites, etc. 54

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 List of Tables:

Sr.No. Particulars Page No.

1 Profit & Loss Statement of Edelweiss Capital Ltd. 17
2 Balance Sheet of Edelweiss Capital Ltd. 18
3 Ratios of Edelweiss Capital Ltd. 19
4 Ratios of India Infoline Ltd. 32
5 Ratios of Geojit BNP Paribas Financial Services. 41

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 List of Figures:
Sr.No. Particulars Page
No.
Edelweiss Capital Limited.
1 Gross Profit Ratio. 20
2 Operating Ratio. 21
3 Net Operating Ratio. 21
4 Net Profit Ratio. 22
5 Current Ratio. 23
6 Quick Ratio. 24
7 Proprietary Ratio. 25
8 Capital Gearing Ratio. 26
9 Debt Equity Ratio. 26
10 Return on Capital Employed. 27
11 Return on Proprietor’s Fund & Return on Equity Share Cap. 27
12 Debtor’s Turnover Ratio. 28
13 Debt Collection Period. 28
14 Earning Per Share. 29
15 Price Earning Ratio. 29
16 Dividend Payout Ratio. 30
17 Debt Service Ratio. 30
India Infoline Limited.
18 Management Efficiency Ratios. 33
19 Financial Stability Ratios. 34
20 Profitability Ratios. 35
21 Overall Efficiency Ratios. 36
Geojit BNP Paribas Financial Services Limited.
22 Management Efficiency Ratios. 42
23 Financial Stability Ratios. 43
24 Profitability Ratios. 44
25 Overall Efficiency Ratios. 45

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 Introduction to Company:

Edelweiss is one of the leading financial services company in India. Its current
businesses include investment banking, securities and retail broking and
investment management. The core inspiring thought of ideas creating wealth and
values protecting it is translated into an approach that is led by entrepreneurship
and creativity and protected by intellectual rigor, research and analysis.

At Edelweiss you can build a personal relationship with our investment

professionals. We see investing from your perspective, and offer
recommendations based on your needs and preferences. To all the investors -
From access to top research to investment guidance and portfolio planning, we
offer it all!

Chairman, CEO and Founder of Edelweiss. Mr.Rashesh Shah has previously

worked for ICICI (now ICICI Bank, India’s largest private sector financial
conglomerate) where he handled a World Bank aided program for export-
oriented projects. He was subsequently with Prime Securities as Head of
Research. Mr. Shah’s relentless focus is on organization building and human
capital development. He has been featured in a variety of publications, including
The Far Eastern Economic Review, Business India, Business World and The
Economic Times. Mr. Shah earned an MBA from the Indian Institute of
Management, Ahmedabad and a Bachelor’s degree in Science from the University
of Bombay.

Greater Pacific Capital, a global equity fund promoted by a clutch of former

Goldman Sachs executives, has bought out Connect Capital’s stake in Edelweiss
Capital, a Mumbai-based financial services firm. Edelweiss Capital was co-founded
in 1995 by Rashesh Shah, an IIM Ahmedabad graduate from the 1989 batch and is
now valued at $ 150 m. The London-based Greater Pacific has also invested
additional money in the company thereby taking a 20% stake in Edelweiss which

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does institutional broking, investment management and arranges financing and
M&A deals for companies, industry sources told. The deal values the 10-year-old
firm at about $150m. Greater Pacific was promoted among others by two former
Goldman Sachs executives, Ketan J Patel, the former managing director of its
strategic group, and Joe M Sealy. Edelweiss Capital, founded by former ICICI Bank
executives Rashesh Shah and Venkat Ramaswamy for about $250,000 in 1995,
specializes in corporate finance and investment banking deals involving medium-
size companies. The firm has raised about $400m in about 80 deals and clocks an
annual revenue of about $30m. About 80% of the firm is owned by the
promoters and employees. Of this, the employees alone own about 25-30%. The
firm is now raising a real estate fund and a private equity fund of more than
$100m each to take advantage of the opportunities thrown up by the country’s
growing economy. Some of its clients include WNS Global Services, a leading BPO
firm, iGATE Global Solutions, Essar Tele-holdings, and Daksh e-Services. The
financial services business in the country is doing well thanks to a roaring stock
market, rising consumerism and growing appetite for fund raising and investment
on the part of both domestic and foreign firms.

Various Products Offered by the Company:

Products: Stocks, Derivatives, IPO, MF, Strategies

Trading Accounts with different features: Trader, Investor

Brokerage Plans: To suit needs of every client

Model Portfolio based on comprehensive analysis of your investment
objectives

Advanced Data tools

Customized investment Strategies

Manage all asset classes under My Portfolio

Financial Research on your fingertips

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Services Offered by the Company:

Investment Banking.

Institutional investment.

Asset management.

Wealth management.

Private client brokerage.

Insurance brokerage.

Wholesale financing.

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Organizational Chart:

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 Department Introduction:

Client Advisory Services leverages the diverse professional experience within the
Private Client Group to provide timely consulting to help clarify goals, examine
alternatives, and implement clients' decisions over time.

Business Transition Services—The Business Transition Services program helps

successful business owners address the complex inter-related issues involved
when making changes in management or ownership of their businesses. At such
times, artificial distinctions between the owner's personal or family matters and
their business concerns break down. We work closely with owners to clarify what
their future relationship with their businesses will be. We develop alternatives to
achieve their goals, emphasizing:

Specialized strategic analysis, with recommendations tailored to your

business situation.

Detailed financial modeling of the owner's personal and business finances.

A transition plan that integrates business, family, and financial issues.
Capital One will provide implementation services, not just advice, to assure
that the owner's objectives are achieved.

Personal Wealth Advisory Services—Our wealth advisory services gives successful

individuals superior strategies to make the most of our clients' financial
opportunities. We develop a comprehensive profile of each client's situation and
use financial models to examine scenarios in detail. Financial modeling allows the
client to see the current and long-term impact of choices on financial security,
taxation, wealth preservation, and other concerns such as gifting and
philanthropy. The ability to compare alternatives in detail simplifies the decision-
making process and gives the client confidence in the selected strategy.

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Department Chart:

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 Need for the Study:

A method of evaluating a security that entails attempting to measure its intrinsic

value by examining related economic, financial and other qualitative and
quantitative factors. Fundamental analysts attempt to study everything that can
affect the security's value, including macroeconomic factors (like the overall
economy and industry conditions) and company-specific factors (like financial
condition and management).

The end goal of performing fundamental analysis is to produce a value that an

investor can compare with the security's current price, with the aim of figuring
out what sort of position to take with that security (underpriced = buy, overpriced
= sell or short).

This method of security analysis is considered to be the opposite of technical

analysis.

Fundamental analysis is about using real data to evaluate a security's value.

Although most analysts use fundamental analysis to value stocks, this method of
valuation can be used for just about any type of security.

Objectives of the Study:

Fundamental analysis is performed on historical and present data, but with the
goal of making financial forecasts. There are several possible objectives:

To conduct a company stock valuation and predict its probable price

evolution.

To make a projection on its business performance of Edelweiss Capital Ltd
with Geojit BNP Paribas Financial Services Ltd & India Infoline Ltd.

To evaluate its management and make internal business decisions.

To calculate its credit risk.

To meet the given number of sales target in the company.

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 Development Plan:

First obtaining income statement & Balance sheet of Edelweiss Capital Ltd
for past three years, and then calculating ratios based on the financial
statements & comparing the performance.

Based on the the ratios calculated we will measure the performance of
Edelweiss Capital Limited & value the company’s stability & credit risk.

Procuring the financial statements of Geojit BNP Paribas Financial Services
Ltd & India Infoline Ltd and comparing them with Edelweiss Capital Limited.
Geojit BNP Paribas Financial Services Ltd & India Infoline Ltd are the major
competitors of Edelweiss Capital Ltd therefore comparing their
performance will give overall picture of the company.

Research Methodology:
Research Design: Descriptive.

Collection of Data:
For this research secondary data is used such as websites,
discussions with seniors, obtaining information from senior authorities.

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PROFIT & LOSS STATEMENT OF EDELWEISS CAPITAL LIMITED.

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 BALANCE SHEET OF EDELWEISS CAPITAL LIMITED.
Mar-07 Mar-08 Mar-09
SOURCES OF FUNDS :
Share Capital 5.04 37.73 37.47
Reserves & Surplus 577.03 1,809.27 2,076.62
Total Shareholders Funds 582.07 1,847.00 2,114.09

Secured Loans 6.76 130.47 243.93

Unsecured Loans 380.23 1,439.03 518.44
Total Debt 386.99 1,569.50 762.37
Minority Interest 139.88 479.82 398.3
Total Liabilities 1,108.94 3,896.32 3,274.76

APPLICATION OF FUNDS :
Fixed Assets
Gross Block 21.33 50.02 65.71
Less: Accumulated Depreciation 7.59 14.52 27.82
Net Block 13.74 35.5 37.89
Capital Work in Progress 3.27 7.92 14.86
Investments 81.44 760.13 269.76
Current Assts.,Loans & Advances
Current Assets 899.02 3,090.10 2,229.00
Loans & Advances 298.45 1,268.24 1,242.12
Less: Current Liabilities & Provisions 186.98 1,265.57 518.87
Net Current Assets 1,010.49 3,092.77 2,952.25
Miscellaneous Expenses not w/o 0 0 0
Total Assets 1,108.94 3,896.32 3,274.76

Contingent Liabilities 554.26 1,218.21 1,124.98

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 RATIOS OF EDELWEISS CAPITAL LIMITED.
2007 2008 2009
Dividend Per Share -- 2 3
Management Efficiency Ratios
Gross Profit Ratio (%) 47.99 41.7 38.5
Operating Ratio(%) 47.4 40.08 46.7
Net Operating Profit Ratio (%) 53.02 60.17 53.48
Net Profit Ratio (%) 29.8 27.05 23.33

Financial Stability Ratios

Current Ratio 2.83 2.33 2.68
Quick Ratio 3.21 1.44 1.9
Proprietor Ratio 0.52 0.47 0.64
Capital Gearing Ratio 0.66 0.85 0.36
Debt Equity Ratio 0.49 0.64 0.48

Profitability Ratios
Return On Capital Employed (%) 28.9 25.89 12.94
Return On Proprietor's Funds (%) 24.45 19.2 8.64
Return on Equity Share Capital (%) 24.45 19.2 8.64

Overall Efficiency Ratios

Inventory Turnover Ratio -- -- --
Debtors Turnover Ratio 7.85 9.21 8.13
Debt Collection Period 46.5 39.7 44.9
Earnings Per Share 24.44 36.12 24.36
Price Earning Ratio -- 22.91 10.6
Dividend Payout Ratio -- 0.05 0.12
Debt Service Ratio 10.53 3.26 3.57
Creditor's Turnover Ratio -- -- --
Creditor's Payment Period -- -- --

Book Value 129.51 246.43 282.1

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 ANALYSIS OF RATIOS OF EDELWEISS CAPITAL LIMITED.
MANAGEMENT EFFICIENCY RATIOS:

Gross Profit Ratio decreased in 2008 due to increase in expenses inspite of
increase in sales, due to introduction into retail broking. In 2009 it
decreased even further because sales decreased drastically because of
recession. The sales increased by Rs.713.62 crore and this was due to
introduction of Edelweiss into retail broking. In 2009 due to recession sales
had reduced from Rs.1081.95 crore to Rs.896.03 crore resulting in a
decrease in the gross profit ratio.

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Operating Ratio decreased in 2008 because of increase in sales even
though increase in expenses. In 2009 Operating ratio increased due to
decrease in sales inspite of expenses remaining higher. As it can be seen
that in 2009 the operating ratio is high as compared to 2008 but less than
2007, it is because that the selling expense and employee cost was high in
2009, thus it decreases the efficiency of the company.

Net Operating Profit Ratio decreased in 2008 because of increase in sales

even though increase in expenses. In 2009 Net Operating Profit Ratio
increased due to decrease in sales inspite of expenses remaining higher. As
net operating profit ratio is less in 2009 as compared to 2008.It has
increased in 2008 because company has diversified in retail for its broking
firm. But the global slowdown has affected its business in 2009.

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Net Profit Ratio decreased in 2008 because of increase in interest &
operating & administration expenses. In 2009 it decreased due to reduction
sales resulting in decline in net profit. Net Profit Ratio decreased in 2008
because of increase in interest by Rs.182.44 crore and operating &
administration expenses by Rs.259.05 crore even though there was an
increase in sales. In 2009 it decreased due to reduction in sales resulting in
decline in net profit.

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FINANCIAL STABILITY RATIOS:

Current Ratio indicates the short term solvency of the company. Current
Ratio in 2007 was 2.83 & decreased in 2008 to 2.33 due to increase in
assets. In 2009 the current ratio is 2.68 which has increased as compared to
2008 due to decrease in current assets. In 2007 CR is highest as compared
to 2008 and 2009, companies current asset have increased mainly due to its
cash balance, and stocks, but in 2008 it has reduced due do reduction in
cash balance, and in 2009 it has increased because company has started
with some new ventures that is mutual funds and retail broking. So from
this ratio it can be seen that company is solvent enough.

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Quick Ratio indicates the short term solvency position of the company.
Standard quick ratio is 1:1. In 2008 it has decreased because of increase in
Loans & Advances whereas in 2009 it has increased due to reduction in
current liabilities & loan & advances. Increase in Loans & Advances from
Rs.298.45 to Rs.1268.24 crore whereas in 2009 it has increased due to
reduction in current liabilities by Rs.746.7 crore and reduction in loans &
advances.

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Proprietary Ratio indicates the contribution in the overall capital structure
made by shareholders in the company. In 2008 it has decreased because of
increase in shareholders’ funds & also increase in total assets. In 2009 it has
increased because of decrease in total assets inspite of increase in
shareholders’ funds. As it can be seen that in 2009, proprietary ratio is the
highest as compared to 2007 and 2008, it means in total assets, proprietor
share is more, which shows company is financially stable. In 2008 it has
decreased because of increase in shareholders’ funds from Rs.582.07 to
Rs.1847.00 crore & also increase in total assets. In 2009 it has increased
because of decrease in total assets by Rs.621.56 crore inspite of increase in
shareholders’ funds by Rs.267.09 crore.

Capital Gearing Ratio has increased due to increase in borrowed funds

whereas in 2009 it has decreased due to decrease in borrowed funds. As it
can be seen that in 2009 the capital gearing ratio is less as compared to
2008 and 2007 which means company is not taking risk, company is utilizing
its own funds for different activities in the business. Capital Gearing Ratio
has increased due to increase in borrowed funds by Rs.1182.51 crore
whereas in 2009 it has decreased due to decrease in borrowed funds by
Rs.807.13 crore.

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Debt Equity Ratios indicates the amount of debt in comparison with Equity
Share Capital. In 2008 it has increased due to increase in borrowed funds
whereas in 2009 it has decreased due to decrease in borrowed funds. As it
can be seen that in 2009 company is using more of it own funds as
compared to borrowed funds whereas in 2008 company has used more of
borrowed funds, which means company’s financial position is highly
solvent. In 2008 it has increased due to increase in borrowed funds by
Rs.1182.51 crore whereas in 2009 it has decreased due to decrease in
borrowed funds by Rs.807.13 crore.

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PROFITABILITY RATIOS:

Return on Capital Employed has decreased in 2008 due to increase in
shareholders’ funds inspite of increase in net profit. In 2009 it has
decreased even further due to decrease in net profit. It has decline from
2007 to 2008 but it has decline almost by half in 2009 due to global
slowdown, and slowdown in financial services. Which means the capital
which has been utilised for business purpose is not giving returns. Return
on capital employed has decreased in 2008 due to increase in shareholders’
funds from Rs.582.07 to Rs.1847.00 crore, inspite of increase in net profit
by Rs.182.62 crore. In 2009 it has decreased even further due to decrease
in net profit by Rs.83.55 crore as a result of decrease in sales.

Return on Proprietor’s Fund & Return on Equity Share Capital has

decreased in 2008 because of tremendous increase in shareholders’ funds.
In 2009 it has decreased even further because of increased in share capital
& decreased in net profit. In 2008 it was down by around 21% and in 2009
it was down by more than 50% it was due to investors was not willing to
invest due to break down in market as it is this ratio is used by investors for
investment purpose in company.

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OVERALL EFFICIENCY RATIOS:

There is no Inventory Turnover Ratio as Edelweiss Capital Limited belongs
to financial service industry, so they maintain no inventories.

Debtor’s Turnover Ratio has increased in 2008 due to increase in credit
sales & decreased in 2009 due to decreased in credit sales. The ratio went
up in 2008 but again went down in 2009 but if we see overall in these 3
years it is better from 2007. As it is an Investment banking firm, it provide
various services, provides loan facilities etc, as all the companies are in
recovery period after global slowdown, company is unable to recover its
money faster.

Debtor’s Collection Period in 2008 decreased because they were efficient in

collecting money from debtors while in 2009 it increased due to non
efficiency in collecting money from debtors and also due to recession. As
seen these ratio we can make out that it has always been around one and a
half month. And that seems to be maintained approximately for three yrs.

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Earnings Per Share has increased in 2008 due to increase in Net Profit &
Increase in number of shares whereas in 2009 it has decreased due to
decrease in net profit & number of shares. EPS has increased by around
47% in 2008 but again reduced by around 16% due to reduction in net
profit percentage.

Price Earning Ratio in 2007 was zero as the company was not listed. In
2008 it increased because the market price was higher while in 2009
market price reduced due to recession.

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Dividend Payout Ratio in 2007 was zero as company has not declared
dividend in 2007. In 2008 the company declared a dividend of Rs.2/share
whereas in 2009 the company declared a dividend of Rs.3/share.

Debt Service Ratio in 2008 decreased because of drastic increase in interest

and in 2009 it increased because of decrease in interest & net profit.

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 Introduction of India Infoline Limited.

They are a one-stop financial services shop, most respected for quality of its
advice, personalised service and cutting-edge technology.

Vision Statement:
Our vision is to be the most respected company in the financial services space.

India Infoline Group:

The India Infoline group, comprising the holding company, india infoline limited
and its wholly-owned subsidiaries, straddle the entire financial services space
with offerings ranging from equity research, equities and derivatives trading,
commodities trading, portfolio management services, mutual funds, life
insurance, fixed deposits, goi bonds and other small savings instruments to loan
products and investment banking.

India Infoline also owns and manages the websites www.indiainfoline.com and
www.5paisa.com the company has a network of over 2100 business locations
(branches and sub-brokers) spread across more than 450 cities and towns. the
group caters to approximately a million customers.

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 RATIOS OF INDIA INFOLINE LIMITED.
Mar '07 Mar '08 Mar '09
Dividend Per Share 3 6 2.8
Management Efficiency Ratios
Gross Profit Ratio(%) 32.75 32.97 24.57
Operating Ratio 0.12 0.55 0.01
Expenses as Composition of Total Sales 0.12 0.55 0.01
Net Operating Profit Ratio(%) 31.49 36.12 29.29
Net Profit Ratio(%) 18.17 23.45 18.51

Financial Stability Ratios

Current Ratio 1.16 1.11 1.11
Quick Ratio 1.51 1.29 1.1
Proprietory Ratio 0.78 0.89 0.99
Capital Gearing Ratio 1.61 2.28 0.03
Debt Equity Ratio 0.28 0.13 --

Profitability Ratios
Return On Capital Employed(%) 23.73 21.98 15.49
Return On Proprietor's Fund(%) 17.99 15.93 10.2
Return on Equity Share Capital (%) 17.99 15.03 10.1

Overall Efficiency Ratios

Inventory Turnover Ratio -- -- --
Debtors Turnover Ratio 4 2.6 2.43
Debt Collection Period 91.25 140.77 150.21
Earnings Per Share 10.39 27.62 3.73
Price Earning Ratio 32.24 27.83 15.72
Dividend Payout Ratio Net Profit 0.29 0.22 0.75
Debt Service Ratio 10.53 10.1 14.58
Creditors Turnover Ratio -- -- --
Creditors Payment Period -- -- --

Book Value 56.88 173.35 36.58

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 COMPARISON OF RATIOS OF EDELWEISS CAPITAL LTD WITH
INDIA INFOLINE LTD.
MANAGEMENT EFFICENCY RATIOS:

The Gross Profit Ratio of Edelweiss is much higher than that of India
Infoline Limited. This is because in 2009 there has been decerease in sales
for Edelweiss Capital Limited & also decrease in sales for India Infoline
Limited. Also the expense of both the companies has decreased.

The total expenses of Edelweiss are less as compared to India Infoline
Limited because there is an additional expense of Miscellaneous Expenses
& Other Manufacturing Expenses in case of India Infoline Limited.

Net Operating Profit Ratio of Edelweiss has increased due to decrease in
operating expenses whereas in case of India Infoline it has decreased due
to decrease in operating expenses also decrease in sales.

Net Profit Ratio of Edelweiss has decreased. This is because of increase in
interest and depreciation expenses. Whereas in case of India Infoline
Limited the Net Profit Ratios has also decreased but it is better than
Edelweiss Capital Limited.

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FINANCIAL STABILITY RATIOS:

Current Ratio indicates the short term solvency of the company. Current
Ratio of Edelweiss Capital Limited is 2.68 that is company is able to
maintain as per the standard ratio i.e 2:1. In case of India Infoline Limited
the Current ratio is 1.11 which is below the standard ratio.

Quick Ratio indicates the short term solvency position of the company.
Standard quick ratio is 1:1 which the Edelweiss Capital Limited is not able to
maintain whereas India Infoline Limited is also able to maintain the
standard quick ratio which is marginally higher.

Proprietary Ratio indicates the contribution in the overall capital structure
made by shareholders in the company. The contribution of shareholders
towards the capital structure is more in case of India Infoline Limited as
compared to Edelweiss Capital Limited.

Debt Equity Ratios indicates the amount of debt in comparison with Equity
Share Capital. Debt of the Edelweiss Capital Limited is 0.48 paisa per 1
rupee whereas in case of India Infoline Limited there is no debt taken by
the company.
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PROFITABILITY RATIOS:

Return on Capital Employed Ratio has decreased for both Edelweiss Capital
Limited and India Infoline Limited. Though India Infoline Limited return on
capital employed has decreased but is higher than that of Edelweiss Capital
Limited. It indicates an increase in its earning capacity and optimum
utilization of funds.

Return on Proprietor’s Fund has decreased in both the companies but has
decreased majorly in case of India Infoline Limited.

Return on Equity Share Capital is almost similar to that of Return on
Proprietor’s Fund but is more of India Infoline Limited when compared with
Edelweiss Capital Limited.

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OVERALL EFFICENCY RATIOS:

There is no Inventory Turnover Ratio as both Edelweiss Capital Limited &

India Infoline Limited belong to financial service industry, so they maintain
no inventories.

Debtor’s Turnover Ratio for both the companies i.e Edelweiss Capital
Limited & India Infoline Limited has increased which indicated that the
company is not efficient in collecting it’s payment from there debtor’s.
Debtor’s Turnover Ratio of Edelweiss Capital Limited is higher when
compared with India Infoline Limited.

Debtor’s Collection Period has increased for both Edelweiss Capital Limited
& India Infoline. It indicates the efficiency of the company in collecting the
debts from their debtor’s. The debt collection period of Edelweiss is better
when compared with India Infoline Limited which much higher.

Earnings Per Share of both the companies have decreased but India
Infoline Limited earnings per share have reduced drastically. There is only
great difference between Edelweiss Capital Limited and India Infoline
Limited when compared for the year 2009.

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The Price Earning Ratio is low for Edelweiss Capital Limited as compared to
India Infoline Limited because the market price per share of both Edelweiss
Capital Limited & India Infoline Limited have gone down.

Dividend Payout Ratio for both Edelweiss Capital Limited and India Infoline
Limited has increased. In 2009 Edelweiss declared a dividend of Rs.3/share
whereas India Infoline Limited declared a dividend of Rs.2.8/share.

The Debt Service Ratio indicates the capability of the firm to repay its
interest and loans. Debt Service Ratio of Edelweiss Capital Limited is 3.57
whereas that of India Infoline Limited is 14.58. It shows that India Infoline
Limited is more capable of paying its debt as compared to Edelweiss Capital
Limited.

Page 37 of 54
 Introduction of Geojit BNP Paribas.

22 years of history in Indian Capital Market:

Geojit BNP Paribas has 22 years of in-depth broking experience in the Indian
Capital Market. More than 495,000 clients and over Rs 9,900 crores (as of 30th
Sep.’09) in Assets Under Management reflect the trust reposed in our expertise.

Pioneer in Online Trading in Feb. 2000:

In the year 2000, Geojit BNP Paribas pioneered the simple concept of providing
individuals with the facility to trade online. This revolution has given the company
the first mover advantage in online trading. As a creative innovator, Geojit BNP
Paribas uses advanced technology in online trading to meet client requirements
such as customized online trading platforms and many other services.

Strong Shareholders:
Geojit BNP Paribas is backed by strong shareholders.

In 2007, global banking major BNP Paribas joined the company’s other major
shareholders - Mr. C.J.George, KSIDC (Kerala State Industrial Development
Corporation) and Mr.Rakesh Jhunjhunwala – when it took a stake to become the
single largest shareholder.

Wide range of products:

Geojit BNP Paribas offers a wide range of trading and investment products and
solutions. Certified financial advisors help clients to arrive at the right financial
solution to meet their individual needs.

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The wide range on offer includes - Equities | Derivatives | Currency Futures |
Custody Accounts | Mutual Funds | Life Insurance & General Insurance | IPOs |
Portfolio Management Services | Property Services | Margin Funding | Loans
against Shares.

Attractive brokerage slabs:

We provide value for money! To start with, we offer low online brokerage charges
which further decrease automatically, as and when, your volumes increase.

0.03 to 0.01 for intra-day trades

0.30 to 0.10 for delivery trades

Rs 75 to Rs 30 for F&O

Learn the craft:

You too can develop your trading skills by availing of the effective guidance by our
research department. We offer-

 Daily mails delivered to our client’s mailbox on market conditions and

recommendations
 Technical analysis of BSE 200 Index scrips
 Free monthly investment magazine
 Services of professionally qualified executives at 500 offices across India.
 Our strong research ideas have been instrumental in converting our clients
into successful traders.

Multichannel service- Internet, Phone, Branch trading:

Trade the way that you want to by selecting from multiple channel options-
Internet, Phone or Branch.
Page 39 of 54

First mover advantage:
Geojit BNP Paribas through its first mover advantage in different areas has been
the first to serve investors with its innovative offerings.

 1st to launch internet trading in the year 2000.

 1st to launch integrated internet trading system for cash and derivative
segments in the year 2002.
 1st Indian stock broking company to commence domestic retail broking
operations in any foreign country.
 1st in the industry to have a global player offering its name thereby
creating Geojit BNP Paribas.
 1st to launch exclusive branches for women in 2005.

There deep reach:

They have a pan-India network of over 500 offices with industry certified
executives and a dedicated Call Centre to provide you quality services.

Wide range of fund options:

Geojit BNP Paribas gives you the option to choose from the 700 plus Mutual Fund
schemes offered by over 35 Asset Management companies such as SBI Mutual
Fund, Reliance Mutual Fund, Franklin Templeton India Mutual Fund, Tata Mutual
Fund, Sundaram BNP Paribas Mutual Fund, Fidelity Mutual Fund, and HDFC
Mutual Fund.

Page 40 of 54
 RATIOS OF GEOJIT BNP PARIBAS FINANCIAL SERVICES LIMITED.
Mar '07 Mar '08 Mar '09
Dividend Per Share 0.4 0.7 0.5
Management Efficiency Ratios
Gross Profit Margin(%) 33.29 30.07 2.37
Operating Ratio 1.43 0.26 3.98
Expenses as Composition of Total Sales 1.43 0.26 3.98
Net Operating Profit Margin(%) 30.22 33.31 9.56
Net Profit Margin(%) 19.16 23.72 9.15

Financial Stability Ratios

Current Ratio 2.09 1.23 1.32
Quick Ratio 2.09 1.23 1.31
Proprietory Ratio 1 1 1
Capital Gearing Ratio -- -- --
Debt Equity Ratio -- -- --

Profitability Ratios
Return On Capital Employed(%) 15.26 28.57 7.63
Return On Proprietor's Fund(%) 9.99 20.64 5.28
Return on Equity Share Capital (%) 9.99 19.88 5.28

Overall Efficiency Ratios

Inventory Turnover Ratio -- -- --
Debtors Turnover Ratio 3.46 3.98 2.66
Debt Collection Period 105.49 91.96 137.29
Earnings Per Share 1.01 2.31 0.65
Price Earning Ratio 34.6 19.87 29.46
Dividend Payout Ratio Net Profit 0.4 0.3 0.77
Debt Service Ratio 86.59 156.96 21.26
Creditors Turnover Ratio -- -- --
Creditors Payment Period -- -- --

Book Value 9.67 11.18 12.29

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 COMPARISON OF RATIOS OF EDELWEISS CAPITAL LTD WITH
GEOJIT BNP PARIBAS FINANCIAL SERVICES LTD.
MANAGEMENT EFFICENCY RATIOS:

The Gross Profit Ratio of Edelweiss Capital Limited has decreased in the
year 2009 but the gross profit ratio of Geojit BNP Paribas has also
decreased by a great extent. This is because the sales of Geojit BNP Paribas
have reduced and the total expense remains same.

The total expenses of Edelweiss are less as compared to Geojit BNP Paribas
because there is an additional expense of Miscellaneous Expenses & Other
Manufacturing Expenses in case of Geojit BNP Paribas.

Net Operating Profit Ratio of Edelweiss has decreased due to decrease in
operating expenses whereas in case of Geojit BNP Paribas it has also
decreased due to decrease in operating expenses also decrease in sales.

Net Profit Ratio of Edelweiss has decreased. This is because of increase in
depreciation expenses. Whereas in case of Geojit BNP Paribas the Net
Profit Ratios has also decreased but it is not better than Edelweiss Capital
Limited.

Page 42 of 54
FINANCIAL STABILITY RATIOS:

Current Ratio indicates the short term solvency of the company. Current
Ratio of Edelweiss Capital Limited is 2.68 that is company is able to
maintain as per the standard ratio i.e 2:1. In case of Geojit BNP Paribas the
Current ratio is 1.32 which is below the standard ratio.

Quick Ratio indicates the short term solvency position of the company.
Standard quick ratio is 1:1 which the Edelweiss Capital Limited is not able to
maintain whereas Geojit BNP Paribas is able to maintain the standard quick
ratio which is marginally higher.

Proprietary Ratio indicates the contribution in the overall capital structure
made by shareholders in the company. The contribution of shareholders
towards the capital structure is more in case of Geojit BNP Paribas as
compared to Edelweiss Capital Limited.

Debt Equity Ratios indicates the amount of debt in comparison with Equity
Share Capital. Debt of the Edelweiss Capital Limited is 0.48 paisa per 1
rupee whereas in case of Geojit BNP Paribas there is no debt taken by the
company.
Page 43 of 54
PROFITABILITY RATIOS:

Return on Capital Employed Ratio has decreased for both Edelweiss Capital
Limited & Geojit BNP Paribas. Though Edelweiss Capital Limited return on
capital employed has decreased but is higher than that of Geojit BNP
Paribas. It indicates an increase in its earning capacity and optimum
utilization of funds.

Return on Proprietor’s Fund has decreased in both the companies but has
decreased majorly in case of Geojit BNP Paribas.

Return on Equity Share Capital is almost similar to that of Return on
Proprietor’s Fund but is more of Edelweiss Capital Limited when compared
with Geojit BNP Paribas.

Page 44 of 54
OVERALL EFFICIENCY RATIOS:

There is no Inventory Turnover Ratio as both Edelweiss Capital Limited &

Geojit BNP Paribas belong to financial service industry, so they maintain no
inventories.

Debtor’s Turnover Ratio for Edelweiss Capital Limited has decreased which
indicates that the company is efficient in collecting it’s payment from there
debtor’s & for Geojit BNP Paribas it has also decreased which indicates that
the company is efficient in collecting it’s payment from there debtor’s.
Debtor’s Turnover Ratio of Edelweiss Capital Limited is higher when
compared with Geojit BNP Paribas.

Debtor’s Collection Period has increased for Edelweiss & also increased for
Geojit BNP Paribas. It indicates the efficiency of the company in collecting
the debts from their debtor’s. The debt collection period of Edelweiss is
better when compared with Geojit BNP Paribas which much higher.

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Earnings Per Share of both the companies have decreased but Geojit BNP
Paribas earnings per share have reduced drastically. There is huge
difference between Edelweiss Capital Limited and Geojit BNP Paribas when
compared for the year 2009.

The Price Earning Ratio is quite high for Geojit BNP Paribas as compared to
Edelweiss Capital Limited because the market price per share of Edelweiss
Capital Limited & Geojit BNP Paribas has decreased.

Dividend Payout Ratio for both Edelweiss Capital Limited and Geojit BNP
Paribas has increased. In 2009 Edelweiss declared a dividend of Rs.3/share
whereas Geojit BNP Paribas declared a dividend of Rs.0.5/share.

The Debt Service Ratio indicates the capability of the firm to repay its
interest and loans. Debt Service Ratio of Edelweiss Capital Limited is 3.57
whereas that of Geojit BNP Paribas is 21.26. It shows that Geojit BNP
Paribas is more capable of paying its debt as compared to Edelweiss Capital
Limited.

Page 46 of 54
 GRAPHICAL REPRESENTATION ON SENSEX INDICIES OF
EDELWEISS CAPITAL LIMITED, INDIA INFOLINE LIMITED &
GEOJIT BNP PARIBAS FINANCIAL SERVICES LIMITED.

Page 47 of 54
 FINDINGS AND INTERPRETATIONS:

FINDINGS FOR EDELWEISS:

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 hasn’t 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.

Taking into account all three years, Edelweiss has been efficient with respect to
certain ratios but hasn’t been up to the standards. Till 2008, 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 earning 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 doesn’t show much variation. This indicates that every year
the increase of decrease in the debt and equity has more or less been
proportionate.

Current ratio is on a brighter side though it has declined as compared to ’08 in
’09. This brings the company in a better position as far as the creditors are
concerned.

Debtor’s ratio had increased in ’08 but came down in ’09, this is result of the
declined sales of the company.

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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
‘09 as compared to ’08, the improvement is not substantial.

An obvious impact of decline in sales is on the profits ratios of the company.
Inspite of a 17.18% decline in sales in ’09 as compared to ’08, 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 ’08 and has remained constant in
’09. However, the ROE ratio has been reduced by 50%. This is not good news for
the owner’s 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 ’09 as compared to ’07 and ’08, the company
has declared a good divided 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
company’s collection department is taking more time to recover funds from the
debtors. This is even worse as the company’s 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.

Page 49 of 54
FINDINGS FOR COMPARISON OF EDELWEISS WITH
INDIA INFOLINE AND GEOJIT BNP PARIBAS:

The Management efficiency ratios indicate that Edelweiss is doing better

than India Infoline in terms of gross profit and expenses, but it has also
done well in terms of net profit. On the other hand, Geojit BNP Paribas has
been incurring losses in 2009 due to reduction in sales because of which
Edelweiss has an upper edge over Geojit BNP Paribas.

The Financial Stability ratios indicate that India Infoline hasn’t been
financially stable when compared to Edelweiss. This is because of the
amount of funds borrowed by India Infoline is quite high and also due to
increase in assets. In case of Geojit BNP Paribas, as the company has
incurred losses it hasn’t borrowed any loans because of which it is
financially unstable as compared to Edelweiss.

According to profitability ratios, India Infoline has better return on capital
employed than Edelweiss due to reduction of net profit for Edelweiss in
2009.Thus India Infoline is doing much better than Edelweiss in terms of
profit. Geojit BNP Paribas has not made any profit in 2009 indicating a
decrease in its earning capacity. Hence, Edelweiss has been more profitable
in 2009 compared to Geojit BNP Paribas.

Edelweiss has been efficient than India Infoline and Geojit BNP Paribas in
most of the ratios. Edelweiss is more capable of collecting its debt as
compared to India Infoline and Geojit BNP Paribas, Edelweiss EPS is also
more than these two companies, so in all it can be said that edelweiss is
much better in terms of its overall efficiency as compared to India Infoline
and Geojit BNP Paribas.

Page 50 of 54
 SCOPE FOR FUTURE ENHANCEMENTS:

After the acquisition of Edelweiss with Anagram Securities Limited it has

increased its number of branches all over Mumbai. E.g.: In Mumbai it has
only 7 branches.

The company’s future looks good after the acquisition & hope that it will do
good in the Broking sector.

Within a span of short period of time i.e one year the company is able to
attract a good number of customers approximately 1,00,000.

The company’s future looks good in long run because of in spite of

recession it was able to do very well as compare with other broking firms.

Page 51 of 54
 RECOMMENDATIONS:

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

The company’s 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 FII’s (Foreign Institutional
Investors) pull out lot of money, still it was able to sustain its market image.

Page 52 of 54
 CONCLUSION:

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 so it is sure to improve in the future and sustain
in the market for a longer time.

In the last three years the earnings per share of Edelweiss Capital Ltd. has
shown a downward trend as a result of a fall in the market price of the
share. But with an aggressive and passionate sales trading team, they are
able to seamlessly execute complex trades, across the entire spectrum of
trading strategies.

Edelweiss Capital Ltd. has been performing well when compared with some
of its competitors. The examples of India Infoline and Geojit BNP Paribas
show that even though Edelweiss has not done well in recent times it still
has a better position in the market. Some of the products and services
offered by Edelweiss are quite unique which gives them an upper edge over
other competitors.

Page 53 of 54
 REFERENCES:

www.edelweiss.in

www.edelcap.com

www.indiainfoline.com

www.geojitbnpparibas.com

www.moneycontrol.com

www.investopedia.com

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