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The core business of CDSL involves enabling shareholders to hold and transfer their securities in an electronic form. Depository services of CDSL include the deposit, transfer and withdrawal of securities, book-entry for trade settlement, and book-keeping in respect of investors’ securities accounts. It also facilitates crediting of securities for initial public offerings and other corporate actions, such as share splits and consolidation, as well as payment of dividends.CDSL maintains and operates a central depository system. This system is basically an electronic book-entry system that records and maintains securities and also registers the transfer of securities. The system changes the ownership of securities without any physical movement or endorsement of certificates and execution of transfer instruments. The company manages a wide range of instruments including equity shares, preference shares, mutual fund units, debt instruments, government securities, certificates of deposits and commercial papers.The revenue from operations includes transaction charges, account maintenance charges and settlement charges paid by DPs and annual fees, corporate action charges and e-voting charges paid by companies whose securities are admitted to the company's systems.Comparison of CDSL and NSDLIn terms of revenue, CDSL holds an approximate market share of 43% while NSDL’s market share is 57%.The revenue of NSDL has grown at a CAGR of 12% over the previous four Fiscals as opposed to CDSL’s 11%.Number of BO(Beneficial Owner a.k.a investor/trader) AccountsIn terms of market share of Demat accounts, CDSL has been growing at a higher rate with a CAGR of 9%, compared with 5% for NSDL.CDSL has experienced a growth in market share from 39% in Fiscal 2011 to 44% in Fiscal 2017.An interesting point to note here is that although CDSl has been able to increase its market share faster than NSDL, NSDL's revenue growth is slightly more than CDSL.Number of Incremental BO AccountsCDSL has gained in market share with respect to incremental Demat accounts from 46% in Fiscal 2012 to 60% in Fiscal 2017. It means that 60% of all new Demat accounts are opening with CDSL.Financial AnalysisBalance SheetCDSL has a share capital of Rs 104.5 crore and its shares have a face value of Rs 10/share.Therefore, total outstanding shares = 10.45 croreThe company had a net worth (a.k.a book value or equity capital) of Rs 548 crore as on 31stMarch, 2017.Book value per share = Rs 52.44The business is fixed asset light as we can see by observing its non-current assets. Tangible fixed assets are just less than Rs 10 crore. The company has huge current and non-current investments worth approximately Rs 500 crore, which constitutes a large part of company's net worth. Clearly, the company is generating a lot of cash.Income StatementLet's look at the segmentation of revenue from operations.We can see that "annual issuer charge" is a major portion of operating revenue. It's the annual fee it charges from corporates issuers. It has grown at a good rate over the last three years. According to the company, it increased "annual issuer fee in FY 16 which resulted in increased income from this segment. It contributed 35% to operating revenue. It is a very stable source of revenue.Transaction charges are the next major source of revenue, which depends on the number of transactions done by CDSL's customers. It contributed a little more than 20% to the overall operating revenue. Revenue from this segment has seen and will see fluctuations.The other two major revenue sources are IPO/Corporate action charges(which of course is increasing) and Online data charges which too is increasing.So during a bear market we can see fluctuation in "transaction revenue " and "IPO" revenue which are about 30% of the overall operating revenue. Rest of the revenue is highly stable and will see gradual increase.Just like its parent BSE, CDSL is also generating income from "other income" apart from revenue from operations. Let's keep this "other income" below EBITDA to see the true operating performance of the business.The company's fixed costs are higher than its variable costs because it is providing services through its fixed infrastructure. The advantage of such a cost structure is that once the revenue is enough to cover fixed costs, most of the incremental revenue flows directly to the bottom line(EBITDA) and thus profits grow faster than revenue.We can see that while CDSL's operating revenue grew from Rs 105 crore to Rs 145 crore at 18% CAGR, its EBITDA grew at a faster pace of 32% from Rs 45 crore to Rs 79 crore. EBITDA margin increased from 43% to 54%.Other income is mostly coming from current/non-current investments - dividends, interest, capital gains etc.ROCE has improved from 18.34% in FY-15 to 21.2% in FY-17.Cash Flow StatementThe company is generating a decent amount of cash from its operating activities. Cash generated from operations before direct taxes conforms with the reported EBITDA which is a good thing. But cash flow after taxes is not that big. Of course, some of the tax has been paid for investment income which is outside the operating activities.The "other income" such as interest, dividend etc., comes under cash flow from investing activities. The company is investing just a small amount in fixed assets. Rest of the cash generated from operations and other income has been divided between further investments and for paying dividends.The company paid a dividend of Rs 31.4 crore(including taxes) to its shareholders. This is about Rs 3/share.Overall, the company's financials are sound with no hidden risks.ValuationAt the upper end of price band, the company's expected market cap is Rs 1557 crore.From a pure P/E perspective, it's coming at a valuation of 18 times P/E.Let's look at the valuation from a different angle.Valuation of core business = Market cap - investments= 1557 - 500 = Rs 1057 croreCore business is available at an EV/EBITDA multiples of 13.2 times and an EV/CFO multiples of 25 times.One year forward EV/EBITDA is almost 10 times.ConclusionI think most sources of revenue are highly stable. In a bull market many more new investors will keep opening Demat accounts (some of them might have opened Demat accounts with CDSL to apply for CDSL's IPO!) and hence operating revenue growth is expected to remain 15%+ during this period. In a bear market, the growth will be more modest, but revenue isn't expected to decline at least. There is more room for EBITDA margin expansion as long as costs remain under control.A valuation of 18 P/E and 13 EV/EBITDA is reasonable.

India has consistently fared poorly in the press freedom index for the last 17–18 years. The best it fared was in 2002 when India was ranked in the 80th position.Dropping by 60 places in 17 years is a sheer embarrassment for a country such as ours, the largest democracy in the world.India’s media has always been susceptible to this type of hijacking, but the BJP’s success in peddling its narrative is unprecedented. The BJP’s success has had an unmatched effect on the totality of India’s political discourse.The fundamental tactics utilized by the BJP to influence media coverage are not themselves unprecedented; the Indian National Congress has itself engaged in such behavior. Indeed, between 1975 and 1978, the Congress government led by Indira Gandhi systematically repressed critical media as part of a nationwide Emergency. Yet today, the BJP has doubled down and transformed previously independent media outlets into state mouthpieces for the sake of minimizing criticism and disseminating their own narrative.Since then it has been a steep journey downwards, with no exception under the Modi government.The question is why?There are numerous reasons ranging from corruption to dishonesty to unethical practices to feudalism. A number of cases have been reported against these media outlets, the allegation/charges range as belowAnti National ActivitiesExtortionSexual Assault & RapeChild Molestation & Child RapePaid NewsCriminal IntimidationMoney LaunderingBlackmailIllicit Black MoneyCriminal MisappropriationConspiracySexual HarassmentFraudShady Foreign Shell CompaniesUnclear Beneficial OwnershipFinancial MalpracticesDefamationRole of Social MediaThe BJP’s social media online troll army remains notorious, referred to as the BJP’s IT Cell, which regularly sends out death and rape threats to female journalists. The social media army is also used to stoke communal hatred, spread fake news, and intimidate those who would take a stand against Modi. Especially for those who belong to some of India’s most marginalized communities, the IT Cell far surpasses normal levels of online toxicity, often with the encouragement of BJP leadersFollowing are some of the Media Houses and respective cases against themSun TVSun TV Network runs the most popular Tamil language satellite television channels in the world. It was started on 14 April 1992 by Kalanidhi Maran. At one point, Sun TV was the most viewed entertainment channel in India, as per BARC report.The channel has a history of corruption, sexual harassment, criminal intimidation, paid news, fraud, money laundering, extortion, blackmailing, illicit-black-money, etc. Few of them are listed below:April 2015: In Aircel-Maxis case Rs. 742 Crore worth of property of Sun TV and owner Kalanidhi Maran was impounded by the Enforcement Directorate for money laundering based on a CBI report.July 2011: Sun TV COO Hansraj Saxena was arrested thrice for various cases of extortion and blackmailing.After one of his arrests, Sun TV COO Hansraj Saxena confessed on a written affidavit and on TV that the channel had created the morphed video of His Holiness Paramahamsa Nithyananda and actress Ranjitha for the purpose of extortion.Jan 2015: The next COO of Sun TV, C Praveen, was also arrested on sexual harassment complaints filed by former staff of the television network.By far the biggest known crime done by the channel was its involvement in 2G spectrum scam which resulted in a loss of Rs. 17,60,00,00,00,000/- (roughly equivalent to $30 Billion USD ) to the public exchequer.Zee NewsTwo Zee editors were arrested for ‘Rs 100-crore extortion bid’ (equivalent to $15 million USD)Nov 28, 2012: Delhi Police’s crime branch arrested two editors of the Zee group on Tuesday, who were accused of extortion. The editors were accused of trying to extort Rs 100 crore worth of advertisements from the company of the complainant in return for dropping stories.Another defamation case of Rs 100 crore suit on ZeeMarch 18, 2014: A Rs. 100-crore defamation case was slapped on Zee, by famous Indian cricketer Mr. M.S. Dhoni, for attacks on his reputation.NDTVBiased and corrupt, anti-national news channel, NDTV, had already a controversial history of disclosing the location of the Indian Army along with artillery to Pakistani forces during times of war. New Delhi Television – NDTV was a leading anti-national news channel in India. NDTV viewership has fallen below 2% especially after their anti-national stand. NDTV alleged that the TV ratings had been manipulated and sued the country’s only television audience measurement company. Even in spite of such boycott by the Indian household, one wonders how still the company continues to flourish. The secret is revealed by studying the financial frauds and scams done by the channel.NDTV FraudsIn the book ‘NDTV Frauds’, author Sree Iyer, exposed how NDTV was actually one of the most corrupt media houses in Indian history. Two Promoters of NDTV, the top management, and other vested interest groups colluded over the years to break laws, evade taxes and fault ICICI bank, by making shell companies with zero employees and zero revenue and other techniques, all resulting in a total financial scam of Rs. 48 Crore ($ 7 Million USD).One is left wondering what right media channels have to pretend to be neutral, ethical, unbiased, ‘voice of the common man’. After all their scams, various news channels unite to protect NDTV from public scrutiny. The media claimed that the entire legal proceedings and investigations initiated against NDTV by families of shareholders of ICICI bank which suffered a loss of Rs. 48 crores was a witch hunt against innocent media houses. NDTV had siphoned money through a complex network of shell companies and other illicit financial tricks.National HeraldNational Herald is an Indian newspaper published by The Associated Journals Ltd, owned by a major political party of the country. It was started in 1938. After independence, the newspaper was briefly shut down in the 1940s and 70s. Owing to financial crunch, the operations were temporarily stopped in 2008. In 2016, the board of directors of Associated Journals Limited (AJL) took the decision of relaunching the newspaper.National Herald Scam – Young IndianA case in a Delhi court was filed by an Indian economist and politician against the owner politicians, their companies, and associated persons. As per the complaint filed in the court of the Metropolitan Magistrate, the ruling party granted an interest-free loan of Rs. 90.25 crore (US$14 million) to Associated Journals Limited (AJL), owner of the National Herald newspaper. It was alleged that the loan was either not repaid or repaid in cash, which is in violation of Section 269T of the Income Tax Act, 1961 A closely held company, Young Indian, was incorporated in November 2010 with a capital of Rs. 50 lakhs(US$78,000) and it acquired almost all the shareholding of AJL and all its properties (alleged to be worth Rs. 5,000 crores (US$780 million)). The complainant alleged criminal misappropriation by the owners. The courts have determined that a prima face case has been established in the matter.Times NowOn September 10, 2008, Times Now had aired false news and there was a suit for Rs. 100 crores (equivalent to $15 Million USD) against the TV channel. The channel tried to escalate the matter to Supreme Court and appealed to save the channel from Bombay High Court order of paying Rs. 20 crore cash deposit and Rs. 80 crore bank guarantee. The Supreme Court denied.What the reader wonders are how these channels continue to survive and even flourish after multi-crore, multi-million dollar scams.Janasri TV – Kannada ChannelIn April 2017 the chief executive officer of a private Kannada TV news channel, Janasri News was arrested on charges of extortion and blackmailing. As per the Police,The channel CEO Lakshmiprasad Vajapai had used the channel as an “instrument” to run his “network” of extortion.The CEO was arrested on a complaint by a businessman alleging extortion and blackmailing. The CEO was blackmailing the businessman threatening to give an undesired representation of the complainant’s business to the entire world and tried to extort Rs 10 crore.CEO Lakshmiprasad followed fixed modus operandi. He would first identify a businessman, dig out information on the businessman, and prepare a news item. He would then broadcast only a portion of this negative content and proceed to contact the “victim.” Lakshmiprasad would then demand money in return for not airing the full episode.A number of cases had been filed against Vajapai at various police stations in the city. There are two more similar cases against Lakshmiprasad at Commercial Street and Mahalakshmipuram Police Stations. Where according to the complaint registered, he has already taken Rs 10 crore from a businessman along with Rs. 30 lakh worth gold jewelry.Samaya NewsSamaya TV is a television news channel, launched on 20 June 2010. Within a year of launch, Samaya News 24X7 became the second-most viewed news channel in Karnataka.Throughout 2012 to 2017 the channel chief reporter Ranganath Bharadwaj conspired with child molester Vinay Bharadwaj (who was fined $ 1/2 Million USD for repeated counts of child molestation) to attack His Divine Holiness Paramahamsa Nithyananda. In this desperate attempt, the channel even attacked the U.S.A. courts with false defamatory news programs which ran in 1000 hours total.The Kannada news television channel Samaya TV and chief reporter Ranganath Bharadwaj were found guilty of defamation and civil conspiracy by USA Court. In Dec 2017, the USA Court fined them with a $5 Million (equivalent to Rs. 32 Crore ) judgment for broadcasting false news about His Divine Holiness Paramahamsa Nithyananda and his USA mission. As of now all other major legal proceedings against media houses filed by various entities throughout the country are pending disposal. This has thus been the single biggest major victory against a paid news channel in the history of India.Aaj TakAnti-national Aaj Tak was once the most popular Hindi language Indian news channel. The channel has been accused of journalistic Hinduphobia and selective misrepresentation of Hindu festivals and rituals. The Election Commission is reported to have identified more than 1,400 cases of paid news between 2009 and 2013, during which elections were held in 17 states of India. One such incident happened in February 2014 where the unholy alliance of the channel (media) and with other vested groups to get exposed on social media and people fed up with the volumes of paid, biased, and irrelevant news by the channel made hashtags like #UnlikeAajtak #StopWatchingAAJTAK go viral. The channel lost 300,000 likes on its social media pages in a single day.Child Exploitation and Liquor BribeIn November 2015, a video came online showing an Aaj Tak reporter bribing a kid with money to purchase liquor in order to convince him to give a negative statement as per the channel’s vested interest.Convicted rapist journalist – Tarun TejpalTarun Tejpal is an Indian journalist, publisher, novelist, and former editor-in-chief of Tehelka magazine. In November 2013, he stepped down as editor for six months after a female colleague accused him of sexual assault and rape. He was arrested on 30 November 2013 and is currently on bail since 1 July 2014. It is particularly eerie to note that it is the same Tejpal who had previously been involved in highlighting the issue of sexual violence in India. One cannot miss noticing the double standards of Indian media, which shows the smallest of false cases against others as a big scandal and hide their own dirty stories of sexual and financial crimes.Rajdeep Sardesai – Times of IndiaDilip Sardesai father of Rajdeep Sardesai (journalist, editor Times of India) was arrested by Mumbai police in 1993 in connection with Foreign Exchange Regulation Act violations, involving $6.89 Million USD.In 2012, Rajdeep Sardesai had denied reporting the killing of 21 Hindus during Assam Riots, saying he would report only if more than 1000 were killed.Radiya tapes – Indian Income Tax department ReportThe Radia tapes controversy relates to the telephonic conversations between Nira Radia, an influence peddler, and with senior journalists, taped by the Indian Income Tax Department in 2008–09.After getting authorization from the Home Ministry, the Indian Income Tax department tapped Radia’s phone lines for 300 days in 2008–2009 as part of their investigations into possible money laundering, restricted financial practices, and tax evasion.In November 2010, OPEN magazine carried a story that reported transcripts of some of the telephone conversations of Nira Radia with senior journalists, many of whom have denied the allegations. The Central Bureau of Investigation has announced that they have 5,851 recordings of phone conversations by Radia, some of which outline Radia’s attempts to broker deals in relation to the 2G spectrum sale. The tapes appear to demonstrate how Radia attempted to use some media persons to influence government decisions.Journalists mentioned in the Radia tapesBarkha Dutt, Group Editor, English news, New Delhi Television(NDTV), NDTV also has a Hindi news channel NDTV IndiaM.K. Venu, then Opinion Editor, The Economic Times. Outlook weekly published an unconditional apology for naming M.K.Venu on its cover.Prabhu Chawla, the then editor of India Today magazineShankar Aiyar, then with India Today GroupVir Sanghvi, HT advisory editorial directorCasual conversations with Radia of Editors of The Times of India, The Economic Times and The Hindu Businessline also figured in the tapes published by Outlook magazine.Press Council reportThe Press Council of India is a statutory body in India that governs the conduct of the print media. It is one of the most important bodies that sustain democracy, as it has supreme power in regard to the media to ensure that freedom of speech is maintained. It is also empowered to hold hearings on receipt of complaints and take suitable action where appropriate.Paid news is a phenomenon in Indian media, that refers to the systematic engagement of mainstream media outlets in publishing favorable articles in exchange for payment. This type of news is typically sponsored by vested interest groups to accomplish their personal goals.A report by the council points out that self-regulation by India’s media has failed to stop the practice of paid news, has some eye-catching recommendations. It suggests a more-powerful regulator and stiffer penalties, including criminal charges, possibly leading to imprisonment, for those who accept payment for news.

Stock MarketStock market is a place where people buy/sell shares of publicly listed companies. It offers a platform to facilitate seamless exchange of shares. In simple terms, if A wants to sell shares of Reliance Industries, the stock market will help him to meet the seller who is willing to buy Reliance Industries. However, it is important to note that a person can trade in the stock market only through a registered intermediary known as a stock broker. The buying and selling of shares take place through electronic medium. We will discuss more about the stock brokers at a later point.Major Stock Exchanges in IndiaThere are two main stock exchanges in India where majority of the trades take place - Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Apart from these two exchanges, there are some other regional stock exchanges like Bangalore Stock Exchange, Madras Stock Exchange etc but these exchanges do not play a meaningful role anymore.National Stock Exchange (NSE)NSE is the leading stock exchange in India where one can buy/sell shares of publicly listed companies. It was established in the year 1992 and is located in Mumbai. NSE has a flagship index named as NIFTY50. The index comprises of the top 50 companies based on its trading volume and market capitalisation. This index is widely used by investors in India as well as globally as the barometer of the Indian capital markets.Bombay Stock Exchange (BSE)BSE is Asia’s first as well as the oldest stock exchange in India. It was established in 1875 and is located in Mumbai. It has a total of ~5,295 companies listed out of which ~3,972 are available for trading as on August 21, 2017. BSE Sensex is the flagship index of BSE. It measures the performance of the 30 largest, most liquid and financially stable companies across key sectors.Different Market ParticipantsThere are a lot of individuals and corporate houses who trade in a stock market. Anyone who buys/sells shares in a stock market is termed as a market participant. Some of the categories of market participants are as follows:Domestic Retail Participants-These are individuals who transact in the markets.NRI’s and Overseas Citizen of India (OCI)-These are people of Indian origin who reside outside India.Domestic Institutions-These are large corporate entities based in India (for example: LIC of India).Domestic Asset Management Companies (AMC)-The market participants in this category would be mutual fund companies like HDFC AMC, SBI Mutual Fund, DSP Black Rock and many more similar entities.Foreign Institutional Investors-FIIs are Non-Indian corporate entities such as foreign asset management companies, hedge funds and other investors.Regulator of the Indian Stock MarketSecurities Exchange Board of IndiaSecurities Exchange Board of India (SEBI) is the regulatory body of the Indian Stock Markets. The main objective of SEBI is to safeguard the interest of retail investors, promote the development of stock exchanges, and regulate the activities of financial intermediaries and investors in the market. SEBI ensures the following:The stock exchanges (BSE and NSE), brokers and sub-brokers conduct their business fairly.Corporate houses should not use markets as a mean to unfairly benefit themselvesSmall retail investors’ interest is protected.Large investors with huge cash should not manipulate markets.Types of Financial Intermediaries in the Stock MarketFrom the time an investor places his order to buy shares till the time it is transferred to his Demat account, a number of corporate entities are involved to ensure smooth transaction. These entities are known as financial intermediaries and they work according to the rules and regulations prescribed by SEBI. Some of the financial intermediaries are discussed below:Stock BrokerA stock broker also known as a dealer is a professional individual who buys/sells shares on behalf of its clients. A stock broker is registered as a trading member with the stock exchange and holds a stock broking license. They operate under the guidelines prescribed by SEBI. An individual needs to open trading/DEMAT account to transact in the financial market.Depository and Depository ParticipantsA Depository is a financial intermediary that offers the service of DEMAT account. A DEMAT account will have all the shares that an investor owns in electronic format. In India, there are only two depositaries which offers DEMAT account services - National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). An investor cannot directly go to the depositary to open the DEMAT account. He needs to appoint a Depository Participant (DP). According to SEBI guidelines, banks, financial institutions and members of stock exchanges registered with SEBI can become DPs.BanksBanks help to transfer funds from a bank account to a trading account. The client needs to categorically mention which bank account has to be linked to the trading account to the stock broker at the time of opening the trading account.National Security Clearing Corporation Ltd (NSCCL) and Indian Clearing Corporation Ltd (ICCL)NSCCL and ICCL are 100% subsidiaries of National Stock Exchange and Bombay Stock Exchange respectively. They ensure guaranteed settlement of transactions carried in stock exchanges. The clearing corporation ensures there are no defaults either from buyers or sellers side.DEMAT Account and Trading AccountIn order to trade in equities, it is mandatory to have a DEMAT account as well as the Trading account.DEMAT AccountDEMAT account or dematerialized account allows holding shares in electronic form instead of taking physical possession of certificates. It is mandatory to have a DEMAT account to trade in shares. DEMAT account holds all the investments an individual makes in shares, exchange traded funds, bonds, government securities, and mutual funds in one place.How to open DEMAT Account?Below mentioned are the steps to open DEMAT account in India:To open a DEMAT account; an individual has to approach a depository participant (DP), an agent of depository, and fill up an account opening form. The list of DPs is available on the website of depository’s i.e. CDSL and NSDL.An individual must attach photocopies of KYC documents like identity proof, proof of address along with the account opening form.The DP will provide the depository participant ID or client ID. All the purchase / sale of shares will be through DEMAT AccountTrading AccountA trading account is used to place buy/sell orders in the stock market. One can open their trading account with a stock broker who is registered with SEBI. An order can be placed either through an online or offline mode. In the online mode, one can buy/sell stocks through the trading terminal provided by the broker whereas; in the offline mode, an individual can ask its broker to place an order on his/her behalf.Key takeawaysA stock market is a place where people buy/sell shares or stocks of publicly listed companies.NSE and BSE are the two major stock exchanges in India.An individual has to mandatorily open a trading account to trade in the stock market.There are different market participants like retail investors, domestic institutions and foreign institutional investorsIndian stock market is governed by SEBI.There are different financial intermediaries like stock broker, banks, depository participants etc.DEMAT account or dematerialized account allows holding shares in electronic form instead of taking physical possession of certificates.Introduction to Primary MarketPrimary market is a market wherein corporates issue new securities in order to raise funds. The company which issues its shares is called issuer and the process of issuing shares to public is known as public issue or Initial Public Offer (IPO). This entire process involves various intermediaries such as Merchant Banker, Bankers to the Issue, Underwriters, and Registrars to the Issue. All these intermediaries are registered with SEBI.Steps to be followed by companies going for an IPOThe company appoints a merchant banker for the IPO process. The merchant banker assists the company in the IPO process.The company has to apply to SEBI with a registration statement. This statement has details about the business of the company, reason for coming out with an IPO and the financial details of the company.Once SEBI receives the registration statement, it decides whether the company should be allowed to go for an IPO or not.After the company gets initial approval from SEBI, it needs to prepare the Draft Red Herring Prospectus (DRHP). DRHP is a document which consists of information about the business of the company and the industry that it operates in. This document gets circulated to the public. It includes details such as estimated size of the IPO , estimated number of shares being offered to public, how does the company plan to utilize the funds, financial statement of the company, promoter details etc.The company now has to advertise about the IPO through TV and print advertisements in order to build awareness about the company and its IPO offering. This process is called as the IPO road show.The company or the issuer of the IPO has to decide the price band between which the company would like to go public. For example, the company has decided a price band of Rs 200-205. So, if an investor wishes to invest in the IPO, he can choose to buy shares at a price anywhere between 200 and 205.After the price band is fixed, the company has to officially open the window so that public can subscribe for shares. The subscribers can bid for an IPO within the price band decided by the company. This is also called as Book Building.After the subscribing window is closed (which is generally open for 2-3 days), the price point at which the issue gets listed is decided. The shares are then listed on the respective stock exchanges.Procedure to apply for an IPOThe subscriber compulsorily needs a DEMAT account to apply for an IPO. He also needs to apply for ASBA (Applications Supported by Blocked Amount) through the bank to which he has linked his trading and DEMAT account.One can apply for an IPO offline as well as online.In offline mode, the subscriber needs to collect the IPO form from the stock broker and submit the duly filled form. The broker will then submit the form to your bank to which you have linked the trading account.In online mode, one can directly login to net banking services of the bank to which he has linked his trading account and apply for the IPO.Secondary MarketThe secondary market is where the securities issued in primary market are bought and sold on the stock exchanges - Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and others. BSE and NSE are the most widely traded exchanges in India with a market capitalisation of Rs 1,25,18,954 crore and Rs 12,282,127 crore respectively.Key TakeawaysPrimary market is a market wherein corporates issue new securities in order to raise funds.The secondary market is where the securities/shares issued in primary market are bought and sold on the stock exchanges.The company which issues its shares is called issuer and the process of issuing shares to public is known as public issue or Initial Public Offer (IPO).Any individual who subscribes for an IPO needs to compulsorily have a DEMAT account. He also needs to apply for ASBA.StockA stock (or a share) is an ownership interest in the underlying business. If you are the owner of the stock, you own a proportionate stake of the company whose stock you own. For E.g. if you own 1000 shares in HDFC Bank, you own 0.00003955% (No. of shares you own / No. of shares of HDFC bank in issue) of the bank.Types of StocksGrowthCompanies that consistently manage to grow their profits faster than their industry peers are called growth stocks. Their faster growth is generally the result of some sustainable competitive advantages. Since they need to constantly fund their growth, they typically pay out little or no dividends. The investors are rewarded from appreciation in stock price. Since competitors can emulate them and eliminate their competitive advantage, growth stocks are more risky than some of the categories we discuss next.ValueStocks available at a significant discount to their intrinsic value fall under this category. These are sound businesses in sectors that are not favored by the market presently. Some of them pay a significant share of their profits as dividend or resort to share buybacks when their shares are out of favor.Dividend YieldThese are companies that generate significant amount of cash in the business and do not have enough profitable opportunities to deploy the cash. So, they return most of it to the shareholders in the form of dividends.CyclicalThese are companies whose profits are linked to economic cycles. They report significant profits when economic growth is strong and struggle to report profits when economic growth slows down. Typical examples are commodity companies in metals, cement, oil & gas etc.Information sources on stocksAn investor can gather information on the stock from various sources. Some of them are mentioned below:Red Herring Prospectus (RHP)This is the most important information source on any company and the best place to start. It contains industry overview, company background, risk factors, management background, management discussion and analysis (MD&A) that gives outlook of the business going forward and detailed financial statements. RHP’s are available on the SEBI website.Annual ReportsPublicly listed companies publish detailed reports annually that include industry overview, company background, company strategy, business outlook and detailed financial statements of the current and preceding financial year. Annual reports are available on the respective company websites.Quarterly resultsPublicly listed companies publish quarterly reports of financial performance with the stock exchanges. They also contain business segment-wise information, data on promoter pledging of shares and non-recurring items that impacted financial performance in the quarter.Investor PresentationsMany publicly listed companies provide detailed investor presentations that cover company background, company strategy, business outlook and detailed financial statements of the current and preceding financial period.Earnings conference callsMany companies conduct conference calls after quarterly results wherein management provides guidance of performance over the medium term and take questions from investors and analysts.Management interviews in print/TVManagement interviews provide clues on management focus on performance, transparency and shareholder friendliness.Key takeawaysstock is an ownership in a business or a company.There are different types of stocks such as growth, dividend yield, value and cyclical stocks.information on stocks can be collected from annual reports, earnings call, management interviews and investor presentations.Fundamental Analysis (FA) is a comprehensive study of a business. When an investor wants to invest in a business for the long term (3-5 years), it is important to understand the business from various perspectives. Fundamental analysis examines economic, financial, qualitative and quantitative factors associated with a stock. It also studies the economic data, performance of its peers, company’s financial statements etc.Interpreting financial statementsInterpreting financial statements is critical to understand the financial health of a company. The three major financial statements are the Profit & Loss Account (P&L), Balance Sheet and Cash Flow statement.P&L AccountP&L account reflects the operating performance of the company in a given year. The operating performance shows the company’s income, expense, and hence its profitability can be derived from this statement. P&L accounts are mandatory for every company and are released every quarter.Revenue from SaleThis is the total value of items sold by the company. Revenue is recognized when an item is shipped and not necessarily when cash is received in lieu of the item.Other IncomeAny other form of income of the company including interest income on the cash that it holds in banks, investment returns on mutual funds, dividend income from subsidiaries etc are recorded here.Cost of Goods SoldThe cost of all materials consumed and of the employees involved in manufacturing in order to produce the goods that were sold during the period.Sales, General and Administrative ExpensesThese include cost of maintenance of plant and equipment, cost of maintaining head office and regional offices, employee costs, marketing and advertising expenses etc.Other ExpensesThese include transportation costs, power and fuel, loss on foreign currency movements, impairment losses on assets and businesses, restructuring charges like cost of laying off workers etc.Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)This is the best measure of the profitability of the company’s operations. This is the best approximation of the surplus cash generated by the business before the debt holders are paid their interest and taxes are paid to government.Depreciation & AmortizationWhen a business purchases plant, equipment, machines that it intends to use over a long period of time, it does not show the expenses in one period only. Rather it spreads out the cost over the life of such equipment and show the annual cost in each year’s P&L. This is called depreciation. It is not a cash expense in the period in which it is recognized in the P&L. Amortization is similar to depreciation in concept but refers to intangible assets like cost of advertising and brand acquisition costs.Earnings before Interest and Tax (EBIT)This is earnings before interest due to debt holders and taxes if any on the profits.Finance CostThis is the interest payment on money that the company has borrowed.Earnings before Tax (EBT)Company pays tax to the government at the applicable tax rate on its earnings.Profit before Tax (PBT)This is the company’s tax liability if company has made a profit at EBT level.Profit after Tax (PAT)This is the company’s tax liability if company has made a profit at EBT level.Earnings per Share (EPS)This is the PAT divided by the number of shares issued by the company. This is the profit made per share that accrues to the share/stock holder.Balance SheetBalance Sheet is a summary of what a company owns and what it owes to external parties. In other words, it shows what are the sources of its funds or liabilities (stock, debt, accumulated profits) and what uses have these funds been put to (assets created). In short, it is a statement of assets and liabilities.Liabilities and Assets side must balanceThe Asset and Liability sides of the balance sheet must balance i.e. Assets = Liabilities always.LiabilitiesShareholder Funds/StocksThis represents the value of the holding of stock/shareholders in the company from an accounting point of view. It is also referred to as Net worth or Net Book Value. This is the sum of paid-up capital and retained earnings. Paid-up capital is the value of shares bought by shareholders in primary sale. Retained earnings are the cumulative profits made by the company since inception less the dividends paid since inception.Long term debtLong term debt is the borrowings that the company owes for a period exceeding one year or more.Short term debtShort term debt is the debt incurred by a company that is due within one year.Trade PayablesThese are purchases that a company is yet to pay in cash to its suppliers. A higher amount is better as it reflects the company’s credibility to get longer credit period from its suppliers.Other Current LiabilitiesThese include the portion of long term debt that is due for repayment in the next year, advances from customers for goods/services that the company has to provide in future and payments due to suppliers for plant, property and equipments.AssetsLong term assetsThese include property, plants and equipments, furniture and fixtures, software packages, vehicles, aircrafts etc. that the company owns for its business. It also includes plants and equipments under construction (capital work in progress) and intangible assets like brands etc.Non-current investmentsThese are investments in stocks/shares of subsidiary and associate companies. Subsidiaries are companies where the publicly listed company has > 50% economic stake while associates are companies where it has < 50% economic stake.Long term loans and advancesThese are loans given to subsidiaries and associates to help them fund their assets.CashThis includes cash and investments in liquid funds that can be immediately converted into cash.Current InvestmentsThese include cash invested in instruments with less than one year maturity which can be easily sold to raise cash.Trade ReceivablesThis represents value of items that the company has sold but not received payment for.InventoriesThese include raw materials that the company uses to produce the final product, semi-finished product and finished products waiting to be sold. Lower the amount the better, indicating efficient procurement strategy and no risk of obsolescence of its products.Short term loans and advancesThese are loans given to subsidiaries and associates that are due to be repaid in less than one year.Other Current AssetsThese include interest and dividend due to be received within the next one year.Cash Flow StatementThis gives a summary of how much cash came into the company in a specific period and how much the company has spent in the same period.Cash from Operating ActivitiesThis represents the net of all cash inflows and outflows as a result of selling the company’s products in the market. This is arrived at by adding non-cash expenses like depreciation and amortization to the company’s PAT and then adjusting for changes in current assets and current liabilities over the period of the cash flow statement. If current assets increase, cash flows decrease and vice versa. If current liabilities increase, cash flows increase and vice versa.Operating cash flow= PAT + D&A -/+ Change in Current Assets +/- Change in Current LiabilitiesCash from Investing ActivitiesThese include cash spent on acquisition of property, plant and equipment, or acquisition of business. It also includes surplus cash that the company invests and redeems from liquid funds.Cash from Financing ActivitiesThese include any cash generated from selling of stock/shares to existing or new shareholders, any addition of debt, any repayments, and dividend payments.Free cash flow to Equity (FCFE)This is the cash available to stock/shareholders after meeting all expenses and debt related obligations. This is the most important metric to understand the health of the business. This is calculated as:FCFE= PAT + Depreciation – Capital Expenditure –/+ Change in current assets +/- Change in current liabilities.Free cash flow to the company (FCFF)This includes the cash flow available to the equity holders and debt holders in the company. This is calculated as:FCFF= EBIT * (1 – tax rate) + Depreciation – Capital Expenditure –/+ Change in current assets +/- Change in current liabilities.Key TakeawaysFundamental Analysis (FA) is a comprehensive study of a business. It examines the economic, financial and qualitative factors related to a stock/ business.P&L account reflects the operating performance of the company in a given year.Balance sheet gives a summary of what a company owns and what it owes to external parties.Cash flow statement gives a summary of how much cash came into the company in a specific period and how much the company spent in the same periodRatio analysis helps us understand how efficient is the company, how secure is its financial position, how profitable is it and what kind of return it generates for its stakeholders (stock and debt holders).Types of RatiosEfficiency ratiosThese ratios help you understand how efficiently the company runs its business.Receivable TurnoverReceivable turnover = Revenues for the period ÷ (Average of Trade Receivables at the beginning and end of the period)A higher number indicates that the company collects its dues quickly and hence is good for its cash flows and business.Inventory TurnoverInventory turnover = Cost of Goods sold (COGS) ÷ (Average of Inventories at the beginning and end of the period)A higher number indicates that the company doesn’t overstock, quickly converts inventory into sales and hence collects cash faster. For the sake of consistency, we could replace COGS with Revenues.Payable TurnoverPayable turnover = Cost of Goods sold (COGS) ÷ (Average of Trade Payables at the beginning and end of the period)A lower number indicates that the company is able to get long credit period from its suppliers and pays out cash slowly which is beneficial to the company. For the sake of consistency, we could replace COGS with Revenues.Asset TurnoverAsset turnover = Revenues for the period ÷ (Average of Total Assets at the beginning and end of the period)A higher number indicates that the company is able to generate more revenues for the value of assets on its balance sheet and hence is able to sweat its assets better than competition.Liquidity RatiosThese ratios help you understand the ability of a company to meet it’s near term payment obligations.Current RatioCurrent ratio = Current Assets ÷ Current LiabilitiesA ratio greater than 1 means the company can easily meet its near term payment obligations.Quick RatioQuick ratio = (Cash + Receivable + Current Investments) ÷ Current LiabilitiesThis eliminates inventories and other current assets that may not be sold immediately to raise cash. The higher the ratio, the better the company is placed to meet short term payment obligations.Leverage RatiosThese are the best indicators of the financial health of a company. Since lenders have to be paid irrespective of the whether the company makes profits or not, these indicators show how vulnerable the company is if the economic situation turns unfavorable.Debt to EquityDebt Equity ratio = (Short term debt + Long term debt) ÷ Shareholder equityA high number indicates that the company has funded most of its assets by raising debt.Interest coverageInterest coverage = EBITDA ÷ Interest paymentsA higher number indicates that the company generates adequate profits from operations to cover the interest payment obligations. A number closer to 1 raises risk of default on interest obligations.Profitability RatiosThese indicate how profitably the company is able to run its operations and how much return the company generates for its investors.EBITDA marginEBITDA margin = EBITDA ÷ SalesThis shows how profitably the company runs its operations. Company with the highest EBITDA margin among its peers has the most pricing power or the best control of costs - both are very desirable characteristics.Net MarginNet margin = PAT adjusted for one-off items ÷ SalesThis gives the profits attributable to the stock/shareholder after factoring in all costs including operating costs, interest payments and taxes payable to government. Again, the company with the highest net margin among peers is the most desirable.Free Cash Flow YieldFree cash flow yield = (Operating cash flow + Investing cash flow) ÷ (No of shares in issue * Share PriceThis gives the cash return on the current value of stockholder’s equity. The higher the ratio, the more attractive is the company.Return on Equity (ROE)ROE = PAT ÷ Average Shareholder fundsThis measures the shareholder’s return on his investment in the company.Return on Capital Employed (ROCE)ROCE = {EBIT * (1 – tax rate)} ÷ (Short term debt + Long term debt + Shareholder funds)This measure the return on the total capital employed.Valuation RatiosThe stock market offers its assessment of the value of a business. The value that it assigns to a business is called market capitalization. We have to arrive at our own estimate of the intrinsic value of a business. We then compare our estimate to that of the market’s assessment to see whether the stock is ‘undervalued’, ‘fairly valued’ or ‘overvalued’.Market capitalizationMarket capitalization = No. of shares issued * Share priceMarket capitalization is the market’s assessment of the value of a company to its stockholders.Buyout value or Enterprise ValueEnterprise value = Market capitalization + Short term debt + Long term debt – Cash & equivalents. This represents the total value of the business including the stock holder and the debt holder. Anyone willing to buy the company needs to buy all stocks and pay-off debt and then can take out cash that is left in the company.Relative ValuationThe concept of relative valuation has two parts- (1) find the ratio between the stock’s market price and one of its financial performances metric, and (2) calculate the same ratio for all its competitors to see whether the company is cheaper or more expensive relative to its competitors.Price/EarningsPE Ratio= Current Price ÷ Earnings per shareThis ratio indicates how much investors are willing to pay for each rupee of earnings. Companies with strong EPS growth outlook typically trade at high PE multiples whereas those with tepid or unpredictable outlook trade at lower multiples.How do you know if a company is cheap on PE?If a company’s PE multiple is lower than its peers and its ROE is comparable or better than its peers, it is cheapPrice Earnings/GrowthPEG ratio = PE ratio ÷ Earnings growth rateThis ratio gives the price investors are willing to pay for each percent of growth in the company’s EPS. In the case of two companies in the same industry with similar growth rates, the one with the lower PEG ratio is cheaper and hence more attractively valued.Price/BookPEG ratio = PE ratio ÷ Earnings growth rateThis ratio indicates how much premium/discount investors are willing to pay over the shareholder equity as per the balance sheet. Companies that generate high ROE trade at a premium to Book Value of shareholder funds while those that generate low or no ROE trade at or at a discount to Book value.EV/EBITDAPEG ratio = PE ratio ÷ Earnings growth rateThis is a cleaner metric than the PE ratio since it takes into consideration operating performance (and hence true profit potential) and is not influenced by a company’s depreciation policy and capital structure. So, two companies with similar EV/EBITDA multiples can have very different PE ratios if one has substantially more debt than the other. It would have much higher interest outgo and much lower PAT. So, it may look more expensive on PE but could actually be cheaper on EV/EBITDA.Key takeawaysRatio analysis helps us understand the overall efficiency of the company, its financial health and profitability.Efficiency Ratio helps to understand how efficiently the company runs its business.Leverage Ratios are the best indicators of the financial health of a companyDividendCash rich companies which do not have adequate opportunity to deploy cash in lucrative business opportunities return a portion of cash to its stockholders. Most often, dividends are paid out of profits though it is not strictly necessary. Dividends are announced periodically (semi-annually, annually etc). Generally, high growth companies do not pay much dividend, while stable cash generating businesses do. To be eligible to receive dividend, one should own the stock on the record date.Stock SplitIt is a scenario when a company announces that it is splitting the face value of its shares. Thus, if the face value is Rs 10 and the company announces 1:5 stock split, the new shares will have face value of Rs 2. The stock holder receives 5 stocks for each stock that he owned. The market price of the stock falls but the market capitalization of the company does not change meaningfully.Bonus IssueThese are free shares that the stockholders of the company receive against the shares that they already own. Bonus shares are issued out of the reserves in shareholder funds. Companies announce a ratio by which new shares are allotted to existing stockholders. If the ratio is 3:1, the stockholder receives 3 shares for each share held.BuybackA company can offer to buy back its shares from the existing stockholders either because it thinks the share price is too low or because it has surplus capital that it cannot put to good use that it plans to return to the shareholders. Buybacks reduce the number of shares in issue and lead to increase in EPS.Rights issueIn this a company offers new shares to all the existing stockholders in the ratio of their holding in the company. Shareholders are offered new shares at a discount to encourage them to apply in the issue. This is a primary issue in which the money paid by the shareholder accrues to the company. A 3:1 rights issue indicates that the stockholder can buy 1 share for every 3 shares that he owns in the company.