Assignment – A
Q1. What do you do you understand by the term “Credit Rating Agency”? Explain there major function?
Q2. What do you mean by Book -Building? Explain the types of Book-Building?
Q3. What do you mean by hire purchase?
Q4. What do you mean by Consumer Credit? Explain the types of Consumer Credit?
Q5. What do you understand by Venture Capital? Explain the scope of Venture Capital?
Assignment – B
Q1. What do you mean by Financial Services? Mention in brief following types of financial services?
Q2. What do you mean by Initial Public Offer? Explain the different type of entry norm to make an IPO?
Q3. What do you mean by Leasing? Explain the different type of leasing?
CASE STUDY
HSBC’s Restructuring in India
Period: 1999-2004 Organization: HSBC India Pub Date: Countries: India Industry: Banking
Abstract:
The case discusses the operations of HSBC Group in India and the measures taken by HSBC India in recent times to achieve a faster growth.
It discusses in detail the reorganization program launched by Booker, the CEO of HSBC India to transform the conservative institution into an aggressive, performance-oriented one.
The case discusses in detail various internal reorganization measures including the introduction of new work principles, downsizing, organizational reshuffling and greater focus on potential growth areas.
Background
The Hong Kong and Shanghai Banking Corporation Limited (HSBC) entered India as early as 1959. Despite being one of the oldest and well-established foreign banks, HSBC had been lagging behind local private sector banks and other foreign banks in India in terms of business network and growth. HSBC’s competitors and industry experts regarded it as a conservative bank that lacked competitive spirit.
Commenting on HSBC, the head of direct sales of one of its rival banks said, “HSBC isn’t seen as being as aggressive as its rivals in the market. It has extremely good relationships with its branch customers and serves them very well, but it is just not seen as being aggressive in the rest of the market.” HSBC’s complacency was reflected in the bank’s financial performance.
Local private sector banks like ICICI and HDFC were far ahead of HSBC in all business segments. When benchmarked against foreign banks, HSBC fared badly. HSBC’s net profits fell by over 25 per cent for two consecutive years in the fiscal 2000-01 and 2001-02, while rival banks like Citibank [3] posted a rise of 37 per cent in profits for the same period.
On November 2002, Niall S K Booker (Booker) was appointed Group Manager and Chief Executive Officer (CEO) of the HSBC Group in India.
Booker soon realized that HSBC India followed a conventional approach to doing business and retained its old bureaucratic structure and culture. He believed that the much criticized laidback work culture was the reason for the lacklustre financial performance of the bank.
Booker decided to transform the bank’s work culture so that HSBC could shed its bureaucratic and conservative image and gear up to face new challenges. He wanted HSBC India to be proactive and aggressive like its competitors.
To achieve this, Booker concentrated on giving the bank a new direction by launching a major restructuring program.
HSBC is a leading global player in the banking and financial services industry. It is the third largest bank in the world in terms of market capitalization it provided a comprehensive range of financial services, namely, personal financial services, commercial banking, corporate investment banking, private banking and other related businesses. HSBC was established in 1865 to finance the growing trade between Europe, India and China. Scotland-born Thomas Sutherland (Sutherland), who worked for the Peninsular and Oriental Steam Navigation Company, established the bank.
He found that there was considerable demand for local banking facilities in Hong Kong and on the Chinese coast. Sutherland established a bank in Hong Kong in March 1865, and another in Shanghai after a month. The banks’ headquarters were at Hong Kong.
Soon, the bank opened branches around the world. The emphasis continued to be on strengthening the presence in China and the rest of the Asia-Pacific region. By the end of the century, HSBC emerged as the foremost financial institution in Asia.
World War I (1914-1919), however, brought disruption and dislocation for many businesses. The 1920s saw a revival with HSBC opening more branches. During World War II (1941-1945), the bank was forced to close many branches and its head office was temporarily shifted to London. After the war, the headquarters was shifted back to Hong Kong.
The post-war political and economic changes in the world compelled the bank to analyze and reorient its strategy for continued business growth. The acquisition of the Mercantile Bankand the British Bank of the Middle East (BBME) in 1959 laid the foundation for the present day HSBC Group
HSBC’s origins in India could be traced back to October 1853, when the Mercantile Bank of India, London and China was established in Mumbai.
Starting with an authorized capital of Rs 5 mn, the Mercantile Bank soon opened offices in London, Chennai (India), Colombo, Kandy, Kolkata (India), Singapore, Hong Kong, Canton and Shanghai.
In the next 10 decades, the Mercantile Bank steadily expanded its geographical network and service offerings, keeping pace with the evolving banking and financial needs of customers. The Mercantile Bank was acquired by the HSBC Group in 1959. The head office of Mercantile Bank at the Flora Fountain building in Mumbai continued to be the head office of the HSBC Group in India.
In the 1970s, HSBC decided to expand by acquisition and formation of its own subsidiaries. HSBC introduced India’s first automated teller machine (ATM) in 1987. In 2001, HSBC opened the first bank branch in Pune (Western India) that remained open all 365 days a year.
On his appointment, Booker’s approach was to focus on fine-tuning and executing existing strategies, rather than experimenting with new plans. He intended to take it slow and steady without radical changes.
He said that “the people issue” was very important to him. Therefore, the key components of the restructuring programmers included introducing new work principles, downsizing, organizational reshuffling and focus on new growth areas.
New Work Principles
HSBC’s work culture was considered most bureaucratic among all foreign banks in India. Reportedly, the top management had a laid-back attitude towards work. An insider said, “There is a bunch of people at the top who aren’t very competent and who all play golf together. It is basically an old boys’club.
The impact of the restructuring programme was reflected by the improved financial performance of HSBC (Refer Exhibit IV and V for the financial highlights of HSBC).
For the financial year 2003-04, the assets per employee and net profit increased by 30 per cent; operating profit by 31 per cent and cost-to-income ratio came down from 47 to 43 per cent compared to the fiscal 2002-03. Personal financial services accounted for 36 per cent of total advances, against 31 per cent in the previous fiscal.
HSBC’s retail assets doubled during this period from around a fourth to a third of its total assets. HSBC expected that the retail business would grow by 40 per cent in the fiscal 2004-05. Home loans business grew by 100 per cent; and the branches’ contribution comprised 30 per cent
Notwithstanding the benefits reaped from the restructuring, HSBC was still a small player in several financial services businesses including asset management, home loans, stock broking, credit cards and retail banking in India.
For instance, HSBC Asset Management (India) Private Ltd. launched in December 2002, had total assets under management amounting to Rs 540 bn by June 2004. Still, it was only the 10th largest asset management company (AMC) in India. The slow growth of advances was another problem for HSBC.
In the financial year 2003-04, HSBC’s loan disbursals grew by just 4.67 per cent over the financial year 2003 while for the same period, its competitors like Standard Chartered and Citibank loan disbursals grew by 44 per cent and 11 per cent respectively. Moreover, in spite of improved financial performance, the changes introduced by Booker did not go well among top managers.
Question to review:-
Q1: The need for old and well-established organizations to change their outlook and the way they operate along with the changing times so as to compete with smaller, nimble-footed competitors successfully
Q2: Examine the restructuring program implemented by HSBC India to revive its financial performance
Q3: Critically analyze the strategies adopted by Niall SK Booker to make HSBC India an aggressive, performance-oriented organization
Q4: Chart a growth strategy for HSBC India in the near future
Assignment – C
Q1. Approval from which body is required to start Factoring in India ?
a)Central Government
b)State Government
c)State Bank of India
d)Reserve Bank of India
Q2. How can Factoring help a Business ?
a) Cash Inflow
b)Low Costing
c)Bad Debts Recovery
d)Increase Sales
Q3. Who is a Factor ?
a)Buyer
b)Seller
c)Agent of Buyer
d)Agent of Seller
Q4. What kind of agreement do Factoring deals with ?
a)Cash Sales of Goods
b)Cash Sales of Fixed Asset
c)Credit Sales of Goods
d)Credit Sales of Fixed Asset
Q5. An Invoice is valued at Rs.10,000 & the seller received Rs.9000.
So what is the Advanced Rate in consideration with Factoring ?
a)9 %
b)10 %
c)90 %
d)100 %
Q6. Book Building is a
(a) method of placing an issue
(b) method of entry in foreign market
(c) price discovery mechanism in case of an IPO
(d) none of the above
Q7. “Sell Reliance Petro Shares at Rs 60” This order is a
(a) Best rate order
(b) Limit order
(c) Discretionary order
(d) Stop Loss Order
Q8. Stock exchange helps in
(a) fixation of stock prices
(b) ensures safe and fair dealing
(c) induces good performance by the company
(d) all of the above
Q9. Issue Management is a system under which concept of Management?
a)Human Resource Management
b)Financial Management
c)Project Management
d)System Management
Q10. ___________ refers to the process of generating, capturing and recording investor demand for shares during an IPO (or other securities during their issuance process) in order to support efficient price discovery.
a)Book building
b)Book keeping
c)Booking
d)Recording
Q11. What are the two types of obligations of merchant banker in issue management?
a)Ex issue and pre issue
b)Pre issue and next issue
c)Pre issue and post issue
d)Post issue and next issue
Q12. The company shall ensure that:
a) The letter of offer, the public announcement of the offer or any other advertisement, circular, brochure, publicity material shall contain true, factual and material information and shall not contain any misleading information and must state that the directors of the company accepts the responsibility for the information contained in such documents.
b) the company shall not issue any shares including by way of bonus till the date of closure of the offer made under these regulations
c) the company shall pay the consideration only by way of cash
d) All the above
Q13. What is IPO?
a) INITIAL PUBLIC OFFER
b) IN THE PUBLIC OFFER
c) INITIAL POSTAL OFFER
d) INTERNAL PUBLIC OFFER
Q14. Forex market deals with
(a) multi currency
(b) only domestic currency
(c) none of the above
Q15. The _____________ of a company is the maximum amount of share capital that the company is authorized by its constitutional documents to issue to shareholders.
a)Authorized capital
b)Issued capital
c)Reserve capital
d)Paid up capital
Q16. The type of lease that includes a third party, a lender, is called:-
a.) Sale and leaseback
b.) Direct leasing arrangement.
c.) Leveraged lease.
d.) Operating lease.
Q17. Medium-term notes (MTNs) have maturities that range up to ?
a.) one year.
b.) two years.
c.) ten years
d.) thirty years (or more)
Q18. The term of the lease may be ?
a) Fixed
b) Periodic
c) Infinite Duration.
d) ANY OF THE ABOVE
Q19. Mutual funds are valued with help of their
(a) NAV’s
(b) NFO
(c) IPO
(d) None of the above
Q20. The SEBI __________lays down the overall regulatory framework for registration and operations of venture capital Funds in India.
a) The SEBI (Venture Capital Funds) Regulation, 1996[Regulations].
b) GUIDELINES.
c) NORMS.
d) RECOMMENDATIONS.
Q21. Right issue is:
(a) issue of securities by issue of prospectus to the public
(b) Securities are issued through some selected investors.
(c) Selling securities in the primary market by issuing rights to the existing shareholders.
(d) None of the above
Q22. Private placement has following advantage:
(a) Flexibility and high cost
(b) Accessibility and speed
(c) High cost and speed
(d) Speed and complexity
Q23. Book Building Process is completed with the help of a
(a) Book runner
(b) Underwriter
(c) Registrar
(d) Lead manager
Q24. What is FVCIs?
a) Foreign Value Capital Investors.
b) For Venus Capital Investors.
c) Foreign Venture Capital Investors
d) Foreign Venture Capital Institution.
Q25. Venture capital (also known as VC or Venture) is a type of _____ capital?
a) private equity .
b) Reserve.
c) Preference.
d) None of the above.
Q26. Total amount of called up share capital which is actually paid to the company by the members is called
(a) Subscribed capital
(b) Called up capital
(c) Paid up share capital
(d) None of the above
Q27. A shares par value is Rs 10 but it is issued at Rs 20 , then extra amount over par value is called
(a) Coupon
(b) Interest
(c) Premium
(d) None of the above
Q28. “Bad news about a company can pull down its stock prices”. This is called
(a) Market risk
(b) Non market risk
(c) Interest risk
(d) Callable risk
Q29. Debt/Income funds invest in
(a) Tax saving schemes
(b) Money Market Instruments
(c) High Rate fixed income bearing instruments
(d) Both debt and equity
Q30. Mutual Funds investor can not earn following return
(a) Dividend
(b) Capital Gain
(c) Increase in NAV
(d) Fixed interest earning
Q31. When approaching a VC firm, consider their portfolio:?
a) Business Cycle: Do they invest in budding or established businesses?.
b) Industry: What is their industry focus?
c) Return: What is their expected return on investment?
d) All the above
Q32. Most venture capital funds have a fixed life of _____ years?
a) 10.
b) 20.
c) 30.
d) 40.
Q33. HIRE PURCHASE IS ALSO CALLED….?
b) PURCHASING.
c) CREDIT PURCHASE.
d) LEASING.
Q34. Balanced funds provide:
(a) Steady return
(b) High return
(c) Increase volatility
(d) None of the above
Q35. Stock exchanges should ensure:
(a) Active trading and insider information
(b) Active trading and transparency
Which of the following is true?
(a) Both a and b
(b) Only b
(c) Only a
(d) Neither a nor b
Q36. Merchant bankers do not indulge in following activities
(a) Drafting of prospectus
(b) Appointment of Registrar
(c) Selection of Promoter
(d) Arrangement of underwriter
Q37. Private placement reduces ________________________ of public issue:
(a) Cost
(b) Subscription
(c) Issue size
(d) None of the above
Q38. Every hire-purchase agreement shall state.
a) The hire-purchase price of the goods to which the agreement relates.
b) The date on which the agreement shall be deemed to have commenced.
c) The goods to which the agreement relates, in a manner sufficient to identify them.
d) All the above.
Q39. A person must be at least ___ years of age to enter into a valid hire purchase.
a) 21.
b) 30
c) 18
d) 15.
Q40. Preference shares means which fulfill the following two conditions
a) It carries preferential rights in respect of dividend at fixed amount and fixed rate
b) It does not carry preferential rights in regard to payment of capital on winding up .
WHICH ONE OF THESE IS TRUE:
(a) Both a and b
(b) Only a
(c) Only b
(d) Neither a nor b.