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What is the difference between Margin Funding and LAS?
Margin Funding is a financing done for investment purpose, whereas LAS is a kind of personal financing not for any direct investment activity. Initial margin in Margin funding could be either Securities or Cash whereas in LAS Initial Margin would be Securities.
Who is financing the funds on behalf of the client?
Financing of the funds is done by Hedge Finance Ltd and not by Hedge Equities Ltd
How is the interest calculated and charged?
Interest is calculated on a daily basis on the outstanding debit amount and is charged on every month
What are documents required to get the Margin funding account opened?
Normal trading & DP account opening forms with all the necessary supporting
Hedge Finance Master Loan Agreement
Hedge Finance KYC Documents
DP Account with Hedge Equities is compulsory
Duly filled and signed Account opening form of Federal Bank Or IndusInd Bank Ltd
PoA in favour of Hedge Finance to operate DP and Bank accounts
What are the account opening charges incurred for availing the Margin Finance facility?
Normal charges for opening Trading & DP accounts
Charges incurred at cost for opening account with Hedge Finance viz. stamping charges, credit risk appraisal charges etc*
Can an account opened under Margin Funding can also trade in F&O?
Yes, an account opened under Margin Funding can also trade in F&O. But the funding is only applicable in Cash market – in F&O the client has to ensure full initial margin payment & MTM daily as per the rules of the Exchange.
How many days it takes to open the account?
On submitting the completed set of documents the account opening process takes around 5 – 7 working days
Why is the delay in opening a Margin Funding account as compared to Normal Trading Accounts?
Besides normal trading and DP accounts, a detailed credit risk appraisal of the client is done and also an account with Bank has to be opened – which may take more time from the bank
Why need to open a separate bank account for Margin Funding?
As per broking rules, the broker has to receive the money from the client’s bank account itself. Hedge Finance Ltd. transfers the loan money to the newly opened client’s bank account (POA Bank account) and through the POA transfers the money to broker’s bank account.
Vice-versa in the case of payout where the broker transfers the money to POA bank account and from the bank account money gets transferred to Hedge Finance back.
How the Margin Shortfall or MTM losses will be recovered from the client?
MTM losses etc. can be accepted in form of cash and or approved securities
Can a client avail both Margin Funding and LAS facilities simultaneously?
Yes, the amount required under LAS would be separately transferred to the client’s other Bank Account.
How many shares are approved for Margin Funding?
Presently we are offering Margin Funding on majority of the listed shares. However considering the risk involved Company may decline finance on any security.
Can normal cash accounts be converted to Margin Funding accounts & if yes, whether the client code will be changed and what are the required documentation?
Yes, the normal cash accounts can be converted to Margin Funding accounts, the client code will not be changed. Customer can start availing the facility once formalities are completed and the account is activated with Hedge Finance
What is the minimum margin to be maintained and when margin calls would be made?
Client has to maintain a Margin of 40% at all the time. When the margin goes below 40% Hedge Finance would make margin calls and if the margin calls are not met securities would be sold to clear the shortfall.
|Status at the time of availing the funding:|
Client Margin Rs.
Funding by Hedge Finance Rs.
Total Purchase Rs.
Value of Total Stocks as at end of day Rs.
|Status when Margin Calls are made:|
Value of Total Stocks Rs.
Client Margin Rs.
Funding by Hedge Finance Rs.
Shortfall in Margin Rs.
What is Margin Call?
Margin call is the intimation given by the lender to the borrower for replenishing of the short fall in the market value of the collateral stipulated or the loan
What are the main benefits of LAS?
The main benefit of LAS is access to liquidity without needing to liquidate your investments / portfolio / stake. LAS are an easy tool to leverage on your existing assets without compromising on the superior returns they offer.
What are the various purposes that LAS can be used for?
The purpose of Loan against shares is to take care of all your investment as well as personal needs and to help you meet your contingencies. An unexpected liquidity crunch can be mitigated with LAS, which is a relatively quicker and easier source for liquidity. LAS can also be used to expand a portfolio. Financing can be availed against an existing investment in shares to reinvest in the stock market. Purchase property, expand business or to meet other financial objectives.
Does the ownership of shares get transferred when I pledge the shares with you?
No, the ownership of the shares is retained by the customer.
Do we need to open a separate bank account for LAS facility like Margin Funding?
No. For LAS no need to open a separate POA bank account. Hedge Finance will fund to clients bank account directly.
In whose name would the shares be held? Will I keep getting dividends on the pledged shares?
The shares remain in the borrower’s name enabling him / her to continue reaping the benefits of the portfolio and enjoy all shareholder benefits such as rights, dividends and bonuses.
What is the Approved List of Shares?
This is the list of shares/securities approved by Hedge Finance Ltd against which loan can be availed subject to predefined hair cut or margin. Hedge Finance Ltd has approved more than 800 shares. This list is subject to change from time to time.
Can I get an overdraft facility against my shares?
Yes, a line of credit facility which grants the borrower flexibility in the use of funds can also be availed. Interest is charged only on the amount actually utilized and not on the entire facility.
What are my loan tenure options?
Loans can be availed as demand loans.
What security / collateral do I have to present for the loan?
Pledge of approved securities – shares, mutual funds, insurance policies, warehouse receipts, corporate bonds, etc are required as security for the loan.
Can I avail the loan against unlisted shares?
Yes, but Hedge Finance Ltd will evaluate it on a case by case basis.
What is the minimum margin that I have to maintain?
As per our norms, a minimum of 50% margin must be maintained on shares.
How often are the shares re-valued?
The portfolio is monitored on a daily basis based on the closing market price. Any margin shortfall must be recouped within 7 days.
Can I prepay the loan? What are the charges involved?
Yes, the loan can be prepaid.
What happens when the market value of the security changes?
If the market value drops to a level where the minimum margin is less than stipulated, the borrower must recoup the margin by pledge of additional shares or by cash margin/part-repayment. If the market value rises, then assuming eligibility as per decided sanction limit, a borrower can take an additional disbursement.
What are the interest cost and other charges applicable?
Please contact Hedge Finance Ltd for more details.