EXECUTIVE SUMMARY

This project regarding the fundamental analysis of five companies in the banking industry has

been conducted in Hedge Equities, Kaloor for a period of 45 days. The main purpose of this

study was to conduct fundamental analysis. In this project, the scope was limited to the five

securities from the banking sector. But that provided an overall picture of the economy and

the banking industry. The scrip I selected was of HDFC bank, Federal Bank, YES Bank, Axis

Bank and ICICI Bank.

To forecast future stock prices, fundamental analysis combines economic, industry, and

company analysis to derive a stock’s fair value called intrinsic value. If fair value is not equal

to the current stock price, fundamental analysts believe that the stock is either over or under

valued. Through the study, an attempt has been made to find the intrinsic value of the stock

and compare with market value of the study and to recommend whether to buy, hold or sell

the stock based on the analysis. This project was helpful in understanding whether the price

of the stock is undervalued or overvalued at the current market price. And fundamental

analysis gave a better foundation for investment decisions.

The data for the study was collected from the annual reports and websites of the five

companies in the banking sector. The collected data was analysed through the various

analysis techniques like Economic analysis, Industry analysis, company analysis, CAMEL

Rating and Intrinsic value calculation.

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CHAPTER 1CHAPTER 1

INTRODUCTION TO STUDYINTRODUCTION TO STUDY

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1. INTRODUCTION TO STUDY

1.1. INTRODUCTION

Investment is putting money into something with the expectation of profit. More specifically,

investment is the commitment of money or capital to the purchase of financial instruments or

other assets so as to gain profitable returns in the form of interest, dividends, or appreciation

of the value of the instrument (capital gains). An investment involves the choice by an

individual or an organization, such as a pension fund, after some analysis or thought, to place

or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond,

financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign

currency, that has certain level of risk and provides the possibility of generating returns over

a period of time.

Investment comes with the risk of the loss of the principal sum. The investment that has not

been thoroughly analyzed can be highly risky with respect to the investment owner because

the possibility of losing money is not within the owner's control. The difference

between speculation and investment can be subtle. It depends on the investment owner's mind

whether the purpose is for lending the resource to someone else for economic purpose or not.

In the view of fundamental analysis, stock valuation based on fundamentals aims to give an

estimate of their intrinsic value of the stock, based on predictions of the future cash flows and

profitability of the business. Fundamental analysis may be replaced or augmented by market

criteria. As an approach to investment analysis, technical analysis is radically different from

fundamental analysis. Technical analysts don’t evaluate a large number of fundamental

factors relating to the company, the industry and the economy. Instead they analyze market

generated data like prices and volumes to determine the future direction of price movement.

1.2. BACKGROUND OF STUDY

The fundamental analysis is all about getting an understanding of a company, the health of

its business and its future prospects. It includes reading and analyzing annual reports and

financial statements to get an understanding of the company's comparative advantages,

competitors and its market environment. Fundamental analysis is built on the idea that the

stock market may price a company wrong from time to time. Profits can be made by finding

underpriced stocks and waiting for the market to adjust the valuation of the company.

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This project is helpful in understanding whether the price of the stock is undervalued or

overvalued at the current market price. And fundamental analysis will give a better

foundation for investment decisions.

1.3. STATEMENT OF THE PROBLEM

The purpose of this study is to forecast the future stock price, the fundamental analysis

incudes the industry analysis, company analysis and economic analysis which help us to

derive a stock’s fair price value called the intrinsic value. Therefore valuation is required in

order to find whether the price of stock is undervalued or overvalued at the current market

price. From this valuation we can reach a conclusion whether it maximizes the return or

minimizes the risk.

1.4. SCOPE OF THE STUDY

The present study mainly focused on the last 3 year performance of the selected banking

companies based in India. This study reveals the various factors that are to be considered for

the fundamental analysis of the companies. In the investor point of view, this study will help

them to understand the price changes of shares. Also this will definitely enable them to find

out how the shares are performed in the last 3 years. For the new investors, this study will

serve as a guideline to know about the investment pattern of the banking sector and also

select good performance companies.

In my project, the scope is limited to the five securities from the banking sector. But this will

provide an overall picture of the economy and the banking industry. The scrip I have selected

is:

HDFC Bank

Federal Bank

YES Bank

Axis Bank

ICICI Bank

The global economy, Indian economy, banking industry and the performance of the above

scrip are analyzed.

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1.5. OBJECTIVES OF THE STUDY

Primary objective:

Fundamental analysis of five private banks in India with a special reference to Hedge

Equities.

Secondary objective:

To analyzed the profitability and price earnings capacity of the banks

To study about how the fundamental factors are affecting the stock prices.

To evaluate the main attribute which traders and investors look while trading in

banking companies.

To offered for valid suggestions to the growth of the investors.

To know more about secondary market.

To identify the best investment decision.

To understand about Indian banking performance.

To understand, how major economic indicators affects the banking performance

To understand the macroeconomic variables those will an impact on the company

progress.

To study the various trends, opportunities, challenges of the industry in which the

company operates.

Find the intrinsic value of the stock and compare with market value.

To know whether the stock price is undervalued or overvalued using fundamental

analysis.

1.6. RESEARCH DESIGN

There are different types of research types. The one used here is empirical research.

Empirical research is research using empirical evidence. It is a way of gaining knowledge by

means of direct and indirect observation or experience. Empiricism values such research

more than other kinds. Empirical evidence (the record of one's direct observations or

experiences) can be analyzed quantitatively or qualitatively. Through quantifying the

evidence or making sense of it in qualitative form, a researcher can answer empirical

questions, which should be clearly defined and answerable with the evidence collected

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(usually called data). Research design varies by field and by the question being investigated.

Many researchers combine qualitative and quantitative forms of analysis to better answer

questions which cannot be studied in laboratory settings, particularly in the social sciences

and in education.

Data collection is mainly done through secondary sources. The secondary sources used are

Annual reports

www. Moneycontrol.com

www. Economictimes.com

NSE.india

www.tradingeconomics.com

1.7 LIMITATION OF THE STUDY

The study was confined only to one particular sector.

The study was more confined with secondary data.

The study was done for a short period of time, which might not hold true over a long

period of time.

The economy and industry are so wide and broad that is difficult to include all the

likely factors influencing the performance of bank.

There is no guarantee that what happened in the past will continue in the future.

Analysis is done only on the basis of some factors therefore percent accuracy is not

possible.

Finally the study is not from inherent limitation of collection and analysis of the

source of data.

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CHAPTER 2CHAPTER 2

CONCEPTUAL FRAMEWORK AND LITERATURE REVIEWCONCEPTUAL FRAMEWORK AND LITERATURE REVIEW

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2. CONCEPTUAL FRAMEWORK & LITERATURE REVIEW

2.1. CONCEPTUAL FRAMEWORK

Fundamental analysis is the examination of the underlying forces that affect the well-being of

the economy, industry groups and companies. As with most analysis, the goal is to develop a

forecast of future price movement and profit from it. At the company level, fundamental

analysis may involve examination of financial data, management, business concept and

competition. At the industry level, there might be an examination of supply and demand

forces of the products. For the national economy, fundamental analysis might focus on

economic data to assess the present and future growth of the economy.

To forecast future stock prices, fundamental analysis combines economic, industry, and

company analysis to derive a stock’s fair value called intrinsic value. If fair value is not equal

to the current stock price, fundamental analysts believe that the stock is either over or under

valued. As the current market price will ultimately gravitate towards fair value, the fair value

should be estimated to decide whether to buy the security or not. By believing that prices do

not accurately reflect all available information, fundamental analysts look to capitalize on

perceived price discrepancies.

Fundamental Analysis is a method of evaluating a security by attempting to measure its

intrinsic value by examining related economic, financial and other qualitative and

quantitative factors. Fundamental analysts attempt to study everything that can affect the

security’s value, including macroeconomic factors (like the overall economy and industry

conditions) and individual specific factors (like the financial condition and management of

companies).

2.1.1. Three Phases of Fundamental Analysis

(a).Understanding of the macro-economic environment and developments (Economic

Analysis)

(b).Analyzing the prospects of the industry to which the firm belongs (Industry Analysis)

(c).Assessing the projected performance of the company (Company Analysis)

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Phase Nature of Purpose Tools and techniques

Analysis

FIRST Economic To access the general Economic indicators

Analysis economic Situation of the

nation.

SECOND Industry Analysis To assess the prospects of SWOT analysis

various industry groupings.

THIRD Company Analysis To analyse the Financial and Analysis ofFinancial

Non-financial aspects of a aspects: Sales,

company to determine Profitability, EPS etc.

whether to buy, sell or hold Analysis of Non-financial

the shares of a company. aspects: management,

corporate image, product

quality etc.

Table no.1:Phases of fundamental analysis

2.1.2.Strengths of Fundamental Analysis

Long-term Trends

Fundamental analysis is good for long term investments based on long-term trends. The

ability to identify and predict long-term economic, demographic, technological or consumer

trends can benefit investors and helps in picking the right industry groups or companies.

Value Spotting

Sound fundamental analysis will help identify companies that represent a good value. Some

of the most legendary investors think for long-term and value. Fundamental analysis can

help uncover the companies with valuable assets, a strong balance sheet and stable earnings.

Business Acumen

One of the most obvious, but less tangible rewards of fundamental analysis is the

development of a thorough understanding of the business. After such painstaking research

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and analysis, an investor will be familiar with the key revenue and profit drivers behind a

company. Earnings and earnings expectations can be potent drivers of equity prices. A good

understanding can help investors avoid companies that are prone to shortfalls and identify

those that continue to deliver.

Value Drivers

In addition to understanding the business, fundamental analysis allows investors to develop

an understanding of the key value drivers within the company. A stock’s price is heavily

influenced by the industry group. By studying these groups, investors can better position

themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth

oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical

(transportation) etc.

Knowing Who is Who

Stocks move as a group. Knowing a company’s business, investors can better categorize

stocks within their relevant industry group that can make a huge difference in relative

valuations. The primary motive of buying a share is to sell it subsequently at a higher price.

In many cases, dividends are also to be expected. Thus, dividends and price changes

constitute the return from investing in shares. Consequently, an investor would be interested

to know the dividend to be paid on the share in the future as also the future price of the share.

These values can only be estimated and not predicted with certainty. These values are

primarily determined by the performance of the company which in turn is influenced by the

performance of the industry to which the company belongs and the general economic and

socio-political scenario of the country.

An investor who would like to be rational and scientific in his investment activity has to

evaluate a lot of information about the past performance and the expected future performance

of companies, industries and the economy as a whole before taking investment decision. Each

share is assumed to have an economic worth based on its present and future earning capacity.

This is called its intrinsic value or fundamental value. The purpose of fundamental analysis is

to evaluate the present and future earning capacity of a share based on the economy, industry

and company fundamentals and thereby assess the intrinsic value of the share. The investor

can then compare the intrinsic value of the share with the prevailing market price to arrive at

an investment decision. If the market price of the share is lower than its intrinsic value, the

investor would decide to buy the share as it is underpriced. The price of such a share is

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expected to move up in future to match with its intrinsic value.

On the contrary, when the market price of a share is higher than its intrinsic value, it is

perceived to be overpriced. The market price of such a share is expected to come down in

future and hence, the investor would decide to sell such a share. Fundamental analysis thus

provides an analytical framework for rational investment decision-making. Fundamental

analysis insists that no one should purchase or sell a share on the basis of tips and rumours.

The fundamental approach calls upon the investor to make his buy or sell decision on the

basis of a detailed analysis of the information about the company, the industry to which the

company belongs, and the economy. This results in informed investing.

The fundamental analysis can be valuable, but it should be approached with caution. If you

are reading research written by a sell-side analyst, it is important to be familiar with the

analyst behind the report. We all have personal biases, and every analyst has some sort of

bias. There is nothing wrong with this, and the research can still be of great value. Learn what

the ratings mean and track the record of an analyst before jumping to a conclusion. Corporate

statements and press releases of a company offer good information, but they should be read

with a healthy degree of skepticism to separate the facts from the spin. Press releases don’t

happen by accident; they are an important PR tool for companies. Investors should become

skilled readers to weed out the important information and ignore the hype.

2.2. LITERATURE REVIEW

Joshi (1986) in his study of all scheduled commercial banks operating in India analyse the

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profitability and profit planning related to the period 1970 – 1982. The study discusses and

trends in profits and profitability of commercial bank nationalization. The factors leading to

the deterioration of profitability are highlighted.

Minakshi and Kaur (1990) attempted to measure quantitatively the impact of the various

instruments of monetary policy on the profitability of commercial banks. The study

empirically proves that pre-liberalization banking being highly regulated and controlled

industry, has suffered a lot so far as profitability concerned. The bank rates and reserve

requirements ratio has played a significant role in having a negative impact on the bank’s

profitability.

Ojha (1992) in his study attempts to measure the productivity of public sector commercial

banks in India. After identifying various measures of productivity like total assets per

employee, total credit per employee, total deposits per employee, pre-tax profits per

employee, net profit per employee, working funds per employee, ratio of establishment

expenses to working funds and net interest per employee, comparison is made with the

banks at the international level. The study concludes the Indian banks have very less

productivity ratio compared with western countries. Since in his study a comparison has

been made of Indian public sector banks, which have to perform other social functions

unlike western commercial banks.

Ho Sein Khanifar (2012) studied the factors affecting investor’s decision by performing

fundamental analysis. The analysis is performed by studying economy, industry and then

firm. The population included in the study was broking firm at Tehram stock exchange. The

study shows that EPS, profit margin, P/E ratio, sales have highest importance in analysis

decision followed by economy related factor and industry related factor.

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CHAPTER 3CHAPTER 3

INDUSTRY PROFILEINDUSTRY PROFILE

3. INDUSTRY PROFILE

3.1 INTRODUCTION

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A financial market is a market in which people and entities can trade

financial securities, commodities, and other fungible items of value at low transaction costs

and at prices that reflect supply and demand. Securities include stocks and bonds, and

commodities include precious metals or agricultural goods. There are both general markets

(where many commodities are traded) and specialized markets (where only one commodity is

traded). Markets work by placing many interested buyers and sellers, including households,

firms, and government agencies, in one "place", thus making it easier for them to find each

other. An economy which relies primarily on interactions between buyers and sellers to

allocate resources is known as a market economy in contras t either to a command

economy or to a non-market economy such as a gift economy

3.2 HISTORY OF THE INDIAN CAPITAL MARKET

The history of the capital market in India dates back to the eighteenth century when East

India Company securities were traded in the country. Until the end of the nineteenth century

securities trading was unorganized and the main trading centers were Bombay (now Mumbai)

and Calcutta (now Kolkata). Of the two, Bombay was the chief trading center wherein bank

shares were the major trading stock During the American Civil War (1860-61). Bombay was

an important source of supply for cotton. Hence, trading activities flourished during the

period, resulting in a boom in share prices. This boom, the first in the history of the Indian

capital market lasted for a half a decade. The bubble burst on July 1, 1865 when there was

tremendous slump in share prices.

The capital market was not well organized and developed during the British rule because the

British government was not interested in the economic growth of the country. As a result

many foreign companies depended on the London capital market for funds rather than in the

Indian capital market.

3.3 FINANCIAL SERVICES INDUSTRY

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Financial services industry encompasses a broad range of organizations that manage money

including credit unions, commercial bank, investment banks, credit card companies,

insurance companies, accountancy companies, consumer finance companies, stock

brokerages, investment funds and some government sponsored enterprises. If we talk about

Indian financial services industry, it is a bank dominated financial industry. Commercial

banks accounts for 60% assets in the Indian financial system, which is followed by insurance

companies. Many NBFCs operates in specialized segments like leasing, factoring,

microfinance, infrastructure finance etc.

Indian financial system is carried out by different regulatory authorities. Reserve bank of

India (RBI) regulates the major part of financial System. Some financial institutions also play

a role of regulatory body for other institutions in the financial sector. NABARD, NHB, and

DCA are the example of such type of regulatory body. SEBI regulates the capital market,

mutual fund and capital market intermediaries. Insurance sector is regulated by IRDA.

Similarly PFRDA regulates pension fund.

3.4 FINANCIAL MARKET

In Broad term describing any marketplace where buyers and sellers participate in the trade of

assets such as equities, bonds, currencies and derivatives. Financial markets are typically

defined by having transparent pricing, basic regulations on trading, costs and fees and market

forces determining the prices of securities that trade.

Indian financial market has witnessed a rapid growth after economic liberalization in India.

The market capitalization of the equity market (National Stock Exchange) has grown from

approximately 6.5 trillion in 2000-01 to approximately 60 trillion in 2009-10 and further to

approximately 61 trillion in 2011-12. The total corporate debt outstanding which stood at 7.9

trillion in June 2010 has grown to 12.9 trillion in March 2013. The outstanding CP has grown

from 575 million in 2003 to 11 billion in 2013. Similarly, outstanding CD has grown from 91

million in March 2003 to 39 billion as on March 22, 2013.

Financial market is basically segmented into two parts:-

Money market

Capital market

3.4.1. Money Market

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Money market is that segment of financial market where short term funds are dealt with i.e.

money market deals in those kinds of financial assets which maturity period is not more than

one year. RBI is at the apex of Indian money market. Banks are the main players in Indian

money market. Apart from commercial and co-operative banks some NBFCs and financial

institutions like LIC, GIC, and UTI etc. also take part in Indian money market. Instruments of

money market are Call money, Treasury bills, Commercial papers, Certificate of deposits.

3.4.2. Capital market

Capital market is that segment of financial market where medium and long term securities are

dealt with. It constitutes of long term borrowings from banks and financial institutions,

borrowing from foreign markets, raising capital by issuing share, bond, debentures etc. Indian

capital market has also witnessed a huge growth and changes after early 1990s. A growing

economy like India, where more than 15 million youth are added to workforce every year,

needs huge investment on a continuous basis for new capacity as well as for expansion,

renovation and modernization of existing productive capacity and creation of supporting

infrastructure. Indian capital market has huge potential to grow. Over the past two decades,

Indian regulators have taken the path towards tighter regulations. As a result, in relative

terms, our capital markets have been less vulnerable to crises or frauds. Quite justifiably, our

regulators and government officials are proud about this. We have a robust regulatory

structure in place for the capital markets. However, the flip side is that they are not geared to

meet the capital requirement to realize the growth potential of the economy. India has

tremendous potential to sustain higher economic growth compared with china because of

favourable demographics and the enterprising nature of its people. India can sustain double–

digit economic growth for at least a couple of decades more, which can lift millions of people

out of poverty as has been the case with china, Singapore and many other countries.

Capital markets are further segmented into two parts: - a) Primary market, b) Secondary

market

Primary market

A market that issues new securities on an exchange. Companies, governments and other

groups obtain financing through debt or equity based securities. Primary markets are

facilitated by underwriting groups, which consist of investment banks that will set a

beginning price range for a given security and then oversee its sale directly to investors. It is

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also known as “New Issue market”. In primary market companies go for fund raising through

IPO (initial public offerings). The primary markets are where investors can get first crack at a

new security issuance. The issuing company or group receives cash proceeds from the sale,

which is then used to fund operations or expand the business. Exchanges have varying levels

of requirements which must be met before a security can be sold. Once the initial sale is

complete, further trading is said to conduct on the secondary market, which is where the bulk

of exchange trading occurs each day. Primary markets can see increased volatility over

secondary markets because it is difficult to accurately gauge investor demand for a new

security until several days of trading have occurred.

Secondary Market

A market where investors purchase securities or assets from other investors, rather than from

issuing companies themselves. The national exchanges - such as the New York Stock

Exchange, NASDAQ, LSE, BSE and NSE are secondary markets. Secondary markets exist

for other securities as well, such as when funds, investment banks, or entities such as Fannie

Mae purchase mortgages from issuing lenders. In any secondary market trade, the cash

proceeds go to an investor rather than to the underlying company/entity directly. A newly

issued IPO will be considered a primary market trade when the shares are first purchased by

investors directly from the underwriting investment bank; after that any shares traded will be

on the secondary market, between investors themselves. In the primary market prices are

often set beforehand, whereas in the secondary market only basic forces like supply and

demand determine the price of the security.

Stock exchanges or stock markets are referred as secondary market where securities are

traded. In India many regional stock exchanges are there but NSE, BSE and OTCEI are the

major which trades the securities nationwide.

3.5. NATIONAL STOCK EXCHANGE OF INDIA LTD.

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock

market trading system on par with the international standards. On the basis of the

recommendations of high-powered Pherwani Committee, Industrial Development Bank of

India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation

of India, all Insurance Corporations, selected commercial banks and others incorporated the

National Stock Exchange in 1992. NSE is the leading stock exchange of the India. It covers

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various cities and town across the country and facilitates the modern screen based trading

system to the country’s traders and investors. NSE has brought the unparalleled transparency,

efficiency, integrity and safety in the security market. NSE has proved itself as catalysis in

the reforming of Indian securities market in terms of microstructure, practices and volume of

trading.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions and

corporate bodies enter into high value transactions in financial instruments such as

government securities, treasury bills, public sector unit bonds, commercial paper, certificate

of deposit, etc.

There are two kinds of players in NSE:

(a) Trading members and

(b) Participants.

NSE has a market capitalization of more than US$989 billion and 1,635 companies listed as

on July 2013. Though a number of other exchanges exist, NSE and the Bombay Stock

Exchange are the two most significant stock exchanges in India and between them are

responsible for the vast majority of share transactions. NSE's flagship index, the S&P CNX

Nifty, is used extensively by investors in India and around the world to take exposure to the

Indian equities market. The CNX Nifty Index was developed by Ajay Shah and Susan

Thomas. The CNX Nifty currently consists of the 50 major Indian companies.

3.6. BOMBAY STOCK EXCHANGE

For the premier Stock Exchange that pioneered the stock broking activity in India, 135 years

of experience seems to be a proud milestone. A lot has changed since 1875 when 318 persons

became members of what today is called "The Stock Exchange, Mumbai" by paying a

princely amount of Re1. Since then, the country's capital markets have passed through both

good and bad periods. The journey in the 20th century has not been an easy one. Till the

decade of eighties, there was no scale to measure the ups and downs in the Indian stock

market. The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that

subsequently became the barometer of the Indian stock market. SENSEX is not only

scientifically designed but also based on globally accepted construction and review

methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks

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representing a sample of large, liquid and representative companies. The base year of

SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic

and international markets through print as well as electronic media.

The Index was initially calculated based on the "Full Market Capitalization" methodology but

was shifted to the free-float methodology with effect from September 1, 2003. The "Free-

float Market Capitalization" methodology of index construction is regarded as an industry

best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow

Jones use the Free-float methodology. Due to its wide acceptance amongst the Indian

investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index

in the country, it provides the time series data over a fairly long period of time (From 1979

onwards).

Small wonder, the SENSEX has over the years become one of the most prominent brands in

the country. The growth of equity markets in India has been phenomenal in the decade gone

by. Right from early nineties the stock market witnessed heightened activity in terms of

various bull and bear runs. The SENSEX captured all these events in the most judicial

manner. One can identify the booms and busts of the Indian stock market through SENSEX.

3.7 CORPORATE ACTIONS IN STOCK MARKETS

Any event that brings material change to a company and affects its stakeholders is known as

corporate action. This includes shareholders, both common and preferred, as well as

bondholders. These events are generally approved by the company's board of directors;

shareholders are permitted to vote on some events as well. Stock split, liquidation, IPO,

dividend, merger and acquisition and spinoffs etc. are the example of corporate actions. Few

recent corporate actions in 2014 in financial services sector are as follows:-

Scrip name Ex. Date Purpose Record date

Sam Lease co 29th jan,14 Stock split from Rs.10 to Re.1 30th jan,14

Muthoot Fin 4th Feb, 14 Interim dividend-Rs. 2.00 5th Feb,14

Priti Mercantile 13th mar,14 Bonus 8:10 15th mar,14

Power finance 7th Feb,14 Interim dividend 8.80 10th Feb,14

Golden Goen 18th mar, 14 Right 9:5 19th mar,14

ATLINFRA 14th mar,14 Stock split from Rs.10 to Re.1 18th mar,14

Table no.2: corporate actions

3.8. BROKING FIRMS IN INDIA

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Broking firms are those business entities which deal with stock broking. In India capital

market is growing very rapidly. Growth of capital market leads to increase in the no. of

investors. With the growth of capital market broking houses in India are also growing

considerably. The financial year FY12-13 turned out to be more difficult for the domestic

broking industry than the previous year as the macro-economic environment remained

challenging notwithstanding short periods that hinted at a possible reversal. The continued

global headwinds on account of expectations of the tapering of the Quantitative Easing by the

Federal Reserve, deceleration in the domestic growth indicators and the sharp depreciation of

the local currency, especially after Q1FY13-14, ensured that many investors continued to stay

away from the domestic capital market.

As expected by ICRA in its earlier reports on the Brokerage Sector in FY12-13, the industry

is witnessing signs of consolidation. The market share of the top 100 brokers on the NSE has

increased substantially to ~89% as at August 2013 from 77% as at March 2013 and 73% as at

March 2011. With companies needing to continuously spend on upgrading their technology

framework, the current environment provides opportunity for the larger players to further

consolidate their positions. Further, we believe that the mid-sized brokers are being forced to

cut back and shut businesses in those areas where they do not have scale whereas some of the

smaller brokers face survival issues.

Top 10 broking firm in India are as follows:-

Kotak Securities Ltd.

Karvy stock broking Ltd.

India bulls

IL&FS investmart Limited.

Motilal Oswal Securities

Reliance Money

India infoline

Angel broking Ltd.

Anand Rathi securities Ltd.

Geojit

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CHAPTER 4CHAPTER 4

COMPANY PROFILECOMPANY PROFILE

4. COMPANY PROFILE

4.1 INTRODUCTION

21

Hedge Equities Pvt. Ltd. is one of the leading retail stock broking house which is running

successfully in the country. Hedge offers its customers a wide range of equity related

services including trade execution on BSE, NSE, Derivatives, Depository services, online

trading ,investment advice etc. The firm has an online trading and investment site –

www.hedgeequities.com. The site gives access to superior content and transaction facility to

retail customers across the country. It simplifies process of investing in stocks.

Hedge equities incorporated under the Companies Act 1956 as Hedge Equities Private

Limited on 17th December 2007 with registered office at 1205, Dalamal Tower, Nariman

Point. Later the company is converted into public limited company on 17th February, 2009.

Team Hedge is a balanced mix of more than 15 years’ experience cutting across various

industries with a strong background in the financial markets. Founder & managing director

of HEDGE GROUP is Mr. Alex K Babu, Mr. Bhuvanendran is CEO of HEDGE EQUITIES,

BOBBY J ARAKUNNEL is COO of HEDGE EQUITIES ever since its inception. The Board

members comprises of veterans from six power houses in their respective fields: FedEx

Securities, Baby Marine Exports, Thakker Developers, Smart Financial, S.M.Hegde (CFO

Videocon Industries) and Padmasree Mohanlal.

HEDGE EQUITIES has around 54 branches & 52 franchises which are spread across 4 states

in India (Kerala, Karnataka, Tamil Nadu and Maharashtra) & in Dubai.

4.2. MISSION

To create an ethical and sustainable financial services platform for our customers and partner

them to build business, to provide employees with meaningful work, self-development and

progression, and to achieve a consistent and competitive growth in profit and earnings for our

shareholders and staff.

4.3. VISION

Ever since its inception, Hedge Equities has been a household name among the masses owing

our success to timely Professional financial assistance to our clients. This aptly articulates our

vision of 'Evolving into a financial supermarket which will be a one stop shop for all

financial solutions'.

4.4. SOCIAL RESPONSIBILITY

22

Being a Responsible Corporate Citizen, Hedge Equities has initiated a Non Profit movement

Hedge Yuva which focuses on educating the masses about Stock Market. The movement has

also formulated various scholarship programs for young and dynamic youth.

Promise of Hedge

To Customers: To exist to serve and meet the customer’s needs. Hedge focus is to

create an ethical and sustainable financial services platform that places customer’s

unique needs over above everything else.

To Employees: Hedge will provide our employees with a meaningful and rewarding

career with emphasis on self-development and career progression.

To Shareholders: Hedge will spare no efforts to achieve a consistent and competitive

growth in earnings and profitability.

Advantage of hedge

At Hedge Equities, the needs of the Customers stand before everything else.

SEBI Registered Portfolio Manager with a dedicated Wealth Management Services

desk that aims to provide objective guidance tailored to meet each customer’s

individual needs.

Strong Research Team backed with best of breed data mining and analysis.

Industry leading technology solutions that make portfolio administration simpler and

cost effective.

A Global Outlook blended with a Local Flavor and backed with a growing network

of over 120 service outlets. 450 qualified employees and over 200 support associates.

The Trust and Goodwill of over 20,000 satisfied customers.

Member of BSE, NSE, MCX, MCX-SX, NMCE, NCDEX and Depository Participant

in CDSL

Rated as the top brand by the investor community of Asianet channel.

Growing overseas presence with operations in Middle East and an expanding

presence in the European region and North America.

4.5 BACKBONE OF HEDGE EQUITIES Ltd

23

Team Hedge is a balanced mix of more than 15 years’ experience cutting across various

industries with a strong background in the financial markets. The board comprises of six

power houses in their respective fields- FedEx Securities, Baby Marine Exports, Thakker

Developers, Smart financial, SM Hedge (CFO, Videocon Industries) and Padmasree Mohan

Lal.

4.5.1. FedEx Securities

Managed by a team of ex-bankers, FedEx is a SEBI registered category I merchant banker.

The company concentrates on non-fund based activities like structuring, tie up of project

financing, financial restructuring, investment banking, corporate and advisory services. The

core management team consists of bankers with rich experience of decades and exposure to

volatile situations in commercial and investment banking. With offices at Nariman point and

Vile Parle East, Mumbai, state of the art infrastructure and qualified manpower to conduct the

business, FedEx Securities envisages phenomenal growth in this sector of clients.

4.5.2. Baby Marine Exports

Baby Marine Group, started its operations in 1977 from Kozhikode and through innovation

and hard work has grown into three units and related industries spanning both the west and

east coast of Indian. Baby Marine Exports, B.M products, and Baby Marine (Eastern) Exports

are efficiently aided by preprocessing units, ice factories and a fleet of insulated and

refrigerated trucks for sea food transportation. Due to constant upgrading of machinery,

statement of the art infrastructural facilities, better links with raw materials suppliers, and an

established network of purchasers have obviously made Baby Marine Group a leading

Exporter of processed marine products to various international markets.

4.5.3. Smart Financial

Smart Financial entered the financial market only in 1992 but over this brief span has covered

a niche for itself by becoming leading financial service provider. The company offers

guidance to investors as to equities, commodities, mutual funds, portfolio management

services and insurance. It offers complete range of financial solutions that encompasses every

sphere of life.

4.5.3.1. Thakker Group

24

Starting off as a land developer and builder in 1962, Thacker’s group diversified into

commercial production of agricultural and horticultural products, housing real estate

marketing, plantations etc. They have provided shelter to more than 40000 families by

offering residential plots and premises. A Thakker developer is the flagship company of the

group. It was established as private limited in 1987 and later went on to become the only

public limited company in North Maharashtra engaged in housing, commercial construction

and land development.

4.5.3.2. S. M. Hedge

Mr. S. M. Hedge, a chartered accountant by profession is the Chief Finance Officer of the

Indian Multinational Videocon International and has been at the helm of affairs for the last 20

years.

4.5.3.4. Padmasree Bharat Mohanlal

Mohanlal, the south Indian movie superstar has become a legend, a brand and cultural

ambassador owing to various factors. Versatility and a natural flair for donning complex

characters have won him numerous accolades not to speak of some unforgettable films

contributed by him. A multifaceted personality, he has some business ventures also which

include Vismaya Max Film Post production studio, college for dubbing artists at the Kinfra

fill and video park, Trivandrum. He is also the director of Uni Royal Marine Exports; a

Kozhikode based major Seafood Export Company .Intellectual and knowledge arbitrage is

the face of modern day business. The same holds true for the financial markets. With the

breathy and depth of knowledge of modern day business that the board of hedge brings to the

table, you can be rest assured that some of the business minds in the business are taking care

of your investments.

4.6. MANAGEMENT TEAM

4.6.1. Alex. K. Babu, Managing Director: Alex Babu is the Founder and Managing

Director of Hedge Equities. He has over 9 years of experience in equity research and fund

management with considerable experience across all market capitalizations. He is a specialist

in mid-cap and infra stock selection. Ever since joining the Hedge Family, he has been

designing, developing and implementing the strategic plan for the company in the most cost

effective and time efficient manner. He was also instrumental in establishing and assembling

a strong research team with equal emphasis on macroeconomic, industrial, and company level

25

research. Prior to joining Hedge Equities, Alex was at the helm of Baby Marine Exports, a

leading Seafood exports firm handling all aspects of finance and marketing. Alex Babu is a

graduate in Engineering from Cochin University of Science and Technology.

4.6.2. N. Bhuvanendran, Chief Executive Officer: Professionalism augmented by

profound vision” is a perfect phrase to describe Bhuvanendran. His rich experience spanning

20 years with the leading names in the Indian financial services industry, is often

camouflaged by his youthful appearance, till Mr. Bhuvanendran opens up his favorite

subject-Money matters. Bhuvanendran is a talented and introspective writer whose creativity

has been capitalized by various financial journals. He is also in the limelight for a market

related show which aims at quenching the financial queries of professionals and investors in a

leading Malayalam television channel. He is one of the few investments professional who

have experience across both listed and unlisted equity space. He is an epitome of the fact that

honesty, transparency and moral integrity are not at variance with Business acumen.

4.6.3. Bobby J Arakunnel, Chief Operating Officer: Mr. Bobby has been responsible for

the entire operations of Hedge Equities ever since its inception. He has proved his versatility

by how casing excellent Man-Management and Marketing Activities and is well versed in all

aspects of Indian Financial Markets. In the last 12 years, he has worked with all the major

players in the financial service sector of the country which has added oodles to his

workmanship.

4.6.4. Mr. Mohanlal, Director: This Honorary Lieutenant Colonel's brand image and

brimming popularity has helped Hedge Equities to create awareness amongst small investors

in retail segment to invest in stocks. Versatility and a natural flair for donning complex

characters have won him numerous accolades not to speak of some unforgettable films

contributed by him. A Multifaceted personality, whose inspiring attitude, has helped him to

take up Business world with a storm.

4.6.5. Dr. Samuel George, Director: He is a doctor and an entrepreneur and runs the

successful and well reputed "City Clinic" in Abu Dhabi since the 1970's. Having completed

his Bachelors in Medicine from the Calcutta Medical College, Dr. George commenced his

career in government service and then subsequently moved to Abu Dhabi in the 1970’s.

Today, their clinic offers specialized services in General Medicine and Pediatrics. Dr. George

also nurtures a dream and a vision to make quality healthcare affordable and accessible to all

and to this end, he is pursuing the development of a multispecialty hospital at Changanassery

in Kerala to serve the growing health care needs of the state.

26

4.6.6. Mr. Pradeep Kumar C, Director: Director A leading Textile exporter of Kerala

whose 20 years of experience in this field has made him a veteran we all look up to. His

vision, augmented by his hard work and commitment has helped him to be a strong player in

the field of Exporting. Starting from a root level, he has travelled the hard way to reach this

phenomenal position in Garment Industry which has supplemented him to expand his domain

to foreign locations as well.

4.7 Organizational structure

Figure no: 1: organization structure

4.8. SERVICES OFFERED

27

4.8.1. Online trading: Hedge Equities has a large network of branches with online terminals

of NSE and BSE in the Capital market and Derivative segments. The clients are assured of

prompt order execution through dedicated phones and expert dealers at our offices.

4.8.2. Internet Trading: Hedge Equities offers Internet trading through this site. You can

trade through the internet from the comforts of your office or home, anywhere in the world.

The dedicated IT systems ensure service up time and speed, making Internet broking through

Hedge Equities hassle-free. Using the 'easiest' facility provided by NDSL, our clients can

transfer the shares sold by them online without delivery instruction slips. Additionally,

digitally signed contract notes can be sent to clients through E-mail.

4.8.3. Depository services: Hedge Equities is a member of the National Securities

Depository Limited (NSDL), offer depository services with minimum Annual Maintenance

Charges and transaction charges. Account holders can view their holding position through the

Internet. We also offer the “easiest” facility provided by NDSL (electronic access to

securities information and execution of secured transaction) through which clients are given

delivery instructions via internet.

4.8.4. Derivative trading: Hedge offers trading in the futures and options segment of the

National Stock Exchange (NSE). Through the present derivative trading an investor can take

a short-term view on the market for up to a three months‟ perspective by paying a small

margin on the futures segment and a small premium in the options segment. In the case of

options, if the trade goes in the opposite direction the maximum loss will be limited to the

premium paid.

4.8.5. Knowledge Centre: Knowledge Centre activities are intended to provide systematic

and structured services mainly to new investors and also to young aspirant aiming for a career

in financial markets. The centre has three functional areas: the publication Division, the

Training centre, and wealth management advisory service which provides complete

investment solutions to investors through knowledge based personalized service.

4.8.6. Equity Research: Hedge Equities constantly strive to deliver insightful research to

enable pro-active investment decisions. The Research Department is broadly divided into two

divisions - Fundamental Analysis Group (FAG) and Technical Analysis Group (TAG). The

fundamental analysts are continuously scanning the entire economy for discovering what they

call the “hidden gems” in stock market terminology and present it to our clients for profitable

28

investments. Technical Analysis Group has predicts the market movements well in advance

using complex Analytical methods including Elliot Wave Theory. We are equipped with

cutting-edge technologies for technical charting which assist our technical analysts to predict

both upside and downside movements.

4.8.7. Portfolio Management Services: Hedge Equities is a SEBI-approved portfolio

manager offering discretionary and nondiscretionary schemes to its clients. Hedge Equities‟

portfolio management team keeps track of the markets on a daily basis and is exposed to a lot

of information and analytic tools which an investor would not normally have access to. Other

technicalities pertaining to shares like dividends, rights, bonus, buy-back, Mergers and

Acquisitions are also taken care of by us. Maximize your returns by opting for our PMS

scheme.

4.8.8. Commodity Trading: You can trade in commodity futures like gold, silver, crude oil,

rubber etc. and take advantage of the extended trading hours (10 am to 11 pm) in

commodities trading.

4.8.9. Mutual Funds, Bonds etc.: We also offer Mutual Funds and Bonds. You can select

from a wide range of Mutual Funds and Bonds available in the markets today.

4.8.10. Currency Trading: Currency derivatives can be described as contracts between the

sellers and buyers, whose values are to be derived from the underlying assets, the currency

amounts. These are basically risk management tools in force and money markets used for

hedging risks and act as 29 insurance against unforeseen and unpredictable currency and

interest rate movements. Any individual or corporate expecting to receive or pay certain

amounts in foreign currencies at future date can use these products to opt for a fixed rate - at

which the currencies can be exchanged now itself. An upfront premium is payable for buying

a derivative. Currency Futures will bring in more transparency and efficiency in price

discovery, eliminate counterparty credit risk, provide access to all types of market

participants, offer standardized products and provide transparent trading platform.

4.8.11. Hedge School of Applied Economics: Hedge Equities initiates Hedge School of

Applied Economics with the sole objective of moulding highly qualified investment

professionals in the state. It is in fact a company itself floated by Hedge Equities with the

parent holding cent percent stake. It is a knowledge initiative of hedge Equities. The initiative

has now developed into a movement imparting financial freedom at individual and

29

organisational level and thus building a financially strong India. Through the various

activities of Hedge School, they facilitate the students, youths and new investors who wish to

explore career as well as investment opportunities in the sector. It offers a set of structured

courses which enable the incumbents to build a better career in the financial industry and take

informed investment decisions.

Competitors

Geojit BNP Paribas

JRG Securities

Religare

Karvy Stock Brokers

Muthoot Securities

Sharewealth

Motilal Oswal

Anandrathi

Table no.3: Competitors of Hedge equities

4.8.11.1. Functional Departments

Client relation Department

The client relation department assists the client or customer to open an account in Hedge

Equities. This department is also known as the front office. A client has to open two types of

accounts to trade and own securities in the NSE & BSE.

Finance Department

Thus a department, to organize financial activities may be created under the direct control of

the board of directors. Finance manager will decide the major financial policy methods.

Lower levels can delegate the other routine activities.

Marketing Department

The major functions of marketing department are:

a) Business associate development: the company takes up the marketing activities of the

various branches. It ensures an efficient marketing arena at its various branches. The

30

company encourages better relations in its branches and promotes for the development of

various marketing strategies.

b) Brand promotion: An important function of marketing department is to promote the name

of the company. Hedge equities do it through the different promotional activities. The name

of Hedge equities as a stock broking firm is made known to the outside world.

c) Investment promotion: The main clients of Hedge equities were its investors. Hence the

marketing department tries to capture as many as possible to encourage them to invest.

d) Delivery promotion: Intraday trading is not always profitable and might involve a lot of

risk hence Hedge equities promotes for delivery where the shares are kept to be sold for a

later date after analyzing the profitability factors.

Systems Department

The systems department is playing a vital role in the day to day operations of the company. It

is through the systems department that the clients can avail the facilities of Internet trading.

Optic fiber cables and high bandwidth connections from the Hedge equities office to the ISP,

a dedicated server and back-up ISDN connections were maintained directly by the systems

department. For the purpose of trading they have made use of two software namely ODIN

(Open Dealers Integrated Network)

Human resource Department

Human resource is often considered as the back of an organization even in this age of

advanced automation & mechanization. Since virtual organizations are not very much

popular in our part of the world, it is very important to any organization to have a HR

department. The presence of an excellent HR department increases the efficiency of an

organization considerably. Human resource management is defined as asset of practices,

policies and programs designed to maximize both personal and organizational goals.

A) Training & Induction

The selected employees will undergo three days continuous induction. During this period, he

will undergo training with all the department of Hedge equities. There will also be classroom

induction also within three months.

b) Wages and Salary Administration

The wages and salaries of the employees were fixed and granted by the HR department with

consent of the finance department

31

c) Performance appraisal

It was human resources department which gives the promotions to all employees, making

transfers and taking disciplinary actions if needed.

D) Grievance Handling

The grievances of the employees were received only through proper channels i.e., through the

particular department heads. The HR department will make as per the rules and regulations of

the company.

Trading Department

The department deals with the trading related activities of the company. The trading refers to

the buying & selling of shares. This department is the most important part of the

Organization. There are two types of trading. They are:

a) Online Trading

These are the trading terminal of the organization. The each computer of the department is

termed as trading terminal. The each terminal is assigned with NCFM certified dealers, who

is in Charge of each portal will do the trade according to the client request. The terminal is

managed by either NEAT (National Exchange for automated trading) software or ODIN

(Open Dealers Integrated Network) software. The client can also place his through written

request or through the telephone, in this the order will be placed by the dealer.

b) Internet Trading

The internet trading is a facility provides by the company in order to trade the securities from

his convenient place like his office, home etc, the order will be placed by the client itself, and

he can make changes before the trade is done for changing the price, cancellation of the

order.

Delivery & Depository Department

Delivery refers to the shares that bought on a particular day are not sold on that day itself and

holding of the shares for an appreciation in the value of the security and to trade it on a future

date. Deliver instruction slip: it is a slip the client should fill and gave to the dealer regarding

the purchase of the share. There are two procedures to move the shares namely,

a) Power of attorney

32

This is which the client signs at the time of opening a trading account and depository

participant account. If the client has given the power of attorney, HEDGE EQUITIES (P)

LTD will have the power to transact the clients stocks without pay-in slips.

b) Easiest

It is secured internet enabled service which means ‘Electronic Access to Securities

information and Execution of Secured Transaction’. This is facility where in the clients can

give delivery instructions via internet. Easiest is a facility provided by CDSL.

The activities related with the depository department.

Depository function

Dematerialization

Pledging

Equity Research Department

The function of the department is to study the details regarding the share or security and to

make predictions regarding the future performance of the company.

The types of approaches done in the department

a) Fundamental analysis b) Technical Analysis

33

CHAPTER 5CHAPTER 5

DATA ANALYSIS AND INTERPRETATIONDATA ANALYSIS AND INTERPRETATION

5. DATA ANALYSIS AND INTERPRETATION

34

5.1. INTRODUCTION

Analysis of data is a process of inspecting, cleaning, transforming, and modeling data with

the goal of discovering useful information, suggesting conclusions, and supporting decision

making. Data analysis has multiple facets and approaches, encompassing diverse techniques

under a variety of names, in different business, science, and social science domains. The

purpose of the data analysis and interpretation phase is to transform the data collected into

credible evidence about the development of the intervention and its performance.

Quantitative and qualitative methods used for data analysis

The aim of qualitative analysis is a complete, detailed description. No attempt is made to

assign frequencies to the linguistic features which are identified in the data, and rare

phenomena receives (or should receive) the same amount of attention as more frequent

phenomena. Qualitative analysis allows for fine distinctions to be drawn because it is not

necessary to shoehorn the data into a finite number of classifications. In quantitative research

we classify features, count them, and even construct more complex statistical models in an

attempt to explain what is observed. Findings can be generalised to a larger population, and

direct comparisons can be made between two corpora, so long as valid sampling and

significance techniques have been used.

This chapter consists of the following analysis

Economy analysis

Banking Industry analysis

Five banking company analysis

CAMEL Rating and analysis

Intrinsic value analysis

5.2. ECONOMY ANALYSIS

35

5.2.1. Global economy

Global Economic Analysis is a macro-level study of all the economies of the world taken as a

whole. Globalization has helped the world economy become more integrated and

homogenized with the free movement of goods and services. Its objective is to unify prices of

commodities and wages worldwide. Diffusion of technical knowledge and information is also

a positive effect of globalization. Global Economic Analysis tends to project a picture of the

economic development experienced by the world in general. Although globalization has

marched on rapidly in recent years, it has not been a bed of roses all the way.

5.2.2. Indian economy

India economy, the third largest economy in the world, in terms of purchasing power, is

going to touch new heights in coming years. As predicted by Goldman Sachs, the Global

Investment Bank, by 2035 India would be the third largest economy of the world just after

US and China. It will grow to 60% of size of the US economy.

5.2.3.Tools for economic analysis

GDP

INFLATION

BALANCE OF PAYMENT

BALANCE OF TRADE

FISCAL DEFICIT

INDIAN GOVERNMENT BUDGET

MONETARY POLICY

INTEREST RATE

UNEMPLOYMENT

BUDGET IN BRIEF

5.2.3.1. Gross domestic product

36

The monetary value of all the finished goods and services produced within a country's

borders in a specific time period, though GDP is usually calculated on an annual basis. It

includes all of private and public consumption, government outlays, investments and exports

less imports that occur within a defined territory.

GDP = C + G + I + NX

where:

"C" is equal to all private consumption, or consumer spending, in a nation's economy

"G" is the sum of government spending

"I" is the sum of all the country's businesses spending on capital

"NX" is the nation's total net exports, calculated as total exports minus total imports. (NX =

Exports - Imports).

India GDP annual growth rate

The Gross Domestic Product (GDP) in India expanded 7.50 percent in the fourth quarter of

2014 over the same quarter of the previous year. GDP Annual Growth Rate in India averaged

5.83 percent from 1951 until 2014, reaching an all-time high of 11.40 percent in the first

quarter of 2010 and a record low of -5.20 percent in the fourth quarter of 1979. GDP Annual

Growth Rate in India is reported by the Ministry of Statistics and Programme Implementation

(MOSPI).

     

Table no.4: GDP

37

YEAR PERCENTAGE

2012 4.5

2013 5.0

2014 6.7

2015 7.5

Figure no.2: GDP

Interpretation

The Gross Domestic Product (GDP) in India expanded 7.5 percentage in the first

quarter of 2015 over the same quarter of the previous year. GDP Annual Growth Rate in

India is reported to by ministry of Statistics And Programmed Implementation. Historically

from 1951 UNTIL 2015, India GDP Annual Growth Rate averaged 5.084 percentage

reaching an all-time high of 10.20 percentages in December of 1988 and a record low -5.20

percentage in December of 1979.

5.2.3.2.Inflation

Inflation is the percentage change in the value of the Wholesale Price Index (WPI) on a year-

on year basis. It effectively measures the change in the prices of a basket of goods and

services in a year. In India, inflation is calculated by taking the WPI as base.

Formula for calculating Inflation=

(WPI in month of current year-WPI in same month of previous year)

-------------------------------------------------------------------------------------- X 100

WPI in same month of previous year

India inflation rate

The inflation rate in India was recorded at 8.59 percent in April of 2014. Inflation Rate in

India is reported by the Ministry of Commerce and industry. Historically, from 1969 until

38

2014, India Inflation Rate averaged 7.73 Percent reaching an all-time high of 34.6% Percent

in September of 1974 and a record low of -11.31 Percent in May of 1976. In India, the

wholesale price index (WPI) is the main measure of inflation. The WPI measures the price of

a representative basket of wholesale goods, In India, wholesale price index is divided into

three groups: Primary Articles (20.1 percent of total weight), Fuel and Power (14.9 percent)

and Manufactured Products (65 percent). Food Articles from the Primary Articles Group

account for14.3 percent of the total weight. The most important components of the

Manufactured Products Group are Chemicals and Chemical products (12 Percent of the total

weight): Basic metals, Alloys and Metal products (10.8 percent): Machinery and Machine

Tools (8.9 percent): Textile (7.3 percent) and Transport. Equipment and Parts (5.2 percent) .

This includes a chart with historical data for India Inflation Rate

Figure no.3:Inflation

Interpretation

The inflation rate in India was recorded at 8.28 percent in May of 2014. Inflation Rate in

India averaged 9.62 Percent from 2012 until 2014, reaching an all-time high of 11.16 Percent

in November of 2013 and a record low of 7.55 Percent in January of 2012. Indian annual

consumer prices decelerated to 8.28 percent in May of 2014 from 8.59 percent in April. It is

the lowest rate in three months as food prices slowed slightly. Provisional estimates showed

food cost rose at a slower 9.4 percent year-on-year in May, down from 9.66 percent in the

previous month. Prices of fruit accelerated to 23.17 percent (21.73 percent in April) while

cost of vegetables slowed to 15.27 percent (from 17.5 percent). Meanwhile, prices of fuel and

39

light decelerated to an annual 5.07 percent (5.96 percent in April) and clothing and footwear

cost was marginally higher at 8.86 percent (8.83 percent in the previous period). The

corresponding provisional inflation rates for rural and urban areas for May of 2014 are 8.86

percent and 7.55 percent.

5.2.3.3. Balance of payment

The balance of payments (BOP) is the method countries use to monitor all international

monetary transactions at a specific period of time. Usually, the BOP is calculated every

quarter and every calendar year. All trades conducted by both the private and public

sectors are accounted for in the BOP in order to determine how much money is going in and

out of a country. If a country has received money, this is known as a credit, and, if a country

has paid or given money, the transaction is counted as a debit. Theoretically, the BOP

should be zero, meaning that assets (credits) and liabilities (debits) should balance. But in

practice this is rarely the case and, thus, the BOP can tell the observer if a country has a

deficit or a surplus and from which part of the economy the discrepancies are stemming.

The BOP is divided into three main categories: the current account, the capital account and

the financial account. Within these three categories are sub-divisions, each of which

accounts for a different type of international monetary transaction.

In this study annual data is used from 1970-71 to 2011-12. The all data have been collected

from HAND BOOK OF INDIA (RBI).

Graph 1: Trend of India’s Balance of Payments during the Pre-Devaluation Period.

Graph 2: Trend of India’s Balance of Payments during the Post-Devaluation Period.

40

Figure no.4: Balance of Payment

Interpretation

In 1970’s the position of balance of payment is satisfactory, In 1980’s the balance of

payment is adversely affected due to trade deficits. It can be observe from the above graph

that balance of payment decline sharply in 1990-91 due to domestic political developments

affected confidence abroad in Indian economy.

The analysis of balance of payments pattern indicates that on an average there was significant

increase during the period. It accounted from US dollar 2599 million in 1991-92 to US dollar

-12832 million in 2011-2012. There was a deficit in this account in 1992-93, 1995-96, 2008-

09 and 2011-2012. Balance of payment decline sharply in 2008-2009 due to recession foreign

institution withdrawal their resources.

5.2.3.4. Balance of trade

India recorded a trade deficit of 10990 USD Million in April of 2015. Balance of Trade in

India averaged -1985.93 USD Million from 1957 until 2015, reaching an all-time high of

258.90 USD Million in March of 1977 and a record low of -20210.90 USD Million in

October of 2012. Balance of Trade in India is reported by the Ministry of Commerce and

Industry, India.

41

Figure no.5: Balance of Trade

5.2.3.5. Fiscal deficit

Fiscal deficit is the difference between the government's expenditures and its

revenues (excluding the money it's borrowed). A country's fiscal deficit is usually

communicated as a percentage of its gross domestic product (GDP).

Government spending, inflation and lower revenue are among some of the main

factors that point to fiscal deficit. The cynical nature of fiscal deficit does not only jeopardize

the growth of the country but also the government’s economic management abilities.

In an ideal financial system, which has a balanced fiscal deficit, the cost of expenditure is

low while production and growth is advancing. But when there is an increase in fiscal deficit

it means that the government is spending too much while it is earning less. Hence, it is

important that the government keeps its expenses under control. One way the government

earns money, is through taxes. For example, if the government lowered taxes or provided tax

concessions to a particular group of people, then it would earn less, leading to an increase in

fiscal deficit. And that’s one of the reasons why you will find the government giving a face-

lift to the tax structures. In the same context, cutting of custom duty and excise duty will lead

to declining revenues.

Like India, many developing countries are making an effort to resolve big fiscal deficits. On

the bright side, for India, among other sources of revenue, foreign investments and inflow of

remittance s from Indians living overseas has helped avoid very high deficits.

FISICAL DEFICIT AS THE % OF GDP

42

Figure no: 6.Fiscal deficit

Interpretation

In 1990 -1991 fiscal deficit risen, it leading to BOP crises in 1991. after that period economic

reforms helps to reduce the fiscal deficit in the period 1996. A sharp increase in the

government salaries and pension in 2002, leads to increase the fiscal deficit. When the govt

introduced the fiscal responsibility and budget management to control the fiscal deficit, this

target were to be achieved in the year 2008. Fiscal deficit gradually decreases from 2011 to

2013, due to the implementation of goods and services tax .

5.2.3.6.India government budget

India recorded a Government Budget deficit equal to 4.50 percent of the country's Gross

Domestic Product in the fiscal year 2013/2014. Government Budget in India averaged -3.87

Percent of GDP from 1991 until 2014, reaching an all-time high of -2.04 Percent of GDP in

1997 and a record low of -7.80 Percent of GDP in 2009. Government Budget in India is

reported by the Ministry of Finance, Government of India.

43

Figure no.7:Indian government budget

Interpretation

Government Budget is an itemized accounting of the payments received by government

(taxes and other fees) and the payments made by government (purchases and transfer

payments). A budget deficit occurs when an government spends more money than it

takes in. The opposite of a budget deficit is a budget surplus. This page provides - India

Government Budget - actual values, historical data, forecast, chart, statistics, economic

calendar and news. Content for - India Government Budget.

5.2.3.7. Unemployment

In India, the unemployment rate measures the number of people actively looking for a job as

a percentage of the labour force. The Government of India has taken several steps to decrease

the unemployment rates like launching the Mahatma Gandhi National Rural Employment

Guarantee Scheme which guarantees a 100 day employment to an unemployed person in a

year. It has implemented it in 200 of the districts and further will be expanded to 600

districts. In exchange for working under this scheme the person is paid 150 per day. 

44

Figure no.8.Unemployment rate

5.2.3.8. Monetary policy

CRR AND SLR

Cash reserve Ratio is a certain percentage of bank deposits which banks are required

to keep with RBI in the form of reserves or balances .Higher the CRR with the CRR with the

RBI lower will be the liquidity in the system and vice-versa .RBI is empowered to vary CRR

between 15 percent and 3 percent. But as per the suggestion by the Narasimham committee

Report the CRR was reduced from 15% in the 1990 to 5 percent in 2002. As of January 2013,

the CRR is 4.00 percent.

Every financial institution has to maintain a certain quantity of liquid assets with

themselves at any point of time of their total time and demand liabilities. These assets can be

cash, precious metals , approved securities like bonds etc. The ratio of the liquid assets to

time and demand liabilities is termed as the statutory liquidity ratio. There was a reduction of

SLR from 38.5% to 25% because of the suggestions by Narasimham Committee. The current

SLR is 23%.

45

Figure no.9.1:CRR and SLR ratio

REPO Rate and REVERSE REPO

Repo rate is the rate at which RBI lends to commercial banks generally

against Government securities. Reduction in Repo rate helps the commercial banks to get

money at a cheaper rate and increase in Repo rate discourages the commercial banks to get

money as the rate increases and becomes expensive. Reverse Repo rate is the rate at which

RBl borrows money from the commercial banks

Figure no.9.2: Repo rate and Reverse Repo rate

46

5.2.3.9.2014-2015 budget brief

Recovery seen with the growth rate of world economy projected at 3.6 per cent in

2014 vis-à-vis in 2013.

Decline in fiscal deficit from 5.7% in 2011-12 to 4.5% in 2013-14 mainly achieved by

reduction in expenditure rather than by way of realization of higher revenue.

Improvement in current account deficit from 4.7 % in 2012-13 to year end level of

1.7% mainly achieved through restriction on non-essential import and slow-down in

overall aggregate demand. Need to keep watch on CAD.

Inflation has remain at elevated level with gradual moderation in WPI recently.

The composite cap of foreign investment to be raised to 49 per cent with full Indian

management and control through the FIPB route.

5.2.3.10. Interest rate

In India, interest rate decisions are taken by the Reserve Bank of India's Central Board of

Directors. The official interest rate is the benchmark repurchase rate. In 2014, the primary

objective of the RBI monetary policy became price stability, giving less importance to

government's borrowing, the stability of the rupee exchange rate and the need to protect

exports. In February 2015, the government and the central bank agreed to set a consumer

inflation target of 4 percent, with a band of plus or minus 2 percentage points, from the

financial year ending in March 2017.

Figure no.10: Interest rate

47

Interpretation

The benchmark interest rate in India was last recorded at 7.50 percent. Interest Rate in India

averaged 6.69 percent from 2000 until 2015, reaching an all-time high of 14.50 percent in

August of 2000 and a record low of 4.25 percent in April of 2009. Interest Rate in India is

reported by the Reserve Bank of India

The benchmark interest rate in India was last recorded at 7.50 percent. Interest Rate in India

averaged 6.69 percent from 2000 until 2015, reaching an all-time high of 14.50 percent in

August of 2000 and a record low of 4.25 percent in April of 2009. Interest Rate in India is

reported by the Reserve Bank of India.

5.2.3.11. Budget in banking

Time bound programme as Financial Inclusion Mission to be launched on 15 August

this year with focus on the weaker sections of the society.

Banks to be encouraged to extend long term loans to infrastructure sector with

flexible structuring.

Banks to be permitted to raise long term funds for lending to infrastructure sector with

minimum regulatory pre-emption such as CRR, SLR and Priority Sector Lending

(PSL).

48

5.3. INDUSTRY ANALYSIS- ANALYSIS OF INDIAN BANKING INDUSTRY

India is considered among the top economies in the world, with tremendous potential for its

banking sector to flourish. The last decade witnessed a significant upsurge in transactions

through ATMs, as well as internet and mobile banking.

The country's banking industry looks set for greater transformation. With the Indian

Parliament passing the Banking Laws (Amendment) Bill in 2012, the landscape of the sector

has duly changed. The bill allows the Reserve Bank of India (RBI) to make final guidelines

on issuing new licenses, which could lead to a greater number of banks in the country. The

style of operation is also slowly evolving with the integration of modern technology into the

banking industry.

In the next 5-10 years, the sector is expected to create up to two million new jobs driven by

the efforts of the RBI and the Government of India to expand financial services into rural

areas. Two new banks have already received licenses from the government, and the RBI's

new norms will offer incentives to banks to spot bad loans and take necessary recourse to

curb the practices of rogue borrowers

5.3.1. SWOT Analysis

In SWOT analysis, we discuss the Strengths, Weaknesses, Opportunities and Threats

pertaining to the Indian banking industry.

STRENGTHS Valuable contributor to GDP Regulatory environment Government backing Rural banking expertise Diversified banking activities

WEAKNESSESIncreasing NPALow penetrationLack of product differentiation

OPPORTUNITIES Technological advance Untapped rural market Favourable Government rural schemes

THREATSUnorganized money lending marketBad quality serviceRise of monopolistic structures

Table no.5:SWOT analysis

Strengths:

In India, bank lending has been a significant driver of GDP growth and employment. The

RBI has been doing an appreciable role in regulating the banking environment in the country,

49

and Indian banks are considered too-strictly-monitored-to-fail. Indian banks are considered to

have strong and transparent balance sheets relative to other bank in comparable economies.

The vast banking network and growing number of branches and ATM has brought even the

remote corners of the country to the benefits of banking. Diversified banking activities under

3 subsidiaries i.e. Indbank Merchant Banking Services Ltd, Indbank Housing Ltd, IndFund

Management Ltd.

Weaknesses:

The increasing share of Non-Performing Assets is a cause of concern. Though banks have

reached the nooks and corners of the country, it has failed to bring in vast majority people

into the system. There is a certain sense of complacency which is reflected by the lack of

product differentiation and quality service. Public sector banks need to strengthen their

employee skill levels and competitiveness especially in sales and marketing, service

operations, risk management and overall organizational efficiency. Also, the regulatory

framework is not effective beyond Scheduled Commercial Banks.

Opportunities:

The scope and economy of bringing in advanced technologies to banking operations is high

in India, owing to the huge customer base and cheap availability of IT/ITeS. Also, there is a

huge rural market which remains untapped even after the penetration of banking

infrastructure to most of the rural areas of India.

Threats:

Even after the penetration of banking infrastructure to many remote areas of the country,

much of the rural population still depend heavily on unauthorized money lenders for their

financial needs. This is a serious concern for the country as a whole as well as the banking

industry. The industry is still dominated by public sector banks, thus creating monopolistic

structures. This can impede competitiveness and efficiency, if not met with the right policies.

Also, the relative complacency of public sector banks with respect to sales and marketing and

service operations should also be looked upon.

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5.3.2. PORTER’s Five Forces Model

Figure no.11:Porters five forces model

Banking is a client-oriented business, which demands high-quality service and extreme trust.

With the onset of financial inclusion initiatives and technological advancements in the

banking scenario, the industry is facing immense challenges from everywhere - competitors,

clients, RBI and other financial intermediaries. Here, we discuss the Porter’s Five Forces

Model to assess the competitive environment in the industry.

a) Buyer Power – The clients are the buyers. The high bargaining power of clients forces the

banks to render uniform services. Nowadays, almost all banks provide electronic facilities

like ATM, Internet banking, Mobile banking etc. to the clients.

b) Supplier Power- On account of the stringent RBI regulatory benchmarks, the bargaining

power of the supplier is low. The banks are obliged to meet the numerous regulatory

standards created by the RBI.

c) Availability of Substitutes- The banks are facing tight competition from substitutes like

NBFCs, mutual funds, government securities and T-bills. Recently, liquid funds have become

a close substitute for savings account. Hence, availability of substitutes is High.

d) Threat of new entrants- In the current scenario, there is a significant threat of new entrants

owing to the RBI rolling out new banking licenses. The RBI has already awarded banking

licenses to two corporations- IDFC and Bandhan Financial. Even then, the threat of new

entrants is generally low on account of the high banking regulations set by the RBI. It is

essential to get approval from the RBI before setting up a bank.

51

Competitive rivalry(High)Buyer Power

(High)

Threat of new entrants

(Low)

Supplier Power(High)

Availability of substitutes

(High)

e) Competitive Rivalry – There is a high competition among the existing banks as number of

prominent public, private, cooperative and foreign banks are competing rigorously for

establishing their own space in the industry.

5.3.3. Market size

The size of banking assets in India totaled US$ 1.8 trillion in FY 13 and is expected to touch

US$ 28.5 trillion in FY 25.Bank deposits have grown at a compound annual growth rate

(CAGR) of 21.2 per cent over FY 06-13. In FY 13, total deposits were US$ 1,274.3 billion.

The revenue of Indian banks increased from US$ 11.8 billion to US$ 46.9 billion over the

period 2001-2010. Profit after tax also reached US$ 12 billion from US$ 1.4 billion in the

period. Credit to housing sector grew at a CAGR of 11.1 per cent during the period FY 08-13.

Total banking sector credit is anticipated to grow at a CAGR of 18.1 per cent (in terms of

INR) to reach US$ 2.4 trillion by 2017.

5.3.4. Government Initiatives

The RBI has announced a few measures in its bi-monthly monetary policy on June 3, 2014

which includes an increase in the foreign exchange remittance limit to US$ 125,000 from the

previous limit of US$ 75,000.

State Bank of India (SBI) has announced a one-year rural fellowship programme 'SBI Youth

for India (SBI YFI)' for 2014 to draft the country's youth to become change agents in the

country's rural regions. The programme is for young professionals who are keen to leadthe

change for a better India.

The RBI has simplified the rules for credit to exporters. Exporters can now receive long-term

advance credit from banks for up to 10 years to service their contracts. Exporters have to

have a satisfactory record of three years to receive payments from banks, who can adjust the

payments against future exports.

The RBI has enabled overseas investors, including foreign portfolio investors (FPIs) and non-

resident Indians (NRIs), to invest up to 26 per cent in insurance and related activities through

the automatic route.

52

5.3.5. Reforming the Banking Sector

As election season comes to a close, Prime Minister Narendra Modi must now join Dr. Rajan

in reviving the stagnant Indian economy and reforming the country’s banking system. The

RBI is aiming to reform and strengthen the Indian banking system through fostering

increased competition in both the private and public sectors, especially in making public

sector banks more competitive.

Public sector banks appear to have more internal structural problems, as evidenced by Dr.

Rajan’s assertion that the government is attempting to take its hands out of managing public

sector banks. The RBI plans to do this by letting more private actors hold public sector

banks’ shares, increase the length of tenure for CEOs at public sector banks, separate the

position of the Chairman and the CEO and give more power to independent banking and

finance professionals. However, there are some inevitable obstacles to this proposal. Making

these structural changes to government-owned banks requires the RBI to win the approval of

parliament and, perhaps more importantly, government officials who currently have control

over public sector banks and may not welcome these changes

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5.4. COMPANY ANALYSIS

5.4.1. HDFC Bank

HDFC Bank Limited is an Indian banking and financial services company based in Mumbai,

Maharashtra. It was incorporated in 1994. HDFC Bank is the fifth largest bank in India by

assets. It is the largest bank in India by market capitalization as of 24 February 2014. As on

Jan 2 2014, the market cap value of HDFC was around USD 26.88B, as compared to  Credit

Suisse Group with USD 47.63B. The bank was promoted by the Housing Development

Finance Corporation, a premier housing finance company (set up in 1977) of India.

As of 31 March 2013, the bank had assets of INR 4.08  trillion. For the fiscal year

2012-13, the bank has reported net profit of INR 69 billion, up 31% from the previous fiscal

year. Its customer base stood at 28.7 million customers on 31 March 2013.

5.4.1.1.Products and Services

Products

Personal banking

Under Personal Banking, HDFC offers:

Accounts & Deposits

Loans

Cards

Demat

Investments

Insurance

Forex

Premium Banking

Private Banking

NRI banking

Under NRI Banking, HDFC offers:

Accounts & Deposits

Money Transfer

54

Investments & Insurance

Research Reports

Payment Services

SME banking

Under SME Banking, HDFC offers:

Accounts & Deposits

Business Financing

Trade Services

Payments & Collections

Cards

Wholesale banking

HDFC offers Wholesale Banking for Corporate and Financial Institutions & Trusts. The

Bank also provides services such as Investment Banking and other services in the

Government sector.

Service

Wholesale banking services

HDFC Bank provides a range of commercial and transactional banking services, including

working capital finance, trade services, transactional services, cash management, etc. to large,

small and mid-sized corporates and agriculture-based businesses in India. The bank is also a

leading provider of these services to its corporate customers, mutual funds, stock exchange

members and banks.

Retail banking services

HDFC Bank was the first bank in India to launch an International Debit Card in association

with VISA (Visa Electron). The bank also issues the MasterCard Maestro debit card. The

Bank launched its credit card business in late 2001. By the end of June 2013, it had a credit

card base of 5.94 million. By March 2012, the bank had a total card base (debit and credit

cards) of over 19.7 million. The Bank is also one of the leading players in the "merchant

acquiring" business with over 240,000 point-of-sale (POS) terminals for debit / credit cards

acceptance at merchant establishments. The Bank is positioned in various net based B2C

55

opportunities including a wide range of Internet banking services for Fixed Deposits, Loans,

Bill Payments, etc.

Treasury

The bank has three main product areas - Foreign Exchange and Derivatives, Local Currency

Money Market & Debt Securities, and Equities. These services are provided through the

bank's Treasury team. To comply with statutory reserve requirements, the bank is required to

hold 25% of its deposits in government securities. The Treasury business is responsible for

managing the returns and market risk on this investment portfolio.

5.4.1.2.Operations

As of 30 September 2013, HDFC Bank has 3,251 branches and 11,177 ATMs, in 2,022 cities

in India, and all branches of the bank are linked on an online real-time basis. The Bank has

overseas branch operations in Bahrain and Hong Kong.

HDFC Bank has two subsidiaries:

HDB Financial Services Limited (‘HDBFS’): HDBFS is engaged in retail asset financing. It

is a non-deposit taking non-bank finance company (NBFC). Apart from lending to

individuals, the company grants loans to micro, small and medium business enterprises. It

also runs call centers for collection services to the HDFC Bank’s retail loan products. HDFC

Bank holds 97.4% shares in HDBFS. As of March 31, 2013, HDBFS has 230 branches in 184

cities. During the FY 2012-13, HDBFS had turnover of INR 9.6 billion and profit after tax of

INR 1 billion.[2] It has 6,404 employees as of 31 March 2013.

HDFC Securities Limited (‘HSL’): HSL is engaged in stock broking. As of March 31, 2013,

HDBFS has 194 branches across 150 cities. HDFC Bank has 62.1% shareholding in HSL.

During the FY 2012-13, HSL had turnover of INR 2.3 billion and profit after tax of INR 668

million. During the year, the Company received the “Best e-Brokerage Award - 2012” in the

Outlook Money Awards in the runner up category

. 5.4.1.3. Management of HDFC

Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th July

2010. Mr. Vasudev has been a Director of the Bank since October 2006. A retired IAS

officer, Mr. Vasudev has had an illustrious career in the civil services and has held several

key positions in India and overseas, including Finance Secretary, Government of India,

56

Executive Director, World Bank and Government nominee on the Boards of many companies

in the financial sector.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years

and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of

experience in public policy, administration, industry and commercial banking. Senior

executives representing HDFC are also on the Board. Senior banking professionals with

substantial experience in India and abroad head various businesses and functions and report

to the Managing Director. Given the professional expertise of the management team and the

overall focus on recruiting and retaining the best talent in the industry, the bank believes that

its people are a significant competitive strength.

5.4.1.4. Shareholding pattern of HDFC

Description Percent of Share (%)Promoter Group (HDFC) 22.72Foreign Institutional Investors (FII) 33.61Individual shareholders 8.43Bodies Corporate 8.01Insurance companies 5.38Mutual Funds/UTI 4.34NRI/OCB/Others .40Financial Institutions/Banks .09ADS/GDRs 17.02

Table no.6:shareholding pattern of HDFC bank

57

Promoter Group (HDFC)Foreign Institutional Investors (FII)Individual shareholdersBodies CorporateInsurance companiesMutual Funds/UTINRI/OCB/OthersFinancial Institutions/BanksADS/GDRs

Figure no.12: Percent of Shares of HDFC bank

5.4.2. Federal Bank

Federal Bank Limited is a major Indian commercial bank in the private sector,

headquartered at Aluva, Kochi, Kerala. It is the fourth largest bank in India in terms of capital

base. As of 30 June 2014, Federal Bank has 1203 branches spread across 24 states and

1392 ATMs across the country. Its balance-sheet stood at Rs 1.03 trillion as of end March

2014 and its net profit stood at Rs 839 crore for the full fiscal year.

5.4.2.1.Sponsorship

Federal Bank Limited is a major Indian commercial bank in the private sector,

headquartered at Aluva, Kochi, and Kerala. It is the fourth largest bank in India in terms of

capital base. As of 30 June 2014, Federal Bank has 1203 branches spread across 24 states and

1392 ATMs across the country. Its balance-sheet stood at Rs 1.03 trillion as of end March

2014 and its net profit stood at Rs 839 crore for the full fiscal year.

5.4.2.2.Mission and vision

Be a "customer-centric" organisation setting standards for customer experience.

58

Be the ‘trusted' partner of choice for target (SME, Retail, NRI) customers.

Become the numero uno bank in Kerala and a leading player in our 

5.4.2.3.Corporate social responsibility

Our Founder's values and ethos based on trust got embedded in the bank's policies and

principles which reflect on its day to day business. CSR in Federal Bank began with the first

act of cultivating banking habits in an agrarian society - to effectively utilize idle money for

productive purposes.Creating employment opportunity for a predominantly farming

community was phase two. The Bank is a commercial entity. It has to carry out its operations

to generate profits to fulfill its responsibility to all stakeholders. But its activities are carried

out in the society and it owes to the society for its business prosperity.

  While carrying out its activities, Bank is duty bound to ensure that its products and

services serve the best interests of the society. Bank has approved a policy for Sustainable

Development, which ensures that Bank's activities are conducive to sustainable social

welfare. In addition to this, Bank has to directly participate in social activities to help the

development of specific areas/segments.

5.4.2.4.Products & Services

Personal Banking – The bank provides a wide range of banking products and services such

as saving accounts, deposits, personal loans, ATM services, telebanking services, RTGS,

insurance, etc.

NRI Banking – The bank offers a wide range of NRI services through all its branches. Non–

Resident Indians (NRI) can open Non–Resident External (NRE), Non– Resident Ordinary

(NRO) accounts in Indian Rupee. You can also have Foreign Currency Non– Resident

(FCNR) accounts in six foreign currencies approved by Reserve Bank of India (US Dollar,

British Pound, Euro, Japanese Yen, Canadian Dollar and Australian Dollar). Returning NRIs

can open Resident Foreign Currency (RFC) account with any of their branches.

SME–Business Banking – The bank offers a parameterized loan and various current account

products tailor–made for each sector under SME. Competitive pricing, relaxation in collateral

security, collateral free loans with CGTMSE cover, customization in various current account

59

products, cash management services, internet bill payment facility etc are some of the

features of their products which makes them a real friend of entrepreneurs.

Corporate Banking – The bank offers customized structured products to meet the

specialized requirements of corporates, institutions and business clients. Each member of

their Corporate Finance team brings with him a wealth of transaction experience across

transaction varieties and sectors to cater to you better.  The bank has emerged as one of the

leading private sector banks in the country, in providing a gamut of products for industry,

trade and infrastructure sectors.  The bank serves a wide range of customers across varying

industries, segments and regions.

5.2.4.5.Awards & Achievement (2012-2014)

Federal Bank won the Banking Frontier's Finnoviti 2013 Award for its innovation

Virtual Accounting System (VAS)

Federal Bank won two IDRBT Awards for Excellence in Banking Technology

Federal Bank won IBA Innovation Award 2013 for FedBook

Federal Bank was awarded "The Best Bank among Private Sector Banks"

Federal Bank was awarded the "Most Socially Committed Organization"

Federal Bank won ACI Excellence Award 2013 for Apna Gold

Federal Bank was awarded "The Best Bank among Private Sector Banks"

Federal Bank won the IDRBT Banking Technology Excellence award for 2013-14 in

four out of total five categories in the mid-sized lenders segment:

Best Bank Award for Use of Technology for Financial Inclusion Among Mid-Size

Banks

Best Bank Award for Social Media and Mobile Banking Among Mid-Size Banks

Best Bank Award for Business Intelligence Initiatives among Mid-Size Banks

Best Bank Award for Best IT Team among Mid-Size Banks

60

5.2.4.6. Management - Federal Bank

Name DesignationAbraham Koshy ChairmanAbraham Chacko Executive DirectorDilip Gena Sadarangani DirectorK M Chandrasekhar DirectorGrace Elizabeth Koshie DirectorShyam Srinivasan Managing Director & CEONilesh Shivji Vikamsey DirectorSudhir Moreshwar Joshi DirectorHarish Hansubhai Engineer DirectorShubhalakshmi Panse Addnl.Independent Director

Table no.7:management of Federal bank

5.2.4.7. shareholding pattern of Federal bankDescription Percent of Share (%)Promoters group 0.00Individual shareholders 16.43Financial Institutions 20.83FII 42.25Govt. 0.00Others 20.49

Table no.8:shareholding pattern of Federal bank

Percent of Share (%)

PromotersIndividualInstitutionFIIGovt.Others

Figure no.13: Percent of shares of Federal Bank

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5.4.3. YES Bank

YES BANK, India's fourth largest private sector Bank is an outcome of the professional

entrepreneurship of its Founder, Rana Kapoor and his highly competent top management

team, to establish a high quality, customer centric, service driven, private Indian Bank

catering to the “Future Businesses of India”. YES BANK is the only Greenfield license

awarded by the RBI in the last 17 years, associated with the finest pedigree investors.

Since its inception in 2004, YES BANK has fructified into a ‘“Full Service Commercial

Bank” that has steadily built Corporate and Institutional Banking, Financial Markets,

Investment Banking, Corporate Finance, Branch Banking, Business and Transaction

Banking, and Wealth Management business lines across the country, and is well equipped to

offer a range of products and services to corporate and retail customers. YES BANK has

adopted international best practices, the highest standards of service quality and operational

excellence, and offers comprehensive banking and financial solutions to all its valued

customers. Today, YES BANK has a widespread branch network of over 560 branches across

375 cities, with 1100+ ATMs and 2 National Operating Centers in Mumbai and Gurgaon.

The sustained growth of YES BANK is based on the key pillars of Growth, Trust,

Technology, Human Capital, and Transparency & Responsible Banking. As

the Professionals’ Bank of India, YES BANK has exemplified ‘creating and sharing value’

for all its stakeholders, and has created a differentiated Banking Paradigm with the vision

of ‘Building the Best Quality Bank of the World in India’ by 2020.

5.4.3.1.Brand Ethos

YES BANK has pursued a differentiated branding strategy in line with its objective of

becoming the Best Quality Bank of the World in India.  The foundation of this strategy lies in

the name "YES", which underlines the twin ethos of service and trust and the promise to

deliver a truly delightful and unprecedented Banking experience to all customers

5.4.3.2.Awards & Achievement

Institutional & Business Excellence

Best Mid-Sized Bank , 2012 - Business Today

Best Mid-Sized Bank, 2012 - Business World

Best Private Sector Bank, 2012 - Money Today

62

Strongest Bank in India- The Asian Banker

Sustainable Bank of the Year (Asia/Pacific) Award - FT/IFC Sustainable Finance

Awards 2012, London

Golden Peacock Award for Sustainability - London Global Convention 2012

Number one IPO, listed between 2005 and 2012 - Moneycontrol

Ranked 561 - Overall & 163 - Return on Assets - FT Banker List Top 1000 Banks

List

Silver Shield for Excellence in Financial Reporting - Private Banks- The Institute of

Chartered Accountants of India (including Cooperative Banks), 2012

Brand Excellence Award in the BFSI segment and Brand Builder of the Year Award -

3rd CMO ASIA Awards 2012 Singapore

Six awards at the 3rd Asia’s Best Employer Brand Awards 2012, Singapore

- Talent Management

- Best HR Strategy in line with Business

- Excellence in HR through Technology

- Continuous Innovation in HR Strategy at Work

- Innovation in Recruitment

- Excellence in Training

The Celent's Model Bank Award for ‘Insights 2 Engage’ & ‘Governance, Risk and

Compliance Competency Framework’, 2012

Technology/Service Excellence

Innovation in Payments, Financial Insights Innovation Awards, 2012

Best Overall Mobile Lifeline Launch- Connected World Forum Awards , Dubai 2012

NASSCOM IT User Award in Banking (Scheduled Commercial Category)

CIO 100 Award 2012

Dataquest Emerging Leaders in Business Technology, DQ Live Awards 2012

Asia Pacific Quality Organization (APQO)-Adjudged World Class Organisation,

August 2014. Only Indian bank to win this prestigious global award.

First bank in India to be awarded the prestigious IMC Ramakrishna Bajaj National

Quality

Award for Business Excellence in the Services Category in 2013.

Dun & Bradstreet- Best Private Sector Bank (Asset Class) 2014

63

Order of Merit SKOCH Financial Inclusion and Deepening Awards 2014

First Private Bank in India to be awarded ISO 14001:2004 certificate 2013

YES BANK was voted India's 3rd Most Trusted Private Bank in 2014 according to

the

Accolades awarded to Rana Kapoor

Business Standard Banker of the Year, 2012

Distinguished Entrepreneurship Award 2012’ at the PHD Chamber Annual Awards

for Excellence 2012

Best Indian Banker (Mid-Sized) - The Sunday Standard FINWIZ Awards, 2012

CEO of the Year Award - 3rd CMO Asia Awards, Singapore 2012

Entrepreneur of the Year Award - HELLO! Hall of Fame Awards

Guru award as part of the IBN-7 Guru Shishya Award 2012 in the Business Category

Thought Leader Award - Thought Leader of the Year 2012

Corporate Excellence Awards - Future Leader of the Year 2012

National Special Social Award - Godfrey Phillips Bravery Awards, 2012

5.4.3.3.Key managementNAME DESIGNATIONMr. Rana Kapoor Founder, Managing Director & CEO

Mr. Aalok Gupta GEVP & Co untry Head- Retail Banking Risk Management

Mr. Aditya Sanghi Group President & Senior Managing Director - Investment Banking

Mr. Ajay Desai Senior President and Chief Financial Inclusion Officer

Table no.9: management of YES bank

5.4.3.4. Shareholding pattern YES Bank

Description Percent of Share (%)

64

Promoters 25.72FII 48.95Individual 9.44Insurance 9.27Banks 3.87Others 2.855Table no.10: Shareholding pattern of YES bank

Percent of shares(%)

promoterFIIIndividualInsurancebanksOthers

Figure no.14:percent of shares of YES bank

5.4.4. Axis Bank

Axis Bank Limited (formerly UTI Bank) is the third largest private sector bank in India. It

offers financial services to customer segments covering Large and Mid-Sized Corporates,

MSME, Agriculture and Retail Businesses. Axis Bank has its registered office at

Ahmedabad.

5.4.4.1.Operations

Indian Business: As on 31-Mar-2014, the Bank had a network of 2402 branches and

extension counters and 12922 ATMs. Axis Bank has the largest ATM network among private

banks in India and it operates an ATM at one of the world’s highest sites at Thegu, Sikkim at

a height of 4,023 meters (13,200 ft) above sea level.

65

International Business: The Bank has eight international offices with branches at Singapore,

Hong Kong, Dubai (at the DIFC), Shanghai, and Columbo, and Colombo and representative

offices at Dubai and Abu Dhabi, which focus on corporate lending, trade finance,

syndication, investment banking and liability businesses. In addition to the above, the Bank

has a presence in UK with its wholly owned subsidiary Axis Bank UK Limited. The total

assets of the overseas branches were US$7.86bn (31 March 2015).

5.4.4.2.Services

Axis Bank operates in four segments: Treasury operations, Retail banking,

Corporate/Wholesale banking and other banking business.Treasury operations: The Bank’s

treasury operation services include investments in sovereign and corporate debt, equity and

mutual funds, trading operations, derivative trading and foreign exchange operations on the

account, and for customers and central funding.

Retail banking: In the retail banking category, the bank offers services such as lending to

individuals/small businesses subject to the orientation, product and granularity criterion,

along with liability products, card services, Internet banking, automated teller machines

(ATM) services, depository, financial advisory services, and Non-resident Indian (NRI)

services.Axis bank is a participant in RBI's NEFT enabled participating banks list.

Corporate/wholesale banking: The Bank offers to corporate and other organisations

services including corporate relationship not included under retail banking, corporate

advisory services, placements and syndication, management of public issues, project

appraisals, capital market related services and cash management services.

NRI services: Products and services for NRIs that facilitate investments in India.

Business banking: The Bank accepts income and other direct taxes through its 214

authorised branches at 137 locations and central excise and service taxes (including e-

Payments) through 56 authorised branches at 14 locations.

Investment banking: Bank’s Investment Banking business comprises activities related to

Equity Capital Markets, Mergers and Acquisitions and Private Equity Advisory. The bank is

a SEBI-registered Category I Merchant Banker and has been active in advising Indian

companies in raising equity through IPOs, QIPs, and Rights issues etc. During the financial

66

year ended 31 March 2012, Axis Bank undertook 9 transactions including 5 IPOs and 2 Open

Offers.

Lending to small and medium enterprises: Axis Bank SME business is segmented in three

groups: Small Enterprises, Medium Enterprises and Supply Chain Finance. Under the Small

Business Group a subgroup for financing micro enterprises is also set up. Axis bank is the

first Indian Bank having TCDC cards in 11 currencies.

Agriculture banking: 759 branches of the Bank provide banking services, including

agricultural loans, to farmers. As on 31 March 2013, the Bank’s outstanding loans in the

agricultural sector was INR 148 billion, constituting 7.5% of its total advances.

Advisory Services have been developed to advise public and private sector clients on capital

structuring and funding options with a view to help the clients to help them reduce the cost of

funds. The Group has also been active in advising the central and various state governments

or their agencies in privatization and bid process management. The Group has successfully

worked on some of the benchmark transactions in infrastructure development &

manufacturing sector covering an entire range of projects across roads, railways, airports,

urban infrastructure maritime, power, oil and gas, petrochemicals, cement, sugar, textiles,

steel & allied sectors, auto ancillaries, paper, Information Technology (IT), etc.

5.4.4.3.History

Axis Bank began its operations in 1994, after the Government of India allowed new private

banks to be established. The Bank was promoted in 1993 jointly by the Administrator of the

Unit Trust of India(UTI-I), Life Insurance Corporation of India(LIC), General Insurance

Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company,

The Oriental Insurance Corporation and United India Insurance Company. The Unit Trust of

India holds a special position in the Indian capital markets and has promoted many leading

financial institutions in the country.

5.4.4.4.Initiatives

The Business Gaurav SME Awards: In 2011–12, Axis Bank set up 6 SME centres and

SME cells each across the country, taking the total number to 32 SME Centres. The Bank

67

also organised the 'Business Gaurav SME Awards' in association with Dun & Bradstreet to

recognise and award achievements in the SME space.

Financial inclusion: Till March 2012, the Bank had opened over 4.4 million No Frills

accounts in over 7607 villages through a network of 15 Business Correspondents and nearly

6000 customer service points. Axis Bank has a strong presence in Electronic Benefit Transfer

(EBT) and has covered 6800 villages across 19 districts and 9 states till date with over 3.7

million beneficiaries.

5.4.4.5.Industry First Initiatives:

Axis Bank launched Mobile Banking App 2.0 for its retail resident Indian customers

the first of its kind in India, which offers a high level of personalization . The App has

been launched in partnership with Tagit, a leading Singapore mobile solutions

company. The new application uses Tagit's mobility solution platform that enables

Banking on-the-go.

'Axis Bank - ISIC Forex Card' for students, is the first photo Travel Currency Card

available in USD, Euro, GBP and AUD currencies. It can be used across 34 million

merchant locations and at over 2 million MasterCard ATMs globally.

Axis Bank has partnered with Visa to launch 'eKYC' (electronic Know your

customer) facility, first organization in India to introduce Biometrics based KYC,

offering convenience, speed and ease to Aadhaar-registered individuals to open bank

accounts.

5.4.4.6.Awards and recognitions

Bank of the Year Money Today FPCIL Awards 2012–13

'Consistent Performer' in 'India’s Best Banks – 2012 survey' by Business Today and

KPMG

5.4.4.7.Brand Ambassador

Deepika Padukone, a Bollywood Actress was appointed as the brand ambassador of Axis

Bank

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5.4.4.8. Listing and shareholding

Axis Banks's equity shares are listed on the Bombay Stock Exchange and National Stock

Exchange of India.The company's global depository receipts (GDRs) are listed on the London

Stock Exchange. The Bonds issued by the Bank under the MTN programme are listed on the

Singapore Stock Exchange.As on 31 December 2013, the promoters UTI, LIC and GIC held

approx. 34% of the shares in Axis Bank. Foreign Institutional investors (FII) held approx.

43% of the shares. Remaining 23% of the shares are held by others.

The bank aims to increase its share in the financial services sector by continuing to build a

strong retail franchise. The segment continues to be one of the key drivers of the Bank’s

growth strategy, encompassing a wide range of products delivered through multiple channels

to customers. It offers a complete suite of products across deposits, loans, investment

solutions, payments and cards.

5.4.4.9.Shareholding pattern

Description Percent of Share (%)Promoters 37.38FII 32.94Individual shareholders 5.79Bodies corporate 0.00Govt 0.00Mutual funds 0.00Financial institutions 13.40Others 10.49

Table no.11: Shareholding pattern of Axis bank

69

Figure no.15: Percent of shares of Axis bank

5.4.4.10. Corporate social responsibility

Axis Bank Foundation: Axis bank has set up this trust in 2006 and supports

supplementary education. Axis Bank contributes up to 1 percent of its net profit

annually to various social initiatives undertaken by this foundation. During the year

2011–12, the foundation has partnered with 36 NGOs for educating over a lakh

underprivileged and special kids in 13 states.

Green Banking: The recycling initiative under the Green Banking banner has helped

the bank productively use around 21572 kilograms of dry waste during the year.The

Axis Bank's corporate office in Mumbai is designed and constructed as a Platinum

LEED-Certified Green Building.

5.4.5. ICICI bank

70

percent of share

PromotersFIIIndividualsFinancial institutionothersbodies corporate

ICICI Bank is an Indian multinational banking and financial services company

headquartered in Vadodara, Gujarat, India. As of 2014 it is the second largest bank in India in

terms of assets and market capitalization. It offers a wide range of banking products and

financial services for corporate and retail customers through a variety of delivery channels

and specialized subsidiaries in the areas of investment banking, life, non-life insurance,

venture capital and asset management. The Bank has a network of 4,050 branches and 12,642

ATM in India, and has a presence in 17 countries including India.

ICICI Bank is one of the Big Four banks of India, along with State Bank of India, Punjab

National Bank and Bank of Baroda. The bank has subsidiaries in the United Kingdom and

Canada; branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar, Dubai

International Finance Centre and China; and representative offices in United Arab Emirates,

South Africa, Bangladesh, Malaysia and Indonesia. The company's UK subsidiary has also

established branches in Belgium and Germany. In March 2013, Operation Red Spider showed

high-ranking officials and some employees of ICICI Bank involved in money laundering.

After a government inquiry, ICICI Bank suspended 18 employees and faced penalties from

the Reserve Bank of Indiain relation to the activity.

5.4.5.1. History

ICICI's branch located in Knightsbridge, London. ICICI Bank was established by the

Industrial Credit and Investment Corporation of India (ICICI), an Indian financial

institution, as a wholly owned subsidiary in 1994. The parent company was formed in 1955

as a joint-venture of the World Bank, India's public-sector banks and public-sector insurance

companies to provide project financing to Indian industry. The bank was initially known as

the Industrial Credit and Investment Corporation of India Bank, before it changed its name to

the abbreviated ICICI Bank. The parent company was later merged with the bank. ICICI

Bank launched internet banking operations in 1998.

5.4.5.3. ICICIs role in Indian financial infrastructure

The bank has contributed to the setup of a number of Indian institutions to establish financial

infrastructure in the country over the years;

National Stock Exchange - The National Stock Exchange was promoted by India's

leading financial institutions (including ICICI Ltd.) in 1992 on behalf of the

71

Government of India with the objective of establishing a nationwide trading facility

for equities, debt instruments and hybrids, by ensuring equal access to investors all

over the country through an appropriate communication network.

Credit Rating Information Services of India Limited (CRISIL) - In 1987, ICICI Ltd

along with UTI set up CRISIL as India's first professional credit rating agency.

CRISIL offers a comprehensive range of integrated products and service offerings

which include credit ratings, capital market information, industry analysis and

detailed reports.

National Commodities and Derivatives Exchange Limited - NCDEX is an online

multi-commodity exchange, set up in 2003, by ICICI Bank Ltd, LIC, NABARD,

NSE, Canara Bank, CRISIL, Goldman Sachs, Indian Farmers Fertiliser Cooperative

Limited (IFFCO) and Punjab National Bank.

Financial Innovation Network and Operations Pvt Ltd. - ICICI Bank has facilitated

setting up of "FINO Cross Link to Case Link Study" in 2006, as a company that

would provide technology solutions and services to reach the underserved and

underbanked population of the country. Using cutting edge technologies like smart

cards, biometrics and a basket of support services, FINO enables financial institutions

to conceptualise, develop and operationalise projects to support sector initiatives in

microfinance and livelihoods.

Entrepreneurship Development Institute of India - Entrepreneurship Development

Institute of India (EDII), an autonomous body and not-for-profit society, was set up in

1983, by the erstwhile apex financial institutions like IDBI, ICICI, IFCI and SBI with

the support of the Government of Gujarat as a national resource organisation

committed to entrepreneurship development, education, training and research.

North Eastern Development Finance Corporation - North Eastern Development

Finance Corporation (NEDFI) was promoted by national level financial institutions

like ICICI Ltd in 1995 at Guwahati, Assam for the development of industries,

infrastructure, animal husbandry, agri-horticulture plantation, medicinal plants,

sericulture, aquaculture, poultry and dairy in the North Eastern states of India. NEDFI

is the premier financial and development institution for the North East region.

Asset Reconstruction Company India Limited - Following the enactment of the

Securitisation Act in 2002, ICICI Bank together with other institutions, set up Asset

Reconstruction Company India Limited (ARCIL) in 2003, to create a facilitative

environment for the resolution of distressed debt in India. ARCIL was established to

72

acquire non-performing assets (NPAs) from financial institutions and banks with a

view to enhance the management of these assets and help in the maximisation of

recovery. This would relieve institutions and banks from the burden of pursuing

NPAs, and allow them to focus on core banking activities.

Credit Information Bureau of India Limited - ICICI Bank has also helped in setting up

Credit Information Bureau of India Limited (CIBIL), India's first national credit

bureau in 2000. CIBIL provides a repository of information (which contains the credit

history of commercial and consumer borrowers) to its members in the form of credit

information reports. The members of CIBIL include banks, financial institutions, state

financial corporations, non-banking financial companies, housing finance companies

and credit card companies.

Institutional Investor Advisory Services India Limited (IiAS) - ICICI Bank has

indirectly invested in Institutional Investor Advisory Services, through ICICI

Prudential Life Insurance Company, in IiAS. IiAS is a voting advisory firm aka proxy

firm, dedicated to providing participants in the Indian market with data, research and

commentary. It provides recommendations on resolutions placed before shareholders

of over 300 companies.THE INDIAN ICICC BANK has been a bank of statue and

integrity this has lead to forein investor being happy to invest in undisclosed amounts

of capital and buying share earnings in over 207 country this year will see the bank

fees drop to 5.5% annually with an increase of 1% interest on saving capital .the bank

will be growing urbunisation in term of building many more 300 branches in India to

cost 15 billion us dollars each costing 40 million us $.

5.4.5.4.Products

ICICI Bank Unifare Bangalore Metro Card

ICICI Bank and Bangalore Metro Rail Corporation Limited (BMRCL) on April 2015,

announced the launch of the ‘ICICI Bank Unifare Bangalore Metro Card’. This card offers

the commuters dual benefits of an ICICI Bank credit or debit card and BMRCL’s smart card,

called Namma Metro Smart Card. This is a cobranded card in association with MasterCard.

73

'Touch n Remit' facility for NRIs in Kingdom of Bahrain

In March 2015, ICICI Bank tied up with SADAD Electronic Payments WLL to offer

remittance service for NRIs based in Bahrain, enabling them to transfer monies instantly to

India from the latter’s kiosks spread across the Kingdom of Bahrain. This facility has been

named as ‘Touch n Remit’.

ICICI Bank Ltd launches 'Video Banking' for NRI

In February 2015, ICICI Bank announced the launch of 'Video Banking' for all its NRI (Non

Resident Indian) customers. Using this service, the customers can now connect with a

customer care representative over a video call, round-the-clock, on all days from anywhere

using their smart phone.

Pockets by ICICI Bank

In February 2015, ICICI Bank Re-Launched POCKETS.Now working as a "Digital wallet"

for everyone (Android OS users only). The Wallet be can be opened by anyone and can do

transactions like recharge, shopping, transfer money using the virtual visa card which is

issued when signing up for the wallet.

ICICI BankPay on Twitter

ICICI Bank on January, 2015 launched banking services on Twitter, christened as

'ICICIBankPay'. This service in India enables ICICI Bank customers to transfer money to

anyone in the country who has a Twitter account, check account balance, view last three

transactions and recharge prepaid mobile in a completely secure manner.

Contactless Credit and Debit Cards

ICICI Bank on January, 2015 announced the launch of the country’s first ‘Contactless’ debit

and credit cards, enabling its customers to make electronic payments by just waving the cards

near the merchant terminal in lieu of dipping or swiping them. These cards are based on the

Near Field Communication (NFC) technology, which provides customers the improved

convenience of speed as these cards require significantly less time than traditional cards to

74

complete a transaction along with enhanced security as they remain in control of the

customer.

My Savings Rewards

ICICI Bank has rolled-out the programme 'My Savings Rewards' from 1 September 2012,

where reward points are offered to individual domestic customers for a variety of transactions

done through the savings bank account. Reward points are offered automatically to customers

for activating Internet banking, shopping online/ paying utility bills with Internet banking and

auto-debit from savings account towards equated monthly installments for home/ auto/

personal loan/ recurring deposit. Customers are required to maintain a monthly average

balance of 15,000 or more. th Indian bank will require 5.5% interest on short term loans₹

and long term bonds and mortgages loans up to $2 million up to 20years to pay back annual

interest of 5.5% short term loans from 3 months up to 3years at 5.5% .credit interest is

reduced to 10% annually .

iWish- the flexible recurring deposit

iWish is a flexible recurring deposit product launched by ICICI Bank for its savings account

customers. Unlike a traditional recurring deposit, iWish allows customers to save varying

amounts of money at any time of their choice. Customers can create several goals and track

their progress on an online interface.

ICICI Bank has developed this product in collaboration with Social Money. ICICI Bank has

also launched an app for Android and Apple smartwatches. The app will provide the facility

of online banking transaction from smartwatch.

Go Green Initiative

The Go Green Initiative is an organisation wide initiative that moves beyond moving people,

processes and customers to cost effective automated channels to build awareness and

consciousness of our environment, our nation and our society.

75

5.4.5.5.Objective

ICICI Bank's Green initiative is to make healthy environment in the organisation i.e.; to

create intrapersonal skills among the customer and understanding between employees of the

organisation.

Broad objectives of the ICICI are:

1. to assist in the creation, expansion and modernisation of private concerns;

2. to encourage the participation of internal and external capital in the private concerns;

3. to encourage private ownership of industrial investment.

5.4.5.6.Green products and services

Instabanking

It is the platform that brings together all alternate channels under one umbrella and gives

customers the option of banking through Internet banking, i-Mobile banking, IVR Banking.[39] On 22 September 2014 ICICI Bank launched Four New Next Generation Mobile Banking

Apps.

Vehicle Finance

Auto loans offer 50% waiver on processing fee on car models which uses alternate mode of

energy. The models identified for the purpose are, Maruti's LPG version of Maruti 800, Omni

and Versa, Hyundai's Santro Eco, Civic Hybrid of Honda, Reva electric cars, Tata Indica

CNG and Mahindra Logan CNG versions.

Carbon Footprint Calculator

Inputs include region, user input of the distance traveled in a particular medium of transport

daily, electricity consumed per month and LPG cylinder/piped natural gas used per month. It

calculates the net carbon footprint to create awareness and sensitize people about the

environment. It also shows the world's and India's average carbon footprint.

76

5.4.5.7. Subsidiaries

Domestic

ICICI Prudential Life Insurance Company Limited

ICICI Lombard General Insurance Company Limited

ICICI Prudential Asset Management Company Limited

ICICI Prudential Trust Limited

ICICI Securities Limited

ICICI Securities Primary Dealership Limited

ICICI Venture Funds Management Company Limited

ICICI Home Finance Company Limited

ICICI Investment Management Company Limited

ICICI Trusteeship Services Limited

ICICI Prudential Pension Funds Management Company Limited[42]

International

ICICI Bank USA

ICICI Bank UK PLC

ICICI Bank Canada

ICICI Bank Eurasia Limited Liability Company

ICICI Securities Holdings Inc.

ICICI Securities Inc.

ICICI International Limited

Credit rating

The credit ratings agency Moody has lowered the ratings for ICICI Bank to Baa3/P-3 from

Baa2/P-2 in April 2015.

77

5.4.5.11.Shareholding pattern

Description Percent of Share (%)Promoters 0FII 41.72Individual shareholders 4.83Bodies Corporate 2.17Mutual funds 7.66insurance 13.69Financial institutions .03Others 29.97

Table no.12:Shareholding pattern of ICICI bank

percent of shares(%)

promotersFIIIndividualBodies corporatemutual fundsinsurance

Figure no.16:Percent of shares of ICICI bank

78

5.5. CAMEL RATING ANALYSIS

The CAMEL rating is a supervisory rating system originally developed in the U.S. to classify

a bank's overall condition. It's applied to every bank and credit union in the U.S.

(approximately 8,000 institutions) and is also implemented outside the U.S. by various

banking supervisory regulators. The ratings are assigned based on a ratio analysis of the

financial statements, combined with on-site examinations made by a designated supervisory

regulator. In the U.S. these supervisory regulators include the Federal Reserve, the Office of

the Comptroller of the Currency, the National Credit Union Administration, and the Federal

Deposit Insurance Corporation.

The first step towards rating of banks in India was taken up in 1995, when the Reserve Bank

of India established the S Padmanabhan Committee to take a fresh look at the banking

Supervision. S Padmanabhan Committee recommended that Banking supervision should

focus on the parameters of the Financial Soundness, Managerial and Operational Efficiency

and firmness.

The components of a bank's condition that are assessed:

(C)apital adequacy

(A)ssets

(M)anagement Capability

(E)arnings

(L)iquidity (also called asset liability management)

5.5.1.Capital Adequacy

Capital Adequacy reflects the overall financial condition of the banks and also the ability of

management to meet the need for additional capital. It also indicates whether the bank has

enough capital to absorb unexpected losses. Capital Adequacy Ratio acts as an indicator of

bank leverage. The following ratios measure Capital Adequacy:

5.5.1.1.Capital adequacy ratio (CAR)

The banks are required to maintain the capital adequacy ratio (CAR) as specified by RBI

from time to time. As per the latest RBI norms, the banks in India should have a CAR of

79

12%. It is arrived at by dividing the sum of Tier-I, Tier-II and Tier-III capital by aggregate of

risk weighted assets (RWA). Symbolically,

CAR= (Tier-I + Tier-II + Tier-III)/RWA

Tier-I capital includes equity capital and free reserves.

Tier-II capital comprises of subordinate debt of 5-7 years tenure, revaluation reserves, hybrid

debt capital instruments and undisclosed reserves and cumulative perpetual preference shares.

Tier-III capital comprises of short-term subordinate debt.

Sl.no Banks Capital adequacy ratio

2013-14 2012-13 2011-12 average Rank

1 HDFC Bank 16.07 16.80 16.52 16.46 3

2 Federal Bank 15.14 14.73 16.64 15.36 4

3 YES Bank 14.40 18.30 17.90 16.86 2

4 Axis Bank 16.07 17.00 13.66 15.57 5

5 ICICI Bank 17.70 18.74 18.52 18.321

Table no.13:capital adequacy ratio

80

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

16.46

15.36

16.86

15.57

18.32

Figure no.17:capital adequacy ratio

5.5.1.2. Debt-Equity Ratio

This ratio indicates the degree of leverage of a bank. It indicates how much of the bank

business is financed through debt and how much through equity. Debt-Equity ratio is arrived

at by dividing total borrowings and deposits by shareholders’ net worth, which includes

equity capital, and reserves and surpluses. Higher ratio indicates less protection for the

creditors and depositors in the banking system

Debt equity ratio=Total debt/Total equity

Banks Debt equity ratio

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2013-14 2012

-13

2011-12 average Rank

1HDFC Bank 8.45 8.18 8.24 8.29 3

2Federal Bank 8.59 8.58 8.43 8.53 2

3 YES Bank 10.42 11.53 10.51 10.82 1

4 Axis Bank 7.35 7.63 9.65 8.21 4

5 ICICI Bank4.53 4.39 4.23 4.38 5

Table no.14: Debt equity ratio

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

8.29 8.5310.82

8.21

4.38

Figure no.18: Debt Equity ratio

5.5.1.3.Total Advances to total Assets Ratio

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This is a ratio of the Total Advances to Total Assets. This ratio indicates a bank’s

aggressiveness in lending which ultimately results in better profitability. Total advances also

include receivables. The value of Total Assets excludes the revaluation of all the assets.

Sl.no Banks Total Advances to total Assets Ratio

2013-14 2012-13 2011-12 Average Rank

1 HDFC Bank0.61 0.59 0.58 0.59 2

2Federal Bank 0.58 0.62 0.63 0.61 1

3 YES Bank 0.51 0.47 0.52 0.50 4

4 Axis Bank0.00 0.57 0.59 0.38 5

5 ICICI Bank0.56 0.54 0.51 0.53 3

Table no.15:Total advances to total asset ratio

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.590.61000000000000

10.5

0.380000000000003

0.53

Figure no.19: Total advances to total asset ratio

Composite capital adequacy

83

BANK Capital Adequacy Debt- equity ratio advances-assets GROUP

RANKING

% Rank Times Rank % Rank Averag

e

Rank

HDFC

Bank16.46 3 8.29 3 0.59 2

8.69 1

Federal

Bank16.01 4 8.53 2 0.61 1

8.45 2

YES Bank 16.87

2

10.82 1 0.50 4 8.38 3

Axis Bank 15.57 5 7.35 4 0.38 5 7.76 5

ICICI

Bank18.31 1 4.53 5 0.53 3

7.79 4

Table no.16: composite capital adequacy

1HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

8.69 8.45 8.38 7.76 7.79

Figure no.20: composite capital adequacy

On the basis of group averages of three ratios of capital adequacy as expressed in table 16

HDFC bank is at the top position with average ratio of 8.69 which is followed by federal

84

bank with ratio 8.45 then the yes bank with ratio of 8.38 then ICICI bank with 7.79 and

finally axis bank with the average ratio of 7.76.

5.5.2.Assets Quality

The quality of assets is an important parameter to gauge the degree of financial strength. The

prime motto behind measuring the assets quality is to ascertain the component of Non-

Performing Assets (NPAs) as a percentage of the total assets. This indicates what types of

advances the bank has made to generate interest income. Thus, assets quality indicates the

type of the debtors the bank is having. The following ratios are necessary to assess assets

quality:

5.5.2.1.Total Investments to Total Assets Ratio

Total investments to total assets indicate the extent of deployment of assets in investment as

against advances. This ratio is used as a tool to measure the percentage of total assets locked

up in investments, which, by conventional definition, does not form part of the core income

of a bank. It is arrived at by dividing total investments by total assets. A higher ratio means

that the bank has conservatively kept a high cushion of investments to guard against NPAs.

Total Investments to Total Assets Ratio = Total investments

Total asset

85

Sl.no Banks Total Investments to Total Assets Ratio

2013-14 2012-13 2011-12 Average Rank

1 HDFC Bank0.25 0.28 0.29 0.27 5

2Federal Bank 0.32 0.28 0.28 0.29 4

3 YES Bank 0.38 0.43 0.38 0.39 1

4 Axis Bank0.33 0.32 0.29 0.313 2

5 ICICI Bank0.29 0.32 0.32 0.31 3

Table no.17:Total investment to total asset ratio

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.27 0.29

0.390000000000003

0.313000000000002

0.310000000000002

Figure no.21:total investment to total asset ratio

5.5.2.2.Net NPAs to Net Advances

It is a measure of the quality of assets in a situation where the management has not provided

for loss on NPAs. Net NPAs are measured as a percentage of net advances.

86

Sl.no Banks Net NPA to Net Advances

2013-14 2012-13 2011-12 Average Rank

1 HDFC Bank0.20 0.30 0.20 0.35 4

2Federal Bank 0.73 0.74 0.98 0.81 2

3 YES Bank 0.12 0.05 0.01 0.06 5

4 Axis Bank0.44 0.40 0.32 0.38 3

5 ICICI Bank1.61 0.97 0.77 1.11 1

Table no:18:Net NPA to net advances

Figure no.22: Net NPA to net advances

87

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.35

0.81

0.06

0.380000000000003

1.11

Composite assets quality

BANK Total investment- total

assets

Net NPA- net

advances

GROUP RANKING

% Rank % Rank Average Rank

HDFC Bank 0.27 5 0.35 4 0.31 4

Federal Bank 0.29 4 0.81 2 0.55 2

YES

Bank 0.39 1 0.06 5 0.22 5

Axis Bank 0.313 2 0.38 3 0.34 3

ICICI Bank 0.31 3 1.11 1 0.71 1

Table no:19:composite asset quality ratio

HDFC Bank Federal Bannk YES Bank Axis Bank ICICI Bank

0.310000000000002

0.55

0.22

0.34

0.710000000000001

Figure no.23:composite asset quality ratio

On the basis of group averages of two ratios of assets quality as expressed in table, ICICI

bank and Federal Bank was at the first position with the group average of 0.71 and 0.55 and

the rest of the three banks scored the lowest because of poor performance of assets.

88

5.5.3.Management Efficiency

Management efficiency is another vital component of the CAMEL Model that ensures the

survival and growth of a bank. The ratios in this segment involve subjective analysis and

efficiency of management. The management of the bank takes crucial decisions depending on

the risk perception. It sets vision and goals for the organization and sees that it achieves them.

This parameter is used to evaluate management efficiency as to assign premium to better

quality banks and discount poorly managed ones. The ratios used to evaluate management

efficiency are described as under:

5.5.3.1.Total advances to Total Deposits

The ratio measures the efficiency of management in converting the deposits available with

the bank (excluding other funds like equity capital, etc.) into high earning advances. Total

deposits include demand deposits, savings deposits, term deposits and deposits of other

banks. Total advances also include the receivables.

Sl.no Banks Total advances to total deposits ratio

2013-14 2012-13 2011-12 average Rank

1 HDFC Bank0.82 0.81 0.79 0.81 2

2Federal Bank 0.73 0.77 0.74 0.75 4

3 YES Bank 0.75 0.70 0.77 0.74 5

4 Axis Bank0.78 0.77 0.75 0.76 3

5 ICICI Bank1.02 0.86 0.99 0.95 1

Table no.20:Total advances to total deposits ratio

Figure no.24:Total advances to total deposits ratio

89

5.5.3.2.Return on Investment

A performance measure used to evaluate the efficiency of an investment or to compare the

efficiency of a number of different investments.

Return on Investment=Net Profit /Total fund

Sl.no Banks Return on investment

2013-14 2012-13 2011-12 average Rank

1 HDFC Bank 1.90 1.82 1.68 1.8 1

2 Federal Bank 1.15 1.27 1.39 1.27 5

3 YES bank 1.64 1.51 1.47 1.54 4

4 Axis Bank 1.65 1.61 1.60 1.62 2

5 ICICI Bank 1.73 1.62 1.44 1.6 3

Table no.21:Return on investment ratio

90

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.81 0.750000000000005

0.740000000000004

0.760000000000005

0.950000000000001

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

1.8

1.271.54 1.62 1.6

Figure no.25: Return on investment ratio

Composite management efficiency

BANK Total advances to total

deposits

Return on

investment

GROUP RANKING

% Rank % Rank Average Rank

HDFC Bank0.81 2 1.8 1 1.305 1

Federal

Bank0.75 4 1.27 5 1.01 5

YES

Bank 0.74 5 1.54 4 1.14 4

Axis Bank0.76 3 1.62 2 1.19 3

ICICI Bank0.95 1 1.6 3 1.275 2

Table no: 22: Composite management efficiency ratio

Figure no.26: composite management efficiency ratio

91

From the above graph we can analysis the HDFC bank management efficiency is better than other banks.

5.5.4.Earning Quality

Earning quality reflects quality of a bank’s profitability and its ability to earn consistently.

The quality of earning is a very important criterion that determines the ability of a bank to

earn consistently, going into the future. It basically determines the profitability of the bank. It

also explains the sustainability and growth in earnings in the future. The following ratios try

to assess the quality of income in terms of income generated by core activity-income from

lending operation.

5.5.4.1. Operating Profit to Average Working Funds Ratio

This ratio indicates how much a bank can earn from its operations net of the operating

expenses for every rupee spent on working funds. This is arrived at by dividing the operating

profit by average working funds. Average Working Funds (AWF) are the total resources

(total assets or liabilities) employed by a bank. It is daily average of total assets / liabilities

during a year. The better utilization of funds will result in higher operating profit. Thus, this

ratio will indicate how a bank has employed its working funds in generating profit.

Sl.no Banks Operating profit to the average working fund ratio

2013-14 2012-13 2011-12 average Rank

92

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

1.30499999999999

1.011.13999999999999 1.19000000000001

1.27499999999999

1 HDFC Bank0.29 0.28 0.25 0.27 2

2Federal Bank 0.198 0.20 0.248 0.215 4

3

YES

Bank 0.197 0.216 0.20 0.204 5

4 Axis Bank 0.3 0.27 0.26 0.276 1

5 ICICI Bank0.27 0.24 0.21 0.24 3

Table no.23:Operating profit to average working fund ratio

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.27

0.215 0.204

0.2760.24

Figure no.27: operating profit to average working fund ratio

5.5.4.2. Interest Income to Total Income

Interest income is a basic source of revenue for banks. The interest income to total income

indicates the ability of the bank in generating income from its lending. This ratio measures

the income from lending operations as a percentage of the total income generated by the bank

in a year. Interest income includes income on advances, interest on deposits with the RBI,

and dividend income.

Sl.no Banks Interest income to total income

2013-14 2012-13 2011-12 average Rank

93

1 HDFC Bank0.46 0.45 0.45 0.453 5

2Federal Bank 0.61 0.61 0.59 0.60 2

3 YES Bank0.62 0.63 0.65 0.63 1

4 Axis bank0.49 0.52 0.50 0.50 4

5 ICICI Bank0.50 0.54 0.55 0.53 3

Table no.24: interest income to total income

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.453

0.600000000000001

0.630000000000005

0.5 0.53

Figure no.28:interest income to total income

Composite Earning quality

94

BANK Operating profit-average

working fund ratio

Interest income-total

income

GROUP RANKING

% Rank % Rank Average Rank

HDFC

Bank0.27 2 0.453 5 0.36 5

Federal

Bank 0.215 4 0.6 2 0.40 2

YES Bank 0.204 5 0.63 1 0.41 1

Axis Bank 0.276 1 0.5 4 0.39 3

ICICI Bank 0.24 3 0.53 3 0.38 4

Table no.25:Composite earning quality ratio

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

0.36

0.40.41

0.390000000000003 0.38000000000000

3

Figure no.29:Composite earning quality ratio

From the above graph we can analysis YES bank and federal bank holding

highest position in earning quality so they consistently earn profit. Axis bank having 0.39

average of earning quality. ICICI Bank and HDFC holding the average of 0.38 and 0.36

respectively.

5.5.5. Liquidity

95

Liquidity is very important for any organization dealing with money. For a bank, liquidity is

a crucial aspect which represents its ability to meet its financial obligations. It is of utmost

importance for a bank to maintain correct level of liquidity, which will otherwise lead to

declined earnings. Banks have to take proper care in hedging liquidity risk, while at the same

time ensuring that a good percentage of funds are invested in higher return generating

investments, so that banks can generate profit while at the same time provide liquidity to the

depositors. Among a bank’s assets, cash investments are the most liquid. A high liquidity

ratio indicates that the bank is more affluent. The ratios suggested to measure liquidity under

CAMEL Model are as follows:

5.5.5.1. Liquid Assets to Total Assets

Liquid Assets include cash in hand, balance with the RBI, balance with other banks (both in

India and abroad), and money at call and short notice. This ratio is arrived by dividing liquid

assets by total assets. The proportion of liquid assets to total assets indicates the overall

liquidity position of the bank.

Sl.no Banks Liquid assets to total assets(%)

2013-14 2012-13 2011-12 average Rank

1 HDFC Bank8.0 6.8 6.2 7.0 2

2Federal Bank 6.0 5.8 7.2 6.3 3

3

YES

Bank5.4 4.1 4.8

4.8 5

4 Axis Bank7.3 6.0 4.8 6.0 4

5 ICICI Bank6.9 7.7 7.4 7.3 1

Table no.26:liquid asset to total asset ratio

96

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

76.3

4.8

6

7.3

Figure no.30:liquid asset to total asset ratio

5.5.5.2.Liquid Assets to Total Deposits

This ratio measures the liquidity available to the depositors of a bank. Liquid assets include

cash in hand, balance with the RBI, balance with other banks (both in India and abroad), and

money at call and short notice. Total deposits include demand deposits, savings deposits,

term deposits and deposits of other financial institutions.

Sl.no Banks Liquid assets to total deposits(%)

2013-14 2012-13 2011-12 average Rank

1HDFC Bank 10.7 9.2 8.5 9.5 2

2Federal Bank 7.5 7.2 8.7 7.2 4

3 YES Bank7.9 6.0 7.3

7.1 5

4 Axis Bank10.05 8 6.3 8.1 3

5 ICICI Bank12.5 14.15 14.17 13.6 1

Table no.27: liquid asset to total deposits ratio

97

Figure no.31: liquid asset to total asset ratio

Composite Liquidity

BANK Liquid asset-total assets Liquid assets-total

deposits

GROUP RANKING

% Rank % Rank Average Rank

HDFC

Bank7.0 2 9.5 2

8.25 2

Federal

Bank6.3 3 7.2 4

6.75 4

YES Bank 4.8 5 7.1 5 5.95 5

Axis Bank 6 4 8.1 3 7.05 3

ICICI Bank7.3 1 13.6 1

10.45 1

Table no.28:Composite liquidity ratio

98

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

9.57.2 7.1 8.1

13.6

HDFC Bank Federal Bank YES Bank AxisBank ICICI Bank

8.256.75

5.957.05

10.45

Figure no.32:Composite liquidity ratio

On the basis of group averages of two ratios of liquidity as expressed in table , ICICI bank

was at the top position with group average of 10.45, followed by theHDFC Bank and Axis

bank with average of 8.25 and 7.05 respectively and Federal bank and YES bank scored the

last position due to its poor performance in Liquid Assets to Total Assets and Liquid Assets

to Total Deposits ratios.

OVERALL GRAND RANKING BASED ON THE CAMEL PARAMETERS

Banks Capital

adequacy

Assets

quality

Management

efficiency

Earning

quality

Liquidity Average Rank

HDFC

Bank8.69 0.31 1.305 0.36 8.25 3.783 2

Federal

Bank8.45 0.55 1.01 0.40 6.75 3.432 3

YES

Bank8.38 0.22 1.14 0.41 5.95 3.22 5

Axis

Bank7.76 0.34 1.19 0.39 7.05 3.346 4

ICICI

Bank7.79 0.71 1.275 0.38 10.45 4.121 1

Table no.29: Overall grand ranking based on the CAMEL parameters

99

HDFC Bank Federal Bank YES Bank Axis Bank ICICI Bank

3.7833.432 3.22 3.346

4.12099999999998

Figure no.33: Overall grand ranking based on the CAMEL parameter

On the basis of group averages of overall performance of these banks as expressed in table

ICICI bank was at the top position with group average of 4.121, followed by HDFC bank

with average of 3.783,Federal bank with the average of 3.432 and Axis bank with average of

3.346 respectively. YES bank scored the last position with 3.22 averages due to its poor

performance in management efficiency.

100

5.6. INTRINSIC VALUE ANALYSIS

5.6.1.HDFC Bank

1. Price to book value ratio

P/B Ratio = stock price /book value

= 1007.5/181.23 = 5.55

2. Price-to-earnings ratio (p/e) 

P/E RATIO = Current market price / Earnings per share (EPS)

= 1007.5/ 35.34

= 28.5

INTRINSIC VALUE

1.Dividend payout ratio

Dividend payout ratio=Dividend per share/Earning per share

= 6.85/35.34 = .19

2.Average Dividend Payout Ratio

Average Dividend Payout Ratio = sum of dividend payout ratio for 5 years/5

= .97/5 = .19

3. Average retention ratio

Average retention ratio = 1- average dividend payout ratio

= 1 – .19= .81

4.Average return on equity

Average return on equity = sum of ROE for 5 years / 5

=79.92/5=15.984

5. Growth in equity

Growth in equity = average retention ratio * average return on equity

=.81*15.984 =12.94

101

6.Normalized average P/E ratio

Normalized average P/E ratio = Sum of P/E ratio for 5 years / 5

=166.33/5=33.266

7.Projected EPS

Projected EPS = Current EPS *(1+g)

=35.34*(1+.13) = 39.93

8.Intrinsic value

Intrinsic value = projected EPS* normalized average P/E ratio

=39.93*33.26 =1328.45

Intrinsic Value Market Value

1328.45 1007.5

Since intrinsic value of the share is more than its present market value a decision can be made to buy the security.

5.6.2. Federal Bank

1. Price to book value ratio

P/B Ratio = stock price /book value

= 132.45/ 81.26 = 1.6299

2. Price-to-earnings ratio (p/e) 

P/E RATIO = Current market price / Earnings per share (EPS)

= 132.45/ 9.81 = 13.50

102

INTRINSIC VALUE

1.Dividend payout ratio

Dividend payout ratio=Dividend per share/Earning per share

=2 /9.81 =.20

2.Average Dividend Payout Ratio

Average Dividend Payout Ratio = sum of dividend payout ratio for 5 years/5

= .20

3. Average retention ratio

Average retention ratio = 1- average dividend payout ratio

= 1 – .20 = .80

4.Average return on equity

Average return on equity = sum of ROE for 5 years / 5

=11.69

5. Growth in equity

Growth in equity = average retention ratio * average return on equity

=.80*11.69 = 9.352

6.Normalized average P/E ratio

Normalized average P/E ratio = Sum of P/E ratio for 5 years / 5

= 11.45

7.Projected EPS

Projected EPS = Current EPS *(1+g)

=9.81*(1+.09) = 10.69

103

8. Intrinsic value

Intrinsic value = projected EPS* normalized average P/E ratio

=10.69*11.45 =122.40

Intrinsic Value Market Value

132.45 122.40

Since there is no significant difference between intrinsic value and market value a

decision can be made to hold that security.

5.6.3. YES Bank

1. Price to book value ratio

P/B Ratio = stock price /book value

= 847.0/ 279.60 = 3.02

2. Price-to-earnings ratio (p/e) 

P/E RATIO = Current market price / Earnings per share (EPS)

= 847.0/ 41.01 = 20.65

INTRINSIC VALUE

1.Dividend payout ratio

Dividend payout ratio=Dividend per share/Earning per share

=9/41.01 = 0.22

2.Average Dividend Payout Ratio

Average Dividend Payout Ratio = sum of dividend payout ratio for 5 years/5

= .22

104

3. Average retention ratio

Average retention ratio = 1- average dividend payout ratio

= 1 – .22= .78

4.Average return on equity

Average return on equity = sum of ROE for 5 years / 5

=25.00

5. Growth in equity

Growth in equity = average retention ratio * average return on equity

=.78*25.00 = 19.5

6.Normalized average P/E ratio

Normalized average P/E ratio = Sum of P/E ratio for 5 years / 5

= 17.88

7.Projected EPS

Projected EPS = Current EPS *(1+g)

=41.01*(1+.18) = 48.40

8.Intrinsic value

Intrinsic value = projected EPS* normalized average P/E ratio

=48.4*17.88 = 865.4

Intrinsic Value Market Value

865.4 847.0

Since there is no significant difference between intrinsic value and market value a

decision can be made to hold that security.

105

5.6.4.Axis Bank

1. Price to book value ratio

P/B Ratio = stock price /book value

= 578.5/ 813.47 = 0.71

2. Price-to-earnings ratio (p/e) 

P/E RATIO = Current market price / Earnings per share (EPS)

= 578.5/ 59.51 = 9.72

INTRINSIC VALUE

1.Dividend payout ratio

Dividend payout ratio=Dividend per share/Earning per share

=20/59.51 = 0.33

2.Average Dividend Payout Ratio

Average Dividend Payout Ratio = sum of dividend payout ratio for 5 years/5

= 0.33

3. Average retention ratio

Average retention ratio = 1- average dividend payout ratio

= 1 – .33 = 0.67

4.Average return on equity

Average return on equity = sum of ROE for 5 years / 5

=84/5 = 16.8

5. Growth in equity

Growth in equity = average retention ratio * average return on equity

=.67*16.8 = 11.25

106

6. Normalized average P/E ratio

Normalized average P/E ratio = Sum of P/E ratio for 5 years / 5

= 71.2/5 = 14.24

7. Projected EPS

Projected EPS = Current EPS *(1+g)

=59.51*(1+.11) = 66.05

8.Intrinsic value

Intrinsic value = projected EPS* normalized average P/E ratio

=66.05*14.24= 940.552

Intrinsic Value Market Value

940.552 578.45

Since intrinsic value of the share is more than its present market value a decision can be made to buy the security.

5.6.5. ICICI Bank

1. Price to book value ratio

P/B Ratio = stock price /book value

= 316.45/ 138.72 = 2.281

2. Price-to-earnings ratio (p/e) 

P/E RATIO = Current market price / Earnings per share (EPS)

= 316.45/ 19.28 = 16.41

INTRINSIC VALUE

1.Dividend payout ratio

Dividend payout ratio=Dividend per share/Earning per share

=5/19.28 = .26

107

2.Average Dividend Payout Ratio

Average Dividend Payout Ratio = sum of dividend payout ratio for 5 years/5

= .26

3. Average retention ratio

Average retention ratio = 1- average dividend payout ratio

= 1 – .26 = 0.74

4.Average return on equity

Average return on equity = sum of ROE for 5 years / 5

=67.04/5 = 13.408

5. Growth in equity

Growth in equity = average retention ratio * average return on equity

=.74*13.408 = 9.92

6.Normalized average P/E ratio

Normalized average P/E ratio = Sum of P/E ratio for 5 years / 5

= 78.1/5 = 15.62

7.Projected EPS

Projected EPS = Current EPS *(1+g)

=19.28*(1+.09) = 21.05

8.Intrinsic value

Intrinsic value = projected EPS* normalized average P/E ratio

=21.05*15.62 = 328.801

108

Intrinsic Value Market Value

328.801 316.45

Since there is no significant difference between intrinsic value and market value a decision

can be made to hold that security.

SUMMARY

HDFC Bank

Scrip code HDFBANBook value(Rs.) 181.23Price/Book 5.55Current EPS 35.34Dividend per share 6.85P/E ratio 28.5Face value 2Intrinsic value 1328.45Current market price 1007.5RATING BUY

Table no.30:Summary of HDFC bank

Federal Bank

Scrip code FederalBnkBook value(Rs.) 81.26Price/Book 1.63Current EPS 9.81Dividend per share 2P/E ratio 13.50Face value 2Intrinsic value 132.45Current market price 122.40RATING HOLD

Table no.31:Summary of Federal bank

109

YES Bank

Scrip code YesbankBook value(Rs.) 279Price/Book 3.02Current EPS 41.01Dividend per share 9P/E ratio 20.45Face value 10Intrinsic value 865.40Current market price 847RATING HOLD

Table no.32:Summary of YES bank

Axis Bank

Scrip code AxisbankBook value(Rs.) 813.47Price/Book 0.67Current EPS 59.51Dividend per share 20P/E ratio 9.72Face value 10Intrinsic value 940.55Current market price 578.45RATING BUY

Table no.33:Summary of Axis bank

ICICI Bank

Scrip code ICICIbankBook value(Rs.) 138.72Price/Book 2.281Current EPS 19.28Dividend per share 5P/E ratio 16.41Face value 2Intrinsic value 328.801Current market price 316.45RATING HOLD

Table no.34:Summary of ICICI bank

110

CHAPTER 6CHAPTER 6

FINDINGS, SUGGESTIONS FINDINGS, SUGGESTIONS

AND CONCLUSIONAND CONCLUSION

111

6. FINDINGS AND SUGGESTIONS

6.1.FINDINGS

The economy of India  is the tenth-largest in the world by nominal GDP. Currently

India GDP Annual Growth Rate averaged 5.83 percentages.

Based on the macroeconomic indicators analysis, the Indian economy anticipated to

grow at 4.9% as compared to previous years.

India is considered among the top economies in the world, with tremendous potential

for its banking sector to flourish. The last decade witnessed a significant upsurge in

transactions through ATMs, as well as internet and mobile banking.

On the basis of liquidity position YES bank and Axis bank scored the last position

due to its poor performance in Liquid Assets to Total Assets and Liquid Assets to

Total Deposits ratios.

Based on earning quality YES bank and Federal bank scored first position.

HDFC bank scored highest rate in management efficiency.

On the basis of assets quality ratio analysis ICICI bank and Federal was at the first

position and Axis bank, HDFC and yes bank scored the lowest because of poor

performance of assets.

On the basis of group averages of three ratios of capital adequacy HDFC Bank was at

the top position with group average of (8.69), followed by Federal bank (8.45),Yes

Bank (8.38), ICICI bank( 7.79) and Axis bank (7.76).

Based on the overall performance of CAMEL rating ICICI bank was at the top

position with group average of 4.121.

Axis bank and HDFC bank intrinsic value of the share is more than its present

market value because their Earning per share value is more.

There is no significant difference in market value and intrinsic value of Yes Bank,

ICICI bank and Federal bank.

112

6.2. SUGGESTIONS

The investor plan to invest in banking sector which have minimum risk and high

returns.

Profitability of the private sector banks seems too satisfactory. So most of the banks

in the group are undervalued stocks.

It is suggested that since the intrinsic value for HDFC bank and Axis bank is more

than the current market price the share can be used for buying purpose.

The rest of the three banks that is federal bank and YES bank has average normalized

CAMEL score states that there is no significant difference in the intrinsic value and

current market price. So it is suggested to Hold both of these bank stocks.

Volatility in the market has significant influence on the market price movement of

ICICI bank. So it is suggested to carefully look at the fundamental parameters as well

as the company specific news to choose the same stock.

Investors can analyse the movement in CRR and Repo to choose large market

capitalized stocks like HDFC and ICICI banks.

Since the operating expense of HDFC bank is well controlled. So the market share

can be used for buying purpose.

Earnings per share value of Axis bank is much better than other banks so it seems to

be undervalued.

113

6.3. CONCLUSION

Many investors enter the share market to take the advantage of bull run. The investment

during this period is highly profitable. The investment can be made without any proper

valuation during this period. When the profits flow for a considerable period, investors begin

to believe that a bearish trend is highly improbable at this stage. The previous share market

crashes are forgotten. Expert after makes prediction on the new highs the market would

reach. This leads to more and more funds entering the share market.

With the help of this project I concluded that banking companies are playing very important

role in the share market. Lot of investors investing their money in banking sector. And this is

the reason of that the volume of banking companies is high

During this period of two months I came to know that in the process of equity analysis of

banking companies’ fundamental analysis having the greater importance. For analysing the

overall performance of the banking companies CAMEL Rating is better than ratio analysis.

The study of the fundamental analysis can give detail information about the well running

companies in the market before investing in any company one should study this concept.

114

BIBLIOGRAPHY

BOOKS

Kothari, C.R, “Research Methodology Methods and Techniques”, New Age

International Publishers, Delhi, Second Edition 2004

Pandian, Punithavathy, “ Security Analysis and Portfolio Management”, Vikas

Publishing House Pvt Ltd, New Delhi

P.G.Apte “International financial management”, published by Tata McGraw Hill

Education Pvt LTD.

WEBSITE

http://www .nseindia.com

http://www.moneycontrol.com

http://www .in.finance.yahoo.com

http://www .money.rediff.com/

http://www .rbi.org.in

http://www.livemint.com

http://www.hedgeequities.com

http://www.investopedia.com

http://www.wikiepedia.com

PERIODICALS

Investors presentations Crisil Research budget analysis 2014 India economy update 2014-2015(Economic policy and poverty team, South Asian

Region, The World Bank)

115

APPENDIX

HDFC Bank

Balance Sheet of HDFC BankMar '14 Mar '13 Mar '12

Capital and Liabilities:Total Share Capital 479.81 475.88 469.34Equity Share Capital 479.81 475.88 469.34Share Application Money 0 0 0.3Preference Share Capital 0 0 0Reserves 42,998.82 35,738.26 29,455.04Net Worth 43,478.63 36,214.14 29,924.68Deposits 367,337.48 296,246.98 246,706.45Borrowings 39,438.99 33,006.60 23,846.51Total Debt 406,776.47 329,253.58 270,552.96Other Liabilities & Provisions 41,344.40 34,864.17 37,431.87Total Liabilities 491,599.50 400,331.89 337,909.51

Mar '14 Mar '13 Mar '12

AssetsCash & Balances with RBI 25,345.63 14,627.40 14,991.09Balance with Banks, Money at Call 14,238.01 12,652.77 5,946.63Advances 303,000.27 239,720.64 195,420.03Investments 120,951.07 111,613.60 97,482.91Gross Block 2,939.92 2,703.08 2,347.19Revaluation Reserves 0 0 0Accumulated Depreciation 0 0 0Net Block 2,939.92 2,703.08 2,347.19Capital Work In Progress 0 0 0Other Assets 25,124.60 19,014.41 21,721.64Total Assets 491,599.50 400,331.90 337,909.49

116

Federal Bank

Balance Sheet of Federal BankMar '14 Mar '13 Mar '12

Capital and Liabilities:Total Share Capital 171.06 171.06 171.05Equity Share Capital 171.06 171.06 171.05Share Application Money 0 0 0Preference Share Capital 0 0 0Reserves 6,779.53 6,193.60 5,535.28Net Worth 6,950.59 6,364.66 5,706.33Deposits 59,731.28 57,614.86 48,937.12Borrowings 5,687.96 5,186.99 4,241.03Total Debt 65,419.24 62,801.85 53,178.15Other Liabilities & Provisions 2,224.32 1,883.06 1,742.29Total Liabilities 74,594.15 71,049.57 60,626.77

Mar '14 Mar '13 Mar '12AssetsCash & Balances with RBI 3,104.29 2,742.50 2,424.15Balance with Banks, Money at Call 1,425.09 977.49 1,108.40Advances 43,436.10 44,096.70 37,755.99Investments 24,117.85 21,154.59 17,402.49Gross Block 402.33 397.47 326.14Revaluation Reserves 0 0 0Accumulated Depreciation 0 0.00 0Net Block 402.33 397.47 326.14Capital Work In Progress 22.62 0 0Other Assets 2,085.86 1,680.81 1,609.61Total Assets 74,594.14 71,049.56 60,626.78

117

Yes Bank

Balance Sheet of Yes BankMar '14 Mar '13 Mar '12

Capital and Liabilities:Total Share Capital 360.63 358.62 352.99Equity Share Capital 360.63 358.62 352.99Share Application Money 0 0 0Preference Share Capital 0 0 0Reserves 6,761.11 5,449.05 4,323.65Net Worth 7,121.74 5,807.67 4,676.64Deposits 74,192.02 66,955.59 49,151.71Borrowings 21,314.29 20,922.15 14,156.49Total Debt 95,506.31 87,877.74 63,308.20Other Liabilities & Provisions 6,387.75 5,418.72 5,677.28Total Liabilities 109,015.80 99,104.13 73,662.12

Mar '14 Mar '13 Mar '12AssetsCash & Balances with RBI 4,541.57 3,338.76 2,332.54Balance with Banks, Money at Call 1,350.10 727 1,253.00Advances 55,632.96 46,999.57 37,988.64Investments 40,950.36 42,976.04 27,757.35Gross Block 273.29 218.45 169.06Revaluation Reserves 0 0 0Accumulated Depreciation 0 0 0.00Net Block 273.29 218.45 169.06Capital Work In Progress 20.18 11.09 8.04Other Assets 6,247.33 4,833.21 4,153.48Total Assets 109,015.79 99,104.12 73,662.11

118

Axis Bank

Balance Sheet of Axis BankMar '14 Mar '13 Mar '12

Capital and Liabilities:

Total Share Capital 469.84 467.95 413.2Equity Share Capital 469.84 467.95 413.2Share Application Money 0 0 0Preference Share Capital 0 0 0Reserves 37,750.64 32,639.91 22,395.34Net Worth 38,220.48 33,107.86 22,808.54Deposits 280,944.56 252,613.59 220,104.30Borrowings 50,290.94 43,951.10 34,071.67Total Debt 331,235.50 296,564.69 254,175.97Other Liabilities & Provisions 13,788.89 10,888.11 8,643.28Total Liabilities 383,244.87 340,560.66 285,627.79

Mar '14 Mar '13 Mar '12AssetsCash & Balances with RBI 17,041.32 14,792.09 10,702.92Balance with Banks, Money at Call 11,197.38 5,642.87 3,230.99Advances 230,066.76 196,965.96 169,759.54Investments 113,548.43 113,737.54 93,192.09Gross Block 2,310.54 2,230.54 2,188.56Revaluation Reserves 0 0 0Accumulated Depreciation 0 0 0Net Block 2,310.54 2,230.54 2,188.56Capital Work In Progress 99.67 125.11 70.77Other Assets 8,980.79 7,066.56 6,482.93Total Assets 383,244.89 340,560.67 285,627.80

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ICICI Bank

Balance Sheet of ICICI BankMar '14 Mar '13 Mar '12

Capital and Liabilities:Total Share Capital 1,155.04 1,153.64 1,152.77Equity Share Capital 1,155.04 1,153.64 1,152.77Share Application Money 6.57 4.48 2.39Preference Share Capital 0.00 0.00 0Reserves 72,051.71 65,547.84 59,250.09Net Worth 73,213.32 66,705.96 60,405.25Deposits 331,913.66 292,613.63 255,499.96Borrowings 154,759.05 145,341.49 140,164.91Total Debt 486,672.71 437,955.12 395,664.87Other Liabilities & Provisions 34,755.55 32,133.60 17,576.98Total Liabilities 594,641.58 536,794.68 473,647.10

Mar '14 Mar '13 Mar '12AssetsCash & Balances with RBI 21,821.83 19,052.73 20,461.29Balance with Banks, Money at Call 19,707.77 22,364.79 15,768.02Advances 338,702.65 290,249.44 253,727.66Investments 177,021.82 171,393.60 159,560.04Gross Block 4,678.14 4,647.06 4,614.69Revaluation Reserves 0.00 0.00 0Accumulated Depreciation 0 0 0Net Block 4,678.14 4,647.06 4,614.69Capital Work In Progress 0 0 0Other Assets 32,709.39 29,087.07 19,515.39Total Assets 594,641.60 536,794.69 473,647.09

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