A Research Project On

Fundamental Analysis of

ICICI Bank

INTRODUCTION TO FUNDAMENTAL

ANALYSIS (Chapter-1)

What is analysis?
The examination and evaluation of the relevant information to select the best course of action from among various alternatives. The methods used to analyze securities and make investment decisions fall into two very broad categories fundamental analysis and technical analysis. !undamental analysis involves analyzing the characteristics of a com"any in order to estimate its value. Technical analysis takes a com"letely different a""roach# it doesn$t care one bit about the %value% of a com"any or a commodity. Technicians &sometimes called chartists' are only interested in the "rice movement in the market.

What is technical analysis?

Technical analysis is a method of evaluating securities by analyzing the statistics generated by market activity( such as "ast "rices and volume. Technical analysts do not attem"t to measure a security$s intrinsic value( but instead use charts and other tools to identify "atterns that can suggest future activity.

What is fundamental analysis?

!undamental Analysis involves examining the economic( financial and other )ualitative and )uantitative factors related to a security in order to determine its intrinsic value. *t attem"ts to study everything that can affect the security$s value( including macroeconomic factors &like the overall economy and industry conditions' and individually s"ecific factors &like the financial condition and management of com"anies'. !undamental analysis( which is also known as )uantitative analysis( involves delving into a com"anys financial statements &such as "rofit and loss account and balance sheet' in order to study various financial indicators &such as revenues( earnings( liabilities( ex"enses and assets'. +uch analysis is usually carried out by analysts( brokers and savvy investors. ,any analysts and investors focus on a single number--net income &or earnings'--to evaluate "erformance. .hen investors attem"t to forecast the market value of a firm( they fre)uently rely on earnings. ,any institutional investors( analysts and regulators believe earnings are not as relevant as they once were. /ue to nonrecurring events( dis"arities in measuring risk and management$s ability to disguise fundamental earnings "roblems( other measures beyond net income can assist in "redicting future firm earnings.

Two Approaches of fundamental analysis

.hile carrying out fundamental analysis( investors can use either of the following a""roaches 0 .To"-down a""roach *n this a""roach( an analyst investigates both international and national economic indicators( such as 1/P growth rates( energy "rices( inflation and interest rates. The

search for the best security then trickles down to the analysis of total sales( "rice levels and foreign com"etition in a sector in order to identify the best business in the sector. 2. 3ottom-u" a""roach *n this a""roach( an analyst starts the search with s"ecific businesses( irres"ective of their industry4region.

How does fundamental analysis works?

!undamental analysis is carried out with the aim of "redicting the future "erformance of a com"any. *t is based on the theory that the market "rice of a security tends to move towards its $real value$ or $intrinsic value.$ Thus( the intrinsic value of a security being higher than the securitys market value re"resents a time to buy. *f the value of the security is lower than its market "rice( investors should sell it.

The steps involved in fundamental analysis are:

0. ,acroeconomic analysis( which involves considering currencies( commodities and indices. 2. *ndustry sector analysis( which involves the analysis of com"anies that are a "art of the sector. 5. +ituational analysis of a com"any. 6. !inancial analysis of the com"any. 7. 8aluation The valuation of any security is done through the discounted cash flow &/9!' model( which takes into consideration 0. /ividends received by investors 2. :arnings or cash flows of a com"any 5. /ebt( which is calculated by using the debt to e)uity ratio and the current ratio &current assets4current liabilities'

Fundamental Analysis Tools These are the most "o"ular tools of fundamental analysis. :arnings "er +hare ; :P+ Price to :arnings Ratio ; P4:

Projected :arnings 1rowth ; P:1 Price to +ales ; P4+ Price to 3ook ; P43 /ividend Payout Ratio /ividend <ield 3ook 8alue Return on :)uity Ratio analysis

!inancial ratios are tools for inter"reting financial statements to "rovide a basis for valuing
securities and a""raising financial and management "erformance. A good financial analyst will build in financial ratio calculations extensively in a financial modeling exercise to enable robust analysis. !inancial ratios allow a financial analyst to +tandardize information from financial statements across multi"le financial years to allow com"arison of a firms "erformance over time in a financial model. +tandardize information from financial statements from different com"anies to allow a""les to a""les com"arison between firms of differing size in a financial model. ,easure key relationshi"s by relating in"uts &costs' with out"uts &benefits' and facilitates com"arison of these relationshi"s over time and across firms in a financial model.

*n general( there are 6 kinds of financial ratios that a financial analyst will use most fre)uently( these are erformance ratios Workin! capital ratios "i#uidity ratios $olvency ratios These 6 financial ratios allow a good financial analyst to )uickly and efficiently address the following )uestions or concerns

10

erformance ratios .hat return is the com"any making on its ca"ital investment= .hat are its "rofit margins= Workin! capital ratios >ow )uickly are debts "aid= >ow many times is inventory turned= "i#uidity ratios 9an the com"any continue to "ay its liabilities and debts=

$olvency ratios %"on!er term& .hat is the level of debt in relation to other assets and to e)uity= *s the level of interest "ayable out of "rofits=

WH' ()"' F*)+A,-)TA" A)A"'$I$ ?ong-term Trends

!undamental analysis is good for long-term investments based on long-term trends( very long-term. The ability to identify and "redict long-term economic( demogra"hic( technological or consumer trends can benefit "atient investors who "ick the right industry grou"s or com"anies.

8alue +"otting
+ound fundamental analysis will hel" identify com"anies that re"resent a good value. +ome of the most legendary investors think long-term and value. 1raham and /odd( .arren 3uffett and @ohn Aeff are seen as the cham"ions of value investing. !undamental analysis can hel" uncover com"anies with valuable assets( a strong balance sheet( stable earnings( and staying "ower.

3usiness insights
One of the most obvious( but less tangible( rewards of fundamental analysis is the develo"ment of a thorough understanding of the business. After such "ains taking research and analysis( an investor will be familiar with the key revenue and "rofit drivers behind a com"any. :arnings and earnings ex"ectations can be "otent drivers of e)uity "rices. :ven some technicians will agree to that.

11

A good understanding can hel" investors avoid com"anies that are "rone to shortfalls and identify those that continue to deliver. *n addition to understanding the business( fundamental analysis allows investors to develo" an understanding of the key value drivers and com"anies within an industry. A stock$s "rice is heavily influenced by its industry grou". 3y studying these grou"s( investors can better "osition themselves to identify o""ortunities that are high-risk &tech'( low-risk &utilities'( growth oriented &com"uter'( value driven &oil'( non-cyclical &consumer sta"les'( cyclical &trans"ortation' or incomeoriented &high yield'.

Bnowing .ho$s .ho

+tocks move as a grou". 3y understanding a com"any$s business( investors can better "osition themselves to categorize stocks within their relevant industry grou". 3usiness can change ra"idly and with it the revenue mix of a com"any. This has ha""ened with many of the "ure internet retailers( which were not really internet com"anies( but "lain retailers. Bnowing a com"any$s business and being able to "lace it in a grou" can make a huge difference in relative valuations. The charts of the technical analyst may

give all kinds of "rofit alerts( signals and alarms( but there s little in the charts that tell us why a grou" of "eo"le make the choices that create the "rice "atterns

(./ective of the study

To analyze economy by using some economic indicators like 1/P( and inflation rate etc for the selected "eriod of 7 years. To analyze the industry es"ecially "rivate bank industry for the selected "eriod of 7 years. To carry out financial and non-financial analysis of *9*9* bank as a whole for the selected "eriod.

+ATA $(*0C-$ +econdary data has been collected from various sources to analyze the fundamentals. The secondary data has been collected from 3ooks A9: e)uity database *nternet-websites

12

-0I(+ (F $T*+': The "eriod of study for the analysis is five years1

CHA T-0 "A)

*t is "ro"osed to divide the "roject into following cha"ters. 9>APT:R 0 *ATRO/C9T*OA TO +TC/< This cha"ter will be introductory in nature covering the relevance of study. 9>APT:R 2 9OA9:PTCA? !RA,:.ORB O! !CA/A,:ATA? AAA?<+*+ This cha"ter will include a com"rehensive study of the conce"t of !undamental analysis And its tools. 9>APT:R 5 /ATA +OCR9: AA/ R:+:AR9> ,:T>O/O?O1< This cha"ter will give an inside into source of data and method of undertaking research. 9>APT:R 6 /ATA AAA?<+*+ This is the cha"ter of all observations( inferences( analysis and conclusions that will be made out of the data analysis during the course of study. 9>APT:R 7 ?*,*TAT*OA+ AA/ +C11:+T*OA+ All the limitations and stumbling blocks that will be encountered during the study will be discussed in this cha"ter along with the future sco"e and suggestions. 3*3?*O1RAP><

13

ECONOMIC ANALYSIS
(Chapter- 2)

14

The economic analysis aims at determining if the economic climate is conclusive and is ca"able of encouraging the growth of business sector( es"ecially the ca"ital market. .hen the economy ex"ands( most industry grou"s and com"anies are ex"ected to benefit and grow. .hen the economy declines( most sectors and com"anies usually face survival "roblems. >ence( to "redict share "rices( an investor has to s"end time ex"loring the forces o"erating in overall economy. :x"loring the global economy is essential in an international investment setting. The selection of country for investment has to focus itself to examination of a national economic scenario. *t is im"ortant to "redict the direction of the national economy because economic activity affects cor"orate "rofits( not necessarily through tax "olicies but also through foreign "olicies and administrative "rocedures.

Tools for -conomy Analysis

The most used tools for "erforming economic analysis are 1ross /omestic Product &1/P' ,onetary "olicy and ?i)uidity *nflation *nterest rates *nternational influences !iscal "olicy *nfluences on long term ex"ectations *nfluences on short term ex"ectations

0' 1ross /omestic "roduct 1/P is one measure of economic activity. This is the total amount of goods and services "roduced in a country in a year. *t is calculated by adding the market values of all the final goods and services "roduced in a year.
*t is a gross measurement because it includes the total amount of goods and services "roduced( of which some merely re"lace goods that have de"reciated or have worn out.

*t is domestic "roduction because it includes only goods and services "roduced within the country.

15

2' *nflation
*nflation can be defined as a trend of rising "rices caused by demand exceeding su""ly. Over time( even a small annual increase in "rices of say 0 D will tend to influence the "urchasing "ower of the nation. *n others word( if "rices rise steadily( after a number of years( consumers will be able to buy only fewer goods and services assuming income level does not change with inflation.

5' *nterest rate

*nterest rate is the "rice of credit. *t is the "ercentage fee received or "aid by individual or organization when they lend and borrow money. *n general( increases in interest rate( whether caused by inflation( government "olicy( rising risk "remium( or other factors( will lead to reduced borrowing and economic slowdown.

6' *nternational influences

Ra"id growth in overseas market can create surges in demand for ex"orts( leading to growth in ex"ort sensitive industries and overall 1/P. *n contrast( the erection of trade barriers( )uotas( currency restrictions can hinder the free flow of currency( goods( and services( and harm the ex"ort sector of an economy.

7' !iscal "olicy

The fiscal "olicy of the government involves the collection and s"ending of revenue. *n "articular( fiscal "olicy refers to the efforts by the government to stimulate the economic directly( through s"ending.

16

Industry Analysis (Chapter-3)

17

An industry analysis hel"s inform business managers about the viability of their current strategy and on where to focus a business among its com"etitors in an industry. The analysis examines factors such as com"etition and the external business environment( substitute "roducts( management "references( buyers and su""liers. *ndustry analysis involves reviewing the economic( "olitical and market factors that influence the way the industry develo"s. ,ajor factors can include the "ower wielded by su""liers and buyers( the condition of com"etitors. And the likelihood of new market entrants.

/ata needs for industry analysis

*ndustry analysis re)uires a variety of )uantitative and )ualitative data. Though one single source for all the data needs might not found( industry associates( business "ublications and the de"artment of economic analysis "erform a com"rehensive industry analysis. A suggestive list of data categories that are utilized for "erforming industry analysis is listed below. Product lines Product growth 9om"lementary "roduct :conomics of scale +u""liers ?abors +ubstitute "roducts 3uyers and their behavior Product "attern &cyclical( seasonal' 9ost structure

Tools for industry analysis

9ross-sectional industry *ndustry "erformance over time /ifferences in industry risk Prediction about market behavior 9om"etitors over the industry life cycle

18

TH- I)+IA) BA)2I)3 $-CT(0 0-4I-W

.ithout a sound and effective banking system in *ndia it cannot have a healthy economy. The banking system of *ndia should not only be hassle free but it should be able to meet new challenges "osed by the technology and any other external and internal factors. !or the "ast three decades *ndia$s banking system has several outstanding achievements to its credit. *t is no longer confined to only metro"olitans or cosmo"olitans in *ndia# in fact( *ndian banking system has reached even to the remote corners of the country. This is one of the main reasons of *ndia$s growth "rocess. The government$s regular "olicy for *ndian bank since 0EFE has "aid rich dividends with the nationalization of 06 major "rivate banks of *ndia. Aot long ago( an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today( he has a choice. 1one are days when the most efficient bank transferred money from one branch to other in two days. Aow it is sim"le as instant messaging or dial a "izza. ,oney has become the order of the day.

ost independence *n 0E6G( the Reserve 3ank of *ndia( *ndia$s central banking authority( was nationalized( and it became an institution owned by the 1overnment of *ndia. *n 0E6E( the 3anking Regulation Act was enacted which em"owered the Reserve 3ank of *ndia &R3*' %to regulate( control( and ins"ect the banks in *ndia.% The 3anking Regulation Act also "rovided that no new bank or branch of an existing bank may be o"ened without a license from the R3*( and no two banks could have common directors.

"i.erali5ation The new "olicy shook the 3anking sector in *ndia com"letely. 3ankers( till this time( were used to the 6-F-6 method &3orrow at 6D# ?end at FD# 1o home at 6' of functioning. *n the early 0EEHs the then Aarsimha Rao government embarked on a "olicy of liberalization and gave licenses to a small number of "rivate banks( which came to be known as Aew 1eneration techsavvy banks( which included banks such as 1lobal Trust 3ank &the first of such new generation banks to be set u"' which later amalgamated with Oriental 3ank of 9ommerce( CT* 3ank &now re-named as Axis 3ank'( *9*9* 3ank and >/!9 3ank.

19

Current situation 9urrently( *ndia has GG scheduled commercial banks &+93s' - 2G "ublic sector banks &that is with the 1overnment of *ndia holding a stake'( 2E "rivate banks &these do not have government stake# they may be "ublicly listed and traded on stock exchanges' and 50 foreign banks. They have a combined network of over FI(HHH branches and 0I(HHH AT,s. According to a re"ort by *9RA ?imited( a rating agency( the "ublic sector banks hold over IG "ercent of total assets of the banking industry( with the "rivate and foreign banks holding 0G.2D and F.7D res"ectively. Over the last four years( *ndia s economy has been on a high growth trajectory( creating un"recedented o""ortunities for its banking sector. ,ost banks have enjoyed high growth and their valuations have a""reciated significantly during this "eriod. ?ooking ahead( the most "ertinent issue is how well the banking sector is "ositioned to cater to continued growth. A holistic assessment of the banking sector is "ossible only by looking at the roles and actions of banks( their core ca"abilities and their ability to meet systemic objectives( which include increasing shareholder value( fostering financial inclusion( contributing to 1/P growth( efficiently managing intermediation cost( and effectively allocating ca"ital and maintaining system stability.

BA)2I)3 $T0*CT*0- I) I)+IA

The banking institutions in the organized sector( commercial banks are the oldest institutions( some them having their genesis in the nineteenth century. *nitially they were set u" in large numbers( mostly as cor"orate bodies with shareholding with "rivate individuals. Today 2I banks constitute a strong Public +ector in *ndian 9ommercial 3anking. 9ommercial 3anks o"erating in *ndia fall under different sub categories on the basis of their ownershi" and control over management# u.lic $ector Banks Public +ector 3anks emerged in *ndia in three stages. !irst the conversion of the then existing *m"erial 3ank of *ndia into +tate 3ank of *ndia in 0E77( followed by the taking over of the seven associated banks as its subsidiary. +econd the nationalization of 06 major commercial banks in 0EFEand last the nationalization of F more commercial 3ank in 0EGH. Thus 2I banks constitute the Public +ector 3anks.

)ew rivate $ector Banks After the nationalization of the major banks in the "rivate sector in 0EFE and 0EGH( no new bank could be setu" in *ndia for about two decades( though there was no legal bar to that effect. The

20

Aarasimham 9ommittee on financial sector reforms recommended the establishment of new banks of *ndia. R3* thereafter issued guidelines for setting u" of new "rivate sector banks in *ndia in @anuary 0EE5. These guidelines aim at ensuring that new banks are financially viable and technologically u" to date from the start. They have to work in a "rofessional manner( so as to im"rove the image of commercial banking system and to win the confidence of the "ublic. :ight "rivate sector banks have been established including banks sector by financially institutions like */3*( *9*9*( and CT* etc.

"ocal Area Banks +uch 3anks can be established as "ublic limited com"anies in the "rivate sector and can be "romoted by individuals( com"anies( trusts and societies. The minimum "aid u" ca"ital of such banks would be 7 crores with "romoters contribution at least Rs. 2 crores. They are to be set u" in district towns and the area of their o"erations would be limited to a maximum of 5 districts. At "resent( four local area banks are functional( one each in Punjab( 1ujarat( ,aharashtra and Andhra Pradesh. Forei!n Banks !oreign commercial banks are the branches in *ndia of the joint stock banks incor"orated abroad. There number was 5G as on 50.H5.2HHE.

$cheduled Commercial Banks in India The commercial banking structure in *ndia consists of +cheduled 9ommercial 3anks in *ndia Cnscheduled 3anks in *ndia

+cheduled 3anks in *ndia constitute those banks which have been included in the +econd +chedule of Reserve 3ank of *ndia &R3*' Act( 0E56. R3* in turn includes only those banks in this schedule which satisfy the criteria laid down vide section62 &F' a' of the Act. %+cheduled banks in *ndia% means the +tate 3ank of *ndia constituted under the +tate 3ank of *ndia Act( 0E77 &25 of 0E77'( a subsidiary bank as defined in the +tate 3ank of *ndia &+ubsidiary 3anks' Act( 0E7E &5G of 0E7E'( a corres"onding new bank constituted under section 5 of the 3anking 9om"anies &Ac)uisition and Transfer of Cndertakings' Act( 0EIH &7 of 0EIH'( or under section 5 of the 3anking 9om"anies &Ac)uisition and Transfer of Cndertakings' Act( 0EGH &6H

21

of 0EGH'( or any other bank being a bank included in the +econd +chedule to the Reserve 3ank of *ndia Act( 0E56 &2 of 0E56'( but does not include a co-o"erative bank%. %Aon-scheduled bank in *ndia% means a banking com"any as defined in clause &c' of section 7 of the 3anking Regulation Act( 0E6E &0H of 0E6E'( which is not a scheduled bank%.

Cooperative Banks 3esides the commercial banks( there exists in *ndia another set of banking institutions called coo"erative credit institutions. These have been made in existence in *ndia since long. They undertake the business of banking both in urban and rural areas on the "rinci"le of coo"eration. They have served a useful role in s"reading the banking habit throughout the country. <et( there financial "osition is not sound and a majority of coo"erative banks has yet to achieve financial viability on a sustainable basis. The coo"erative banks have been set u" under various 9oo"erative +ocieties Acts enacted by +tate 1overnments. >ence the +tate 1overnments regulate these banks. *n 0EFF( need was felt to regulate their activities to ensure their soundness and to "rotect the interests of de"ositors According to the R3* in ,arch 2HHE( number of all +cheduled 9ommercial 3anks &+93s' was 0I0 of which( GF were Regional Rural 3anks and the number of Aon-+cheduled 9ommercial 3anks including ?ocal Area 3anks stood at 7. Taking into account all banks in *ndia( there are overall 7F(F6H branches or offices( GE5(57F em"loyees and 2I(HGG AT,s. Public sector banks made u" a large chunk of the infrastructure( with GI.I "er cent of all offices( G2 "er cent of staff and FH.5 "er cent of all automated teller machines &AT,s'.

$W(T A)A"'$I$ (F BA)2I)3 $-CT(0

$T0-)3TH *ndian banks have com"ared favorably on growth( asset )uality and "rofitability with other regional banks over the last few years. The banking index has grown at a com"ounded annual rate of over 70 "er cent since A"ril 2HH0 as com"ared to a 2I "er cent growth in the market index for the same "eriod. Policy makers have made some notable changes in "olicy and regulation to hel" strengthen the sector. These changes include strengthening "rudential norms( enhancing the "ayments system and integrating regulations between commercial and co-o"erative banks. 3ank lending has been a significant driver of 1/P growth and em"loyment. -6tensive reach: the vast networking J growing number of branches J AT,s. *ndian banking system has reached even to the remote corners of the country.

22

*n terms of )uality of assets and ca"ital ade)uacy( *ndian banks are considered to have clean( strong and trans"arent balance sheets relative to other banks in com"arable economies in its region. W-A2)-$$ Public +ector 3anks need to fundamentally strengthen institutional skill levels es"ecially in sales and marketing( service o"erations( risk management and the overall organizational "erformance ethic J strengthen human ca"ital. Old "rivate sector banks also have the need to fundamentally strengthen skill levels. The cost of intermediation remains high and bank "enetration is limited to only a few customer segments and geogra"hies. +tructural weaknesses such as a fragmented industry structure( restrictions on ca"ital availability and de"loyment( lack of institutional su""ort infrastructure( restrictive labour laws( weak cor"orate governance and ineffective regulations beyond +cheduled 9ommercial 3anks &+93s'( unless industry utilities and service bureaus. 0efusal to dilute stake in $* .anks: The government has refused to dilute its stake in P+C banks below 70D thus choking the headroom available to these banks for raining e)uity ca"ital. Impediments in sectoral reforms: O""osition from ?eft and resultant cautious a""roach from the Aorth 3lock in terms of a""roving merger of P+C banks may ham"er their growth "ros"ects in the medium term.

(0T*)IT'

The market is seeing discontinuous growth driven by new "roducts and services that include o""ortunities in credit cards( consumer finance and wealth management on the retail side( and in fee-based income and investment banking on the wholesale banking side. These re)uire new skills in sales J marketing( credit and o"erations. .ith increased interest in *ndia( com"etition from foreign banks will only intensify. 1iven the demogra"hic shifts resulting from changes in age "rofile and household income( consumers will increasingly demand enhanced institutional ca"abilities and service levels from banks. Aew "rivate banks could reach the next level of their growth in the *ndian banking sector by continuing to innovate and develo" differentiated business models to "rofitably serve segments like the rural4low income and affluent4>A* segments# actively ado"ting ac)uisitions as a means

23

to grow and reaching the next level of "erformance in their service "latforms. Attracting( develo"ing and retaining more leadershi" ca"acity !oreign banks committed to making a "lay in *ndia will need to ado"t alternative a""roaches to win the Krace for the customerL and build a value-creating customer franchise in advance of regulations "otentially o"ening u" "ost 2HHE. Reach in rural *ndia for the "rivate sector and foreign banks "i.erali5ation of -CB norms: The government also liberalised the :93 norms to "ermit financial sector entities engaged in infrastructure funding to raise :93s. This enabled banks and financial institutions( which were earlier not "ermitted to raise such funds( ex"lore this route for raising chea"er funds in the overseas markets. Hy.rid capital: *n an attem"t to relieve banks of their ca"ital crunch( the R3* has allowed them to raise "er"etual bonds and other hybrid ca"ital securities to shore u" their ca"ital. *f the new instruments find takers( it would hel" P+C banks( left with little headroom for raising e)uity.

TH0-AT$ Threat of stability of the system failure of some weak banks has often threatened the stability of the system. Rise in inflation figures which would lead to increase in interest rates. *ncrease in the number of foreign "layers would "ose a threat to the Public +ector 3ank as well as the "rivate "layers.

24

2ey players
Andhra Bank Allahabad Bank !njab "ational Bank '(I Bank )otak *ahindra Bank &itibank #SB& Bank A,eri-an ./0re++ Bank State Bank of India Vijaya Bank #$%& Bank I&I&I Bank &ent!rion Bank of !njab Standard &hartered Bank State Bank of *y+ore AB" A*12

25

Company analysis (Chapter-4)

26

Analysis of the com"any consists of measuring its "erformance and ascertaining the cause of this "erformance. .hen some com"anies have done well irres"ective of economic or industry failure( this im"lies that there are certain uni)ue characteristics for this "articular com"any that had made it a success. The identification of these characteristics( whether )uantitative or )ualitative( is referred to as com"any analysis. Muantitative indicators of com"any analysis are the financial indicators and o"erational efficiency indicators. !inancial indicators are the "rofitability indicators and financial "osition indicators analyzed through the income and balance sheet statements( res"ectively( of the com"any. O"erational indicators are ca"acity utilization and cost versus sales efficiency of the com"any( which includes the marketing edge of the com"any. 3esides the )uantitative factors( )ualitative factors of a com"any also influence investment decision "rocess of an institutional investor. The focus of the )ualitative data( as revealed in the annual re"ort- as in the directors s"eech. Rather than on )uantitative data.

Tools for company analysis

9om"any analysis involves choice of investment o""ortunities within a s"ecific industry that com"rises of several individual com"anies. The choice of an investible com"any broadly de"ends on the ex"ectations about its future "erformance in general. >ere( the business cycle that a com"any is undergoing is a very useful tool to assess the future "erformance from the com"any. 9om"any analysis ought to examine the levels of com"etition( demand( and other forces that affect the com"anys ability to be "rofitable. Of these factors( understanding the com"etitive environment is most im"ortant. A business faces five forces of com"etition &"orters model' namely( sellers com"etition( buyers com"etition( com"etition from new entrants( exit com"etition. 9om"etitive forces include the "ower of those who sell the business( those who buy the business# those who buy from the business( how easily new businesses can enter the industry( how costly it is to exit( and finally( the com"etition from those who already in the industry. >ow well a com"any deals with each of these forces will determine whether the com"any earns above or below average "rofit. :ach of these forces is discussed below. 71 orter model

Porter$s !ive !orces is a framework for industry analysis and business strategy develo"ment formed by ,ichael :. Porter of >arvard 3usiness +chool in 0EIE. *t draws u"on *ndustrial Organization &*O' economics to derive five forces that determine the com"etitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry "rofitability. An %unattractive% industry is one in which the combination of these five forces acts to drive down overall "rofitability. A very unattractive industry would be one a""roaching %"ure com"etition%( in which available "rofits for all firms are driven down to zero. Three of Porter$s five forces refer to com"etition from external sources. The remainder are internal threats.

27

Porter referred to these forces as the micro environment( to contrast it with the more general term macro environment. They consist of those forces close to a com"any that affect its ability to serve its customers and make a "rofit. A change in any of the forces normally( re)uires a business unit to re-assess the market"lace given the overall change in industry information. The overall industry attractiveness does not im"ly that every firm in the industry will return the same "rofitability. !irms are able to a""ly their core com"etencies( business model or network to achieve a "rofit above the industry average. A clear exam"le of this is the airline industry. As an industry( "rofitability is low and yet individual com"anies( by a""lying uni)ue business models( have been able to make a return in excess of the industry average. Porter$s five forces include - three forces from $horizontal$ com"etition threat of substitute "roducts( the threat of established rivals( and the threat of new entrants# and two forces from $vertical$ com"etition the bargaining "ower of su""liers and the bargaining "ower of customers. This five forces analysis is just one "art of the com"lete Porter strategic models. The other elements are the value chain and the generic strategies

(a) The threat of the entry of new competitors

Profitable markets that yield high returns will attract new firms. This results in many new entrants( which eventually will decrease "rofitability for all firms in the industry. Cnless the entry of new firms can be blocked by incumbents( the abnormal "rofit rate will fall towards zero &"erfect com"etition'. The existence of barriers to entry &"atents( rights( etc.' The most attractive segment is one in which entry barriers are high and exit barriers are low. !ew new firms can enter and non-"erforming firms can exit easily. :conomies of "roduct differences 3rand e)uity +witching costs or sunk costs 9a"ital re)uirements Access to distribution

28

9ustomer loyalty to established brands Absolute cost *ndustry "rofitability# the more "rofitable the industry the more attractive it will be to new com"etitors %.& The threat of su.stitute products or services The existence of "roducts outside of the realm of the common "roduct boundaries increases the "ro"ensity of customers to switch to alternatives 3uyer "ro"ensity to substitute Relative "rice "erformance of substitute 3uyer switching costs Perceived level of "roduct differentiation Aumber of substitute "roducts available in the market :ase of substitution. *nformation-based "roducts are more "rone to substitution( as online "roduct can easily re"lace material "roduct. +ubstandard "roduct Muality de"reciation %c& The .ar!ainin! power of customers %.uyers& The bargaining "ower of customers is also described as the market of out"uts the ability of customers to "ut the firm under "ressure( which also affects the customer$s sensitivity to "rice changes. 3uyer concentration to firm concentration ratio /egree of de"endency u"on existing channels of distribution 3argaining leverage( "articularly in industries with high fixed costs 3uyer volume 3uyer switching costs relative to firm switching costs 3uyer information availability Ability to backward integrate Availability of existing substitute "roducts 3uyer "rice sensitivity /ifferential advantage &uni)ueness' of industry "roducts R!, Analysis %d& The .ar!ainin! power of suppliers The bargaining "ower of su""liers is also described as the market of in"uts. +u""liers of raw materials( com"onents( labor( and services &such as ex"ertise' to the firm can be a source of "ower over the firm( when there are few substitutes. +u""liers may refuse to work with the firm( or( e.g.( charge excessively high "rices for uni)ue resources.

29

+u""lier switching costs relative to firm switching costs /egree of differentiation of in"uts *m"act of in"uts on cost or differentiation Presence of substitute in"uts +trength of distribution channel +u""lier concentration to firm concentration ratio :m"loyee solidarity &e.g. labor unions' +u""lier com"etition - ability to forward vertically integrate and cut out the 3C<:R %e& The intensity of competitive rivalry !or most industries( the intensity of com"etitive rivalry is the major determinant of the com"etitiveness of the industry. +ustainable com"etitive advantage through innovation 9om"etition between online and offline com"anies# click-and-mortar -v- slags on a bridge ?evel of advertising ex"ense Powerful com"etitive strategy The visibility of "ro"rietary items on the .eb used by a com"any which can intensify com"etitive "ressures on their rivals. >ow will com"etition react to a certain behavior by another firm= 9om"etitive rivalry is likely to be based on dimensions such as "rice( )uality( and innovation. Technological advances "rotect com"anies from com"etition. This a""lies to "roducts and services. 9om"anies that are successful with introducing new technology are able to charge higher "rices and achieve higher "rofits( until com"etitors imitate them. :xam"les of recent technology advantage in have been m"5 "layers and mobile tele"hones. 8ertical integration is a strategy to reduce a business$ own cost and thereby intensify "ressure on its rival.

2. The financial statements of the company: Records that outline the financial activities of a business( an individual or any other entity. !inancial statements are meant to "resent the financial information of the entity in )uestion as clearly and concisely as "ossible for both the entity and for readers. !inancial statements for businesses usually include income statements( balance sheet( statements of retained earnings and cash flows( as well as other "ossible statements

5. 0atio analysis: A tool used by individuals to conduct a )uantitative analysis of information in a com"any$s financial statements. Ratios are calculated from current year numbers and are then com"ared to "revious years( other com"anies( the industry( or even the economy to judge the "erformance of the com"any. Ratio analysis is "redominately used by "ro"onents of fundamental analysis. There are many ratios that can be calculated

30

Nfrom the financial statements "ertaining to a com"any$s "erformance( activity( financing and li)uidity. +ome common ratios include the "rice-earnings ratio( debt-e)uity ratio( earnings "er share( asset turnover and working ca"ital.

6. 0(A: Return on assets( which( offering a different take on management$s effectiveness reveals how much "rofit a com"any earns for every dollar of its assets. Assets include things like cash in the bank( accounts receivable( "ro"erty( e)ui"ment( inventory and furniture. ROA is calculated like this
Annual Net Income Total Assets

81 0(I: Return on *nvestment is one of several commonly used a""roaches for evaluating the financial conse)uences of business investments( decisions( or actions. RO* analysis com"ares the magnitude and timing of investment gains directly with the magnitude and timing of investment costs. A high RO* means that investment gains com"are favorably to investment costs
1A*A+- *A8:+T,:AT 9O+T+ *A8:+T,:AT 9O+T+

91 0(- Of all the fundamental ratios that investors look at( one of the most im"ortant is return on e)uity. *t$s a basic test of how effectively a com"any$s management uses investors$ money - RO: shows whether management is growing the com"any$s value at an acce"table rate. RO: is calculated as
Annual Net Income Average Shareholders' Equity

:1 - $: The "ortion of a com"any$s "rofit allocated to each outstanding share of common stock. :arnings "er share serve as an indicator of a com"any$s "rofitability.

31

9alculated as

;1 + $: The the sum of declared dividends for every ordinary share issued. /ividend "er share &/P+' is the total dividends "aid out over an entire year &including interim dividends but not including s"ecial dividends' divided by the number of outstanding ordinary shares issued. /P+ can be calculated by using the following formula

/ - +um of dividends over a "eriod &usually 0 year' +/ - +"ecial( one time dividends + - +hares outstanding for the "eriod <1 =( 0ATI(: The amount of earnings "aid out in dividends to shareholders. *nvestors can use the "ayout ratio to determine what com"anies are doing with their earnings 9alculated

7>1 +I4I+-)+ '-I"+: financial ratio that shows how much a com"any "ays out in dividends each year relative to its share "rice. *n the absence of any ca"ital gains( the dividend yield is the return on investment for a stock. /ividend yield is calculated as follows

32

RESEARCH METHODOLOGY (Chapter-5)

33

0esearch methodolo!y
Research methodology is a way to systematically solve the research "roblem. The research methodology using for find out the solution of the research "roblem is analytical research methodology and some extend descri"tive research methodology +econdary /ata The sources of secondary data for solve the "roblems are 9om"any Annual Re"ort A9: e)uity database *nternet-websites

eriod of study
The "eriod of the study is 7 years i.e. &2HHF-2H0H'. 9om"any 7 years data has been taken for the analysis.

Tools
These are the most "o"ular tools of fundamental analysis. They focus on earnings( growth( and value in the market. :arnings "er +hare ; :P+ Price to :arnings Ratio ; P4: Projected :arning 1rowth ; P:1 Price to +ales ; P4+ Price to 3ook ; P43 /ividend Payout Ratio /ividend <ield 3ook 8alue Ratio Analysis ?i)uid ratio

34

Turnover ratio 8aluation ratio

Techni#ues
The techni)ue used in the analysis of the com"any is excel sheets( gra"hs and tables of financial statement for exam"le balance sheet( "rofit loss a4c( cash flow statement( dividend "er share( ratio analysis( valuation ratio etc.

35

DATA ANALYSIS

(Chapter-6)

36

The "rocess of evaluating data using analytical and logical reasoning to examine each com"onent of the data "rovided. This form of analysis is just one of the many ste"s that must be com"leted when conducting a research ex"eriment. /ata from various sources is gathered( reviewed( and then analyzed to form some sort of finding or conclusion. There are a variety of s"ecific data analysis method( some of which include data mining( text analytics( business intelligence( and data visualizations /ata can be of several ty"es Muantitative data is a number Mualitative data is a "ass4fail or the "resence of a characteristic Muantitative data is data measured or identified on a numerical scale. Aumerical data can be analyzed using statistical methods( and results can be dis"layed using tables( charts( histograms and gra"hs. The term )ualitative data is used to describe certain ty"es of information. This is almost the converse of quantitative data( in which items are more "recisely described as data in terms of )uantity and in which numerical values are used. >owever( data originally obtained as )ualitative information about individual items may give rise to )uantitative data if they are summarized by means of counts. Mualitative data described items in terms of some )uality or categorization that may be $informal$ or may use relatively ill-defined characteristics such as warmth and flavor. >owever( )ualitative data can include well-defined as"ects such as gender( nationality or commodity ty"e.

37

ECONOMY ANALYSIS

38

Analysis of Indian -conomy

*ndia$s economy ex"anded G.GD in the second )uarter from a year earlier( com"ared to an G.FD onyear ex"ansion in the first( lifted by robust activity in manufacturing. Agricultural out"ut along with strong develo"ment in the *ndustrial( ,ining and banking sector have hel"ed to boost the *ndian economy. Agricultural out"ut raised 2.G "er cent y-o-y thanks to im"roved harvests. *ndustrial "roduction increased by 02D and in the mining sector by ED. According to 2H0H data the shares of banking sector value add in 1/P has been increased I.ID from 2.7D. The forecasters have assigned highest 2E.F "er cent chance that it will fall in F.H-F.E "er cent in 2H0H- 00. They raised their forecasts slightly for agriculture growth to 6.H "ercent from 5.7 "ercent( for industry to E.H "ercent from G.0 "ercent and for services it was steady at E.H "ercent . The survey showed the economists ex"ect 1/P growth in the A"ril-@une )uarter to be G.0 "ercent u" from I.E "ercent in the last survey. !or the @uly-+e"tember )uarter( 1/P growth is "laced at G.5 "ercent. The Reserve 3ank of *ndia has stated that it had seen an annual growth of G.7D steadily. The main "riority of the Reserve 3ank is to curb the ongoing inflation( which "eaked at 00D last month. *nterest rates have been increased by the banks to contain the inflation( but it could slow down the growth of the *ndian economy in the coming months. 3ut even thought there has been a rise in the interest rates there

hasnt been much change in the distribution of loans( the *ndian customer is hardly affected with the hiked interest rates. Almost every sector of the economy is "oised to grow faster and a E "er cent growth in 2H0H-00 is not difficult if domestic "olicies and external factors do not come in the way. :x"ert ex"ects that *ndia s economy to grow by G.0D in 2H0H based on a stee" gain in industrial out"ut and resurgent "rivate consum"tion investment and ex"orts. .ere these scenarios to continue growth would lift further to G.5D in 2H00 said 9hief :conomist. They also ex"ect the Reserve 3ank of *ndia &R3*' to continue gradually raising interest rates and to kee" a tight leash on li)uidity to tame inflation. Recently R3* changed the re"o rate from 7.I7D to FD and reverse re"o rate 6.7D to 7D. 9RR rate they kee"ing unchanged. This six time * a year they revise key "arameter to control inflation.

39

I)+IA 3+ $*03-$ ;1<? I) TH- THI0+ @*A0T-0

*ndia$s domestically-"owered economy grew more than ex"ected in the +e"tember )uarter( defying weakness elsewhere and "utting "ressure on the Reserve 3ank of *ndia &R3*' to tighten monetary "olicy although a rate increase next month still looks unlikely. Annual gross domestic "roduct grew G.E "ercent in the +e"tember )uarter -- matching the revised figure for the "revious )uarter. 9onsumer "rice inflation eased to an annual E.I "ercent in October from E.G2 "ercent the "revious month( data showed on Tuesday. .holesale "rice inflation( which is more closely watched as it covers a higher number of "roducts( eased to G.7G "ercent in October from G.F2 "ercent a month earlier. *nvestment growth slowed on an annualized basis to 00.0 "ercent from 0E "ercent in the "revious )uarter( while annualized "rivate consum"tion accelerated to E.5 "ercent from I.G "ercent in the "revious )uarter( "ointing to inflationary risks. The services sector( which accounts for over 7H "ercent of 1/P( grew E.G "ercent in the +e"tember )uarter( higher than E.5 "ercent in the "revious )uarter. +igns of easing inflation( a fragile global economy and weaker industrial out"ut in +e"tember were likely to forestall any rise in rates in the near-term( some analysts said. %Cnless the full year growth looks likely to cross E "ercent( the central bank is unlikely to get aggressive again in raising rates(% said Anjali 8arma( economist at ,! 1lobal in ,umbai. *ndustrial out"ut growth -- a key indicator of growth momentum -- in Asia$s third-largest economy slowed unex"ectedly in +e"tember to 6.6 "ercent from a year earlier( down from the "revious month$s u"wardly revised F.E2 "ercent growth

'ear 2H0H 2HHE 2HHG

40

,a r G.F H 7.GH G.7H

Au n G.E H F.HH I.GH

$e p G.E H

+e c -

G.FH F.7H I.7H F.0H

>ealthy economic growth( es"ecially since 2HH7( has also facilitated im"ressive growth in the commercial banking sector &9hart 7.2'. Though the growth rate of the consolidated balance sheet of commercial banks moderated in 2HHG-HE at 20 "er cent as com"ared to 27 "er cent in 2HHI-HG( the sector continued to grow at a rate higher than that of the nominal 1/P &at current market "rices'. Accordingly( the ratio of commercial banking assets to 1/P increased to EG.7 "er cent at end- ,arch 2HHE from E0.F "er cent as at end-,arch 2HHG.

41

.ith the im"act of the financial crisis gradually affecting the global economy( credit off-take slowed down further and the year on year growth in bank credit during the first half year of 2HHE-0H stood at 02.5 "er cent. /uring the same "eriod( investments grew by 56.7 "er cent &as com"ared to F.5 "er cent as on +e"tember 2HHG'. >owever( there are early signs of credit growth recovering in line with the economy( on the back of fiscal and monetary measures. This trend is clearly shown by the movements in incremental credit-de"osit &9/' and investment-de"osit &*/' ratio in recent "eriods &9hart 7.7'.

42

I)+IA I)F"ATI() 0ATThe inflation rate in *ndia was last re"orted at E.6I "ercent in /ecember of 2H0H. !rom 0EFE until 2H0H( the average inflation rate in *ndia was I.EE "ercent reaching an historical high of 56.FG "ercent in +e"tember of 0EI6 and a record low of -00.50 "ercent in ,ay of 0EIF. *nflation rate refers to a general rise in "rices measured against a standard level of "urchasing "ower. The most well known measures of *nflation are the 9P* which measures consumer "rices( and the 1/P deflator( which measures inflation in the whole of the domestic economy. This "age includes *ndia *nflation Rate chart( historical data and news.

yea r 2H0 H 2HH E 2HH G

Aa n 0F.2 2 0H.6 7

Fe . 06.G F

,a r 06.G F

Ap r 05.5 5

,a y 05.E 0

Au n 05.I 5

Aul 00.2 7 00.G E

Au !

$e p

(c t

)o v

+ e c

E.GG 00.I 2

E.G2 00.F 6

E.IH 00.6 E 0H.6 7

G.55 05.7 0 0H.6 7

E.6I 06.E I

E.F5

G.H5

G.IH

G.F5

E.2E

7.70

7.6I

I.GI

I.G0

I.I7

I.FE

G.55

E.H2

E.II

E.IH

43

India Interest 0ate

(he ben-h,ark intere+t rate 3re4er+e re0o5 in India 6a+ la+t re0orted at 575 0er-ent7 In India8 intere+t rate de-i+ion+ are taken by the 1e+er4e Bank of India9+ &entral Board of $ire-tor+7 (he offi-ial intere+t rate i+ the ben-h,ark re0!r-ha+e rate7 %ro, 2000 !ntil 20108 India9+ a4era:e intere+t rate 6a+ 5782 0er-ent rea-hin: an hi+tori-al hi:h of 14750 0er-ent in A!:!+t of 2000 and a re-ord lo6 of 3725 0er-ent in A0ril of 20097

'ear 2H00

Aa n 7.7 H

Fe .

,a r

Ap r

,a y

Au n

Au l

Au !

$e p

(c t

)o v

+ e c

2H0 H 2HH E 2HH G

5.27

5.27

5.5G

5.F5

5.I7

5.I7

6.HG

6.7H

7.HH

7.27

7.27

6.7H F.HH

6.HH F.HH

5.I7 F.HH

5.5G F.HH

5.27 F.HH

5.27 F.HH

5.27 F.HH

5.27 F.HH

5.27 F.HH

5.27 F.HH

5.27 F.HH

5.27 7.7H

44

INDUSTRY ANALYSIS

45

The last decade has seen many "ositive develo"ments in the *ndian banking sector. The "olicy makers( which com"rise the Reserve 3ank of *ndia &R3*'( ,inistry of !inance and related government and financial sector regulatory entities( have made several notable efforts to *m"rove regulation in the sector. The sector now com"ares favorably with banking sectors in the region on metrics like growth( "rofitability and non-"erforming assets &APAs'. A few banks have established an outstanding track record of innovation( growth and value creation. This is Reflected in their market valuation. >owever( im"roved regulations( innovation( growth and value creation in the sector remain limited to a small "art of it. The cost of banking intermediation in *ndia is higher and bank "enetration is far lower than in other markets. *ndias banking industry must strengthen itself significantly if it has to su""ort the modern and vibrant economy which *ndia as"ires to be. .hile the onus for this change lies mainly with bank managements( an enabling "olicy and regulatory framework will also be critical to their success. The failure to res"ond to changing market realities has stunted the develo"ment of the financial sector in many develo"ing countries. A weak banking structure has been unable to fuel continued growth( which has harmed the long-term health of their economies. *n this Kwhite "a"erL( we em"hasize the need to act both decisively and )uickly to build an enabling( rather than a limiting( banking sector in *ndia.

( (0T*)ITI-$ A)+ CHA""-)3-$ F(0 "A'-0$

The bar for what it means to be a successful "layer in the sector has been raised. !our challenges must be addressed before success can be achieved. !irst( the market is seeing discontinuous growth driven by new "roducts and services that include o""ortunities in credit cards( consumer finance and wealth management on the retail side( and in fee-based income and investment banking on the wholesale banking side. These re)uire new skills in sales J marketing( credit and o"erations. +econd( banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates "rovided. This will ex"ose the weaker banks. Third( with increased interest in *ndia( com"etition from foreign banks will only intensify. !ourth( given the demogra"hic shifts resulting from changes in age "rofile and household income( consumers will increasingly demand enhanced institutional ca"abilities and service levels from banks.

3rowth in the Indian .ankin! industry

The growth in the *ndian 3anking *ndustry has been more )ualitative than )uantitative and it is ex"ected to remain the same in the coming years. 3ased on the "rojections made in the %*ndia 8ision 2H2H% "re"ared by the Planning 9ommission and the /raft 0Hth Plan( the re"ort forecasts that the "ace of ex"ansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-,arch 2H0H are estimated at Rs 6H( EH(HHH crores That will com"rise about F7 "er cent of 1/P at current market "rices as com"ared to FI "er cent in 2HH2-H5. 3ank assets are ex"ected to grow at an annual com"osite rate of 05.6 "er cent during the rest of the decade as against the growth rate of 0F.I "er cent that existed between 0EE6-E7 and 2HH2-H5. *t is ex"ected that there will be large additions to the ca"ital base and reserves on the liability side.

46

Peer Group Comparison (Standalone) Compan y Name Indusin d Ban$ ICICI Ban$ 2010 03 25706 .93 9732. 18 4024 .98 Yea r #nd Net Sales PBI DT P A T Adj. #PS( !s) PBIDT M

(Rs. In Crore) PAT M !"C #

!"#

2010 03

2706. 99

703.8 9

350. 31

8.53

26

12.94

7.53

19.51

36.1

37.86

15.66

6.18

7.96

%ota$ Ban$

2010 03

3255. 62

1297

561. 11

8.06

39.84

17.23

6.68

13.52

&D'C Ban$

2010 03

16172 .9

6429. 73

2948 .7

64.42

39.76

18.23

5.95

16.31

A(is Ban$

2010 03

11638. 02

5240. 56

2514 .53

62.06

45.03

21.61

6.39

19.15

Interpretation

>ere we can see that *9*9* has highest net sales with 27IHF.E5 cr. And PAT is also highest among the "eer grou" with 6H2I.E5 cr. That means *9*9* is most favorable com"any to invest in terms of "rofit.

47

Bank B rivate Industry 0atios

Description No Of Comp nies Mar)in !atios !ie"# on $#% nces !ie"# on In%estments Cost of &i 'i"ities NI( Interest )pre # Per*orman+e !atios RO$ (*) RO+ (*) ROC+ (*) #**i+ien+y !atios Cost Income R tio Core Cost Income R tio Oper tin, Costs to $ssets Gro,t- !atio Core Oper tin, Income -ro.t/ Oper tin, 0rofit -ro.t/ Net 0rofit -ro.t/ $#% nces -ro.t/ .i/uidity !atios &o ns1Deposits(2) C s/1Deposits(2) In%estment1Deposits(2)

20 10 74 13. 31 6.2 2 5.0 2 5.6 3 8.2 8 1.1 7 10. 65 5.9 6 42. 89 44. 25 7.4 6

20 09 89 14. 23 7.4 4 6.0 9 5.3 8 8.1 4 1.2 8 11.0 7 7.11 42. 45 45. 19 7.5 5

20 08 83 12. 87 7.2 1 5.8 7 4.6 9 7 1.3 4 12. 02 7.0 4 46. 35 48. 74 7.4 9

20 07 71 12. 04 6.3 7 5.1 4.3 8 6.9 4 1.1 9 14. 45 6.4 50. 66 51. 78 7.8 2

200 6 68 11.3 6 6.41 4.27 4.92 7.1

1.18 13.3 6 5.56 51.3 8 50.8 8.2

9.0 9 2.4 5 3.7 3 8.9 9

30. 55 20. 79 16. 84 14. 77

44. 08 60. 6 55. 86 46. 44

32. 44 37. 8 37. 48 38. 42

107. 35 127. 56 102. 66 86.7 2

0.2 0.0 9 0.4

0.2 6 0.0 7 0.4

0.2 2 0.1 0.4

0.1 8 0.0 7 0.4

0.19 0.06 0.43

Inc &o n1Deposit (*)

7 19. 63

4 25. 72

3 22. 28

1 17. 58

18.7 3

48

Interpretation ROE: RO: examines "rofitably from the "ers"ective of e)uity investors by relating
"rofits available for the e)uity share holders with the book value of e)uity investments. The return from the "oint of view of e)uity shareholders may be calculated by com"aring the net "rofit less "reference dividend with there total contribution to the firm. Over the years RO: of the industry have declined 0(A: ROA measures a "rofitability of the firm in terms of assets em"loyed in the firm. RO: is calculated by establishing the relationshi" between the "rofits and the assets em"loyed to earn that "rofit. ROA shows as to how much is the "rofit earn by the firm "er ru"ee of assets used. >ere industry ROA is almost stable. )-T 0(FIT: the AP ratio establishes the relationshi" between the net "rofit &after tax' of the firm and the net sales. *ts measures the efficiency of the management in generating additional revenue over and above the total cost of o"erations. Aet "rofit ratio has decreased over the years which mean that the overall "rofitability of the industry has fallen down.

49

Bank B rivate Industry profit C "oss A=C

D+)CRI03ION No of Comp nies Interest + rne# Ot/er Income 3ot " Income Interest +2pen#e# Oper tin, +2penses 0ro%isions n# Contin,encies 0rofit 4efore 3 2 3 2es 3ot " 0rofit $fter 3 2 +2tr items 0rofit 'ro6,/t for. r# $#76stments to 0$3 3ot " 0rofit 8 &oss I9. $00RO0RI$3ION)

& te st 98 135486. 15 35136.2 4 170622. 38 78145.2 2 38681.0 1 19010.4 1 34785.7 4 12304.4 3 148141. 07 22481.3 1 522.08 15392.5 5 24.84 37898.7 37886.2 3

2010 74 113327.7 1 29599.5 4 142927. 25 65332.3 6 33282.4 5 16440.6 8 27871.7 6 9657.77 124713. 26 18213.9 9 519.49 14902.9 2 523.31 33093.6 33074.11

2009 89 136806. 93 35299.7 7 172106. 71 84711.83 36938.6 5 16710.7 33745.5 3 12149.6 9 150510. 87 21595.8 4 530.5 11246.87 15.64 32858.3 5 32827.8 5

2008 83 107590. 8 28016.6 6 135607. 47 68370.1 9 31161.41 8910.47 27165.3 9 8925.72 117367.7 9 18239.6 8 51.46 5710.75 140.12 24090.5 5 24089.0 9

2007 71 71311. 52 20011. 95 91323. 48 42996. 95 24155. 71 6848.8 4 17321. 97 5498.1 79499. 61 11823. 87 133.84 3893.1 2 182.71 15899. 7 16043. 16

2006 68 50355. 01 14051. 36 64406. 36 28555. 1 18421. 37 4792.7 4 12637. 15 3904.4 3 55673. 64 8732.7 3 62.51 1766.3 1 85.56 10584. 6 10647. 11

Interpretation
Private bank industry "rofit J loss account shows that banking industry is having a large "rofit yoy and growing ra"idly. This is a good sign for the investor who want to invest in the banking industry.
50

Competition
?ast Price ,arket 9a". &Rs. 9r.' 02I(522.FG 0HE(55H.5F 76(I66.26 55(I6G.I0 02(60G.0I 0H(EIG.75 I(676.E2 6(66E.05 6(2I2.F7 5(EE2.07 Aet *nterest *ncome 27(IHF.E5 0E(E2G.20 07(076.G0 5(277.F2 5(7GE.5F 6(H60.I6 5(FI5.25 0(I7I.E6 2(FE6.HF 5(H7F.GG Aet Profit Total Assets

*9*9* 3ank >/!9 3ank Axis 3ank Botak ,ahindra *ndus*nd 3ank <:+ 3AAB !ederal 3ank Barur 8ysya *A1 8ysya 3ank @B 3ank

0(0H7.67 2(57H.H7 0(555.67 67G.HH 2FI.HH 50F.27 65F.H7 60I.HH 575.07 G25.7H

6(H26.EG 5(E2F.5E 5(5GG.6E 7F0.00 7II.52 I2I.05 6F6.77 55F.H5 50G.F7 702.5G

5F5(5EE.I0 222(67G.7F 0GH(F6I.GI 5I(65F.50 57(5FE.72 5F(5G2.7H 65(FI7.F0 20(EE5.6E 55(GGH.26 62(76F.GH

51

COMPANY ANALYSIS

52

ICICI BA)2 "T+

*9*9* 3ank was originally "romoted in 0EE6 by *9*9* ?imited( an *ndian financial institution( and was its wholly-owned subsidiary. *9*9*s shareholding in *9*9* 3ank was reduced to 6FD through a "ublic offering of shares in *ndia in fiscal 0EEG( an e)uity offering in the form of A/Rs listed on the A<+: in fiscal 2HHH( *9*9* 3ank s ac)uisition of 3ank of ,adura ?imited in an all-stock amalgamation in fiscal 2HH0( and secondary market sales by *9*9* to institutional investors in fiscal 2HH0 and fiscal 2HH2. *9*9* was formed in 0E77 at the initiative of the .orld 3ank( the 1overnment of *ndia and re"resentatives of *ndian industry. The "rinci"al objective was to create a develo"ment financial institution for "roviding medium-term and long-term "roject financing to *ndian businesses. *n the 0EEHs( *9*9* transformed its business from a develo"ment financial institution offering only "roject finance to a diversified financial services grou" offering a wide variety of "roducts and services( both directly and through a number of subsidiaries and affiliates like *9*9* 3ank. *n 0EEE( *9*9* become the first *ndian com"any and the first bank or financial institution from non@a"an Asia to be listed on the A<+:. After consideration of various cor"orate structuring alternatives in the context of the emerging com"etitive scenario in the *ndian banking industry( and the move towards universal banking( the managements of *9*9* and *9*9* 3ank formed the view that the merger of *9*9* with *9*9* 3ank would be the o"timal strategic alternative for both entities( and would create the o"timal legal structure for the *9*9* grou" s universal banking strategy. The merger would enhance value for *9*9* shareholders through the merged entitys access to low-cost de"osits( greater o""ortunities for earning fee-based income and the ability to "artici"ate in the "ayments system and "rovide transaction-banking services. The merger would enhance value for *9*9* 3ank shareholders through a large ca"ital base and scale of o"erations( seamless access to *9*9* s strong cor"orate relationshi"s built u" over five decades( entry into new business segments( higher market share in various business segments( "articularly fee-based services( and access to the vast talent "ool of *9*9* and its subsidiaries. *n October 2HH0( the 3oards of /irectors of *9*9* and *9*9* 3ank a""roved the merger of *9*9* and two of its wholly-owned retail finance subsidiaries( *9*9* Personal !inancial +ervices ?imited and *9*9* 9a"ital +ervices ?imited( with *9*9* 3ank. The merger was a""roved by shareholders of *9*9* and *9*9* 3ank in @anuary 2HH2( by the >igh 9ourt of 1ujarat at Ahmedabad in ,arch 2HH2( and by the >igh 9ourt of @udicature at ,umbai and the Reserve 3ank of *ndia in A"ril 2HH2. 9onse)uent to the merger( the *9*9* grou" s financing and banking o"erations( both wholesale and retail( have been integrated in a single entity.

53

*9*9* 3ank is *ndias second-largest bank with total assets of Rs.5(IE5.H0 billion &C+O I7 billion' at ,arch 50( 2HHE and "rofit after tax Rs.5I.7G billion for the year ended ,arch 50( 2HHE. The 3ank has a network of 0(676 branches and about 6(I20 AT,s in *ndia and "resence in 0G countries. *9*9* 3ank offers a wide range of banking "roducts and financial services to cor"orate and retail customers through a variety of delivery channels and through its s"ecialized subsidiaries and affiliates in the areas of investment banking( life and non-life insurance( venture ca"ital and asset management. The 3ank currently has subsidiaries in the Cnited Bingdom( Russia and 9anada( branches in Cnited +tates( +inga"ore( 3ahrain( >ong Bong( +ri ?anka( Matar and /ubai *nternational !inance 9entre and re"resentative offices in Cnited Arab :mirates( 9hina( +outh Africa( 3angladesh( Thailand( ,alaysia and *ndonesia. Their CB subsidiary has established branches in 3elgium and 1ermany.

54

$)A $H(0T (F ICICI BA)2 "T+

Company Details Industry 4 n: ; 0ri% te

C-airman Mana)in) Dire+tor Company Se+retary ISIN Bloom0er) Code !euters Code

< 9 < m t/ C/ n# D <oc// r ) n#eep 4 tr IN+090$01013 ICICI4C IN IC4<.4O

Company Address !e)istered "**i+e & n#m r:=R ce Co6rse Circ"e=9 #o# r =390007=-67 r t

P-one

91502655661720013983200

'a(

915026552339926

1e0site

....icici' n:.com

#mail

in%estor>icici' n:.com

Pri+e In*ormation .atest Date .atest Pri+e (!s) Pre2ious Close (!s) 3 Day Pri+e 4ar 3 Year Pri+e 4ar 56 1ee$ &i)- (!s) 56 1ee$ .o, (!s) Beta

095( r511 1033.55 1020.85 1.24 11.76 1277 803.3 1.4927

'a+e 4alue (!s) Industry P#

10 20.04

55

0IC- 4=$ $-)$-D CHA0T

0erio#? @rom 1010312010 3o 0910312011

Company Si7e (Standalone) Mar$et Cap(!s Crore) 118741. 77 185491. 05

#4 (!s Crore)

.atest no. o* s-ares

1148873022

S-are -oldin) pattern as on 683836

Promoter No o* s-ares

Promoter

0 4516801 00

'II No o* S-ares

'II

39.23

Total No o* S-ares

1151422189

'ree 'loat 'inan+ial &i)-li)-ts (Standalone) Des+ription #/uity Paid >p 683889 1114.81 688:89 1113.21

100 (Rs. In Crore) 688;89 1112.6 688<89 899.27 688=89 889.8

!eser2e

50503.

48419.

45357.5

23413.

21316.16

48 202016 .6

73 218347. 83

3 244431. 05

92 230510 .19 165083.1 7

Deposits

Gross Blo+$

7114.1 2

7443.7 1

7036

6298.5 6

5968.57

Interest #arned

25706. 93 9732.1 8

31092. 55 8925.2 3

30788.3 4

21995. 59 5874.4 1

14306.13

"peratin) Pro*it

7960.68

3888.42

PAT

4024.9 8

3758.1 3

4157.73

3110.2 2

2540.08

Di2idend

120

110

110

100

85

Adj. #PS(!s)

36.1

33.76

37.37

34.59

28.55

Adj. Boo$ 463.02 4alue(!s) 444.95 417.67 270.37 249.56

56

%ey Mar$et !atio (Standalone) .atest #PS (!s) .atest C#PS (!s) Pri+e?TTM C#PS(() TTM P# (() Pri+e?B4(() #4?TTM #BIDTA(() #4?TTM Sales(() Di2idend Yield M+ap?TTM Sales(() .atest Boo$ 4alue (!s) 40.95 45.11

22.91 25.24 2.14 20.29 7.53 1.16

4.82 482.44

@uarter on @uarter (Standalone)

Parti+ulars

68383 6

6838 8:

@ on @ 4ar

(Rs. In Crore) Y on Y 688:36 4ar

Interest #arned

6695. 96

6309. 1

6.13

6089.57

9.96

Total #(penditure

1717. 92

1570. 37

9.4

1362.39

26.1

"peratin) Pro*it

2342. 61

2211. 94

5.91

2368.84

51.11

PAT

1437. 02

1236. 27

16.24

1101.06

30.51

PBIDTM

34.99

35.06

50.2

38.9

5 10.05

PATM

21.46

19.6

9.49

18.08

18.69

Adj. #PS(!s)

12.48

10.74

16.2

9.88

26.32

57

Interpretation
B-TA: A measure of the volatility( or systematic risk( of a security or a "ortfolio in com"arison to the market as a whole. 3eta is used in the ca"ital asset "ricing model &9AP,'( a model that calculates the ex"ected return of an asset based on its beta and ex"ected market returns. >ere beta is more than 0 &0.6E2I' beta of greater than 0 indicates that the security s "rice will be more volatile than the market. +tocks beta is 0.6E2I# its theoretically 6E.2ID more volatile than the market. - $ :P+ indicates the "rofitability of a com"any. :arning "er +hare is the single most "o"ular variable in dictating a shares "rice. :arning "er +hare is the Aet *ncome &"rofit' of a com"any divided by the number of outstanding shares. And here :P+ of the com"any increasing. This shows that com"any is earning "rofit. =-: "rice-to-earnings ratio &P4:' is "robably the most widely used ; and thus misused investing metric. *ts easy to calculate( which ex"lains its "o"ularity. The most common way to calculate P4: P share "rice divided by earnings "er share + $ The the sum of declared dividends for every ordinary share issued. /ividend "er share &/P+' is the total dividends "aid out over an entire year &including interim dividends but not including s"ecial dividends' divided by the number of outstanding ordinary shares issued. /ividends are a form of "rofit distribution to the shareholder. >aving a growing dividend "er share can be a sign that the com"anys management believes that the growth can be sustained. >ere dividend is highest in last 7 years# it indicates that com"any is growing <O<. *9*9* is having highest market ca"ital( net "rofit and assets value as com"ared to com"etitors this indicates that *9*9* is most favorable com"any for investors.

58

ICICI BA)2 "T+ BA"A)C- $H--T

( r510 D+)CRI03ION )OARC+) O@ @AND)? )/ re C pit " )/ re B rr nts 8 O6tst n#in, 3ot " Reser%es Deposits 4orro.in,s Ot/er &i 'i"ities 8 0ro%isions 3ot " &i 'i"ities $00&IC$3ION O@ @AND) ? C s/ n# ' " nce .it/ Reser%e 4 n: of In#i 4 " nces .it/ ' n:s n# moneC t c "" In%estments $#% nces -ross '"oc: &ess? $cc6m6" te# Depreci tion &ess? Imp irment of $ssets Net 4"oc: &e se $#76stment C pit " Bor: in 0ro,ress Ot/er $ssets 3ot " $ssets Contin,ent &i 'i"ities 4i""s for co""ection 4oo: 9 "6e $#76ste# 4oo: 9 "6e ( r509 ( r508 ( r507 ( r506

1114.89 0.00 50503.4 8 202016. 60 94263.5 7 15501.1 8 363399. 72

1113.29 0.00 48419.7 3 218347. 82 93155.4 5 18264.6 6 379300. 96

1462.68 0.00 45357.53 244431.0 5 65648.43 42895.38 399795.0 8

1249.34 0.00 23413.9 2 230510. 19 51256.0 3 38228.6 4 344658.1 1

1239.83 0.00 21316.16 165083.1 7 38521.91 25227.88 251388.9 5

27514.2 9 11359.40 120892. 80 181205. 60 7114.12 3901.43 3212.69

17536.3 3 12430.2 3 103058. 31 218310. 85 7443.71 3642.09 3801.62

29377.53 8663.60 111454.34 225616.0 8 7036.00 2927.11 4108.90

18706.8 8 18414.4 5 91257.8 4 195865. 60 6298.56 2375.14 3923.42

8934.37 8105.85 71547.39 146163.1 1 5968.57 1987.85 3980.71

19214.9 3 363399. 72 727084. 06 6474.95 463.02 463.02

24163.6 2 379300. 96 834683. 00 6000.44 444.95 444.95

20574.63 399795.0 8 1211082. 33 4278.28 417.67 417.67

16489.9 2 344658.1 1 562959. 91 4046.56 270.37 270.37

12657.51 251388.9 5 395033.6 7 4338.46 249.56 249.56

59

6 0

ICICI BA)2 "T+ 0(FIT A)+ "($$ A=C

( r5 10 D+)CRI03ION No of (ont/s I. INCO(+ Interest + rne# Ot/er Income 3ot " Income II. +D0+NDI3AR+ Interest +2pen#e# Oper tin, +2penses 0ro%isions n# Contin,encies 0rofit 4efore 3 2 3 2es 3ot " III. 0RO@I3 $ND &O)) 0rofit $fter 3 2 +2tr items 0rofit 'ro6,/t for. r# $#76stments to 0$3 3ot " 0rofit 8 &oss I9. $00RO0RI$3ION) +E6itC Di%i#en# * + rnin,s 0er )/ re $#76ste# +0) 12.00 25706.9 3 7477.65 33184.5 8 17592.5 7 5859.83 4386.86 5345.32 1320.34 29159.6 0 12.00 31092. 55 7603.7 3 38696. 28 22725. 93 7045.1 1 3808.2 6 5116.9 7 1358.8 4 34938. 14 3758.1 3 2436.3 2 6194.4 5 6194.4 5 110.00 33.76 33.76 12.00 30788. 34 8810.7 6 39599. 11 23484. 24 8154.1 8 2904.5 8 5056.1 0 898.37 35441. 38 4157.7 3 12.00 21995.5 9 6927.87 28923.4 6 16358.5 0 6690.56 2226.37 3648.04 537.82 25813.2 4 12.00 14306. 13 4180.8 9 18487. 02 9597.4 5 5001.1 5 791.81 3096.6 1 556.53 15946. 94 2540.0 7 ( r5 09 ( r5 08 ( r5 07 ( r5 06

4024.98

3110.22

2809.65

998.27 5156.0 0 5156.0 0 110.00 37.37 37.37

293.44

188.22 2728.3 0 2728.3 0 85.00 28.55 28.55

6834.63 6834.63 120.00 36.10 36.10

3403.66 3403.66 100.00 34.59 34.59

61

6 2

ICICI BA)2 "T+ FI)A)CIA" 0ATI($

1A(I2S
er Share 1atio+ . S $ S rofitability ratio+ ; 1atio " 1atio 12. 12A <i=!idity 1atio+ &!rrent 1atio >!i-k 1atio

2010

2009

2008

2007

2006

36710 12

33776 11

37737 11

34759 10

28755 8750

15706 12717 7796 1708

12736 9774 7783 796

12799 10751 11775 1712

11741 10781 13737 1704

15710 14712 14762 1721

1794 14770

0778 5794

0772 6742

0761 6704

0762 6764

63

Interpretation
-arnin! per share %- $&: :P+ is the "rofitability of the firm measures in terms of number of e)uity shares( which is derived by dividing the "rofit after tax by the number of e)uity shares. :P+ calculation in a time series analysis indicates whether the firm :P+ is increasing or decreasing. Over the years :P+ of the firm is increasing which indicates that "er share earning of the firm has increased( but this increase in :P+ is erroneous in the sense that the real earnings &RO:' have not increased.

64

+ividend per share %+ $&: sometimes the e)uity shareholders may not be interested in the :P+ but in the return which they are actually receiving from the firm in the form of dividends. The amount of "rofits distributed to shareholders "er share is known as /P+ and it is calculated by dividing total "rofits distributed by number of e)uity share. /ividend "er share over the years has increased which indicates that the amount of dividend distributed towards the shareholder has increased1

3ross profit ratio: the 1P ratio is also called the average mark u" ratio. *t is calculated by com"aring the gross "rofit of the firm with the net sales. *n 2HHI 1P ratio had drastically fallen( which means o"erating efficiency of the firm has decreased but it has recovered over the next three years and become almost stable.

65

)et profit ratio the AP ratio establishes the relationshi" between the net "rofit &after tax' of the firm and the net sales. *ts measures the efficiency of the management in generating additional revenue over and above the total cost of o"erations. Aet "rofit ratio has decreased over the years which mean that the overall "rofitability of the firm has fallen down.

0(- RO: examines "rofitably from the "ers"ective of e)uity investors by relating "rofits available for the e)uity share holders with the book value of e)uity investments. The return from the "oint of view of e)uity shareholders may be

66

calculated by com"aring the net "rofit less "reference dividend with there total contribution to the firm. Over the years RO: of the firm have declined which indicates that the funds of the owner have not been used "ro"erly by the firm( and the firm has not been able to earn satisfactory return for the owner.

0(A ROA measures a "rofitability of the firm in terms of assets em"loyed in the firm. RO: is calculated by establishing the relationshi" between the "rofits and the assists em"loyed to earn that "rofit. ROA shows as to how much is the "rofit earn by the firm "er ru"ee of assets used. ROA of the firm over the year is almost stable.

67

Current 0atio: current ratio shows the firms ability to "ay its current liability out of its current assets. 1enerally a current ratio of 2 0 is considered to be satisfactory but sometimes it varies from industry to industry therefore the firms current ratio should be com"ared with the standard for the s"ecific industry only. 9urrent ratio of the firm has increased over the year which indicates that the firm has enough current assets to "ay off its current liability.

@uick ratio this ratio establishes the relationshi" between )uick current assets and current liabilities. Muick current assets excludes inventory and "re"aid ex"enses from current assets as they are "otentially illi)uid. This calculated by dividing )uick assets by total current liabilities. 1enerally a )uick ratio of 0 0 is considered to be satisfactory. Muick ratio of the firm is much higher than the ideal and its increasing over the years which means that the firm has enough )uick assets to "ayoff its current liability.

68

ICICI BA)2 "T+ 4A"*ATI() 0ATI(

D+)CRI03ION $#76ste# 0+ (2) 0C+(2) 0rice 1 4oo: 9 "6e(2) Di%i#en# !ie"#(*) +91Net ) "es(2) +91+4I3D$(2) +91+4I3(2) +91C+(2) ( C p 1 ) "es Fi,/ 0+ &o. 0+ ( r5 10 26.3 9 23.5 9 2.06 1.26 7.80 20.6 0 8.74 0.55 4.13 28.4 5 10.3 5 ( r5 09 9.85 8.76 0.75 3.31 4.19 14.5 9 4.68 0.34 1.19 25.1 9 7.03 ( r5 08 20.6 1 18.8 1 1.84 1.43 4.93 19.0 5 5.31 0.38 2.78 42.1 3 20.6 1 ( r5 07 24.6 7 22.1 3 3.16 1.17 5.83 21.8 4 6.41 0.37 3.49 29.5 0 15.9 6 ( r5 06 20.6 4 18.1 6 2.36 1.44 6.38 23.4 8 7.19 0.36 3.66 22.7 6 13.2 4

ICICI BA)2 "T+ CA$H F"(W 0ATI(

( r5 10 D+)CRI03ION C s/ @"o. 0er s/ re 16.77 5 127.46 5 104.54 256.45 52.29 ( r5 09 ( r5 08 ( r5 07 ( r5 06

0rice to C s/ @"o. R tio @ree C s/ @"o. per )/ re 0rice to @ree C s/ @"o. @ree C s/ @"o. !ie"# ) "es to c s/ f"o. r tios

56.82 102.15 9.33 0.11 13.75

52.61 241.13 1.38 0.72 52.19

57.37 198.79 3.87 0.26 52.65

3.33 5 160.91 55.30 50.19 0.95

11.27 30.12 19.56 0.05 3.07

69

Intrinsic value of ICICI Bank <ear 2HHF 2HHI 2HHG 2HHE 2H0H :P+ 5F.0H 55.IF 5I.5I 56.7E 2G.77 P4: 2F.5E E.G7 2H.F0 26.FI 2H.F6

0' 3ased on the "ast 7 year :P+ data( estimated growth D can be determine. And the estimated growth rate is 0H.0D 2' Aow( by using the current :P+ we can com"ound it with the estimated growth i.e. 0H.0D 5' 9urrent :P+ is 6H.E7 com"ounding of the :P+ is 6H.E7N&6H.E7Q.0H0'P67.HG7 6' Aow( based on the "ast 7 year P4: take the average of P4: value which is 2H.652 7' Aow multi"ly the ste" 5 J 6 and we will get the estimated share "rice. F' :stimated share "rice is E20.0IF and current share "rice is 0H55 which is higher than the estimated its means that share "rice is overvalued and investor should sell the shares for short term.

70

-6pected 3rowth of ICICI in E>77 .y *nicon Investment research report

K*9*9* 3ank registered a good financial "erformance in M6!<00 with standalone PAT u" by 66D to *AR 06.72 3n from *AR 0H.HF 3n in M6!<0H. The growth( being the highest in last I years( was aided by increase in interest and non interest income. The MoM increase in Aet *nterest *ncome was better than ex"ected &a rise of 25.5D from *AR 2H.57 bn in M6!<0H to *AR 27.0H 3n to M6!<00'. Aet interest margin increased MoM J <o< by 0H b"s to 2.ID res"ectively( on account of lower cost of funds( lower delin)uencies and growing 9A+A de"osits.L K9A+A ratio increased from 60.ID in M6!<0H to 67.0D in M6!<00. The total de"osits increased by 00.ID <o< &*AR FFG.I 3n on ,arch 50(2H00 as com"ared to *AR 752.0G 3n in ,arch 50(2H0H'. Aon interest income decreased by 05.2D MoM and 00.0D <o<( this was "rimarily because of ,T, loss in treasury income &M6!<00 value stood at *AR 0.EF 3n' and reduction in other income by I5.FD &MoM'. >owever( fee income increased by 0I.GD to *AR 0I.E0 3n on MoM basis. Advances increased <o< by only 0ED which was lower than the industry level of 20D( advances to domestic I0or"orate increased by 62.FD <o<. The retail advances like vehicle loan and home loan are ex"ected to grow in the near future. The Aet APAs im"roved from 0.GID in M6!<0H to H.E6D of net advances in M6!<00. ?oan loss coverage ratio also increased to IFD on ,arch 50(2H00 from 7E.7D in ,arch 50(2H0H( much above the R3* regulation of IHD. O"erating ex"enses rose <o< by 06.0D to *AR 0I.GE 3n in M6!<00 from *AR 06.7G 3n in M6!<0H. 9redit to de"osit ratio from domestic business stood at I7D( 9ost to income ratio was 62D due to healthy o"erating income growth. This was on account of ex"anding network of the bank with 272E branches and F0H6 AT,s.L K*9*9* 3anks growth in the "ast has been mainly retail-driven( the bank is now looking to grow its large cor"orate and +,: segment loan book as well. Progress on the R69 strategy &9A+A( ca"ital conservation( cost control and credit charges' has been good. At the 9,P *9*9* is trading at 2x of its !<02: P438 &standalone basis'. .e have Accumulate rating on the stock for a target "rice of *AR 05HF(L says Cnicon *nvestment research re"ort

71

FINDING S (Chapter-7)

72

*n this "roject re"ort there are many facts which say whether an investor should invest in *9*9* 3ank or not. !or the conclusion on this "art( we have analyzed economic( industry as well as com"any &*9*9* 3ank'. 0' *n the :conomic Analysis we can see that economic is booming after 2HHE and current "osition shows that this is the good time to invest after the recession because 1/P growth rate is increasing. And overall economy is growing. 2' *n the industry analysis here overall industry PAT is increasing over the years which means banking industry is having much "rofit but on the other side banking industry Aet Profit growth has decreased very much so investor should invest carefully. 5' *n the analysis of *9*9* 3ank we can see that :P+ is increasing yoy. And dividend is also increasing so investor can invest in the com"any but on other side we com"any s intrinsic value is less than the current "rice it shows that the share "rice is overvalued and invester should sell the share. 3ut if investor want to invest in the com"any for long term than he can have a good "rofit because com"any growing ra"idly in terms of "rofit and net sales and its :P+ J /P+ are increasing over the years.

73

LIMITATI ONS

74

!undamental analysis has some limitation involved in it. This limitation can be ex"lained as under Time Constrain: !undamental analysis may offer excellent insights( but it can be extraordinarily timeconsuming. Time-consuming models often "roduce valuations that are contradictory to the current "rice "revailing on the exchange. Company $pecific: 8aluation techni)ues vary de"ending on the industry grou" and s"ecifics of each com"any. !or this reason( a different techni)ue and model is re)uired for different industries and different com"anies. This can be )uite time-consuming "rocess( which can limit the amount of research that can be "erformed. The sales and inventory ratio may be very im"ortant for the cement sector com"any but these ratios are not very useful for the banking sector. Inade#uacies of +ata: .hile making analysis one has to often wrestle with inade)uate data. .hile deliberate falsification of data may be rare( subtle misre"resentation and concealment are common. Future *ncertainties: !uture changes are largely un"redictable# more so when the economic and business environment is buffeted by fre)uent winds of change. *n an environment characterized by discontinuities( the "ast record is a "oor guide to future "erformance. Irrational ,arket Behavior: The market itself "resents a major obstacle while making analysis on account of neglect or "rejudice( undervaluation may "ersist for extended "eriods# likewise( overvaluations arising from unsatisfied o"timism and mis"laced enthusiasm may endure for unreasonable lengths of time.

75

CONCLUS ION

76

!undamental analysis holds that no investment decision should be without "rocessing and analyzing all relevant information. *ts strength lies in the fact that the information analyzed is real as o""osed to hunches or assum"tions. On the other hand( while fundamental analysis deals with tangible facts( it does not tend to ignore the fact that human beings do not always act rationally. ,arket "rices do sometimes deviate from fundamentals. Prices rise or fall due to insider trading( s"eculation( rumor( and a host of other factors. !undamental analysis is based on the analysis of the economic( industry as well as the com"any and in this research we can see that the economic indicators have an effect on the bank growth and assets. The above re"ort says that our economic is growing after the recession and it is the good time for the one who want to invest. and according to the industry analysis investor can invest in the banks but he4she should be careful for the investment. 3ut according to financial analysis of *9*9* bank its "erformance in the "rivate industry is good and ex"ected to grow further in the near future which is a good sign for investment. :P+ and dividend both are increasing yoy and its on the to" in terms of "rofit and net interest income if we com"ared it with the other banks in the same industry but we cant ignore the intrinsic value of the com"any which is lower than the current value which shows then investor should sell the share of the com"any if he4she is investing for short term and for long term it is good for investor to invest in the com"any.

77

$*33-$TI()

78

The analysis carried out at on the *9*9* 3ank( their "rofit and loss account( balance sheet and ratios. * shall suggest the investors to invest in *9*9* 3ank than the other banks as a value investment. Reasons S ?argest "rivate sector bank in *ndia( second largest in entire banking *ndustry Sincrease in "rofit year-on-year basis. +trong S
*ncreasing :P+ indicate good earnings. *ncrease in sharing "rofit with shareholders in form of dividend.

S *9*9* 3ank is ex"anding its footholds on international level also# its *nsurance and asset management business are also "erforming well.

79

BIB"I(30A H'

80

Books: *nvestment Analysis J Portfolio ,anagement- Prasanna 9handra. !inancial management ; R.P Rustagi AC- -@*IT' data .ase We.sites: www.google.com www.icicibank.com www.rbi.org.in www.moneycontrol.com www.e)uitymaster.com mwww.nseindia.com htt" 44www.businessstandard.com4india4index2."h" htt" 44economictimes.indiatimes.com4
htt" 44en.wiki"edia.org4wiki4,agneticTinkTcharacterTrecognition htt" 44finance.indiabizclub.com4info4indianTbankingTindustry htt" 44finance.indiamart.com4investmentTinTindia4bankingTinTindia.html

8 1