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A Comparative Study of Services provided to Karvy Franchisee and Other Franchisees

Presented By :Vijaya Mishra MBA 3rd Semester(Finance)JECRC Business School

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About The Company

• Karvy is a premier integrated financial services provider and ranked among top five in almost all its business segments.

• KARVY covers the entire spectrum of financial services such as Stock broking, Depository Participants, Distribution of financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPOs, among others.

• Karvy Fortune, a separate vertical that looks exclusively towards franchisees came into operations from 2007 where it started offering franchisee to expand its business and reach customers at all over India.

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Objective of Study

•To compare the services provided by broking houses to their respective franchisees on the basis of certain criteria.

•Providing suggestions to company to make its plan more efficient and competitive.

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A franchise is an agreement or license between two parties which gives a person or a number of people (the franchisee/s) the rights to market a service or product using the trademark of another business (the franchisor).  

FranchisingFranchising Defined Defined

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• Low Cost Sales Channel

• Tapping unexploited markets

• Increasing market share

• Making the organization’s presence felt to the whole nation

• Strong Brand Recognition

• Product Reach to all target clientele

• Growth of Business Associates with Organization

NEED OF ALTERNATE SALES CHANNEL IN BROKING NEED OF ALTERNATE SALES CHANNEL IN BROKING INDUSTRYINDUSTRY

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FRANCHISEE PLAYERS IN FINANCIAL SERVICES FRANCHISEE PLAYERS IN FINANCIAL SERVICES INDUSTRYINDUSTRY

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PRODUCT OFFERINGS FOR BUSINESS PARTNERS:-PRODUCT OFFERINGS FOR BUSINESS PARTNERS:-

•Equities Trading – NSE and BSE•Derivatives Trading•E- Broking / Online Broking•Commodities Trading•Mutual Funds•IPOs•Depository Services•PAN CARD PROCESSING

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Offering to Karvy Franchisee

 1. Refundable Deposits: Total INR 250,000/- a. INR 150,000/- with KSBL (Equities) b. INR 100000/-for commodities (additional)  2. Registration Charges: INR 27500/- 3. Revenue Sharing: BROKERAGE SHARING RATIO (EQUITY) KSBL: 40% BUSINESS PARTNER: 60%

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4. Minimum Brokerage to be charged to end clients: Segment Type Brokerage Rate Applicable Cash Segment (BSE & NSE) Trading 0.03% on Turnover Derivative Segment (F&O & Commodities) Trading 0.03% on Turnover Cash Segment (BSE & NSE) Delivery 0.30%

5. Back Office Cost: INR 1500 per month 

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Facilities offered in the package:  2Km Area: In order to reduce competition between the franchisees of the same company, Karvy has come out with the policy that it would not give any franchisees within 2km area once it has given there.

Client Database: The Company would provide database of those clients who are somehow dealing with Karvy but are not trading through it. This database helps franchisees to tap those clients and grow their business.

Cheque Punching Facility: The Company authorises its franchisees to punch the client’s cheque and increase their trading limit hand to hand rather than going to branch office for the same.

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Services provided to Franchisees: Online Mutual fund: One can invest easily through the facility of online mutual fund. It is convenient way to invest in different funds with the same cheque which is otherwise not available in offline mode. The commission structure is as follows:

Upfront(on login) : 50%Trail( loyalty Income) : 50%Brokerage : 50 paisa per transaction

Online IPO Facility: Franchisees provide their clients with facility of online IPO and the commission structure is made on the same which is earned by the franchisee. The commission is provided in two ways:Per application moneyOn the basis of allotment

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Loan against Securities: The shares can be pledged by clients against whom they can obtain loan and can use it for any purpose besides purchasing additional shares. The franchisee gets 0.5% of the loan taken.

Loan against Mutual Funds: Besides the above, clients can also take loan against mutual funds held in their demat account.

Marginal Funding: This is somewhat similar to loan against securities, the only difference being that the loan taken can only be used for purchasing additional units of shares Interest charged for the same- 16%-18%

Life Insurance/General Insurance: Karvy has tie-up with almost all LI/GI companies and franchisees can sell those insurance products.

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TIN/PAN FC: This is an optional facility which franchisee can avail. Thereafter franchisee is authorised to accept applications for PAN number and TIN number which he can directly send to main office of Company after punching those applications. Besides he can collect TDS amount and send it to Hyderabad Office.

Share of Franchisee in TIN FC:Pan Card-Rs 5 per applicationE-TDS: Upto Rs 100- Rs 7.5Rs 101-1000-Rs 45Above Rs 1000- Rs 165

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Research Methodology

Type of research DescriptiveData Collection Source Primary data Secondary dataSample Size 100Type of Sampling Judgemental SamplingLocation JaipurData Collection Technique Questionnaires

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Analysis and Interpretation

Number of Franchisees of different broking house used for Data Collection.

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1) How long have you been associated with the current company?a) 0-1 years b)1-2 yearsc) 2-3years d) More than 3 years

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2)Do you work on fixed basis or sharing basis? a) Fixed b) Sharing

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3)If, on sharing basis than what is your sharing ratio?a)50:50 b) 60:40c)75:25

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4)What brokerage do you charge from the clients? a)1P:10P b) 2P:20Pc) 3P:30P d) Other

 

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5) Do you think that their should be appropriate distance between two franchisees of the same company? a)Yes b) No c)Doesn’t matter

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6)Do you feel the requirement of cheque punching facility? a) Yes b) No

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7) What is your Back-Office cost? a) No Cost b) Less than Rs 1000 c) Rs 1000-2000 d) More than Rs 2000

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8) Do you think it is reliable? a)Yes b) No

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9)Do you think client database would help you to grow business?a)Yes b) Noc)Doesn’t matter 

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10)Would you like to avail TIN/PAN FC? a)Yes b) No

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Facts and Findings

Out of 100 franchisees taken as sample, only 16% of them continued their business for more than 3 years which showed that they were satisfied with the company they worked for, rest still worked but were looking for more services and were little dissatisfied or had less customers.

Security Deposit was high for both equity and commodity.

One thing which was good about the company was that all its franchisees were registered in both NSE and BSE. Other companied didn’t had all the their franchisees registered.

45% of the franchisees knew Karvy as Registrar and transfer agent and were unaware of its broking house and thus showed interest in hearing its services. This was probably because of the reason that Karvy doesn’t go for promoting itself.

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Brokerage was low in other companies as compared to Karvy and franchisees preferred to work on fixed basis rather than sharing basis.

One thing which we noticed in our study was that franchisees showed interest in Karvy because it was registrar of almost 80% of companies and so they could solve their problems easily.In addition separate vertical only looking for franchisees could solve their problems more easily than other companies.

TIN/PAN FC was liked by 63 % as it cold help them in getting more clients.

Cheque punching facility was liked and was not provided by any other company.

Our company was very rigid in its policy which actually should not be in order to be competitive.If company would reduce its cost to little extent it could acquire more market share because of its strong identity.

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Conclusion

•Though the company is very big name in it self, the competitors are offering more flexible and competitive plans to their franchisee , so the company needs to modify their plan to gain more market share.

•Online Database is useful only for new players in the market.

•2 km facility is not so useful because franchisees have fear of other companies if not of the same company.

•Cost charged by Karvy from its franchisees are comparatively higher than the services actually provided.

•No franchisees are completely satisfied of its service provider

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Recommendations and Suggestions

1) The Brokerage charges, 3 paisa and 30 paisa for intraday and delivery respectively, are quiet high. In the competitive market where brokerage is as less than 1P:10P,it is difficult to attract investors to trade at 3P:30P.It should be reduced.

2) The security deposit of Rs 150000(Equity) and Rs100000 (commodity) was high as compared to other plans in the market. It should be reduced to at least Rs 100000 for both Equity and Commodity.

3) The percentage of sharing of brokerage should be changed to 50:50.

4) The back-office cost of Rs 2000 per month is not reliable and it should be completely finished off.

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