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Delisting Of ICICI Securities : Reasons and Brief Explanation
Ever heard of a company delisting itself from the stock market on purpose? That is precisely what is happening to the ICICI Securities. In March 2024, the minority shareholders showed their support by voting in favour of ICICI Securities’ delisting, and to merge with its parent company, ICICI Bank. But before you jump to conclusions, this was not bad news. It was a strategic move by ICICI Bank to simplify its structure and create a more robust financial force.

In this blog, we will explore the reasons behind the proposed delisting of ICICI Securities, the process, and how this decision could benefit both ICICI Bank and its shareholders.

ICICI Securities – Brief

ICICI Securities is a listed company founded in 1995 as ICICI Brokerage Services Limited and is a subsidiary of ICICI Bank. The company embraced technology and launched a revolutionary online brokerage platform, ICICIdirect.com, in 2000 and pioneered online investment opportunities in mutual funds and government bonds. It expanded its reach through physical ICICI direct branches across India in 2005 and diversified services by offering health and life insurance products by 2006. The company name was officially changed to ICICI Securities in 2007.

On November 9, 2023, the Reserve Bank of India approved ICICI Bank’s request to establish full ownership of ICICI securities. About 71.9% of the brokerage’s minority shareholders approved the delisting, which is higher than the regulatory requirement of a two-thirds majority.

The ICICI Bank is offering 67 shares of ICICI Bank for every 100 shares of ICICI Securities held by the shareholders. However, there was some disagreement among investor groups. Institutional shareholders, who have a more significant stake, supported the delisting, while some retail investors opposed it.

Additionally, the Quantum Asset Management Company (QAM), with a 0.21% stake in ICICI Securities, voted against the deal. According to QAM, ICICI’s offer for the stake is undervalued. It should be priced at approximately INR 940 per share, considering the lowest multiple among its comparable peers in the market. This valuation is significantly higher than the current offer on the table by the ICICI Bank.

Why Retail Investors are not in favour of Delisting

A few Retail Investors are opposing the delisting of ICICI Securities because of the Swap Ratio concern:

Swap Ratio Concern – Retail investors felt that the exchange rate offered by ICICI Bank (67 shares of ICICI Bank for every 100 shares of ICICI Securities) undervalued the ICICI Securities. They believe that their holdings are worth more than the offered price, and the swap ratio would not translate to the same potential growth as holding separate stocks.

If you’re not familiar with Swap Ratio, it refers to the exchange rate at which shares of the acquiring company (ICICI Bank in this case) are offered for shares of the target company (ICICI Securities). It establishes the percentage of ownership a target company shareholder will receive in the new or surviving company.

Read Also: Delisting Of ICICI Securities : Reasons and Brief Explanation

Reasons for Delisting of ICICI Securities

ICICI Securities is proposed to become a wholly-owned subsidiary of ICICI Bank, which would give ICICI Bank complete ownership and control over ICICI Securities.

The Bank believed that merging the two entities would improve efficiency and allow it to offer a broader range of financial products and services under one roof. The Delisting would also allow for streamlining operations and decision-making processes within the bank.

Delisting – An Overview

The Delisting refers to removing a company’s stock from a stock exchange, i.e., NSE and BSE in India. This means the stock can no longer be traded on an exchange. The companies might delist their shares for several reasons, such as mergers and acquisitions, non-compliance with listing requirements, financial distress, etc. Generally, the delisting can be classified as voluntarily or involuntarily.
- Voluntary Delisting
  A company might choose to go private or get acquired by another company. In this case, the company will generally offer shareholders a way to sell their shares before the delisting happens. ICICI securities is a case of voluntary delisting.
- Involuntary Delisting
  This happens when a company does not follow the stock exchange listing requirements. There are different requirements a company needs to meet to stay listed, such as maintaining a specific price or filing several reports on time. The exchange can delist, if a company does not meet the listing requirements.
You must wonder what happens to the shares after the company is delisted, particularly in case of Involuntary delisting. Even though delisting makes things trickier, you still own a stake in the company, as indicated by your shares. Let’s have a quick overview:
- Once the company is delisted, you can no longer trade it on the stock exchange. This significantly reduces liquidity, meaning finding a buyer for your shares might be challenging.
- You might be able to sell your shares on the Over the counter (OTC) market, which is essentially a network of dealers who trade securities outside of exchanges. However, OTC markets are less regulated and generally have wider bid-ask spreads than the stock exchange.
- Shareholders might find it challenging to sell their shares as there may be limited buyers in the OTC market.
- In case of voluntary delisting, the acquirer provides the buyback window. The shareholders can sell their holdings to the promoters before delisting.
Read Also: ICICI Bank Case Study: Financials, KPIs, Growth Strategies, and SWOT Analysis

Conclusion

The delisting of ICICI Securities will mark a turning point for the company and ICICI Bank. While some retail investors expressed concerns, the goal is to create a more efficient financial institution. Only time will tell the impact of this strategic move. The company may be delisted, but the decision positions them for future growth as a part of a stronger financial entity.

Additionally, the delisting will pave the way for a more streamlined and competitive financial giant. This could be a positive development for ICICI Bank and the Indian financial landscape. Also, SEBI is currently reviewing multiple complaints regarding the delisting. Upon the collection of substantiated evidence, the SEBI will initiate an investigation. The actions that SEBI may take remain uncertain.

Frequently Asked Questions (FAQs)
1. Why ICICI Securities is getting delisted?
  The purpose of delisting is to simplify ICICI Bank’s structure, and achieve better integration between the two entities.
2. Did ICICI Bank take this decision because of the poor performance of ICICI Securities?
  No, it was a strategic decision to delist ICIC Securities, and not due to negative performance of the company.
3. Did everyone agree with the delisting?
  The institutional investors favoured the delisting; however, a few retail investors opposed it.
4. What will happen to the shareholders of ICICI Securities?
  The shareholders of ICICI securities will receive the ICICI Bank shares in exchange for their holdings.
5. Will this delisting affect the stock price of ICICI Bank?
  The long-term impact remains to be seen, but the move overall aims to strengthen the banking operations.

May 15, 2024

Jio Financial Services: Business Model And SWOT Analysis

Did you know there is a recently listed company that is the country’s third biggest NBFC after the Bajaj twins, i.e., Bajaj Finance and Bajaj Finserve? It is the new kid on the block with the backing of Reliance Industries Limited (RIL), as it is RIL’s newly carved out Entity. We are talking about Jio Financial Services Limited (JFSL).
In this blog, we will talk about its Jio business model and SWOT analysis.

Jio Financial Services – Introduction

Reliance Industries Limited (RIL) demerged its financial services company, Reliance Strategic Investments Ltd (incorporated in 1999), and renamed it as Jio Financial Services Limited (JFSL). The Jio Financial Services aims to provide simple, affordable, and innovative digital-first solutions.

JFSL is positioned uniquely to play a crucial role in transforming the landscape of digital finance in India. It is a non-banking financial company. As of 13 May 2024, the market capitalization of Jio Financial is almost INR 2.2 lakh crores. It is one of the top 40 Indian companies by market capitalization, in a list headed by Reliance at INR 19 lakh crores. The company debuted on the stock exchanges on August 21, 2023. The company’s initial listing price was INR 265 per share on the BSE and INR 262 per share on the NSE, and currently trading at INR 341 (as of 13 May 24)..

Jio Financial Services Business Model

The company is a holding company that operates its Jio financial services business model through its consumer-facing subsidiaries, Jio Finance Limited (JFL), Jio Insurance Broking Limited (JIBL), and Jio Payment Solutions Limited (JPSL), and joint venture namely Jio Payments Bank Limited (JPBL).

Products

Lending: The company offers personal loans for salaried and self-employed individuals through MyJio app. Further, the company has also launched consumer durable loans across 300 stores in India.

Insurance Broking: Established partnership with 24 insurance companies (Life – 5, General – 15, Health – 4) offering a wide range of products such as General, Life, Auto Insurance, Health Insurance, Embedded insurance, corporate solutions & employer-employee benefits.

Payments Bank: It provides services such as bill payments, money transfers, etc. It has an on-ground network of over 2,400 business correspondents.

Products in the pipeline: There are several products in the pipeline such as Business and merchant loans for self-employed individuals, sole proprietors, and small business entities; Auto loans, Home loans, and loans against shares.

Competitive Landscape

Non-Banking Financial Companies (NBFCs) in India are characterized by oligopoly competition. An oligopoly is an industry where a small group of large companies have a dominant position, giving them more market control and pricing power than the other companies.

Jio Financial Services SWOT Analysis

Strengths

Jio Financial Services Limited (JFSL) has the potential to be a game changer in the Indian market for several reasons. It is a part of Reliance, which has a well-established brand presence that drives trust and recognition.
1) JFSL has the backing of Reliance Industries, one of the largest conglomerates in India. This gives JFSL access to a vast pool of resources, including capital, talent, and technology.
2) JFSL is focused on providing financial services to underserved segments of the population, such as small businesses and low-income households. This is a large and growing market that is ripe for disruption.
3) A 50:50 joint venture between Jio and Blackrock will combine BlackRock’s scale and investment expertise with Jio Financial Services’ knowledge and resources to deliver affordable, innovative investment solutions to millions of investors in India.

Weakness

The company is relatively new; although they are backed by Reliance Industries Limited, it is still in the financial industry, so building trust can be challenging for them.
Due to its extensive product portfolio, it may encounter difficulties in effectively managing and allocating resources to it.

Opportunities

Today’s India is adopting digital finance at a fast pace and the digitalization has penetrated every corner of the nation through Jan Dhan accounts, digital payments, usage of smartphones, and low-cost data. The growth opportunities presented by financial services are remarkable and provide strong directional support to the economy.

Favorable demographics: 450 million working people and the 12th largest population of high-net-worth individuals (HNIs).
Increasing user activity: Higher consumption and digitalization will fuel the growth. As per several estimates, India to become a USD 10 trillion economy by 2035.

Threats

The business operates in an Oligopoly market where few big players have the controlling power to dictate price and the competition.
Their margins may be impacted by regulatory changes made by the Indian government as it is highly regulated.
Economic growth may affect consumers’ spending and saving patterns, which in turn will affect the company’s profitability.

Jio Financial Services Financials

Let’s have a look at the financials of Jio Financial Services Limited.

Profit and Loss Statement (INR crore)

Particulars	Mar-23	Mar-24
Sales	45	1,854
Expenses	6	296
Operating Profit	39	1,558
OPM %	88%	84%
Other Income	10	429
Interest	–	10
Depreciation	–	22
Profit before tax	49	1,956
Tax %	37%	18%
Net Profit	31	1,605

Balance Sheet.

Particulars	Mar-23	Mar-24
Equity Capital	2	6,353
Reserves	114,118	132,794
Borrowings	743	–
Other Liabilities	66	5,715
Total Liabilities	114,930	144,863
Fixed Assets	158	175
CWIP	38	–
Investments	108,141	133,292
Other Assets	6,593	11,396
Total Assets	114,930	144,863

Shareholding pattern

Particulars	Sep-23	Dec-23	Mar-24
Promoters	46.77%	47.12%	47.12%
FIIs	21.58%	19.83%	19.45%
DIIs	13.64%	12.99%	12.50%
Government	0.13%	0.14%	0.14%
Public	17.86%	19.92%	20.77%

From the above table, we can observe that FIIs and DIIs have reduced their shareholding over the last three quarters. In contrast, retailers have increased their shareholding.

Conclusion

In summary, JFSL’s stock price performance has been impressive and has shown an upward trajectory in recent months, reaching new record highs. The stock hit INR 394.70 in April 2024, an all-time high. Further, the company also reported stellar performance in FY 2024.

But it is important to note that the market and most of the stocks are at all-time highs, and there are major events lined up like Indian Elections, Budgets, and then US Elections. So, always consider your risk tolerance and time horizon before making any investing decision.

S.NO.	Check Out These Interesting Posts You Might Enjoy!
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Frequently Asked Questions (FAQs)

What is the old name of Jio Financial Services Limited (JFSL)?
JFSL was initially incorporated as Reliance Strategic Investments Private Limited in 1999.
What products do Jio Financial Services offer?
The company is a holding company that operates its financial services business through its consumer-facing subsidiaries, Jio Finance Limited (JFL), Jio Insurance Broking Limited (JIBL), and Jio Payment Solutions Limited (JPSL), and joint venture namely Jio Payments Bank Limited (JPBL). These subsidiaries offer services such as lending, insurance broking, payments bank, etc. Further, JFSL has multiple products in the pipeline.
What are the challenges for Jio Financial Services in the coming future?
JFS operates in a highly regulated sector; along with that, it will be affected by economic, interest rate fluctuations, repo rates, inflation rates, etc.
Is Jio Financial Services (JFS) a NBFC?
Yes, the JFS is a Non-Banking Financial Company (NBFC). NBFCs in India are highly regulated by the Reserve Bank of India (RBI).
Is Jio Financial Services a good investment?
The company’s future looks promising, but it is crucial to do thorough research before investing.

May 15, 2024

Breakdown of CTC: A Detailed Analysis

Did you know your take-home pay is only part of the picture? In India, CTC can be up to 30% more than your net salary. In this blog, we will explain why CTC is important and what it entails.

CTC – An Overview

CTC stands for Cost to Company. It refers to the total amount a company spends on an employee in a year, which includes the employee’s salary and all the benefits they receive. Benefits can include health insurance, housing allowances, and more.

To calculate CTC, you add the employee’s salary and benefits. For example, if an employee has a salary of INR 50,000 per month and the company pays INR 5,000 per month for his health insurance and other perks, then, the employee’s CTC would be INR 55,000 per month or INR 660,000 per year.

CTC differs from an employee’s net salary (the amount they take home). Taxes and other deductions are reduced from salary.

Breakdown of CTC

Basic Salary

This is the fixed amount of money an employee receives before any allowances or deductions. It forms the core of your take-home pay and is subject to income tax.

Allowances

These are monetary benefits provided by the company to help cover employee expenses. There are numerous allowances; some of the key allowances are:

1. House Rent Allowance (HRA)

HRA is a part of your CTC that helps offset the cost of renting a house. It is a monetary benefit, and under certain conditions, it is partially exempt from income tax.

Here is an explanation of HRA:

HRA helps employees manage their rental accommodation expenses. The lowest of the following is the tax-exempt amount-
- HRA received from the employer.
- 50% of your base salary if you live in a metro city or 40% if you live in a non-metro city.
- Actual rent paid less than 10% of your base salary.
However, there are certain conditions for exemption, which are as follows-
- You are required to be lodging in a rented space.
- You must have rent receipts as evidence of the payment.
- The landlord’s PAN card details might be needed (if rent exceeds INR 1 lakh annually).

Furthermore, HRA is unavailable if you live in your own house or company-provided accommodation.

2. Leave Travel Allowance (LTA)

LTA is another component of your CTC that falls under the allowance category. It is designed to partially reimburse your travel expenses incurred during your leave from work. Let us take a closer look at LTA:

It aims to provide financial assistance for domestic travel during your vacation or leave period.
LTA is exempt from income tax under certain conditions, allowing you to save on taxes.
The exemption is available for two journeys in a block of four years. The lower of the following amount is exempted-
- Actual travel expenses incurred.
- LTA amount offered by your employer.
- Deemed travel expenses, which are calculated based on your salary and travel class.
LTA covers your travel expenses for immediate family (spouse, dependent children, and sometimes dependent parents and siblings). The mode of travel can be bus, train, or economy airfare.

Generally, you must submit bills and travel documents to your employer to claim the LTA exemption.

Furthermore, LTA is meant for domestic travel within India. International travel expenses are not covered.

3. Conveyance Allowance

Conveyance Allowance, also known as transport allowance, is a part of your CTC that helps you cover the daily commuting expenses between your home and workplace and is partially exempt from income tax.

Let us take a closer look at the Conveyance Allowance:

The main objective of conveyance allowance is to offset the cost of commuting to and from work.
The amount of conveyance allowance that is exempt from income tax is limited. In India, the exempt amount is INR 1,600 per month or INR 19,200 per year.
You do not need to submit any bills or receipts to claim the exemption for conveyance allowance.

4. Dearness Allowance (DA)

DA is a component of your CTC designed to address inflation. It is a monetary benefit provided by the government or some private sector employers to adjust your salary for rising living costs.

Let us have a quick overview of the dearness allowance:

The purpose of DA is to compensate for inflation and help maintain purchasing power over time. As the cost of essential goods and services rises, DA helps bridge the gap and ensure your salary retains its value.
The calculation of DA can vary depending on the entity providing it.
In India, for government employees, DA is a percentage of their basic salary and is reviewed twice a year – January and July, depending on the Consumer Price Index (CPI).
Also, private companies might calculate DA using their internal procedures or guidelines.

Employer Contribution

These are indirect benefits where the company pays on the employee’s behalf, which include:

1. Provident Fund (PF)

Provident Fund (PF) is a type of retirement savings plan that can be either optional or mandatory, depending on the structure and particular work circumstances. The purpose of PF is to provide financial security for employees after retirement.
Both employers and employees contribute a fixed percentage of the employee’s salary towards the provident fund. The contribution rates can differ by country and employment type.
An authorized financial institution or a government agency invests the contributions, and the employee can withdraw the collected funds under certain circumstances, such as medical emergencies. Additionally, the employee can withdraw the entire accumulated amount and the interest received upon retirement.

There are two types of provident funds.

Employee Provident Fund (EPF) – A Provident Fund scheme for salaried individuals in India.
Public Provident Fund (PPF) – A voluntary PF scheme provided by the Government of India and is open to all citizens.

2. Gratuity

An employer makes a one-time payment to an employee as a token of appreciation for their service, specifically after completing a long tenure with the company. It is a compulsory benefit under India’s Payment of Gratuity Act, 1972.

Individuals are eligible for gratuity if they have completed five or more years of continuous service with the same company.

The gratuity amount is calculated using the following formula:

Gratuity = Last drawn salary * (15/26) * number of completed years of service.

The last drawn salary is your basic salary and dearness allowance.
15/26 is the factor that represents 15 days’ wages for each completed year of service.
Number of completed years of service include any portion of the year over six months, regarded as a full year.

Additionally, there is a maximum limit on the gratuity payable. The cap is INR 20 lakh, which means you will earn a maximum of INR 20 Lakh even if the calculated gratuity amount is higher, and a part of the gratuity amount is taxable.

3. Employee State Insurance (ESI)

ESI is a social security program offered by the Indian government to a few employees and is managed by the ESIC (Employees’ State Insurance Corporation).

The main objective of ESI is to provide medical and financial assistance to employees and their dependents in case of sickness, temporary, or permanent disability because of employment, maternity, or death due to employment injury.

ESI applies to employees working in factories and other businesses registered under the ESI Act.
There is a minimum salary threshold for coverage. As of April 2024, employees earning up to INR 21,000 per month are generally covered under ESI.

Employers contribute 4.75%, and employees contribute 1.75% (for wages below INR 137 per day, employee contribution is nil.)

Also, employers must register their company with ESIC if they meet the eligibility criteria.

Conclusion

To wrap up, a deep understanding of CTC is essential for anyone negotiating a job offer or evaluating a compensation package. Once you familiarise yourself with various components like allowances and employer contributions, you can get a clearer picture of the total value that you receive from your employer.

Frequently Asked Questions (FAQs)

What is a CTC?
CTC stands for the cost to the company. It is the total amount a company spends on an employee annually.
Why is understanding CTC important?
Knowing your CTC helps you understand the total value of your compensation package, which ultimately allows you to compare job offers more efficiently and negotiate your salary confidently.
What is the difference between CTC and take-home salary?
CTC is the total cost to the company, while your take-home salary is what you receive after taxes and other deductions from your CTC.
Does a higher CTC always mean a better job offer?
Not necessarily. A high base salary with fewer benefits might be better for some, while a lower base salary with great benefits might suit others.
Are there any taxes on CTC?
Taxes are levied on your take-home salary- a portion of your CTC after deductions.

May 14, 2024

Old Regime Vs New Tax Regime: Which Is Right For You?

You have put in a lot of effort and made money, but you’re not sure which tax regime to choose, the new or the old one.

Don’t worry; we’ve got you covered. Read the blog to get all the answers to your old and new regime related questions.

Overview of Income Tax Slab

A taxation system that applies to an individual based on their income and taxes them based on different slabs is referred to as an income tax slab. An individual’s tax slab rises in tandem with their income. This taxation system is regarded as fair and progressive because an individual’s tax liability rises with their income, and lower income groups are exempt from taxes.

The Ministry of Finance modify / update the tax slabs annually, and they are announced at each budget speech.

Tax Regimes in India

In India currently, there are two types of tax regimes, i.e., Old Regime and New Regime.

Old Tax Regime – Before 2020, India had just one tax system. Under the Old tax system, you could deduct a variety of expenses from your income, such as house rent, travel expenses, medical expenses, tuition fees for children, etc. This would help you minimize your income and lower your tax obligation.

In the Old regime, the slab was determined by an individual’s age. Have a look at the below table:

Income Slab	Tax Rate
Income Slab	Individuals aged <60 years	Senior Citizens aged above 60 but below 80 years	Super Senior Citizens aged >80 years
Up to INR 250,000	Nil	Nil	Nil
INR 250,001 to 300,000	5%	Nil	Nil
INR 300,001 to 500,000	5%	5%	Nil
INR 500,001 to 1,000,000	20%	20%	20%
Above INR 1,000,000	30%	30%	30%

New Tax Regime – The Ministry of Finance announced a new taxation system (optional) for individuals and Hindu Undivided Families (HUFs) in the budget of the financial year 2020–21. However, if a person chooses to use the new tax regime, they will not be eligible to deduct things like HRA, LTA, Section 80C deductions, and so on. In fact, no deductions are available in the new tax regime apart from the standard deduction of INR 50,000 for salaried individuals and pensioners. Because there aren’t many deductions available under the new regime, many don’t like it, and not many have chosen it after its implementation.

Income Tax Slab as per new regime

Income Slab	Tax Rate
Up to 300,000 INR	Nil
300,001 to 600,000 INR	5%
600,001 to 900,001 INR	10%
900,001 to 1,200,001 INR	15%
1,200,001 to 1,500,001 INR	20%
Above 1,500,000 INR	30%

Old Tax Regime Vs New Tax Regime

There are a few major differences between the old and new tax regimes. Let’s analyze each one of them:

Tax Rates

Under the old tax regime, tax rates are higher, but an individual can avail of various tax deductions in sections such as 80C, 80D, 80TTA, etc.
While the new tax system has reduced tax rates, it does not permit the use of the Income Tax Act’s deductions.

Simplicity

Although there are many ways to save taxes under the previous tax system, it could be challenging to engage in tax planning. Further, sometimes people end up spending / investing their savings only to avail certain deductions.
The new tax system offers a simpler tax calculation; however, individuals may lose out on deductions offered in the old tax regime.

Tax Implications

The previous tax system levied taxes based on an individual’s income and allowed deductions, which favored higher-income earners.
2.The new tax system mainly benefits those with lower incomes and those who don’t want to claim any deductions.

Example of Calculation under different Tax Regime

Let us clarify the differences between tax regimes using examples to help you better understand the difference.

Suppose Mr. A is a salaried individual who is earning an annual income of INR 800,000 (salary). Let’s calculate the tax liabilities of Mr. A under different tax regimes:

Old Tax Regime

Particulars	Tax under Old Regime (INR)
Salary	800,000
Less: Standard Deduction	-50,000
Taxable Income	750,000
Tax up to 250,000	Nil
Tax from 250,001 to 500,000 @5%	12,500
Tax from 500,001 to 750,000 @20%	50,000
Total Tax	62,500
Cess @4% on Total Tax	2,500
Total Tax including cess	65,000

New Tax Regime

Particulars	Tax Under Old Tax Regime (INR)
Salary	800,000
Less: Standard Deduction	-50,000
Taxable Income	750,000
Tax up to 300,000	Nil
Tax from 300,001 to 600,000 @5%	15,000
Tax from 600,001 to 750,000 @10%	15,000
Total Tax	30,000
Cess @4% on Total Tax	1,200
Total Tax including applicable cess	31,200

From the above tables, we can conclude that if Mr. A opts for the old tax regime, his tax liability will come to INR 65,000; while he opts for the new tax regime, he will save INR 33,800.

Conclusion

In summation, it depends on individual-to-individual which tax system is better as each person’s net taxable income and amount of deductions is different. Both the new and old taxation system has advantages and disadvantages of its own. Choosing between the two will necessitate professional guidance from a tax adviser or a Chartered Accountant.

Further, if you want to calculate your taxable amount, explore our calculator: I ncome
Tax Calculator

Frequently Asked Questions (FAQs)

Is the section 80C deduction still relevant under the new tax regime?
No, deduction under Section 80C (up to INR 150,000) is not allowed when you opt for a new tax regime. It is only available in the old tax regime.
Can a salaried individual change the new regime to the old regime?
Yes, any individual who has opted for a new tax regime can opt for an old tax regime in the next financial year.
Is deduction u/a 80D applicable in the new tax regime?
No, an individual cannot claim a deduction under section 80D as the insurance premium paid towards health insurance is not applicable in the new tax regime.
When was the new tax regime introduced?
The Finance Minister, Nirmala Sitharaman, announced a new tax regime (optional) for individuals and Hindu Undivided Families (HUFs) in the budget of 2020-21.
Which tax regime is better for me if I have a home loan?
If you have a home loan or are looking to take one, then you should opt for the old tax regime. However, it still depends on the interest amount of the loan and your taxable income.

May 13, 2024

BSE Case Study: Business Model And SWOT Analysis

The Bombay Stock Exchange is a titan of Indian Finance. With a history stretching back to the 1800s, it is not just the oldest stock exchange in Asia, but a vital part of the country’s economic story. But how does the BSE stack up in today’s fast-paced financial world?

In this blog, we will explore the exchange’s rich past and analyse the risks and opportunities.

The Bombay Stock Exchange, or BSE, is a stock exchange located in Mumbai, India. Established in 1875, it is the oldest stock exchange in Asia and the tenth oldest in the world. It is one of the India’s leading exchange groups and is known as the ‘Dalal Street’ which is often regarded as the Wall Street of India.

It provides a platform for trading in equities, currencies, debt instruments, derivatives, and mutual funds.

BSE History

The story starts under a banyan tree near Mumbai Town Hall, where a handful of stockbrokers would gather to trade in the 1850s.

Premchand Roychand, a cotton merchant, is credited with formalising these informal gatherings by establishing the ‘Native Share and Stock Brokers Association in 1875. This is the official founding year of the BSE.

Owning to the rapid increase of brokers, the trading venue relocated multiple times in Mumbai before eventually establishing its permanent residence on Dalal Street.

By 1950, the BSE had grown significantly. In 1957, the Indian Government officially recognised it as the country’s first stock exchange, granting it official trading rights. Since then, BSE has continuously evolved to keep pace with the times.

BSE Business Model

The BSE operates on a transaction-based fee model, generating revenue from various activities. Below is an analysis of the fundamental components of the business model of the BSE:

Trading Platform

The BSE offers a platform for investors to buy and sell stocks, currencies, derivatives, and other financial instruments. This platform connects buyers and sellers efficiently and charge a fee for the same.

Price discovery

It facilitates price discovery and determines the fair market value of securities traded on the exchange through buy and sell orders.

Market Information

The BSE effectively disseminates real-time market data and information to investors, thereby facilitating their ability to make informed investment decisions. Furthermore, customer segments of the BSE include Retail & Institutional investors, brokers, and issuers.

It generates its revenue from the following:

Listing Fees – The Companies pay a fee to list their shares on the BSE. Further, many other parties, such as Asset Management Companies, Brokerage houses, etc. pay a fee for the membership.
Trading Fees – The exchange charges a fee for every buy and sell order executed on the platform. This can be a fixed amount or a percentage of the transaction value (turnover).

BSE Financial Statements

Let’s have a look at the financial statements of the exchange:

Balance Sheet

Key Metrics	FY 2023 (INR crore)	FY 2022 (INR crore)
Total current Assets	3,857.10	4,953.54
Total non-current Assets	2,136.71	1,231.86
Total Equity	2,828.99	2,789.71
Total Non-current Liabilities	14.49	10.87
Total Current Liabilities	2,392.69	2,743.93

Income Statement

Key Metrics	FY 2023 (INR crore)	FY 2022 (INR crore)
Total Income	953.94	863.53
Total expenses	705.91	600.45
Net profit for the year	205.65	244.93

Cash flow Statement

Key Metrics	FY 2023 (INR crore)	FY 2022 (INR crore)
Cash Flow from Operating Activities	137.11	1,441.75
Cash Flow from Investing Activities	111.33	979.9
Cash Flow from Financing Activities	185.51	8.94
Cash and cash equivalents at the end of the year	452.99	886.94