research project report kamal

8/7/2019 RESEARCH PROJECT REPORT Kamal

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Dronacharya Institute of Management and Technology, Kurukshetra

Research Project Report

ON

INTRA COMPANYANALYSISOFICICIBANK

Submittedin partial fulfillment of the requirement for the

award

of the degree of

MASTER OFBUSINESSADMINISTRATION

(2008-2010)

Under the guidance of Submitted By:

Mr. Chander Parkash Raj Kamal

Gupta

M.B.A. 4TH

Sem


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Dronacharya Instit t ofManagement and Technology, Kurukshetra

( Dronacharya nstitut ofManagement&

Technology)(Affiliatedto Kurukshetra University, Kurukshetra)

INDEX

ACKNOWLEDGEMENT

PREFACE

DECLARATION

EXECUTIVE SUMMARY

HISTORY OF ICICI BANK

TIME LINE HISTORY OF ICICI BANK

RESEARCH METHODOLOGY

FINANCIAL ASPECTS OF ICICI BANK

Profi & loss Account

B lance Sheet

Capital Structure

Quarterly ResultHalf Yearly Result

Annually Result

RATIO ANALYSIS

Introduction

Meaning of Ratio Analysis

Objectives of Ratio Analysis

Forms of Ratio Analysis

Steps in Ratio Analysis

Types of ComparisonPre-requisites to Ratio Analysis

Classification of Ratio Analysis

Based on Financial Statements

Based on Function

Based on User


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Dronacharya Institute ofManagement and Technology, Kurukshetra

Liquidity Ratios

Current RatioLiquid Ratio

Absolute Ratio

Working capital

Investment /Shareholder

Earning per Share

Dividend per Share

Dividend Payout Ratio

Gearing

Capital Gearing Ratio

Profitability

Gross Profit Ratio

Net Profit RatioReturn on Capital Employed

Financial

Debtors Turnover Ratio (DTO)Solvency Ratios

Debt Equity RatioInterest Coverage Ratio (ICR)

Reserves to Total Funds

Market Based Return

Importance of Ratio Analysis

Advantages & Disadvantages of Ratio AnalysisPurpose of Ratio Analysis

DUPONT ANALYSIS

INTRA COMPANY ANALYSIS

STRATEGIC ANALYSIS

SERVICE GAP ANALYSIS

RECOMMENDATIONS

SUGGESTION TO OTHER FINANCIAL INSTITUTIONS

BIBLOGRAPHY


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ACKNOWLEDGEMENT

It gives great pleasure in presenting my project work on INTRA

COMPANY ANALYSIS OF ICICI BANK . I am the students of

Dronacharya Institute of Management & Technology, Kurukshetra

successfully completed my project and would like to thank Lect . Mr.

Chander Parkash for his timely encouragement, guidance and support.

PREFACE


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The primary objective of this report is to provide the readers the insight

into the success of ICICI B NK.

I hope that the report has made the text interesting and lucid. In writing

this report, I have benefited immensely by referring to many publications

and articles.

Any suggestions to improve this reportin contents orin style are always

welcome and will be appreciated and acknowledged.

DECLARATION


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I hereby declare that allthe information that has been collected, analyzed

and documented forthe projectis authentic possession.

I would like to categorically mention thatthe work here has neither been

purchased nor acquired by any other unfair means. However, for the

purpose ofthe project, information already compiled in many sources has

been utilized.

(Raj Kamal

Gupta)

EXECUTIVE SUMMARY

ICICI Bankis a leading Indian private sector commercial bank offering a variety

of products and services. It was incorporated in India in 1994. In 2002, ICICI, a non-

bank financial institution, and two of its subsidiaries, ICICI Personal Financial

Services and ICICI Capital Services, were amalgamated with ICICI Bank. As of

March 31, 2007 ICICI Bankis the largest private sector bankin India and the second


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largest bank in India, in terms of assets. May 10, 2007, ICICI Bank has the largest

market capitalization among all banks in India.

ICICI Banks commercial banking operations span the corporate and the retail

sector. It offers a suite of products and services for both its corporate and retail

customers. ICICI Bank offers a range of retail credit and deposit products and services

to retail customers. The implementation of its retail strategy and the growth in the

commercial banking operations for retail customers has had a significantimpact on its

business and operations in recent years. At year-end fiscal 2007, retail finance

represented 63.8% of its total loans and advances compared to 62.9% at year-end

fiscal 2006 and 60.9% at year-end fiscal 2005. ICICI Bank has approximately 24.0

million retail customer accounts. Its corporate customers include Indias leading

companies as well as growth-oriented small and middle market businesses, and the

products and services offered to them include loan and deposit products and fee and

commission-based products and services.

At year-end fiscal 2007 its principal network consisted of 710 branches, 45

extension counters and 3,271 automated teller machines, or ATMs, across several

Indian states. Pursuant to the amalgamation of Sangli Bank with ICICI Bank, its

network of branches and extension counters increased by 198. ICICI Bank offers its

customers a choice of delivery channels, and they use technology to differentiate there

products and services from those of its competitors. ICICI Bank remains focused on

changes in customer needs and technological advances to remain at the forefront of

electronic banking in India, and seekto deliver high quality and effective services.

HISTORY OF ICICI BANK

ICICI was formed in 1955 atthe initiative ofthe World Bank, the Government

of India and Indian industry representatives. The principal objective was to create a

development financial institution for providing medium-term and long-term project

financing to Indian businesses. Until the late 1980s, ICICI primarily focused its

activities on project finance, providing long-term funds to a variety of industrial

projects. With the liberalization of the financial sector in India in the 1990s, ICICI

transformed its business from a development financialinstitution offering only project


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finance to a diversified financial services providerthat, along with its subsidiaries and

other group companies, offered a wide variety of products and services.

ICICI Bank was incorporated in 1994 as a part ofthe ICICI group. ICICI Banks

initial equity capital was contributed 75.0% by ICICI and 25.0% by SCICI Limited, a

diversified finance and shipping finance lender of which ICICI owned 19.9% at

December 1996. Pursuant to the merger of SCICI into ICICI, ICICI Bank became a

wholly-owned subsidiary of ICICI. Effective March 10, 2001, ICICI Bank acquired

Bank ofMadura, an old private sector bank, in an all-stock merger.

Conversion into a bank offered ICICI the ability to accept low-cost demand

deposits and offer a wider range of products and services, and greater opportunities

for earning non-fund based income in the form of banking fees and commissions.

ICICI Bank also considered various strategic alternatives in the context of the

emerging competitive scenario in the Indian banking industry. ICICI Bankidentified a

large capital base and size and scale of operations as key success factors in the Indian

banking industry.

At the time of the merger, both ICICI Bank and ICICI were publicly listed in

India and on the New York Stock Exchange. The amalgamation was approved by

each of the boards of directors of ICICI, ICICI Personal Financial Services, ICICI

Capital Services and ICICI Bank at their respective board meetings held on October

25, 2001. The amalgamation was approved by ICICI Banks and ICICIs shareholders

at their extraordinary general meetings held on January 25, 2002 and January 30,

2002, respectively..

TIME LINE HISTORY OF ICICI BANK

1955:

:

1956:

1960:

The Industrial Credit and Investment Corporation of India Limited (ICICI)

incorporated at the initiative ofthe World Bank, the Government of India and

representatives of Indian industry, with the objective of creating a development

financialinstitution for providing medium-term and long-term project financingto Indian businesses. Mr.A.RamaswamiMudaliar elected as the firstChairman

of ICICI Limited.

ICICI emerges as the major source of foreign currency loans to Indian industry.

Besides funding from the World Bank and other multi-lateral agencies, ICICI


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1961:

1967:

1969:

1972:

1977:

1982:

1986:

:

:

:

1987:

1988:

1993:

:

1994:

1996:

:

:

1997:

also among the first Indian companies to raise funds from International markets.

ICICI declared its first Dividend at 3.5%.

ICICI building at 163, Backbay Reclamation was inaugurated.

The first West German loan of DM 5 million from Kredianstalt was obtained byICICI.

ICICI made its first debenture issue forRs.6 crore, which was oversubscribed.

Firsttwo regional offices in Calcutta and Madras were opened.

Second entity in India to set-up merchant banking services.

ICICI sponsors the formation of Housing Development Finance Corporation.Managed its first equity public issue.

Becomes the first ever Indian borrowerto raise European Currency Units.

ICICI commences leasing business.

ICICI first Indian Institution to receive ADB Loans. First public issue by anIndian entity in the Swiss CapitalMarkets.

ICICI along with UTI sets up Credit Rating Information Services of IndiaLimited, (CRISIL) India's first professional credit rating agency.

ICICI promotes Shipping Credit and Investment Company of India Limited.

(SCICI)

The Corporation made a public issue of Swiss Franc 75 million in Switzerland,

the first public issue by any Indian equity in the Swiss CapitalMarket.

ICICI signed a loan agreement for Sterling Pound 10 million withCommonwealth Development Corporation (CDC), the first loan by CDC for

financing projects in India.

ICICI promotes TDICI - India's firstventure capital company.

ICICI sets-up ICICI Securities and Finance Company Limited injoint venture

with J. P. Morgan.

ICICI sets up ICICI AssetManagementCompany.

ICICI sets up ICICI Bank.

ICICI becomes the first company in the Indian financial sectorto raise GDR.

ICICI announces merger with SCICI.


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:

:

1998:

:

1999:

:

2000:

:

2001:

2002:

:

:

:

:

:

:

:

2003:

Mr.K.V.Kamath appointed the Managing Director and CEO of ICICI Ltd

ICICI was the firstintermediary to move away from single prime rate to three-tier prime rates structure and introduced yield-curve based pricing.

The name "The IndustrialCredit and InvestmentCorporation of India Limited"was changed to "ICICI Limited".

ICICI announces takeover of ITCClassic Finance.

Introduced the new logo symbolizing a common corporate identity forthe ICICIGroup.

ICICI announces takeover of Anagram Finance.

ICICI launches retail finance - car loans, house loans and loans for consumer

durables.

ICICI becomes the first Indian Company to list on theNYSE through an issueof American Depositary Shares.

ICICI Bank becomes the first commercial bank from India to list its stock onNYSE.

ICICI Bank announces merger with Bank ofMadura.

The Boards of ICICI Ltd and ICICI Bank approved the merger of ICICI withICICI Bank.

ICICI Ltd merged with ICICI Bank Ltd to create Indias secondlargest bankinterms of assets.

ICICI assigned higherthan sovereign rating by Moodys.

ICICI Bank launched Indias firstCDO (Collateralised Debt Obligation) Fundnamed Indian Corporate Collateralised Debt Obligation Fund (ICCDO Fund).

"E Lobby", a self-service banking centre inaugurated in Pune. It was the first ofits kind in India.

ICICI Banklaunched Private Banking.

1100-seatCallCentre set up in Hyderabad

ICICI Bank Home Shoppe, the first-ever permanent aggregation and display ofhousing projects in the county, launched in Pune,


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:

:

:

:

:

:

:

:

2004:

:

:

:

:

:

:

:

2005:

:

:

ATM-on-Wheels, Indias first mobile ATM, launched in Mumbai.

The first Integrated Currency ManagementCentre launched in Pune.

ICICI Bank announced the setting up of its first ever offshore branch in

Singapore.

The first offshore banking unit (OBU) at Seepz Special Economic Zone,Mumbai, launched.

ICICI Banks representative office inaugurated in Dubai.

Representative office set up in China. : ICICI Banks UK subsidiary launched.

Indias first ever "Visa Mini Credit Card", a 43% smaller credit card indimensions launched.

ICICI Bank subsidiary set up in Canada.

Temasek Holdings acquired 5.2% stake in ICICI Bank.

ICICI Bank became the marketleaderin retail creditin India.

Max Money, a home loan product that offers the dual benefit of highereligibility and affordability to a customer, introduced.

Mobile banking service in India launched in association with RelianceInfocomm.

Indias first multi-branded credit card with HPCL and Airtellaunched.

Kisan Loan Card and innovative, low-cost ATMs in rural India launched.

ICICI Bank and CNBC TV 18 announced Indias first ever awards recognizingthe achievements of SMEs, a pioneering initiative to encourage the contributionof Small and Medium Enterprises to the growth of Indian economy.

ICICI Bank opened its 500th branch in India.

ICICI Bankintroduced 8-8 Banking wherein allthe branches ofthe Bank wouldremain open from 8a.m. to 8 p.m. from Monday to Saturday.

ICICI Bankintroduced the concept of floating rate for home loans in India.

First rural branch and ATMlaunched in Uttar Pradesh at Delpandarwa, Hardoi.

"Free for Life" credit cards launched wherein annual fees of all ICICI Bank


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:

:

:

:

2006:

:

:

:

:

:

2007:

:

:

:

:

:

CreditCards were waived off.

ICICI Bank and Visajointly launched mChq a revolutionary credit card on themobile phone.

Private Banking Masters 2005, a nationwide Golftournament for high networth

clients of the private banking division launched. This event is the largestdomestic invitation amateur golf event conducted in India.

First Indian company to make a simultaneous equity offering of $1.8 billion inIndia, the United States and Japan.

Acquired IvestitsionnoKreditny Bank ofRussia.

ICICI Bank became the largest bank in India in terms of its market

capitalization.

ICICI Bank became the first Indian bankto issue hybrid Tier-1 perpetual debtinthe international markets.

ICICI Bank subsidiary set up in Russia.

Introduced a new product - NRI smart save Deposits a unique fixed depositscheme for nonresident Indians.

Representative offices opened in Thailand, Indonesia and Malaysia.

Financial counseling centre Disha launched. Disha provides free creditcounseling, financial planning and debt management services.

Bhoomi puja conducted for a regional hub in Hyderabad, Andhra Pradesh.

ICICI Banks USD 2 billion 3-tranche international bond offering was thelargest bond offering by an Indian bank.

SangliBank amalgamated with ICICI Bank.

ICICI Bank raised Rs 20,000 crore (approx $5 billion) from both domestic andinternational markets through a follow-on public offer.

ICICI Banks GBP 350 million international bond offering marked theinaugural deal in the sterling market from an Indian issuer and also the largestdealin the sterling market from Asia.

Launched Indias first everjewellery card in association with jewelry major


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:

:

:

:

Gitanjali Group.

ICICI Bank became the first bank in India to launch a premium credit card The Visa Signature CreditCard.

Foundation stone laid for a regional hub in Gandhinagar, Gujarat.

Introduced SME Toolkit, an online resource centre, to help small and mediumenterprises start, finance and grow their business.

ICICI Bank signed a multi-tranche dual currency US$ 1.5 billion syndicationloan agreementin Singapore.

ICICI Bank became the first private bank in India to offer both floating andfixed rate on car loans, commercial vehicles loans, construction equipment

loans and professional equipmentloans.

RESEARCH METHODOLOGY

MEANING of RESEARCH:

Research in common parlance refers to a search for knowledge. Research is

defined as a scientific and systematic search for pertinent information on specific

topic. Infect,

Research is an art of scientific investigation. Research is thus an original contribution

to existing stock of knowledge making forits advancement. Itis pursuit oftruth with

help of study, observation, comparison and experiment.

The advanced Learners Dictionary ofCurrent English lays down the meaning of

research as a carefulinvestigation or inquiry especially through search for new facts

in any branch of knowledge.

In short, the search of knowledge through objective and systematic method of

finding solution to a problem is research. The systematic approach concerning

generalization and formulation oftheory is also research. As such the term research

refers to the systematic method consisting of enunciating the problem, formulating a

hypothesis, collecting the facts or data, analyzing the facts and reaching certain

conclusions eitherin form of solutions towards the concerned problem or in certain

generalizations for some theoretical formulation.


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Research Methodology is a way to systematically solve the research problem. It

may be understood as a science of studying how research is done scientifically. In it

we study the various steps that are generally adopted by a researcher in studying his

research problem along with logic behind them. It is necessary for the researcher to

know not only the research methods but also the methodology. Research

Methodology includes:

Research Problem

Research Design

Sampling Design

Collection of Data

Research Problem: There are two types of research problems, i.e. those that relateto state of nature and those, which relate to relationship between variables. Atthe very

outsetthe researcher must single outthe problem he wants to study i.e. he must decide

the general area ofinterest or aspect of a subject matterthat he would like to inquire

into. Essentially two steps are involved in formulating the research problem i.e.

understanding the problem thoroughly, and rephrasing the same into meaningful

terms from an analytical point ofview.

Research Design: A research design is the arrangement of conditions for collection

and analysis of data in a manner that aims to combine relevance to the research

purpose with economy in procedure. Infect, the research design is the conceptual

structure with in which research is conducted; it constitutes the blue print for the

collection, measurement and analysis of data.

TYPES of RESEARCH DESIGN:

Exploratory Research Design: Exploratory research studies are also termed

as formulate research studies. The main purpose of such studies is that of

formulating a problem for more precise investigation. The major emphasis in

such studies is on the discovery ofideas and insights.


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Descriptive Research Studies: Descriptive research studies are those which

describing the characteristics of a particularindividual or group.

Diagnostic Research Studies: Diagnostic research studies determine the

frequency with which something occurs orits association with something else.

Experimental Research Studies: In this study researchertests the hypothesis

of casual relationship between variables. Such studies require procedures that

will not only reduce bias and increase reliability, but will permit drawing

inferences about causality.

RESEARCH DESIGN PROJECT

Research design includes descriptive and diagnostic study of framework.

Sampling Design: Allthe items under consideration in any field ofinquiry constitute

a universe or population. A complete enumeration of allitems in the population

is known as census inquiry. We select only a few items from the universe for our

study purpose. The items so selected constitute whatis technically called a sample.

DATA COLLECTION METHOD

The task of data collection begins after a research problem has been defined and

research design plan chalked out. Data is collected by methods:

1. Primary Data:

The primary data are those, which are collected afresh and forthe firsttime,

and thus happen to be originalin character.

Primary data is the data, which is collected through observation or direct

communication with the respondent in one form or another. These are several

methods for primary data collection like Observation Method, Interview Method,

through schedules, through questionnaires and so on.

Methods:

y Observation Method: the observation is the most commonly used method

especially in studies relating to behavior sciences. In this way we observe for

things around us, butthis sort ofinformation is not scientific observation.


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y Observation becomes a scientific tool and the method of data collection forthe

researcher, when it serves a formulated research purpose is systematically

planned and recorded and is subjected to checks and controls on validity and

reliability.

y Interview Method: the interview method of collecting data involves

presentation of oral-verbal stimuli and reply in terms of oral-verbal responses

personal interview method requires a person known as the interviewer asking

questions generally in the face to face contactto other person or persons. This

sort ofinterview may be in the foam of direct personalinvestigation or it may

be indirect oralinvestigation.

y Questionnaire Method: this method of data collection is quite popular,

particularly in case of big enquiries. Itis being adopted by private individuals,

research works, private and public organizations and even by governments. In

this case a questionnaire is sent to persons concerned with request to answer

the number of questions printed in a definite order on a form or set of forms.

y Schedules: this method of data collection is very much like the collection of

data through questionnaire, with little difference which lies in the fact the

schedules are being filled by the enumerators who are specially appointed for

the purpose. The enumerators along with schedules go to respondents, put to

them the questions listed and record the replies in the space meant for the

same in Performa.

2) Secondary Data:

These methods are those, which have been passed through the statistical

process.

Study of secondary data thatincludes:

1) Magazines2) Journal

3) Portails

4) Documents.

5) Books


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ANALYSIS OF DATA:

Data, after collection, has to be analyzed in accordance willthe outline laid for

the time of developing the research plan. The term analysis refers to the computation

of certain measures along with searching for patterns of relationship that exist among

data groups. Data presented in raw state appear unrecognized and complex. Statistical

processors are used this complex data into some significant understandable form.

FINANCIAL ASPECTS OF ICICI BANK

Profit & Loss Account

Mar ' 09 Mar ' 08 Mar ' 07 Mar ' 06 Mar ' 05

Income

Operating income 38,250.39 39,467.92 28,457.13 17,517.83 11,838.10

Expenses

Material consumed - - - - -

Manufacturing expenses - - - - -

Personnel expenses 1,971.70 2,078.90 1,616.75 1,082.29 737.41

Selling expenses 669.21 1,750.60 1,741.63 840.98 601.71

Adminstrative expenses 7,475.63 6,447.32 4,946.69 2,727.18 1,248.31Expenses capitalized - - - - -

Cost of sales 10,116.54 10,276.82 8,305.07 4,650.45 2,587.43

Operating profit 5,407.91 5,706.85 3,793.56 3,269.94 2,679.78

Other recurring income 330.64 65.58 309.17 466.02 448.46

Adjusted PBDIT 5,738.55 5,772.43 4,102.73 3,735.96 3,128.25

Financial expenses 22,725.93 23,484.24 16,358.50 9,597.45 6,570.89

Depreciation 678.60 578.35 544.78 623.79 590.36

Other write offs - - - - -

Adjusted PBT 5,059.96 5,194.08 3,557.95 3,112.17 2,537.88

Tax charges 1,830.51 1,611.73 984.25 556.53 522.00Adjusted PAT 3,740.62 4,092.12 2,995.00 2,532.95 2,007.28

Non recurring items 17.51 65.61 115.22 7.12 -2.08

Other non cash adjustments -0.58 - - - -

Reported net profit 3,757.55 4,157.73 3,110.22 2,540.07 2,005.20

Earnigs before appropriation 6,193.87 5,156.00 3,403.66 2,728.30 2,058.29

Equity dividend 1,224.58 1,227.70 901.17 759.33 632.96


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Preference dividend - - - - -

Dividend tax 151.21 149.67 153.10 106.50 90.10

Retained earnings 4,818.07 3,778.63 2,349.39 1,862.46 1,335.22

Balance Sheet


Sources of funds

Owner's fund

Equity share capital 1,113.29 1,112.68 899.34 889.83 736.75

Share applicationmoney - - - - 0.02

Preference share capital 350.00 350.00 350.00 350.00 350.00

Reserves & surplus 48,419.73 45,357.53 23,413.92 21,316.16 11,813.20

Loan funds

Secured loans - - - - -

Unsecured loans 2,18,347.82 2,44,431.05 2,30,510.19 1,65,083.17 99,818.78

Total 2,68,230.84 2,91,251.26 2,55,173.45 1,87,639.16 1,12,718.75

Uses of funds

Fixed assets

Gross block 7,443.71 7,036.00 6,298.56 5,968.57 5,525.65Less : revaluationreserve

- - - - -

Less : accumulateddepreciation

3,642.09 2,927.11 2,375.14 1,987.85 1,487.61

Net block 3,801.62 4,108.90 3,923.42 3,980.71 4,038.04

Capital work-in-

progress- - 189.66 147.94 96.30

Investments 1,03,058.31 1,11,454.34 91,257.84 71,547.39 50,487.35

Net current assets

Current assets, loans &advances

34,384.06 31,129.77 23,551.85 15,642.79 11,115.99

Less : currentliabilities& provisions

43,746.43 42,895.38 38,228.64 25,227.88 21,396.16

Total net current assets -9,362.37 -11,765.62 -14,676.78 -9,585.09 -10,280.17

Miscellaneousexpenses not written

- - - - -

Total 97,497.56 1,03,797.62 80,694.15 66,090.96 44,341.52


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From

Year

To

Year

Class

Of

Share

Authorized

Capital

Issued

Capital

Paid Up

Shares (Nos)

Paid Up

Face

Value

Paid Up

Capital

1994 1995EquityShare

300.00 150.00 150000000 7 105.00

1994 1995 EquityShare 300.00 150.00 700 10 -

Quarterly Results in Details

Dec ' 09 Sep ' 09 Jun ' 09 Mar ' 09 Dec ' 08

Otherincome 1,673.14 1,823.79 2,089.88 1,673.67 2,514.54

Stock adjustment - - - - -

Raw material - - - - -

Power and fuel - - - - -

Employee expenses 427.02 449.55 466.52 457.42 503.00

Excise - - - - -

Admin and selling expenses - - - - -

Research and development expenses - - - - -

Expenses capitalised - - - - -

Other expenses 935.37 974.98 1,079.50 1,199.63 1,231.11

Provisions made 1,002.16 1,071.30 1,323.65 1,084.54 1,007.70

Depreciation - - - - -

Taxation 265.62 323.90 327.25 327.16 490.99

Net profit / loss 1,101.06 1,040.13 878.22 743.76 1,272.15

Extra ordinary item - - - - -

Prior year adjustments - - - - -


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Half Yearly Results in Details

Sep ' 09 Mar ' 09 Sep ' 08 Mar ' 08 Sep ' 07

Otherincome 3,913.67 4,188.21 3,415.51 4,788.24 4,022.53




Employee expenses 916.07 960.42 1,011.28 1,037.15 1,041.75

Excise - - - - -


Research and developmentexpenses

- - - - -

Expenses capitalised - - - - -Other expenses 2,054.48 2,430.74 2,642.67 3,240.91 2,834.37

Provisions made 2,394.95 2,092.24 1,716.02 1,707.83 1,196.76


Taxation 651.15 818.15 540.69 461.45 436.92

Net profit / loss 1,918.35 2,015.91 1,742.22 2,380.05 1,777.68



Equity capital 1,113.60 1,113.29 1,113.29 1,112.68 1,110.66

Equity dividend rate - - - - -

Agg.of non-prom. shares (Lacs) 11135.64 11132.51 11132.49 11126.87 11119.12Agg.of non promotoholding (%) 100.00 100.00 100.00 100.00 100.00

OPM (%) 61.09 64.31 65.85 62.45 65.83

GPM (%) 28.04 25.19 20.89 21.95 18.08

NPM (%) 10.84 10.31 9.10 11.48 9.42


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Annual Results in Details


Otherincome 7,603.72 8,810.77 5,929.17 4,983.14 3,416.14




Employee expenses 1,971.70 2,078.90 1,616.75 1,082.29 737.41

Excise - - - - -


Research and developmentexpenses

- - - - -

Expenses capitalized - - - - -

Other expenses 5,073.41 6,075.28 5,073.81 3,918.86 2,561.74

Provisions made 3,808.26 2,904.59 2,226.36 1,594.07 428.80


Taxation 1,358.84 898.37 537.82 556.53 522.00

Net profit / loss 3,758.13 4,157.73 3,110.22 2,540.07 2,005.20



Equity capital 1,113.29 1,112.68 899.34 889.83 736.78

Equity dividend rate - - - - -

Agg.of non-prom. shares (Lacs) 11132.51 11126.87 8992.67 8898.24 7367.15

Agg.of non promotoHolding (%) 100.00 100.00 100.00 100.00 100.00

OPM (%) 65.09 64.08 61.22 53.90 60.38GPM (%) 23.06 20.10 20.31 24.32 23.05

NPM (%) 9.71 10.50 10.75 13.17 15.63


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Share Holding

Share holding pattern as on : 31/12/2009 30/09/2009 30/06/2009

Face value 10.00 10.00 10.00

No. OfShares

%

Holdin

g

No. OfShares

%

Holdin

g

No. OfShares

%

Holdin

g

Promoter's holding

Sub total - - - - - -Non promoter's holding

Institutionalinvestors

Banks Fin. Inst. andInsurance

196772204 17.66 193684224 17.39 184997587 16.62

FII's 405186131 36.37 393903476 35.37 404572215 36.34

Sub total 681285777 61.15 666311911 59.84 665820721 59.80

Otherinvestors

Private CorporateBodies

30683910 2.75 32640436 2.93 37174101 3.34

NRI's/OCB's/ForeignOthers

8344069 0.75 8661306 0.78 9403169 0.84

Direcctors/Employees

915614 0.08 933488 0.08 938988 0.08

Govt 6760 - 7380 - 19780 -

Others 324764614 29.15 335589655 30.14 326545246 29.33

Sub total 364710768 32.73 377828066 33.93 374077085 33.60

General public 68131224 6.12 69419969 6.23 73422082 6.59

Grand total1114127769

100.001113559946

100.001113319888

100.00


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RATIOANALYSIS

INTRODUCTION:

Fundamental Analysis has a very broad scope. One aspectlooks atthe general

(qualitative) factors of a company. The other side considers tangible and measurable

factors (quantitative). This means crunching and analyzing numbers from the

financial statements. If used in conjunction with other methods, quantitative analysis

can produce excellent results.

Ratio analysis isn'tjust comparing different numbers from the balance sheet,

income statement, and cash flow statement. It's comparing the number against

previous years, other companies, the industry, or even the economy in general. Ratios

look atthe relationships between individualvalues and relate them to how a company

has performed in the past, and might perform in the future.

MEANING OF RATIO:

A ratio is one figure express in terms of another figure. It is a mathematical

yardstick that measures the relationship two figures, which are related to each other

and mutually interdependent. Ratio is express by dividing one figure by the other

related figure. Thus a ratio is an expression relating one number to another. It is

simply the quotient oftwo numbers. It can be expressed as a fraction or as a decimal

or as a pure ratio orin absolute figures as so many times. As accounting ratio is an

expression relating two figures or accounts or two sets of account heads or group

contain in the financial statements.


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MEANING OF RATIO ANALYSIS:

Ratio analysis is the method or process by which the relationship ofitems or

group ofitems in the financial statement are computed, determined and presented.

Ratio analysis is an attempt to derive quantitative measure or guides

concerning the financial health and profitability of business enterprises. Ratio analysis

can be used both in trend and static analysis. There are several ratios atthe disposal of

an annalist but their group of ratio he would prefer depends on the purpose and the

objective of analysis.

This technique is called cross-sectional analysis. Cross-sectional analysis

compares financial ratios of several companies from the same industry. Ratio analysis

can provide valuable information about a company's financial health. A financial ratiomeasures a company's performance in a specific area. For example, you could use a

ratio of a company's debt to its equity to measure a company's leverage. By

comparing the leverage ratios of two companies, you can determine which company

uses greater debt in the conduct of its business. A company whose leverage ratio is

higherthan a competitor's has more debt per equity.

OBJECTIVE OF RATIOS:

Ratio is work out to analyze the following aspects of business organization -

A) Solvency-

1) Long term

2) Short term

3) Immediate

B) Stability

C) Profitability

D) Operational efficiency

E) Credit standing

F) Structural analysis

G) Effective utilization of resources

H) Leverage or external financing

FORMS OF RATIO:


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Since a ratio is a mathematical relationshi p between to or more variables /

accounting figures, such relationship can be expressed in different ways as follows

A] As a pure ratio:

For example the equity share capital of a company is Rs. 20,00,000 & thepreference share capitalis Rs. 5,00,000, the ratio of equity share capitalto preference

share capitalis 20,00,000: 5,00,000 or simply 4:1.

B] As a rate oftimes:

In the above case the equity share capital may also be described as 4 times

that of preference share capital. Similarly, the cash sales of a firm are

Rs. 12,00,000 & credit sales are Rs. 30,00,000. so the ratio of credit sales to cash sales

can be descri bed as 2.5 [30,00,000/12,00,000] or simply by saying that the credit

sales are 2.5 times that of cash sales.

C] As a percentage:

In such a case, one item may be expressed as a percentage of some otheritem.

For example, net sales ofthe firm are Rs.50,00,000 & the amount ofthe gross profitis

Rs. 10,00,000, then the gross profit may be descri bed as 20% of sales [

10,00,000/50,00,000]

STEPS IN RATIO ANALYSIS;

The ratio analysis requires two steps as follows:

1] Calculation of ratio

2] Comparing the ratio with some predetermined standards. The standard ratio may

be the past ratio ofthe same firm orindustrys average ratio or a projected ratio orthe

ratio ofthe most successful firm in the industry. In interpreting the ratio of a particular

firm, the analyst cannot reach any fruitful conclusion unless the calculated ratio is

compared with some predetermined standard. The importance of a correct standard is

oblivious as the conclusion is going to be based on the standard itself.

TYPES OF COMPARISONS:

The ratio can be compared in three different ways


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1] Cross Section Analysis:

One ofthe way of comparing the ratio or ratios ofthe firm is to compare them

with the ratio or ratios of some other selected firm in the same industry at the same

point oftime. So it involves the comparison of two or more firms financial ratio at

the same point oftime. The cross section analysis helps the analyst to find out as to

how a particular firm has performed in relation to its competitors. The firms

performance may be compared with the performance ofthe leader in the industry in

order to uncover the major operational inefficiencies. The cross section analysis is

easy to be undertaken as most of the data required for this may be available in

financial statement ofthe firm.

2] Time Series Analysis:

The analysis is called Time series analysis when the performance of a firm is

evaluated over a period oftime. By comparing the present performance of a firm with

the performance ofthe same firm overthe last few years, an assessment can be made

about the trend in progress of the firm, about the direction of progress of the firm.

Time series analysis helps to the firm to assess whetherthe firm is approaching the

long-term goals or not. The Time series analysis looks for (1) important trends in

financial performance (2) shiftin trend overthe years (3) significant deviation if any

from the other set of data.

3] Combined Analysis:

Ifthe cross section & time analysis, both are combined togetherto study the

behavior & pattern of ratio, then meaningful & comprehensive evaluation of the

performance ofthe firm can definitely be made. A trend of ratio of a firm compared

with the trend ofthe ratio ofthe standard firm can give good results. For example, the

ratio of operating expenses to net sales for firm may be higher than the industry

average however, over the years it has been declining for the firm, whereas the

industry average has not shown any significant changes.


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The combined analysis as depicted in the abo e diagram, which clearly shows that the

ratio of the firm is abo e the industry a erage, but it is decreasing o er the years & is

approaching the industry a erage.

PRE RE UISITIES T RATIO ANAL SIS:

In order to use the ratio analysis as de ice to make purposeful conclusions,

there are certain pre-requisites, which must be taken care of. It may be noted that

these prerequisites are not conditions for calculations for meaningful conclusions. The

accounting figures are inacti e in them & can be used for any ratio but meaningful &

correct interpretation & conclusion can be arri ed at only if the following points are

well considered.

The dates of different financial statements from where data is taken must be same.

If possible, only audited financial statements should be considered, otherwise there

must be sufficient e idence that the data is correct.

Accounting policies followed by different firms must be same in case of cross section

analysis otherwise the results of the ratio analysis would bedistorted.

One ratio may not throw light on any performance of the firm. Therefore, a group of

ratios must be preferred. This will be conducti e to counter checks.

Last but not least, the analyst must find out that the two figures being used to

calculate a ratio must be related to each other, otherwise there is no purpose of

calculating a ratio.


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CLASSIFICATION OF RATIO

CLASSIFICATION OF RATIO

BASED ON FINANCIAL BASED ON FUNCTION BASED ON

USER

STATEMENT

1] BALANCE SHEET 1] LIQUIDITY RATIO 1] RATIOS FOR SHORTTERM

RATIO 2] LEVERAGE RATIO CREDITORS

2] REVENUE 3] ACTIVITY RATIO

STATEMENT 4] PROFITABILITY RATIO 2] RATIO FOR

SHAREHOLDER

RATIO

3] COMPOSITE 5] COVERAGE RATIO 3] RATIOS FOR

MANAGEMENT

RATIO

4] RATIO FOR LONGTERM

CREDITORS

a) BASED ON FINANCIAL STATEMENT

Accounting ratios express the relationshi p between figures taken from

financial statements. Figures may be taken from Balance Sheet , P& P A/C, or both.

One-way of classification of ratios is based upon the sources from which are taken. It

include Balance sheet ratio, Revenue ratio and Composite ratio.


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1]Balance Sheet Ratio:

Ifthe ratios are based on the figures of balance sheet, they are called Balance

SheetRatios. E.g. ratio of current assets to currentliabilities or ratio of debtto equity.

While calculating these ratios, there is no need to refer to the Revenue statement.

These ratios study the relationship between the assets & the liabilities, ofthe concern.

These ratio help to judge the liquidity, solvency & capital structure of the concern.

Balance sheet ratios are Current ratio, Liquid ratio, and Proprietory ratio, Capital

gearing ratio, Debt equity ratio, and Stock working capital ratio.

2] Revenue Ratio:

Ratio based on the figures from the revenue statement is called revenue

statement ratios. These ratio study the relationshi p between the profitability & the

sales of the concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense

ratio,Net profit ratio,Net operating profit ratio, Stockturnover ratio.

3] Composite Ratio:

These ratios indicate the relationshi p between two items, of which one is

found in the balance sheet & otherin revenue statement.

There are to types of composite ratios-

a) Some composite ratios study the relationshi p between the profits & the

investments of the concern. E.g. return on capital employed, return on

proprietors fund, return on equity capital etc.

b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios,

dividend payout ratios, & debt service ratios.

b) BASED ON FUNCTION


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Accounting ratios can also be classified according to their functions in to

liquidity ratios, leverage ratios, activity ratios, profitability ratios & turnover ratios.

1] Liquidity Ratios:It shows the relationship between the current assets & currentliabilities ofthe

concern e.g. liquid ratios & current ratios.

2] Leverage Ratios:

It shows the relationship between proprietors funds & debts used in financing

the assets ofthe concern e.g. capital gearing ratios, debt equity ratios, & Proprietory

ratios.

3] Activity Ratios:

It shows relationshi p between the sales & the assets. It is also known as

Turnover ratios & productivity ratios e.g. stock turnover ratios, debtors turnover

ratios.

4] Profitability Ratios:

It shows the relationshi p between profits & sales e.g. operating ratios, gross profit

ratios, operating net profit ratios, expenses ratios

It shows the relationshi p between profit & investment e.g. return on investment,

return on equity capital.

5] Coverage Ratios:

It shows the relationshi p between the profit on the one hand & the claims of

the outsiders to be paid out of such profit e.g. dividend payout ratios & debt service

ratios.

c) BASED ON USER


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1] Ratios for short-term creditors:

Current ratios, liquid ratios, stock working capital ratios

2] Ratios for the shareholders:

Return on proprietors fund, return on equity capital3] Ratios for management:

Return on capital employed, turnover ratios, operating ratios, expenses ratios

4] Ratios for long-term creditors:

Debt equity ratios, return on capital employed, proprietor ratios.

1) LIQUIDITY RATIOS -


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Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year)

obligations. The ratios, which indic``ate the liquidity of a company, are Current ratio,

Quick/Acid-Test ratio, and Cash ratio. The Liquidity ratios give a basic ability of a

company to meet its short term liabilities. They also give a picture of how the

company has financed its short term assets. There are various ratios within these

which provide information about a companys fundamentals.These ratios are

discussed below

Current Ratio:

This ratio compares the current assests with the currentliabilities. Itis also known as

working capital ratio or solvency ratio. Itis expressed in the form of pure ratio


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Current assets

Current ratio =

Current liabilities

Current ratio is equal to current assets divided by current liabilities. If the current

assets of a company are more than twice the current liabilities, then that company is

generally considered to have good short-term financial strength. If current liabilities

exceed current assets, then the company may have problems meeting its short-term

obligations. As a general rule, a current ratio of 2:1 or greateris normally sufficientto

meet near-term operating needs. A current ratio that is too high can suggest that a

company is hoarding assets instead of using them to grow the business -- not the

worst thing in the world, but potentially something that could impact long-term

returns.

The current ratio is calculated as:

CurrentRatio = CurrentAssets /CurrentLiabilities

The current ratio in case of ICICI BANK can bee seen here:

Year 2004-05 2005-06 2006-07 2007-08 2008-2009

CurrentRatio 0.51 0.62 0.61 0.72 0.78

Liquid Ratio:

The quick ratio is simply current assets minus inventories divided by current

liabilities. By taking inventories out ofthe equation, you can check and see if a

company has sufficientliquid assets to meet short-term operating needs. There

is a possibility of window dressing in case of the current ratio. The current

assets comprise ofthe cash, inventories and the sundry debtors.


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The Liquid ratio is calculated as:

Liquid Ratio = (Current Assets Inventory)/Current Liabilities

The liquid ratio for the 5 years has been gi en below:

Year 2004-05 2005-06 2006-07 2007-08 2008-2009

Liquid Ratio 4.98 6.42 6.04 6.64 5.94

Absolute Cash Ratio:

The abo e ratios still lea e a possibility of window dressing using the debtors

to the company. The ACR ensures that we get the exact cash present with the

company to co er for its current liabilities.

The Absolute cash ratio is calculated as:

Absolute cash ratio = (Current Assets Inventory Debtors)/Current Liabilities

The ACR for the 5 years has been listed below:

Year 2004-05 2005-06 2006-07 2007-08 2008-2009

Absolute Cash Ratio 21.14 17.55 12.30 11.81 11.45

Liquid Ratio

0

2

4

6

8

2004-052005-06

2006-072007-08

2008-09

Liquid Ratio

Liquid Ratio


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Working capital:

The working capitalis given by:

Working capital= CA CL

This gives a clear picture of how the assets have been financed by the

company. Ifthis is a positive value, itindicates thatthe assets have been partly

financed by current liabilities and partly by Long term debt. If this value is

negative, then parts of the fixed assets have been financed by the current

liabilities. Working capital is basically an expression of how much in liquidassets the company currently has to build its business, fund its growth, and

produce shareholdervalue. If a company has positive working capital, then it

is in good shape, with plenty of cash on hand to pay for everything it might

need to buy. If a company has negative working capital, then its current

liabilities are actually greater than their current assets, so the company lacks

the ability to spend with the same aggressive nature as a working capital

positive peer. All otherthings being equal, a company with positive working

capital will always out perform a company with negative working capital.

Year 2004-05 2005-06 2006-07 2007-08 2008-2009

Working capital -10,280.17 -9,585.09 -14,676.78 -11,765.62 -9,362.37

2) INVESTMENT/SHAREHOLDER-


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Earnings Per Share:

EPS is the net profit of loss to the share holders for each share. It is used in

valuation of a company and to measure its performance. PAT is used in the

calculation of EPS because itis gives the amount available to the shareholders

once the taxes are paid. Itis calculated by taking the weighted average ofthe

shares outstanding.

EPS = Profit after Tax / No. of shares

Year 2004-05 2005-06 2006-07 2007-08 2008-09

EPS 27.25 28.47 33.30 36.78 33.62

Dividend Per Share:

Dividend per share represents the amount of dividend each shareholder will

receive for every share they own. DPS is calculated taking the interim and


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final di idend paid. It is different from EPS as it indicates the amount paid to

shareholders as compared to the amount a ailable.

DPS= Total Dividend paid/No. of shares

Year 2004-05 2005-06 2006-07 2007-08 2008-09

DPS 8.50 8.50 10.00 11.00 11.00

Di idend Payout Ratio:

Di idend Pay-out Ratio shows the relationship between the di idend paid to equity

shareholders out of the profit a ailable to the equity shareholders.

Di idend per shareDi idend Pay out ratio = * 100

Earning per share

D/P ratio shows the percentage share of net profits after taxes and after preference

di idend has been paid to the preference equity holders.

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Di idend Payout

Ratio

27.85 27.36 28.84 29.08 31.00

3) GEARING -


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Capital Gearing Ratio:

Gearing means the process of increasing the equity shareholders return through the

use of debt. Equity shareholders earn more when the rate ofthe return on total capital

is more than the rate ofinterest on debts. This is also known as leverage ortrading on

equity. The Capital-gearing ratio shows the relationship between two types of capital

viz: - equity capital & preference capital & long term borrowings. Itis expressed as a

pure ratio.

Preference capital+ secured loan

Capital Gearing Ratio =

Equity capital & reserve & surplus

Capital gearing ratio indicates the proportion of debt & equity in the financing of

assets of a concern.

4) PROFITABILITY

These ratios hel p measure the profitability of a firm. A firm, which generates a

substantial amount of profits per rupee of sales, can comfortably meet its operating

expenses and provide more returns to its shareholders. The relationship between profit


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and sales is measured by profitability ratios. There are two types of profitability

ratios: Gross ProfitMargin andNet ProfitMargin.

Gross Profit Ratio:

This ratio measures the relationship between gross profit and sales. Itis defined as the

excess of the net sales over cost of goods sold or excess of revenue over cost. Thisratio shows the profit that remains after the manufacturing costs have been met. It

measures the efficiency of production as well as pricing. This ratio helps tojudge how

efficientthe concern is I managing its production, purchase, selling & inventory, how

good its control is over the direct cost, how productive the concern , how much

amountis leftto meet other expenses & earn net profit.


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Gross profit

Gross Profit Ratio = * 100

Net sales

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Profit Margin Ratio 17.64 15.10 11.41 12.99 12.36

Net Profit Ratio:

Net Profit ratio indicates the relationshi p between the net profit & the sales it is

usually expressed in the form of a percentage.

NPATNet profit ratio = * 100

Net sales

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Net Profit Rratio 16.32 14.12 10.81 10.51 9.74

Return on Capital Employed:

The profitability ofthe firm can also be analyzed from the point ofview of the total

funds employed in the firm. The term fund employed orthe capital employed refers to

the total long-term source of funds. It means that the capital employed comprises of

shareholder funds plus long-term debts. Alternatively it can also be defined as fixed

assets plus net working capital.


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Capital employed refers to the long-term funds invested by the creditors and the

owners of a firm. It is the sum of long-term liabilities and owner's equity. ROCE

indicates the efficiency with which the long-term funds of a firm are utilized. This

ratio can be used to determine the profitability and efficiency of a company. It

indicates how well the company has utilized its capital employed. A higher ratio

indicates better returns for the company. In order to avoid reduction in shareholders

earnings, the rate of borrowing must be lowerthatROCE.

NPAT

Return on capital employed = *100

Capital employed

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Return on Capital Employed 31.29 35.75 67.40 64.64 51.75

5) FINANCIAL

These ratios determine how quickly certain current assets can be converted into cash. They

are also called efficiency ratios or asset utilization ratios as they measure the efficiency of a

firm in managing assets. These ratios are based on the relationshi p between the level of

activity represented by sales or cost of goods sold and levels ofinvestmentin various assets.

The important turnover ratios are debtors turnover ratio, average collection period,

inventory/stock turnover ratio, fixed assets turnover ratio, and total assets turnover ratio.

These are described below:


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Debtors Turno er Ratio (DTO):

DTO is calculated by di iding the net credit sales by a erage debtors outstanding during the

year. It measures the liquidity of a firm's debts.

et credit sales are the gross credit sales

minus returns, if any, from customers. A erage debtors are the a erage of debtors at the

beginning and at the end of the year. This ratio shows how rapidly debts are collected. The

higher the DTO, the better it is for the organization.

redit sales

ebtors urnover atio =

verage debtors

In entory or StockTurno er Ratio (ITR):


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ITR refers to the number of times the inventory is sold and replaced during the

accounting period.

Formula:

COGSS ck T R i

A ck

ITRreflects the efficiency of inventory management. The higher the ratio, the more

efficientis the management ofinventories, and vice versa. However, a high inventory

turnover may also result from a low level of inventory, which may lead to frequent

stock outs and loss of sales and customer goodwill. For calculating ITR, the average

ofinventories atthe beginning and the end of the year is taken. In general, averagesmay be used when a flow figure (in this case, cost of goods sold) is related to a stock

figure (inventories).

Solvency Ratios:

Solvency ratios are an indicator of the ability of a company to meet its long

term debt obligations. The lower the solvency ratio, the more likely the

company will default. Some ofthe ratios used to test for solvency are:

Debt-Equity Ratio:

Itis defined as the ratio between debt and equity. Itindicates the proportion of

debt and equity used to finance the assets. A higher DER indicates that the

assets are financed more by debt as compared to equity.

DebtEquity ratio= Debt/Ratio

The debt equity ratios ofthe ICICI BANK are as follows:

Table 10: Debt Equity Ratio

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Debt-equity ratio 7.98 7.45 9.50 5.27 4.42


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Interest Coverage Ratio (ICR):

It is defined as the ratio between Profit Before Interest and Tax (PBIT) and

interest This ratio can be used to determine the ease of a company to pay the

interest on its outstanding debts.

CR = PBIT /Interest

The ICRs ofthe ICICI BANK are:

Table 11: InterestCoverage Ratios

Year 2004-05 2005-06 2006-07 2007-08 20078-09Interestcoverage ratio 38.41 52.30 65.12 52.34 49.41

Debt to Total Funds:

It gives an indication of the leverage and potential risk of the company in

terms of debt-load. A higher debt ratio indicates thatthe company is financed

more by debts as compared to capital.

Debt to total funds= Debt / Total Funds

The debtto total funds ratio ofthe ICICI BANK are as follows:

Year 2004-05 2005-06 2006-07 2007-08 2008-09

Debt to totalfunds 0.0522 0.0357 0.0335 0.0201 0.0183

Reserves to Total Funds:


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The reserves to total fund ratio indicates the proportion of reserves used to

finance assets. A higher ratio indicates that the reserves form a larger part of

the overall funds.

Reserves to total funds= Reserves/ Total funds

The ratios ofthe BHEL Company are as follows:

Year 2004-05 2005-06 2006-07 2007-08 2008-09Reserves tototal funds 0.1048 0.1136 0.0918 0.1557 0.1805

Proprietors Ratio:

Proprietary ratio is a test of financial & credit strength of the business. It relates

shareholders fund to total assets. This ratio determines the long term or ultimate

solvency ofthe company.

In other words, Proprietary ratio determines as to what extentthe owners interest &

expectations are fulfilled from the totalinvestment made in the business operation.

Proprietary ratio compares the proprietor fund with total liabilities. It is usually

expressed in the form of percentage. Total assets also know it as net worth.

Proprietary fund

Proprietary ratio =

Total fund

Creditors Turnover Ratio:


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Itis same as debtors turnover ratio. It shows the speed at which payments are made to

the supplier for purchase made from them. Itis a relation between net credit purchase

and average creditors

N c i p chC i T R i

A c i

Market Based Returns:

PE Ratio:

This value is of most importance to shareholders of the company. It is the

most common ratio used to value the company. This is a clear indicator of

how much value can be extracted from the companys share and gives

shareholders an estimate of the returns that the share of this company can

provide in return to theirinvestment

Price to Earnings ratio = Market Price / (Earnings per share)

Earnings per share = PAT /No. of Shares issued.

Low PE stocks indicate thatthe price ofthe stock represents a smaller multiple

of the earnings for the previous year. The stock holders generally value the

price of a stock as a multiple of the earnings per share, by expecting the

company to do well and hence increase value in turn increase the share value

of the company equity shares. Although low PE stocks do indicate a

possibility of growth, in todays world they have to be looked at closely.Price to Earnings ratio = Market Price / (Earnings per share)

Years 2004-05 2005-06 2006-07 2007-08 2008-09

PE 63.98 65.82 64.80 66.35 62.33

Market Capitalization to Net worth (Price to Book Ratio):


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This ratio is used to compare the marketvalue of the share to the Bookvalue of the

company equity share. Itis calculated as:

Price to Book ratio = Stock Price *No. of shares issued/Net worth

= Stock Price / Bookvalue

A low PB ratio could be interpreted in 2 ways. It could mean thatthe company share

is undervalued and has scope of appreciation and hence providing returns overtime. It

could also mean that there is something wrong with the company fundamentally as

bookvalue is the value of allthe tangible assets and liabilities.

IMPORTANCE OF RATIO ANALYSIS -

As a tool of financial management, ratios are of crucial significance. The importance

of ratio analysis lies in the factthatit presents facts on a comparative basis & enables

the drawing of interference regarding the performance of a firm. Ratio analysis is

relevantin assessing the performance of a firm in respect ofthe following aspects:

1] Liquidity position,

2] Long-term solvency,

3] Operating efficiency,

4] Overall profitability,

5] Inter firm comparison

6] Trend analysis.

1] Liquidity Position:

With the hel p ofRatio analysis conclusion can be drawn regarding the

liquidity position of a firm. The liquidity position of a firm would be satisfactory ifit

is able to meet its current obligation when they become due. A firm can be said to

have the ability to meetits short-term liabilities ifit has sufficientliquid funds to pay

the interest on its short maturing debt usually within a year as well as to repay the


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principal. This ability is reflected in the liquidity ratio of a firm. The liquidity ratio are

particularly usefulin credit analysis by bank & other suppliers of shortterm loans.

2] Long Term Solvency:

Ratio analysis is equally useful for assessing the long-term financialviability of

a firm. This respect ofthe financial position of a borrower is of concern to the long-

term creditors, security analyst & the present & potential owners of a business. Thelong-term solvency is measured by the leverage/ capital structure & profitability ratio

Ratio analysis s that focus on earning power & operating efficiency.

Ratio analysis reveals the strength & weaknesses of a firm in this respect. The

leverage ratios, forinstance, willindicate whether a firm has a reasonable proportion

of various sources of finance or if it is heavily loaded with debt in which case its

solvency is exposed to serious strain.

3] Operating Efficiency:

Yet another dimension of the useful of the ratio analysis, relevant from the

viewpoint of management, is that it throws light on the degree of efficiency in

management & utilization ofits assets. The various activity ratios measures this kind

of operational efficiency. In fact, the solvency of a firm is, in the ultimate analysis,

dependent upon the sales revenues generated by the use of its assets- total as well as

its components.

4] Overall Profitability:

Unlike the outsides parties, which are interested in one aspect ofthe financial

position of a firm, the managementis constantly concerned about overall profitability

ofthe enterprise. Thatis, they are concerned aboutthe ability of the firm to meets its


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short term as well as long term obligations to its creditors, to ensure a reasonable

return to its owners & secure optimum utilization of the assets of the firm. This is

possible if an integrated view is taken & allthe ratios are considered together.

5] Inter Firm Comparison:

Ratio analysis not only throws light on the financial position of firm but also serves as

a stepping-stone to remedial measures. This is made possible due to inter firm comparison &

comparison with the industry averages. A single figure of a particular ratio is meaningless

unless itis related to some standard or norm. one ofthe populartechniques is to compare the

ratios of a firm with the industry average. It should be reasonably expected that the

performance of a firm should be in broad conformity with that of the industry to which it

belongs. An inter firm comparison would demonstrate the firms position vice-versa its

competitors. Ifthe results are atvariance either with the industry average or with the those of

the competitors, the firm can seekto identify the probable reasons & in light, take remedial

measures.

6] Trend Analysis:

Finally, ratio analysis enables a firm to take the time dimension into account. In other

words, whetherthe financial position of a firm is improving or deteriorating overthe years.

This is made possible by the use oftrend analysis. The significance ofthe trend analysis of

ratio lies in the factthatthe analysts can know the direction of movement, thatis, whetherthe

movementis favorable or unfavorable. For example, the ratio may be low as compared to the

norm but the trend may be upward. On the other hand, though the present level may be

satisfactory butthe trend may be a declining one.


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ADVANTAGES OF RATIO ANALYSIS

Financial ratios are essentially concerned with the identification of significant

accounting data relationshi ps, which give the decision-maker insights into the financial

performance of a company. The advantages of ratio analysis can be summarized as follows:

Ratios facilitate conducting trend analysis, which is important for decision making and

forecasting.

Ratio analysis helps in the assessment ofthe liquidity, operating efficiency, profitability and

solvency of a firm.

Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons.

The comparison of actual ratios with base year ratios or standard ratios helps the management

analyze the financial performance ofthe firm.

DISADVANTAGES OF RATIO ANALYSIS

Ratio analysis has its limitations. These limitations are described below:

1] Information Problems:

Ratios require quantitative information for analysis but it is not decisive about

analytical output.

The figures in a set of accounts are likely to be at least several months out of

date, and so might not give a proper indication of the companys current financial

position.

2] Comparison of Performance over T ime;

When comparing performance overtime, there is need to considerthe changes in

price. The movementin performance should be in line with the changes in price.


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When comparing performance overtime, there is need to considerthe changes in

technology. The movement in performance should be in line with the changes in

technology.

3] Inter-firm Comparison:

Companies may have different capital structures and to make comparison of

performance when one is all equity financed and anotheris a geared company it may

not be a good analysis.

Selective application of government incentives to various companies may also

distortintercompany comparison. comparing the performance oftwo enterprises may

be misleading.

Inter-firm comparison may not be useful unless the firms compared are of the

same size and age, and employ similar production methods and accounting practices.

Even within a company, comparisons can be distorted by changes in the price level.

Ratios provide only quantitative information, not qualitative information.

PURPOSE OF RATIO ANLYSIS -

1] To identify aspects of a businesses performance to aid decision making

2] Quantitative process may need to be supplemented by qualitative

Factors to get a complete picture.

3] 5 main areas:-

Liquidity the ability ofthe firm to pay its way.

Investment/shareholders information to enable decisions to be made on the extent

ofthe risk and the earning potential of a business investment.

Gearing information on the relationshi p between the exposure of the business to

loans as opposed to share capital.

Profitability how effective the firm is at generating profits given sales and or its

capital assets.

Financial the rate at which the company sells its stock and the efficiency with

which it uses its assets.


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DUPONT ANALYSIS

DuPont analysis provides the frameworkto understand the drivers ofROI. In DuPont

analysis, an effort is made to decompose ROI and go to the root cause of ROI. To

enable this, the DuPont model integrates the elements of Income statement and the

balance sheet. This method is a very simple method which provides a clear

understanding of how the company generates its return. This analysis provides an

insightinto the importance of assetturnover as well as sales to overall return. We can

undertake the DuPont analysis by taking any variation ofROI, viz ROTA, ROCE, or

RONW. For our analysis, we are

taking ROCE.

ROCE = Profit Margin *Asset Turnover * Asset to Capital Employed

y ProfitMargin = PBIT/Sales

y Asset Turnover = Sales /Total Asset

y Assetto Capital Employed = Total Asset/Capital

Dupont Ratios 2004-05 2005-06 2006-07 2007-08 2008-09

ROCE 31.29 35.75 67.40 64.64 51.75

Profit Margin 4.25 4.15 4.56 5.19 5.15Asset Turnover 2.14 2.94 4.52 5.61 5.14

Asset to capital Emp. 3.44 2.93 3.27 2.22 1.955


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INTRA COMPANY ANALYSIS

RONW (Return on Net worth):

This ratio shows the money available for the equity shareholders and Return on Net

Worth (stockholders funds) is a valuable financial ratio for evaluating a company's

efficiency and the quality ofits management. Itis a basic ratio thattells a stockholder

what he is getting out of his investmentin the company.

Y

2004-05 2005-06 2006-07 2007-08 2008-09

R

w

h 15.99 11.40 12.31 8.80 7.55

ROCE:

This ratio can be used to determine the profitability and efficiency of a company. It

indicates how well the company has utilized its capital employed. A higher ratio

indicates better returns for the company. In order to avoid reduction in shareholders

earnings, the rate of borrowing must be lowerthatROCE.

ROCE= Profit before Income and Tax / Capital Employed

Y

2004-05 2005-06 2006-07 2007-08 2008-09

R

! c

"

pi

"

l

mpl!

y

# 31.29 35.75 67.40 64.64 51.75

0

2

4

6

8

10

12

14

16

18

2004-05 2005-06 2006-07 2007-08 2008-09

$ ONW


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Earnings per Share:

EPS is the net profit ofloss to the share holders for each share. Itis used in valuationof a company and to measure its performance. PAT is used in the calculation of EPS

because itis gives the amount available to the shareholders once the taxes are paid. It

is calculated by taking the weighted average ofthe shares outstanding.

EPS = Profit after Tax / No. of shares

Years 2004-05 2005-06 2006-07 2007-08 2008-09

EPS 27.25 28.47 33.30 36.78 33.62

Dividend per share:

0

10

20

30

40

50

60

70

80

2004-05 2005-06 2006-07 2007-08 2008-09

% & EC

0

5

10

15

20

25

30

35

40

2004-05 2005-06 2006-07 2007-08 2008-09

EPS


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Dividend per share represents the amount of dividend each shareholder will

receive for every share they own. DPS is calculated taking the interim and

final dividend paid. Itis different from EPS as itindicates the amount paid to

shareholders as compared to the amount available.

DPS= TotalDi' idendpaid / No. of shares

Years 2004-05 2005-06 2006-07 2007-08 2008-09

DPS 8.50 8.50 10.00 11.00 11.00

0

2

4

6

8

10

12

2004-05 2005-06 2006-07 2007-08 2008-09

D ( S


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STRATEGIC ANALYSIS

TOWS MATRIX

STRENGTHS WEAKNESSES

OP

PORTU

NITIES

S O Strategies

Strength: Large Capital base.

Opportunity: Market Expansion.

Strategy: Deep Penetration into RuralMarket.

W O Strategies

Weakness: Workforce Responsiveness.

Opportunity: Outsourcing of Non - CoreBusiness.

Strategy: Outsource Customer Care & otherE-Helps.

T

HREATS

S T Strategies

Strength: Low operating costs

Threat: Increased Competition from othersPvt. Banks.

Strategy: Steps to Ensure Loyalty by oldCustomers.

W T Strategies

Weakness: Not Equal to InternationalStandards.

Threat: Entry of many Foreign Banks.

Strategy: Consider additional benefits

DETAILED ANALYSIS -


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1. Strength - Opportunity Analysis:

Strength: It is well know that ICICI Bank has the largest Authorised Capital

Base in the Banking System in India i.e. having a total capacity to raise Rs.

19,000,000,000 (Non Premium Value)

Opportunity: Seeing the present financial & economic development of Indian

Economy and also the tremendous growth ofthe Indian companies including the

acquisition spree followed by them, it clearly states the expanding market for

finance requirements and also the growth in surplus disposal income of Indian

citizens has given a huge rise in savings deposits from the above pointitis clear

thatthere is a huge market expansion possible in banking sectorin India.

Strategy: From the analysis of Strength & Opportunity the simple and straight

possible strategy for ICICI Bank could be - to penetrate into the rural sector of

India for expanding its market share as well as leading all other Pvt. Banks from a

great gap.

2. Strength - Threat Analysis:

Strength: ICICI Bank is not only known for large capital but also for having a

low operations cost though having huge number of branches and services

provided.

Threat: After showing a significant growth overall, India is able to attract many

international financial & banking institutes, which are known fortheir state of art

working and keeping low operation costs.

Strategy: To ensure that ICICI Bank keeps going on with low operation cost &

have continuous business it should simply promote itself well & provide quality

service so as to ensure customer loyalty, therefore guaranteeing continuous

business.

3. Weakness - Opportunity Analysis:


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Weakness: It is well known that workforce responsiveness in banking sector is

very low in Indian banking sector, though ICICI Bank has better responsible staff

but it still lacks behind its counterparts like HSBC, HDFC, CITI BANK, YES

BANK etc.

Opportunity: In the present world, India is preferred one of the best places for

out - sourcing of business process works and many more.

Strategy: As international companies are reaping huge benefits after out-sourcing

there customer care & BPOs, this same strategy should be implemented by ICICI

Bank so as to have proper customer service without hindering customer

expectations.

4. Weakness - Threat Analysis.

Weakness: Though having a international presence, ICICI Bank has not been able

to keep up the international standards in providing customer service as well as

banking works.

Threat: In recent times, India has witnessed entry of many international banks

like CITI Bank, YES Bank etc which posses an external entrant threat to ICICI

Bank as this Banks are known for their art of working and maintain high

standards of customer service.

Strategy: After having new entrants threat, ICICI Bank should come up with

more additional benefits to its customer or may be even reduce some fees for any

additional works of customers.

SERVICE GAP ANALYSIS


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DETAILED ANALYSIS -

GAP 1: No Strong R& D for finding hidden needs of customers.


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Though ICICI Bank has been investing in R&D, but the investments are not

that high as well as the R&D of ICICI Bankis not strongly equipped so as to analysis

the deep hidden needs of customers as well as employees.

GAP 2: Not able to provide the desired services due to regulations.

Though knowing some of the desired services of customers or having some

innovative schemes allthis schemes are notimplemented by ICICI Bank, as all banks

in India are underthe regulation ofReserve Bank of India.

GAP 3: Improper Implementation by Employees.

Many schemes are launched by ICICI Bankto ensure old customer loyalty as

well as new customer base after compiling with RBI approval; stillthese schemes are

not implemented properly by the bank staff and mostly agents of banks because of

less understanding of schemes or because of no faith in them.

GAP 4: Problems faced by customers are spread rapidly, affecting the new customer

decision.

It is well noted in India that mouth to mouth publicity is the fastest way of

publicity whether it is positive or negative, under such situations any problem or

inconvenience faced by any customer of ICICI Bank spreads like rapid fire and

effects the decision of old as well as new customer directly & indirectly.

GAP 5: Services as promised by the agents are not delivered either on time or not at

all provided.

In orderto get better pay, the agents of ICICI Bank usually give false promises

to there customers regarding the quality of service or new schemes so as to lure them.

In such cases the finalloseris notjustthe customers butthe ICICI Group as whole as

it effects allthere businesses.

RECOMMENDATIONS

1. A Major Revamp ofits Customer Care:


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A complete over hauling of its customer care department is required so as to

reduce complaints of customerin turn which may affectits working.

2. Penetration into Rural Market with E Commerce Facility:

Though it is one of the strategies of ICICI Bank to enter deeply into rural

sector, butthis step has to be taken up seriously and as soon as possible so as

to tap the market the rural market easily and these services should be well

equipped with E Commerce features mainly like Tele banking and ATMs

etc.

3. Introduction of Smart Cards for New as well as Old Credit

Card Holders:

ICICI Bank should come up with the concept of smart cards were the data

regarding all the accounts & credit cards details of a individual customer is

placed in a single cards hence reducing the burden of carrying all credit cards

& other necessary items required for banking transaction.

4. Concentrate on Building Brand Image:

ICICI Bank is very well known institution for investing purposes and as well

as for its practices involving anti social elements; therein affecting its name

and Brand value ofits self and also ICICI group as a whole.

5. Formulation of a Win - Win Situation to Reduce Non

Performing Assets:


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It has become a necessity for ICICI Bank to reduce its NPAs which have

risen tremendously afterthe merger with ICICI Limited.

6. Completely Separation of other alike Businesses like Insurance,

Mutual Funds etc:

Itis usually seen the ICICI Bank branches are over crowded with ICICI staff

though they dont belong to that branch or does not even belong to the ICICI

Bank, they usually are the agents ofits other businesses like Insurance, Mutual

funds etc this annoys the customer and creates a bad impression.

7. Major re-look at Working of their Agents:

The easiest way to reach to customers is through agents; and the agents of

ICICI Bank are highly skilled in this field but they do it at the cost of

customers innocence. There