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Bussiness Plan

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									MBC Stock Financing Company (P) Ltd

Business Plan

7, Barakhamba Road, New Delhi-110001, India Tel: +91-11- 2371 6275 Fax: +91-11-23311098

803-804, Arunachal Building, Barakhamba Road, New Delhi - 110 001 Tel No.: 91.11.41511771 / 72 / 73 Fax: 91.11.41511770 E-mail:
Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


Table of Contents
Statement of Confidentiality & Non Disclosure Executive Summary 1 Business Description 1.1 Industry Overview 1.2 Company Description 1.3 History & Current Status 1.4 Goals & Objective 1.5 Critical Success factors 1.6 Company Owner Ship 1.7 Exit Strategy 2 Product & Services 2.1 Product /Service Description 2.2 Unique feature of Service 2.3 Research & Development 2.4 Production of services 2.5 New & Follow on services 3 The Market 3.1 Industry Trends & Analysis 3.2 Market Trends & Analysis 3.3 Competitors Analysis 4 Marketing Strategies & Sales of services or product 4.1 Introduction 4.2 Market segmentation strategy 4.3 Targeting strategy 4.4 Positioning strategy 4.5 Product/ service strategy 4.6 Pricing strategy 4.7 Distribution of services channels ,development 4.8 Advertising & promotion strategy 4.9 Sale of services forecast 5 Development 5.1 Development Strategy 5.2 Development Time Line 5.3 Development Expenses

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


6 Management 6.1 Company Organization 6.2 Management Team 6.3 Management Structure & Style 6.4 Ownerships 6.5 Board Of Directors 7 Operations 7.1 Operations Strategy 7.2 Scope of Operations 7.3 Ongoing Operations 7.4 Location of Offices 7.5 Personnel 7.6 Operational Expenses 7.7 Legal Environment 7.8 Credit Policies 8 Financial 8.1 Start Up funds Requirements 8.2 Financial History 8.3 Current Financial Position of group 8.4 Operating Forecast 8.5 Break Even Analysis 8.6 Projected Balance Sheet 8.7 Income Statement 8.8 Cash Flow 8.9 Capital Requirements 8.10 Risks & Opportunities 8.11 Mode & mechanism of raising capital 9 Appendix

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


Statement of Confidentiality & Non Disclosure This document contains proprietary and confidential Information. All research and data submitted is confidential. Executive Summary
There're many pickings in the market today as a result of High Inflation rates above 12% and the gloomy economic climate. Market values have been shaved off more than 50% for certain sectors. So investors who do their homework will certainly find bargains. Share financing accounts of Share Financing Company shall offer the power to take advantage of those buying opportunities. Share Margin Trading through such account provides a credit line to investor to invest in stocks and shares using cash and/or marginable shares as collateral. It provides him with the benefit to increase his share purchasing power as it leverages on his existing portfolio of shares

Business Description and Operative Procedure
Proactive is a diversified group engaged in core sectors of Indian economy. Its Management team combines vast international and local expertise which allows the group to implement best international practices within the local environment across various businesses. While the group started as a Real Estate company but with the growing Indian economy its participation in other core sectors such as IT, BPO and Financial services was inevitable. The group has plans to leverage its experience in real estate as an investor, manager and advisor to other core sectors such as infrastructure wherein the group plans to source and secure environmental friendly and efficient technology in core sectors such as energy. The Group's vision is to have product and services which are globally competitive and be partner of choice for its stake holders. We are a group of growing Financial Service companies serving the financial needs of all our customers with wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services.

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Helping Corporate to mobilize equity capital from multilateral agencies/private equity funds/portfolio investors/FCCB/GDRs Locating suitable partners for JV’s, business alliances, takeovers and strategic alliances. While providing complete support in business due diligence, Techno Commercial and shareholders agreements. Debt syndication

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


Providing financial engineering and in particular financial structuring support to Corporate The Group already has one company named ,MSB which is a Boutique Broking House that focuses on customer needs of product & services which include the following :       Retail broking in capital markets and Derivatives for Two largest equity stock exchanges in India i.e. National Stock Exchange & Bombay Stock Exchange ( MSB individual companies have membership). Retail commodity broking for two largest commodity broking exchanges in India I.e. NCDEX & MCEX (MSB is a participating member). E-trading and Virtual private network (VPN ) access for broking and advisory. Depositary Services & Demat services Research Backed guidance and investment advisory for HNI portfolio management and other investments. Personalized investment advise through trained relationship managers. We are present in all major metropolitan cities

A share and stock financing company will be a need of the hour addition to this Group, extending financial assistance to an intelligent investor through Share financing accounts Share Financing Account allows a client to maximize his purchasing power. To open a Share Financing Account, one only needs to place a minimum cash deposit of fixed sum say Rs 25000/or deposit of equivalent worth of margin able securities and thereafter he can enjoy the following benefits:          Attractive financing margin of - up to 60% for marginable stocks and shares A wide range of marginable stocks and shares quoted on the NSE/BSE Exchange Financing based on the current market value of marginable stocks and shares Comprehensive monthly statements with details of securities held and transactions done Total convenience as all settlements are handled for him Increase in investment power of up to 3.5 times Competitive interest rate of 1% above Bank Prime rate at daily rest Earn interest on unutilized credit balances Convenience of using the account via internet or mobile phone

The requirements   One must be an Indian Citizen or Permanent Resident and at least 21 years old and qualify to enter into agreement as per the Indian Contract Act. A minimum annual income of Rs 300000/-(Variable and advisable )

A minimum initial deposit of Rs 250000/- in cash, stocks and shares or a combination of both

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


Procedure 1. Open a Share Financing Account 2. sign and submit the , Individual or corporate account opening forms ( Format already available with MSB) with supporting documents 3. Submit Transfer of Securities form - for pledging of securities as collateral ( If Required)Submit Additional supporting document.  A copy of your latest BSE/NSE Statement of Securities Holdings (if any)  A copy of your annual income tax assessment generated by Income Tax Department or half-yearly Bank statement generated by Bank or statements generated by a financial institution 4. Corporate Accounts For Corporate account following extra documents may be needed:  Certificate of Incorporation  Certified True Extract of Directors Resolutions of the Company  Memorandum and Articles of Association  RC instant information print-out dated less than 2 weeks Others (as requested by our Company where applicable) All documents have to be certified true copy by: (i) (ii) (iii) (iv) 2 Directors of the company; or A Director and Secretary of the company; or Notary Public Commissioner for Oath


Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


5. Trading One can start trading when he has put up the initial collateral with the Company. He can put up either cash or marginable securities as collateral. If the initial collateral is in the form of marginable securities, the he has to wait until his shares are transferred to Company account . This normally may take about 2 to 3 days. 6. Deposit of cash or securities as collateral in the Share Financing Account

Type of Collateral Cash Share

Collateral Value Rs 25000 Rs 200000

Available Fund For Purchasing Rs 87500 Rs500000

Number of times of Collateral 3.5 Times 2.5 Times

a) Cash as Collateral: Illustrative example:Assumption: The client provides a cash deposit of Rs 5,000 and buys Rs17,500 worth of shares The market value of the purchased shares equals to total cost of the purchases (unit price per share is the same) Total market value of shares purchased) / Cost of shares purchased - Cash collateral) Margin % = Rs17, 500 / (Rs 17,500 – Rs 5,000) = 140% b) Securities as Collateral: Illustrative example: Assuming that client deposited share collateral valued at Rs 20,000 and the market value of the purchased shares is equal to the total cost of purchases at Rs 50,000 Total market value of share portfolio (including collateral) / Amount Owing in Share Financing Account) Margin % = (Rs 20,000 + Rs 50,000) / Rs 50,000 = 140% 7. Margin Calls when the market value of the portfolio of shares in Share Financing Account falls. If the margin % falls below 140%, you will face a Margin Call. When the margin % falls below 140%, you will be requested to deposit additional cash, marginable securities or sell shares in the existing portfolio within 2 days to bring the margin % back to at least 140%. When the margin % falls below 130%, you are required to deposit additional cash, marginable securities on the same day of notification and bring margin % back to at least 140%. Failing that, the Company will have to liquidate your margin shares immediately to bring the margin % to at least 140%. The Company may do so in compliance of the covenants of the agreement and form executed by you, without notifying you.

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


8. Meeting The Margin Call When a client receives a margin Call he can either deposit additional cash, marginable securities or sell shares in his existing portfolio to meet any margin call. 9. Calculating margin Call amount

For instance: Total market value of share portfolio = Rs 70,000 Amount Owing in Share Financing Account = Rs 50,000 Margin Percentage = 140% Assuming that the market value of shares drops from Rs 70,000 to Rs 65,000, the margin percentage will become 130% (i.e. Rs 65,000 / Rs 50,000). The amount to top up is calculated below: Cash top up = 1.4 Loan – Share Value / Margin % = Rs 65,000 x 100 % / 1.4 = Rs 70,000 – Rs 65,000/1.4 = Rs 3,571

Rs 50,000 – Rs 3,571 = 140%

The amount of top up using share collateral: Cash top up x 1.4 = Rs 5,000 The value of shares that needs to be liquidated: Cash top up x 3.5 = Rs 12,500
10. Statements on transactions

Every client is sent monthly statements showing his share transactions, shareholdings and net interest payable 11. Charges for the Share Financing Account The Share financing company may charge for the various services provide as per lis below which is not exhaustive but suggestive       
13. Deposit of securities as collateral into Company’s Account Withdrawal of securities from Company’s Account into customer's securities account. Withdrawal of securities from Company’s Account to other financial institutions

Dividend Processing Fee
Rights Issue Processing Fee Maintenance Fee Custodian Fee for foreign securities held with Company’s Shares Trading in the Company’s Share Financing Account

One can buy all securities quoted on the NSE/BSE Exchange and selected securities quoted on other Exchanges around the world . However, certain risk securities shall be given zero value or a value lower than its full market value. 14. Charged interest rate

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


The interest rate payable starts from as low as 1% above RBI Prime Lending Rate and charged on due date of your purchase on a daily basis
15. Interest on unutilized funds in the Share Financing Account

The interest (as agreed) will be computed based on a rate determined at the beginning of each month at daily rest. 16. Exit Procedure or Closure of Share Financing Account One can withdraw shares from his Share Financing account when his margin % is greater than 140%. The value of the shares that can be withdrawn is determined as follows: -

Illustrative example 1 Lest us say that sample loan portfolio details are as follows: Collateral Shares (a) Market value of shares traded ( b ) Total market value of share portfolio ( a ) + ( b ) Amount Owing in Share Financing Account = RS.100,000 = RS.230,000 = RS.330,000 = RS.200,00

Value of withdrawn shares = Market value of shares-1.4(amount owing) = RS.330,000 – 1.4 (RS.200,000 ) = RS.62,000 Alternatively, one can withdraw the net proceeds when he sell shares, day following the due date of the sale transactions. However, one must maintain a margin % of at least 140% after the cash withdrawal. Illustrative example 2: Assuming that a sale of Rs 30,000 has been executed and one had also toped up his account with cash of Rs 14,000 2 days ago to meet margin requirements. The market value of his portfolio remains unchanged, his margin percentage one-day following the due date of the sale will be as follows:Market value of portfolio / (Amounting owing + sales proceeds + earlier cash top up) Margin % after withdrawal = Rs.300, 000 / (Rs.170, 000 + 30,000 + 14,000) = 140% One can also withdraw cash when there is credit balance in your account. Your account will have a credit balance when the value of your sales proceeds exceeds your loan amount and the accrued interest.

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


The service Share financing service means providing cash against a collateral security of Shares in electronic form or hard copies. The activity of finance is the application of a set of techniques that individuals and organizations (entities) use to manage their money, particularly the differences between income and expenditure and the risks of their investments. Against electronic stock security or a stock certificate, a printed document which states the name, incorporation state, and date of incorporation, the registered number of the certificate, the number of shares of stock in a corporation the certificate represents, the name of the shareholder, the date of issuance, and the number of shares authorized in the particular issue of stock, signed by the President and Secretary of the corporation (or with facsimile signatures). On the reverse side of the certificate is a form for transfer of the certificate to another person. After transfer the new owner should register the change of ownership with the corporation The lender can find a borrower, a financial intermediary, such as a investor or trader in the stock market or buy shares in the stock market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.

Setting up a Share Financing Company: Dr Rakesh Saxena Advocate, Wednesday, July 30, 2008


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