Final SM India Infoline

7/25/2019 Final SM India Infoline

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INTRODUCTION

Corporate governance is the set of processes, customs, policies, laws, and

institutions affecting the way a corporation is directed, administered or

controlled. Corporate governance also includes the relationships among the

many staeholders involved and the goals for which the corporation is

governed. The principal staeholders are the shareholders, management, and

the !oard of directors. Other staeholders include employees, customers,

creditors, suppliers, regulators, and the community at large

Corporate "overnance is not #ust the rules, regulations and law prescri!ed !ut

it the culture of relationships. The woring of corporate governance depends on

how the participants !ehave and interact with each other. $n important part of

corporate governance deals with accounta!ility, fiduciary duty, disclosure to

shareholders and others, and mechanisms of auditing and control. In this sense,

corporate governance players should comply with codes to the overall good of

all constituents.

Corporate "overnance is the mechanism !y which the values, principles,

policies and procedures of a corporation are inculcated and manifested. The

essence of corporate governance lies in promoting and maintaining integrity,

transparency and accounta!ility in the woring of management.

"ood corporate governance plays a vital role in underpinning the integrity and

efficiency of financial marets. %oor corporate governance weaens a

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company's potential and at worst can pave the way for financial difficulties and

even fraud. If companies are well governed, they will usually outperform other

companies and will !e a!le to attract investors whose support can help to

finance further growth though the concept and form of Corporate "overnance

is evolving over the years, it inherently re(uires continuous nurturing and

adapting to the dynamic !usiness environment.

Corporate Governance Framework

The )oard of Directors is responsi!le for management oversight,

supervising the !usiness e*ecution functions of the +anagement Council,

an e*ecutive organ under its authority. The +anagement Council

deli!erates upon fundamental policies and strategy regarding !usiness

management, as well as maes decisions on important matters regarding

operational e*ecution. Issues discussed !y the +anagement Council and

a summary of its discussions are reported to the )oard of Directors,

which maes decisions on items of particular importance. In principle, the

+anagement Council meets three times a month, !ut meetings may !e

convened whenever necessary. The auditing function is carried out !y

statutory auditors )oard of -tatutory $uditors, who review the )oard of

Directors as well as operational e*ecution functions, and attend important

meetings, including meetings of the )oard of Directors as well as the

+anagement Council.

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PURPOSE OF CORPORATE

GOVERNANCE

&. %rotecting shareholders' wealth.

/. 0nhancing the wealth through proper utili1ation of assets.

2. +aintenance of that wealth and not frittering away in unconnected

and non profita!le venture.

3. through e*propriation, and a!ove all safeguarding he interests of

the shareholders.

The main o!#ective !ehind corporate governance is to protect long term

share holder value along with the other staeholders. It is the foundation

to !uild maret confidence and encouraging sta!le and long term

investment flows. Corporate institutions should have a sound frame wor

for their operation to achieve their o!#ective and creating wealth for the

welfare of the society as a whole. Corporate governance is very wide

term, which covers a wide range of activities that relate to the way

!usiness organi1ation is directed and governed. It deals with the policies

and practices that directly impact on the organi1ation's performance,

stewardship sand its capacity to !e accounta!le to its various

staeholders.

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OBJECTIVES OF CORPORATE

GOVERNANCE

Over all o!#ectives of corporate governance are as follows 4

&. 0nhancement of shareholder value, eeping in view the interest of

other staeholder.

/. follow provisions of the companies $ct, 50+$ factory $ct and other

statutes .

2. deloy the funds of the company in attaining institutional goal as

enshrined in the memorandum.

3. utili1e funds taen from financial institutions and the capital maret for

the purposes for which they were intended.

6. develop core competence to effectively manage its diversifications.

7. manage and chec the diversification of funds !y the way of loans,

advances or investment to su!sidiary or investment companies.

8. control over the !ad practices .

9. conduct ethical and fair practices towards its share holders, customers,

suppliers, employees and the pu!lic at large.

:. provide complete information to the directors on the woring of the

company.

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PRINCIPLES OF CORPORATE

GOVERNANCE

Commonly accepted principles of corporate governance include

Ri!t" an# e$%ita&'e treatment o( "!are!o'#er"4 Organi1ations

should respect the rights of shareholders and help shareholders to

e*ercise those rights. They can help shareholders e*ercise their

rights !y effectively communicating information that is

understanda!le and accessi!le and encouraging shareholders to

participate in general meetings.

Intere"t" o( ot!er "take!o'#er"4 Organi1ations should recogni1e

that they have legal and other o!ligations to all legitimate

staeholders.

Ro'e an# re"pon"i&i'itie" o( t!e &oar#4 The !oard needs a range

of sills and understanding to !e a!le to deal with various !usiness

issues and have the a!ility to review and challenge management

performance. It needs to !e of sufficient si1e and have an

appropriate level of commitment to fulfill its responsi!ilities and

duties. There are issues a!out the appropriate mi* of e*ecutive and

non;e*ecutive directors.

Interit) an# et!ica' &e!avior4 0thical and responsi!le decision

maing is not only important for pu!lic relations, !ut it is also a

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necessary element in ris management and avoiding lawsuits.

Organi1ations should develop a code of conduct for their directors

and e*ecutives that promotes ethical and responsi!le decision

maing. It is important to understand, though, that reliance !y a

company on the integrity and ethics of individuals is !ound to

eventual failure. )ecause of this, many organi1ations esta!lish

compliance and ethics programs to minimi1e the ris that the firm

steps outside of ethical and legal !oundaries.

*i"c'o"%re an# tran"parenc)4 Organi1ations should clarify and

mae pu!licly nown the roles and responsi!ilities of !oard and

management to provide shareholders with a level of accounta!ility.

They should also implement procedures to independently verify

and safeguard the integrity of the company


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at international level maes transparency and disclosure the ey

pillars of corporate governance.

I+PORTANCE OF CORPORATE

GOVERNANCE

= Corporate governance has succeeded in attracting a good deal of pu!lic

interest !ecause of its apparent importance for the economic health ofcorporations and society in general.

= Corporate governance provides the structure through which the

o!#ectives of the company are set, and the means of attaining those

o!#ectives and monitoring performance are determined.

= Corporate governance provides proper incentives for the !oard andmanagement to pursue o!#ectives that are in the interests of the company

and shareholders and should facilitate effective monitoring, there!y

encouraging firms to use resources more efficiently

= Corporate governance is used to monitor whether outcomes are in

accordance with plans and to motivate the organi1ation to !e more fully

informed in order to maintain or alter organi1ational activity. Corporate

governance is the mechanism !y which individuals are motivated to align

their actual !ehaviors with the overall participants.

= Corporate governance is a tool for competitive advantage. Normally

when we loo at the issue of competitive advantage from a managerial

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point of view, we can loo at those factors, which are within the control

of the enterprise. This relates to the focus on (uality, productivity as well

as innovation, which are the !asic re(uirements, in a highly competitive

environment. This is needed for getting the competitive edge in a maret

where the customer is ing.

= The corporate governance framewor should ensure the e(uita!le

treatment of all shareholders, including minority and foreign

shareholders. $ll shareholders should have the opportunity to o!tain

effective redress for violation of their rights.

= The corporate governance framewor recogni1es the rights of

staeholders as esta!lished !y law and encourage active co;operation

!etween corporations and staeholders in creating wealth, #o!s, and the

sustaina!ility of financially sound enterprises.

= The corporate governance framewor ensures the timely and accurate

disclosure of all material matters regarding the corporation, including the

financial situation, performance, ownership, and governance of the

company. $ strong disclosure regime can help to attract capital and

maintain confidence in the capital marets. Disclosure also helps improvepu!lic understanding of the structure and activities of enterprises,

corporate policies and performance with respect to environmental and

ethical standards, and companies< relationships with the communities in

which they operate.

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CO+PAN, OVERVIE-

Vision

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, ommodities trading, !ortfolio "anagement #ervices,

"utual $unds, Life Insurance, $i%ed deposits, &oIe bonds and other small

savings instruments to loan products and Investment ban'ing. India Infoline

also owns and manages the websites www.indiainfoline.com and

www.6paisa.com

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The company has a networ' of ()* business locations +branches and sub-

bro'ers spread across / cities and towns. It has more than *00,000

customers.

India Infoline Ltd.

India Infoline Limited is listed on both the leading stoc' e%changes in India,

vi1. the #toc' E%change, "umbai +2#E and the 3ational #toc' E%change

+3#E and is also a member of both the e%changes. It is engaged in thebusinesses of Equities bro'ing, 4ealth 5dvisory #ervices and !ortfolio

"anagement #ervices. It offers bro'ing services in the ash and 6erivatives

segments of the 3#E as well as the ash segment of the 2#E. It is registered

with 3#6L as well as 6#L as a depository participant, providing a one-stop

solution for clients trading in the equities mar'et. It has recently launched its

Investment ban'ing and Institutional 2ro'ing business.

India Infoline Marketing & Services

IIFL (Asia) Pte Liited

II$L +5sia !te Limited is wholly owned subsidiary which has been

incorporated in #ingapore to pursue financial sector activities in other 5sian

mar'ets. $urther to obtaining the necessary regulatory approvals, the

company has been initially capitali1ed at 7 million #ingapore dollars.

Products and Services

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4e are a one-stop financial services shop, most respected for quality of its

advice, personali1ed service and cutting-edge technology.

!"uities

India Infoline provided the prospect of researched investing to its clients,

which was hitherto restricted only to the institutions. 8esearch for the retail

investor did not e%ist prior to India Infoline. India Infoline leveraged technology

to bring the convenience of trading to the investor9s location of preference

+residence or office through computeri1ed access. India Infoline made it

possible for clients to view transaction costs and ledger updates in real time.

Portfolio Manageent Service

Our !ortfolio "anagement #ervice is a product wherein an equity investment

portfolio is created to suit the investment ob:ectives of a client. 4e at IndiaInfoline invest your resources into stoc's from different sectors, depending on

your ris'-return profile. This service is particularly advisable for investors who

cannot afford to give time or don;t have that e%pertise for day-to-day

management of their equity portfolio.

Invest #nline

India Infoline has made investing in "utual funds and primary mar'et soeffortless. 5ll you have to do is register with us and that9s all. 3o paperwor' no

queues and 3o registration charges.

I$V!S% I$ MF

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India Infoline offers you a host of mutual fund choices under one roof, bac'ed

by in-depth research and advice from research house and tools configured as

investor friendly.

Insurance

5n entry into this segment helped complete the client9s product bas'et>3 for e*ample

employee opposition to #o! losses prevented the restructuring via. +erger

with a foreign partner of 5rance who is financially trou!led $lston, a

ma#or producer of ships and trains. In the same year Bolswagen despite

suffering from very high la!our cost had to promise its estern "ermany

employees #o! security until />&& in e*change for a wage free1e until

/>>8 and more fle*i!le woring hours. The company worers wield

considera!le power partly through co;determination rights that re(uire

employees to !e consulted on corporate decision.

Top +anaement Team"4 +anagers in U.- and U.A tend to have

professional !acground and strong functional !acground in finance or

mareting. This is not the case in "ermany where managers are more

technical oriented. There is also variation in the international e*perience

and !acground of managers. +anagerial career mo!ility tends to !e veryfluid in U.- and U.A due to open la!our marets. In ?apan and 5rance

managers tend to remain with a company for a long period of time. There

is also wide acceptance of leaders from across !oarders in the U.A

S!are!o'#er"4 Countries vary in their mi* types of shareholders. $t one

e*treme the U.- and U.A have mostly arms length, natural shareholders

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who are focused on shareholder value ma*imi1ation. 0mployee

shareholders typically use their ownership to !loc the glo!al relocation

of #o!s. This applies even in the U.- where united $irlines provide a rare

e*ample of a large pu!lic company with ma#ority ownership 66 percent

owned !y an employee stoc ownership plan. This employee stae and

hence control have greatly constrained the a!ility of the $irline to

relocate #o! overseas.

"overnment4 "overnment intervention is usually in the form of maret

regulation. $ representative measure for government intervention in the

economy is regulation around taeovers. In countries such as 5rance,

"ermany, Italy and ?apan government intervention often provide strong

taeover !arrier such as golden shares, which !estow on the holder veto

power over changes to the company>& plans for a 0uropean taeover code, which would

guarantee the right of shareholder to !e consulted during !ids were

shelved following o!#ection from "erman government. The previous year

Bodafone, the U.A telecoms company made a successful hostile !id for

+annesmann, a "erman telecoms company and the "erman government

was worried that other local companies might fall into foreign land. 5or

e*ample Bolswagen is protected from taeover !y special law. -weden,

which fall in the continental governance model that use multiple voting

rights to help and prevent its companies from !ecoming vulnera!le to

taeover. 5rance is also particularly active in preserving national

ownership of ma#or companies. In />>3 the 5rench government !roered

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the taeover of $ventis a 5rench "ermany pharmaceutical company !y

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performance outcomes, ex ante. It could !e argued, therefore, that

e*ecutive directors loo !eyond the financial criteria.

Rem%neration4 %erformance;!ased remuneration is designed to

relate some proportion of salary to individual performance. It may

!e in the form of cash or non;cash payments such as shares and

share options, superannuation or other !enefits. -uch incentive

schemes, however, are reactive in the sense that they provide no

mechanism for preventing mistaes or opportunistic !ehaviour, and

can elicit myopic !ehaviour.

E.terna' corporate overnance contro'"

0*ternal corporate governance controls encompass the controls e*ternal

staeholders e*ercise over the organi1ation. 0*amples include4

demand for and assessment of performance information especially

financial statements

de!t covenants

government regulations

media pressure

taeovers

competition

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managerial la!our maret

telephone tapping

Role Of The $ccountant

5inancial reporting is a crucial element necessary for the corporate

governance system to function effectively. $ccountants and auditors arethe primary providers of information to capital maret participants. The

directors of the company should !e entitled to e*pect that management

prepare the financial information in compliance with statutory and ethical

o!ligations, and rely on auditors< competence.

Current accounting practice allows a degree of choice of method in

determining the method of measurement, criteria for recognition, and

even the definition of the accounting entity. The e*ercise of this choice to

improve apparent performance imposes e*tra information costs on users.

One area of concern is whether the accounting firm acts as !oth the

independent auditor and management consultant to the firm they are

auditing. This may result in a conflict of interest which places the

integrity of financial reports in dou!t due to client pressure to appease

management. The power of the corporate client to initiate and terminate

management consulting services and, more fundamentally, to select and

dismiss accounting firms contradicts the concept of an independent

auditor. Changes enacted in the United -tates in the form of the -ar!anes;

O*ley $ct in response to the 0nron situation as noted !elow prohi!it

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accounting firms from providing !oth auditing and management

consulting services. -imilar provisions are in place under clause 3: of

-0)I $ct in India.

Ro'e O( In"tit%tiona' Inve"tor"

+any years ago, worldwide, !uyers and sellers of corporation stocs

were individualinvestors, such as wealthy !usinessmen or families, who

often had a vested, personal and emotional interest in the corporations

whose shares they owned. Over time, marets have !ecome largely

institutionali1ed !uyers and sellers are largely institutions

The rise of the institutional investor has !rought with it some increase of

professional diligence which has tended to improve regulation of the

stoc maret !ut not necessarily in the interest of the small investor or

even of the naEve institutions, of which there are many. Note that this

process occurred simultaneously with the direct growth of individuals

investing indirectlyin the maret for e*ample individuals have twice as

much money in mutual funds as they do in !an accounts. @owever this

growth occurred primarily !y way of individuals turning over their funds

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F%nction" o( t!e +anaement

&. The management comprises the Chief 0*ecutive, 0*ecutive;directors

and the ey managers of the company, involved in day;to;day activities ofthe company.

/. The Committee !elieves that the management should carry out the

following functions4

Assisting the board in its decision making process in

respect of the companys strategy, policies, code of

conduct and performance targets, !y providing necessary inputs.

GImplementing the policies and code of conduct of the !oard.

G+anaging the day to day affairs of the company to !est achieve the

targets and goals set !y the !oard, to ma*imi1e the shareholder value.

G%roviding timely, accurate, su!stantive and material information,

including financial matters and e*ceptions, to the !oard, !oard;

committees and the shareholders.

G0nsuring compliance of all regulations and laws.

G0nsuring timely and efficient service to the shareholders and to protect

shareholder's rights and interests.

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G-etting up and implementing an effective internal control systems,

commensurate with the !usiness re(uirements.

GImplementing and comply with the Code of Conduct as laid down !y

the !oard.

GCo;operating and facilitating efficient woring of !oard committees.

2. $s a part of the disclosure related to +anagement, the Committee

recommends that as part of the directors' report or as an addition there to,

a +anagement Discussion and $nalysis report should form part of the

annual report to the shareholders. This +anagement Discussion H

$nalysis should include discussion on the following matters within the

limits set !y the company's competitive position4

GIndustry structure and developments.

GOpportunities and Threats

G-egment;wise or product;wise performance.

GOutloo.

GRiss and concerns

GInternal control systems and their ade(uacy.

GDiscussion on financial performance with respect to operational

performance.

3. "ood corporate governance casts an o!ligation on the management in

respect of disclosures. The Committee therefore recommends that

disclosures must !e made !y the management to the !oard relating to all

material financial and commercial transactions, where they have personal

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interest, that may have a potential conflict with the interest of the

company at large for e.g. dealing in company shares, commercial

dealings with !odies, which have shareholding of management and their

relatives etc.

S-OT ANAL,SIS

Strent!"/

&. %rice competitiveness 0.g.4 No !roerage is charged, $nnual

maintenance charges are least

/. India Infoline is a!le to respond very (uicly as we have no red tape,

no need for higher management approval, etc.

2. India Infoline is a!le to give really good customer care, as the current

small amount of wor means we have plenty of time to devote to

customers

3. Their lead consultant has strong reputation within the maret

6. They change direction (uicly if our approach isn't woring

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7. +anagement philosophy and commitment to ma*imi1e shareholders

returns of India Infoline.

8. Ongoing activities of the company to support up gradation of

operational %erformance.

-eakne""e"

&. New entrant in the maret which is dominated !y !ig !rand names lie

ICICI, Reliance +oney etc.

/.Company has a small staff with a shallow sills !ase in many areas.

Opport%nitie"

&. The share trading sector is e*panding, with many future opportunities

for success.

/. The competitors may !e slow to adopt new technologies.

T!reat"

&. Developments in technology will change the share maret !eyond the

a!ility to adapt.

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/.$ small change in focus of a large competitor is a threat for the maret

position.

2.Constant pressure to !e cost competitive to meet customer e*pectations.

CONCLUSION

Competition today is at a mouse click.

0ffective corporate governance is more than #ust putting in place

structure, such as committees and reporting mechanisms, to achieve

desired results. -uch structure is only a means for developing a more

creata!le corporate governance framewor and is not ends in them. That

is, there !e more emphasis on the su!stance rather than the form of good

corporate governance and to the confidence and assurance of

staeholders.

$ ey aspect of corporate governance is to ensure that all participant are

aware of and accepts their #o!s, responsi!ilities and accounta!ilities and

that they have a sound understanding an appreciation of the latter's

practical importance in meeting th e pu!lic interest. The framewor is

very people oriented involving !etter communication a more systematic

approach to corporate management a greater emphasis on corporate and

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ethical conduct ris management sills development relationship with

citi1ens as clients and (uality service deliver

BIBLIOGRAP0,

-e&"ite"4

www.indiainfoline.com

www.sharehan.com

www.moneypore.com

www.wiipedia.com

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http://www.indiainfoline.com/http://www.sharekhan.com/http://www.moneypore.com/http://www.wikipedia.com/http://www.indiainfoline.com/http://www.sharekhan.com/http://www.moneypore.com/http://www.wikipedia.com/


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