Margin Funding

INDEX

1. Introduction
2. Policy
3. Account opening for Margin Funding
4. Margin Requirements
5. Buy
6. Sell
7. Funds Payout
8. Shares Payout
9. Risk Management
10. Interest Charge
11. Repayment

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Introduction

“Margin Funding” allow you to take higher exposure on the funds as well as unlock the value of your
existing portfolio & take advantage of investment opportunities in the market without the involvement of
fresh funds. One can use the shares in his current portfolio to make fresh purchases in the market.
If utilized prudently, this product can help unlock the value of Securities even during depressed Stock
Market conditions and provide customers with the much-needed liquidity during pressing times.
Advantages:
1. Provide instant liquidity without having to sell your Securities.
2. Allow you to grab investment opportunities instantly without any need to pay first.
3. Leverages your funds available for investments.
4. Benefits like bonuses and dividends continue to accrue to the borrower.
5. Any appreciation in the value of the Securities given as margin would automatically allow
enhancement in drawing power.
6. Interest calculated on the amount utilized & the time for which it is utilized.

Margin Funding Policy

Margin funding is a facility where client can keep his position to the extent of his drawing power and
margin value, where drawing power would be based on respective margin on approved list of securities
as specified by Angel Infin Private Limited (AIPL):

1. Facility will be provided against approved Scrips categorized into A, B and C with approved limits and
margin requirement of respective Scrip in the said categories. AIPL reserves the right to modify, alter,
delete, add any of the scrip appearing in approved list without assigning any reason. In case where the
client want to take exposure in any specific scrip (other than the scrips where unlimited exposure is
allowed) for more than 0.25% of market cap of the company, then client would have to give higher
margin i.e. 30%,40% & 45% on respective A,B & C category.

2. It is necessary to have client’s IT return & balance sheets/net worth certificates & other relevant
document as required by AIPL as per KYC guideline issued by RBI on Feb. 21,2005.

3. All clients have to provide upfront margin in the form of securities/Cheques. (Incase of securities as
margin, hair-cut as applicable to various categories of approved securities would apply).In case cheque is
given for margin then margin requirement would be fulfilled on clearance of the cheque.

4. If any security is withdrawn from approved list, Client would not be allowed to take additional
position in such scrip & if he does so then such additional position would be treated as unapproved.
Also, withdrawn scrips provided as security earlier would be required to be replaced by other approved
scrips or by cash collateral.

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5. Client would have to pay the margin shortfall before the margin percentage falls by 60%. The client
would be informed at every stage when the margin Percentage begins to fall from the desired levels. (For
Example, client X is having ‘B’ category scrips is required to keep margin at 35%. Each time the margin
falls below 35 % client would be informed for the same until only 14% is left (35-60%of 35) and if the
margin continues to remain unfulfilled, AIPL would square off the positions to get the margins back to
acceptable levels. Square off would take place at the moment the scrip price comes down to the extent so
as to trigger the square off even if the price recovers afterwards Incase of square off, the ‘C’ category
scrips would be sold first and then ‘B’ and at last ‘A’category scrip.AIPL reserves the right to square off in
any manner as it decides.

6. Securities purchased will be transferred to Demit a/c of client on which AIPL would have POA and
AIPL will have full authority on the securities lying in the demat account.

7. ALL the securities would be valued at last traded/Closing price of either BSE or NSE as per discretion
of AIPL but incase of margin requirement, the lowest price during the trading hours would also be
considered.

8. In case Square up done by AIPL at its discretion, all the losses in relation to same will be borne by
client. AIPL would not be responsible incase the securities are not squared up for any reason like no
buyer of securities etc. even if value of securities fall below the debit balance of client in AIPL and client
would have to fulfill the margin requirement.

9. The client should confirm the available quantity & unsettled transaction before liquidating the position
for any scrip. Any loss occurred due to such transaction would be borne by clients.

10. In case of purchase made by the client is more than the total available limit i.e. margin and funding
amount, then AIPL would have right not to accept the whole transaction and client would be responsible
for any amount due to broker because of such transactions.

11. AIPL may require, at any point of time, any additional margin on the basis of volatility or risk
perception in the scrip.

12. MTM loss can be accepted in the form of cash and/or approved securities or combination of both.

13. If the client want any securities funded by AIPL in his another demat account through off market
transfer, he has to pay so much of the amount so as to keep the margin as per norms.

14. There would be no funding on the securities purchased during the No Delivery period or lock-in
shares.

15. The shares purchased/Sold would be used first for Margin funding subject to other things are
complied with. If client want to buy/Sell any approved scrip as a normal Buy/Sell (it means not to be
considered for margin funding) then client has to intimate the same to us by 4 PM on the same day
otherwise the positions would be considered first for margin Funding.

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16. If the client is buying same scrip in one exchange and selling it to another exchange then this would be
treated as square off transaction unless the client informs otherwise well in advance.

17. The minimum loan amount would be 1 lakh.

18. The interest would be charged on T+2 basis from client.

19. Any credit received in the loan account of the client would be first appropriated against interest due,
penal interest and finally, the balance in the principal loan account, if any.

20. The AIPL would charge the interest at such rates with right to revise at its discretion , which would be
debited at the end of the month calculated on the basis of daily outstanding.

21. If the client makes default in making payment of interest on time then AIPL would charge 2% penal
interest per month over and above the normal interest charged to him.

22. The shares purchased under margin funding can be sold but client’s ledger must have a sufficient
credit balance in his ledger at the end of the day of sale, to repay the dues to AIPL otherwise shares
would not be released for pay in.

23 Any sell trade done by client for shares lying in margin funding would be released for pay in
obligation even if there is any margin shortfall in margin funding subject to condition that the client is not
under the risk at angel level after considering all segments(for which client is registered with us) but
client has to fulfill the margin shortfall in next 7 trading days otherwise the open position in normal
broking books would be squared off to the extent to recover the margin shortfall in margin funding

24. The back dated trades for last 15 days can be funded subject to condition that client should be active
on the date of trade which is to be funded

25. AIPL would have right at its sole discretion to add, alter, modify, delete any or all clauses of this
policy.

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Account opening for Margin Funding

The client, who is willing to avail Margin Funding facility, should execute the following documents with
the assistance of angel’s relationship manager.

1) Master Financing Agreement - The agreement would be executed between Client & Angel Infin Pvt.
Ltd.(referred as “AIPL” afterwards). It would contain all the terms & Conditions between both of the
parties regarding disbursement, interest, Margin and Repayment. This is a basic document which
would decide the future course of transactions.

2) Irrevocable Power of Attorney – This Contains the Power granted by Client to Angel for opening &
operating the client’s Bank as well as Demat account. In simple term, both Bank & Demat account
would be under Control of AIPL and AIPL would execute all transaction on the behalf of clients. This
power is grated to AIPL because for margin funding facility client has to compulsorily open a specific
bank account from where AIPL would meet the client’s exchange obligation after financing to
him/her. So it is the only way to give the funds to client.

3) Letter of Continuity – This document states that the facility would be of continuation nature and
disbursement and repayment can happen any number of time within the limits of amount
sanctioned to client.

4) Demand Promissory note – By this, Client Promises to repay the loan as and when called by Lender
i.e. Angel Infin Pvt. Ltd.

All the above docs should be sent by branches to CSO after completion of all the requirements. The
branch should make ensure that all documents as required are in place and photocopies are verified with
originals. The responsibility of Credit Verification i.e. sanction amount, interest rate to be charged etc. of
the clients entirely lies at the Branch end. CSO has the right to approve or reject any or all of the
parameters.

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Opening of Demat & Bank Accounts under POA of AIPL

For Margin Funding facility, two bank accounts (Current account & savings account with Kotak
mahindra bank) and one Demat account would be opened in client’s name. The current account & Demat
account would be used for margin funding (has to be opened under POA of AIPL) and savings account
would be opened to facilitate fund transfer to the client. Both the account opening forms would be part of
our Margin Funding Loan Document Kit.

The current bank account of client would be opened in Mumbai under POA of AIPL and client would
have no control on this account. The margin funding to client would be done in this account so that
client’s exchange obligation would be met through this account. (This account would be Zero balance
maintenance account).

The savings account would be opened with Kotak bank’s branch nearest to client’s location so that client
is able to operate it easily. This account would be Zero balance account and client will get cheque book
and ATM card and phone banking facility for this savings account. The ATM can be used at any of Kotak
and HDFC bank’s ATM network free of charge. The payout to client would be given in this savings
account. (Payout can be given by DD also on request of client ).

The Branch will coordinate with Kotak mahindra bank at local level to open the bank account of the
client, as the both current(with Mittal court, Mumbai) & Savings (Local branch of client location) account
can be opened by any Kotak bank branch.(it means the Client residing at kolkata, both current and
savings account can be opened by kotak’s kolkata branch). This process would make the bank account
opening process faster as branches can resolve the bank account related discrepancies at local level and
get the account opened earliest. For this branch has to provide the bank account opening form duly filled
up with all respects to Kotak mahindra bank. The Power of attorney would be given from CSO end to
Kotak bank directly for all cases.

The demat account would be opened with CDSL DP of Angel broking limited under POA of AIPL
irrespective of the fact that client is already having demat account . For Demat account, client would
have to give POA in favour of Angel Broking Limited also for Auto Pay in/Pay out against the exchange
obligation of client, in normal course, the way its currently carried out. The branch will send DP forms
duly filled up to CSO for account opening.

In addition to above, After opening of bank account as well as Demat account, the client would be
mapped for margin funding

Please note that he above mentioned documents / procedures are mandatory, & in any case no account
will be opened if any of the documents in not submitted / any discrepancy is found in the same.

The charges of account opening would be debited from client ledger.

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Margin

The client has to give the margin to AIPL before availing the margin Funding facility. The margin can be
given either in cash or in the form of share. The shares given as margin must be in approved scrip list of
AIPL. The shares would be valued after applying the appropriate haircut on it.

In case of cash margin, the cheque should be in favour of Angel Infin Pvt. Ltd. In case of margin in form
of shares, then shares must be transferred from client’s demat account to AIPL account and CMR should
be given to branch which in turn send it to CSO for updation in records.

Limit setting

Once the client has given the margin, The system would calculate the limits available to client but this
would be on higher side i.e. taking into consideration that client would buy all ‘A’ group Scrip only. IF
client is going to buy ‘B’ & ‘C’ group scrip, then client has to calculate how much funding would be
available to client on the margin given by him.

Explanation: If a client has given margin say Rs. 1 lakh then system would fix the limit of Rs. 4 lakh
assuming that all ‘A’ category scrip are going to be bought. ( On A group margin is 25%, so funding
would be 3 lacs and total buying allowed would be 4 lacs). If client want to buy ‘B’ category scrip, then he
can buy shares of Rs.285714/- i.e. 35% margin on B category so taking 1 lakh margin buying allowed
would be 100000/35%=285714/-)

Buy

The client would be made available the list of approved scrips and Funding percentage allowed on them
through back office login. The client would buy/Sell shares from his normal trading account and if client
has given the margin then only approved scrips bought by client would be considered first for margin
Funding and remaining would not be considered for funding purpose for which client would have to
make full payment as per normal transaction. The client would be able to view the trades which are
considered for margin funding through back office login.

The funds to the extent of buying obligation against approved scrip subject to funding limits set for client,
will be transferred to Client Kotak bank account (POA) from AIPL Bank A/c. The funds are further
transferred to broker’s account from Client’s POA account to meet the exchange obligation on T+2 Day.
The amount of funding given to client would be reflected in client’s ledger and on this amount interest
would be charged.

The shares are credited in client DP account (under POA of AIPL). The shares lying in such Clients DP
account will be then transferred to AIPL A/c on T+2 day.

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Shortage/Auction :- Incase client has not received full quantity of shares as bought then the no. of shares
delivered short may be either given the delivery after 2 days or payout of funds can be received by the
client. In case there is no delivery of shares and Auction payout is received then the amount would be
credited in client’s account on payout day and No. of shares short would be reduced from client’s holding
under Margin funding.

Buy Process

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Sell

The client would sell the shares from his trading account as a normal and if the shares sold by the client
are lying under margin funding facility then these shares would be taken first as sold unless the client
informs otherwise to branch by 4 PM on the day client has sold the shares.

The sales proceeds are credited to client’s bank account (under POA) on T+2 day and than further
transfer from client POA Bank account to AIPL bank account would be done.

The shares earlier transferred to AIPL pool A/c, will be Transferred back to Client POA A/c to the extent
of quantity sold , from where broker would debit the client account to meet the exchange obligation.

After deducting the Principal Amount & interest charged, the balance amount will be margin of client to
be used either for further purchase of shares or Pay-out to client (as the case may be).In case of funds
payout, the amount would be transferred to client’s savings bank account (Kotak) or DD to be issued as
per request by client.

Sell Process

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Funds payout

If the client wants to withdraw the funds, then withdrawal would be allowed only to the extent that
after withdrawal the margin is maintained as per the norms. If the withdrawal request can be
processed then funds would be transferred to Client’s Kotak saving bank account or issue a DD to
client as per request of the client.

Shares Payout

If the client wants to transfer the shares to his Demat account, then withdrawal would be allowed
only to the extent that after withdrawal the margin is maintained as per the norms. If the withdrawal
request can be processed then shares would be transferred to client’s demat account from AIPL
account after obtaining the CMR for the Demat account where the shares are to be transferred.

Risk Management

The client has to maintain the margin at all times as per the requirement. The risk management team
would keep a close watch on all the client’s position and incase the margin is required from the client

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then client would be informed accordingly from CSO. The client would have to meet the margin
requirement before the square off triggers. The square off would trigger once the margin percentage
goes down by 60%. In case the client is having various categories of shares then the weighted average
margin requirement would be considered i.e. the combined effect of category of shares and margin
percentage would be considered. Incase after informing to client and the margin requirement is not
fulfilled then square off would take place and C category shares would be sold first and after it B and
A category would be sold. The selling would be done to the extent the margin comes to the required
level and after square off client would be informed for the same.

Interest Charge

It is to be noted here that, the interest on funding amount will be calculated on Daily outstanding i.e.
ledger debits and posted in client’s ledger at the end of the month. In case the client fails to pay such
interest , penal interest of additional 2% p.m. may be levied to the client. The Ledger of client would
be sent on quarterly intervals.

Repayment

Every sell off done by the client would be first adjusted against the interest charge and than towards
the loan. The client can repay the loan and again take it till the agreement is active. If client want to
repay and close the account, then client would have to repay whole debit balance and the interest
charge till the date of repayment and once there in no dues to client the account can be closed and if
any payout is due, it would be given to the client.

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