Fyp-Equity Research For India Infoline

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A PROJECT REPORT ON EQUITY RESEARCH (FUNDAMENTAL ANALYSIS) FOR INDIA INFOLINE LTD.
SUBMITTED TO UNIVERSITY OF PUNE IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE MASTERS IN BUSINESS ADMINISTRATION (M.B.A.)
SUBMITTED BY CHOTHANI HITESH HASMUKH ( BATCH - 2006-08 )
BRACTs VISHWAKARMA INSTITUTE OF MANAGEMENT, KODHAWA PUNE- 411014.
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www.final-yearproject.com | www.troubleshoot4free.com/fyp/
ACKNOWLEDGEMENT
This project bears imprint of all those who have directly or indirectly helped and extended their kind support in completing this project.
At the time of making this report I express my sincere gratitude to all of them.
I must first express my gratitude to Ms. Reena Singh, Branch Manager (Sohrab Hall Branch) and the staff members for having accorded me the permission to undertake a project in India Infoline Ltd.
I also must show my deepest gratitude to Director Dr. Sharad Joshi and Prof. Smita Sovani for their valuable suggestions, guidance and advice in bringing out this project.
- Chothani Hitesh H.
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INDEX Sr. No. 1. Title EXECUTIVE SUMMARY

Page No. 1
2.
COMPANY PROFILE
3.
OBJECTIVE OF THE STUDY
4.
THEREOTICAL BACKGROUND
10
5.
RESEARCH METHODOLOGY
18
6.
DATA ANAYLSIS/FINDINGS
20
7.
LIMITATIONS
55
8.
CONCLUSION
57
9.
RECOMMANDATION
60
10.
BIBLIOGRAPHY
62
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INTRODUCTION
The stock markets are the most volatile markets and are difficult to understand as the weather. Though this does not mean that the markets cannot be predicted but it only means that trends may change without warning, as with weather. The stock markets are characterized by almost all factors, again starting right from weather and ending at the political environment. Effects of one market also causes a spillover into the other and an external cause in one market can lead to the reaction in another market. For instance, its been proved that a delayed monsoon in India will create the problems of flooding in the European countries, effecting adversely economies of both the regions. The pulse of the market also depends upon timely exit and entry. For arriving at a correct conclusion reasonable data is required to understand the mechanics of the stock and the industry vis--vis global and local in which the company operates. While a practical long-term view will help reduce risks, marrying the stock on the other hand may totally increase risks. By going through the Industry Reports, Financials the investor can arm himself with reasonable information about the stocks, which are being tracked by the investor. However, for consistent monitoring of stocks, it is imperative that the investor has limited exposure to the stocks, which are being capable of being tracked by him a too big a portfolio will divert attention and ultimately harm investor interests. In the present project an attempt is made to study the importance of fundamental analysis for investors.
Shares: -
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The companies Act 1956 defines Shares as a share in the capital of a company and includes stock except where distinction between stock and share is expressed or implied. A share is regarded as property, which can be bought and sold like any other property. It also consists other rights given by Articles of Association of company.
Equity or ordinary shares: These are those shares, which do not enjoy any special rights in respect of payment of dividend or repayment of capital. The return of capital to equity shareholders is not guaranteed. Also when the company is wound up, capital of equity shareholders is lastly paid, only after all other claims have been paid in full. That is why equity is also called as The Risk Bearing or Venture Capital.
There are two sources of return on equity shares: -
1. Dividend: -When companies earn sufficient profit, then Board of Directors declares for all shares. 2. Capital Gain: -Which arises from an increase in the market price of shares, which is generally associated with growth in per share earning.
Benefits of Investments in Equity shares: -
1. You can earn good rate of dividend or can make better profit on market fluctuation.
2. Bonus issue: - These are given as free gift to existing shareholders either fully
or partly paid up out of accumulated profits. 3. Existing shareholders can get Right issue in case of further issue of capital by company. 4. Equity shareholders have Right to vote in annual general meeting and other rights like call meeting, winding up of the company. 5. Shareholders get free copy of Annual Report in which details of all business conducted in last year is mentioned.
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6. A share is Transferable Property. It can be transferred or transmitted by shareholder to any other person. 7. Tax Exemption: -As per Income Tax Act, Dividend is not taxable in the hands of shareholders similarly Long Term Capital Gain on shares is exempted up to March 2007.
8. Liquidity: -Because of large market for share investor can convert his
investments into liquid money easily.
What is Fundamental analysis?

Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, fundamental analysts look to capitalize on perceived price discrepancies.
Fundamental analysis is a method used to determine the value of a stock by analyzing the financial data that is 'fundamental' to the company. That means that fundamental analysis takes into consideration only those variables that are directly related to the company itself, such as its earnings, its dividends, and its sales. Fundamental analysis does not look at the overall state of the market nor does it include behavioral variables in its methodology. It focuses exclusively on the
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company's business in order to determine whether or not the stock should be bought or sold.
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EXECUTIVE SUMMARY
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In India many traditional people are very risk averse. They are not aware of the investment opportunities in the stock market. They consider stock market as a game of gambling. But the original scenario is quite different. There is no doubt that there are speculators who try to hike the price of a stock artificially. Investing in equities involves high risk and the return on it totally depends on the companies performance. But investing in the right stock at the right price and holding for a longer time horizon would surely be a better investment.
The strategy of selecting stocks that trade for less than their intrinsic value is called value investing. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, causing stock price movements that do not correspond with the company's long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated. The very definition of value investing is subjective. Some value investors only look at present assets/earnings and don't place any value on future growth. Other value investors base strategies completely around the estimation of future growth and cash flows. Despite the different methodologies, it all comes back to trying to buy something for less than its worth. The purpose behind this project was to learn the mannerisms of the stock market trading and analyzing a stock for a good investment opportunity.
The reason behind choosing this project is that it provides hands on experience with what goes on in the stock market on a day to day basis. The field of equity research is very vast and one has to look into various aspects of the functioning of the company to get to any conclusion about the possible performance of the company in the market. Investors like warren buffet made a fortune out of investments in the stock market, which is quiet impossible without proper research about the companies. The field of equity research is full of challenges.
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The project is done with India Infoline Securities Limited a very well known company in the field of stock broking and capital market services sector. This project gave me a chance to get valuable insights from a hoard of vastly experienced people in this field and to get various approaches each one adopts to evaluate various companies. The duration of the project was two months. These two months were not only limited to learning and devoting time towards equity research but it also provided an insight on what various services such broking houses provide and what efforts are required to manage such organizations.
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COMPANY PROFILE
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INDIA INFOLINE LTD

India Infoline limited is listed on both the leading stock exchanges in India, i.e. The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). It is engaged in the business of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with the National Securities Depository Ltd. (NSDL) as well as Central Depository Services Ltd. (CDSL) as a depository participant, providing a one-stop solution for client trading in the equities market. A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients.
COMPANY VISION:
The companies Vision is to be the most respected company in the financial services space. The box below elaborates how the company proposes to attain the vision of being the most respected company in the space.
SHAREHOLDERS Growth at above industry rate with derisking High ROCE, ROE
GENERAL PUBLIC Corporate Governance Transparency
CUSTOMERS Cutting edge technology High service standards
EMPLOYEES Skill development by investments in training Empowerment and conducive work environment
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SLOGAN:
ITS ALL ABOUT MONEY, HONEY!
PRODUCT AND SERVICES:

We are a one-stop financial services shop, most respected for quality of its advice, personalised service and cutting-edge technology.
Equities Broking:
India Infoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to India Infoline. India Infoline leveraged technology to bring the convenience of trading to the investors location of preference (residence or office) through computerized access. India Infoline made it possible for clients to view transaction costs and ledger updates in real time.
Portfolio Management Services:

Our Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. We at Indiainfoline invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio.
Research:
Sound investment decisions depend upon reliable fundamental data and stock selection techniques. India Infoline Equity Research is proud of its reputation for, and we want you to find the facts that you need. Equity investment professionals routinely use our research and models as integral tools in their work. They choose Ford Equity Research when they can clear your doubts.
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Commodities:
India Infolines extension into commodities trading reconciles its strategic intent to emerge as a one-stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Companys commodities business provides a contra-cyclical alternative to equities broking. The Company was among the first to offer the facility of commodities trading in Indias young commodities market (the MCX commenced operations only in 2003). Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities market has several products with different and non-correlated cycles. On the whole, the business is fairly insulated against cyclical gyrations in the business.
Insurance:
An entry into this segment helped complete the clients product basket; concurrently, it graduated the Company into a one-stop retail financial solutions provider. To ensure maximum reach to customers across India, we have employed a multi pronged approach and reach out to customers via our Network, Direct and Affiliate channels. Following the opening of the sector in 1999-2000, a number of private sector insurance service providers commenced operations aggressively and helped grow the market.
The Companys entry into the insurance sector derisked the Company from a predominant dependence on broking and equity-linked revenues. The annuity based income generated from insurance intermediation result in solid core revenues across the tenure of the policy.
Invest In Mutual Fund

India Infoline offers you a host of mutual fund choices under one roof, backed by in-depth research and advice from research house and tools configured as investor friendly.
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Wealth Management Services:

Imagine a financial firm with the heart and soul of a two-person organization. A world-leading wealth management company that sits down with you to understand your needs and goals. We offer you a dedicated group for giving you the most personal attention at every level.
Mortgages:
During the year under review, Indiainfoline acquired a 75% stake in Moneytree Consultancy Services to mark its foray into the business of mortgages and other loan products distribution. The business is still in the investing phase and at the time of the acquisition was present only in the cities of Mumbai and Pune. The Company brings on board expertise in the loans business coupled with existing relationships across a number of principals in the mortgage and personal loans businesses. Indiainfoline now has plans to roll the business out across its pan-Indian network to provide it with a truly national scale in operations.
HEAD OFFICE: India Infoline Ltd., 75, Nirlon Complex, Off. Western Express Highway, Goregaon (East), Mumbai 400063.
WEB ADDRESS: www.indiainfoline.com www.5paise.com
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OBJECTIVE OF THE PROJECT
TO UNDERSTAND THE CONCEPT AND TECHNIQUES OF FUNDAMENTAL ANALYSIS. TO STUDY THE PUBLIC SECTOR BANKS AND KEY PLAYERS IN THE INDIAN STOCK MARKET. TO RECOMMEND THE BEST AS A VALUE INVESTMENT
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THEREOTICAL BACKGROUND
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ABOUT PUBLIC SECTOR BANKS.

The shares undertaken here for the analysis belongs to the banking industry. All the firms herein mention are from the public sector. This means that all the banks are Public Sector Undertaking (PSUs).
A Public sector undertaking is a wherein the majority of the stake is with either the state or the central government. A better word instead of stake can be control, i.e. either the control is in the hands of the state government or the central government. We can see in each of the bank that the majority of the shares are held by the promoters that is the government. Nationalization of the banks took place on 19th July, 1969. Initially fourteen banks were nationalized. Later on six more banks were added to the list. At present nineteen banks are under the public sector.
The government had contributed an aggregate of Rs. 20,446.12 crore towards recapitalization of the nationalized banks by the end of March 1999. The government of India decided to allow some of the public sector banks to tap directly the domestic capital markets. In order to enable the nationalized banks to access the capital markets to strengthen their capital base and meet the capital adequacy norms. The authorized capital of each of the public sector banks was been set at Rs. 1500, crore divided into 150 crore fully paid up share of Rs. 10 each.
Oriental Bank of Commerce was the first nationalized bank to have access to the capital markets. It raised a sum of Rs. 387.24 crore in October 1994, reducing the government shareholding to 66.5%. In these way all the the public sector banks came down to the capital market as and when required. The government share holding is still the highest in all the public sector banks though all the banks have bought their IPOs to the market.
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Why Public Sector Banks?

A Public sector undertaking is a wherein the majority of the stake is with either the state or the central government. A better word instead of stake can be control, i.e. either the control is in the hands of the state government or the central government. We can see in each of the bank that the majority of the shares are held by the promoters that is the government.
The public sector banks are one of the major sources of finance for small, medium as well as large firms. These banks are very important from the point of deposit mobilization. The public sector banks are those which have a strong network of branches and they have reached the remote areas of the country. For e.g. the state bank of India has a great network of branches and ATMs. SBI is the largest bank of the country and is an agent of the Reserve bank Of India.
The public sector is a great source for fund mobilization and asset allocation. The banks considered herein are the banks that have highest market capitalization among the Public Sector Banks of the banking industry.
The banks if ranked according to their market capitalization:

State Bank of India. Punjab National Bank. Bank of Baroda. Bank of India.
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BANKING STRUCTURE OF INDIAN BANK
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KEY POINTS ABOUT THE BANKS
Demand
Indian economy is growing at an impressive rate. The Industrial production remained robust during April-May 2007, recording a year-on-year expansion of 11.7 per cent. The manufacturing sector remained the key driver of industrial activity, with growth of 12.7 per cent. While growth of the mining sector remained subdued, that of the electricity sector was higher than that during April-May 2006. The manufacturing sectors robust performance was largely contributed by machinery and equipment, food products, basic metal and alloy industries and chemicals and chemical products. The higher growth in food products and wood and wood products could be partly attributed to the base effect. Robust growth in bank deposits and nonfood credit off take and exports of business process outsourcing and information technology-enabled services helped in sustaining the growth of the sub-sector financing, insurance, real estate and business services. All these sectors are directly or indirectly connected to the bank or are dependent on the banks for the growth.
Barriers to entry
Getting license for opening a bank is a rigorous process. The Reserve Bank of India has laid down many criteria for getting a license for any organization to run a banking business. It requires a specific amount of capital as prescribed by the RBI. There is a huge investment in technology. Now days the business houses are in requirement of speed banking so investment in technology is very important. For growth of the bank it is very important for a bank to build a strong branch network. Again there are rules laid out by the RBI for opening of the branches. Banks have to open branches in the rural area to get a license to open a branch in the urban area.
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Bargaining power of suppliers:

The bargaining power of the supplier is high during periods of tight liquidity. Trade unions in public sector banks can be anti reforms. Depositors may invest elsewhere if interest rates fall.
Competition:
There is high competition in the banking sector because of various kinds of banks working in India. There are public sector banks, private sector and foreign banks. The private sector banks are the banks which attracts the business house and the high income class people. They normally are providing better service than the public sector bank. The foreign banks operating in India are doing their business quite efficiently. They have shown higher return on asset than the domestic banks, higher non interest income, attained higher capital adequacy ratio and lower NPAs. The public sector banks are facing a good competition from the scheduled co-operative bank like The Cosmos Co operative bank. The non banking financial companies (NBFC) are also giving a good competition being in similar business lines.
Supply:
Liquidity is controlled by the Reserve Bank of India (RBI). This may be done by the RBI by the means of CRR or SLR.
CRR, BANKS AND SHARE PRICE
One of the major factors affecting profitability of the bank and thus the share price of the banks is the CRR. Lets understand how. CRR stands for the cash reserve ratio. This is the specified proportion of deposits that a bank has to maintain with the RBI. At present the cash reserve ratio is 7.00%. When there is a change in the CRR, the first impact is seen on the banks. For banks, the rise in CRR would mean that a larger proportion of funds will be with RBI, while a fall in rate will mean a lower proportion will be with the apex bank.
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There are specific angles that one has to consider while evaluating the impact of CRR on banks. In time of boom, like is the currently, lending will give a higher rate of return to banks. Hence, if they have to keep a large proportion of their funds away from lending and in the form of deposits, it is a loss of opportunity for them. This will bring down their earnings. An increase in CRR would also mean that money is sucked out of the system. This would mean that funds are hard to come by and hence banks will have to pay more to depositors in order to induce them to keep their funds banks. This will push up the cost of funds for banks. Due to this banks will also have to raise lending rates in order to meet the increased cost while maintaining their margins. The market will analyze banks on the basis of their margins, and whether they will be able to maintain this going forward. A CRR rise in it self means tougher condition for banks but what is important is that they should also be able to keep pace with this entire situation. That is the key to the way in which the bank stocks will perform in the market.
RBIs moves on the CRR.
Effective Since March 31, 2004 September 18, 2004 October 2, 2004 January 24, 2006 October 31, 2006 December 23, 2006 January 6, 2007 January 31, 2007 February 17, 2007 March 3, 2007 April 14, 2007 April 28, 2007
Cash Reserve Ratio 4.50 4.75 5.00 5.00 5.00 5.25 5.50 5.50 5.75 6.00 6.25 6.50 (+0.25) (+0.25) (+0.25) (+0.25) (+0.25) (+0.25) (+0.25) (+0.25)
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There may also be an over all impact on companies in terms of scarcity of funds along with an increase in costs due to which the overall interest charges for capital intensive companies will increase. There is also the worry that a lower lending could lead to a contraction in activities, which might slow down demand in various sector. This in turn could act as a dampener for several companies. It also affects share prices of companies that operate in the affected sector over the medium term.
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RESEARCH METHODOLOGY
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The present study is the outcome of systematic procedures adopted by the researcher, which includes primary data collection as well as secondary data collection. They are explained below:
1. PRIMARY DATA COLLECTION:

Primary data is originally gathered specifically on project hand. One can obtain information from dealers, salesmen, etc. It offers much greater accuracy and reliability. In this study, the facts and figures are raw material with which researcher works. Thus, in primary data collection researcher come across many methods as follows:
Observation method
2. SECONDARY DATA COLLECTION:

Secondary data is the data already collected by someone else. This data is not especially collected to solve present or specific problem. The information is relevant and can be used for our purpose. After doing the data collection in primary method, the researcher did the collection through the secondary data. In this there are several types such as:
General library Trade-Books Internet etc.
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DATA ANALYSIS AND FINDINGS
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THE CURRENT ECONOMIC SCENARIO

The status of the economy has a major impact on the overall stock prices. Economic analysis is the study of the economic trends in the economy. The major factors contributing to the economy analysis are as follows.
THE GROWTH OF THE GDP.

The Indian economy continued to record robust growth in 2006-07 for the fourth successive year, buoyed by the sustained momentum in the services and manufacturing sectors. The latest estimates released by the Central Statistical Organisation (CSO) in May 2007 revised real GDP growth upwards to 9.4 percent during 2006-07 from 9.2 per cent in the advance estimates. The upward revision was mainly due to manufacturing (12.3 per cent from the earlier estimate of 11.3 per cent) and construction (10.7 per cent from 9.4 per cent), partly offset by downward revision in financing, insurance, real estate and business services (10.6 per cent from 11.1 per cent). Real GDP growth averaged 8.6 per cent per annum during 2003-04 to 2006-07 and 7.6 per cent per annum for the Tenth Plan period (2002-03 to 2006-07) Indian economy grew 9.3% in April-June 2007 fuelled by industrial and services sectors. The real GDP growth during the same quarter of last year was at 9.6%. While the agricultural sector grew at 3.6%, industrial and services grew 10.6% each on Y-o-Y basis. Despite the higher than expected growth during the first quarter, economists expect growth momentum to slow down in the coming quarters due to high level of interest rates and rupee appreciation.
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The Growth of the GDP:
GDP Trend
10 8 6 GDP Growth % 4 2 0 2004-05 2005-06 Year 2006-07 7.5 9 9.4
THE TREND OF INFLATION.

Simply put, inflation is a rise in prices items over a period of time. It is measured through various indices & each provides specific information about the prices of items that it represents. The index could be the Wholesale Price Index (WPI) or the Consumer Price Index (CPI) for specified categories of people like agricultural workers or urban non - manual employees. Each of the indices created in the specific manner with the certain year as the base year and they consider the price change over the year. The rate of inflation declared every week has an impression on the stock market. In the graph you can see the trend followed by the inflation.
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The Trend of Inflation
Inflation Trend
8 7 Inflation (%) 6 5 4 3 2 1 0 29/04/05 26/10/06 9/6/2006 31/10/06 6/1/2007 31/01/07 17/02/07 3/3/2007 30/03/07 14/04/07 Date 4.5 6 4.9 5.3 6.4 6.7 6
6.5
6.5
6.3
INFLATION AND THE MARKETS? To tame inflation, the government usually hikes interest rates. This tends to make debt instrument attractive relative to equities as the former carry a lower risk(small saving instruments are risk free as they are guaranteed by the government). This result in some amount investment shifting from equity to debt. However, high inflation is not always bad and low inflation need not always be good for equity markets, as the impact will differ for companies and sector across different time horizons. The first thing to consider is the items where prices are rising. For e.g. a rise in oil prices will impact a wide range of items from food products to those that require transportation.
BALANCE OF PAYMENTS Indias balance of payments in 2006-07 reflected a number of positive features, merchandise trade continue to exhibit robust growth during 2006-07, although there was some loss of pace from a strong growth of 2005-06. The higher growth of imports vis--vis experts lead to a persistent rise in trade deficit, on the balance of payments basis. Nonetheless the current account deficits as per cent of GDP remain unchanged (1.1% of GDP) from the previous year since the widening of
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the merchandise trade deficit was offset to a large extent by the continuing buoyancy in net invisibles surplus. Net capital inflows to India remained buoyant (4.9% of GDP), fart exceeding the current account deficit. Higher capital flows could be attributed to the strengthening of micro economic fundamentals, greater investor confidence and ample global liquidity. Net FDI inflows from abroad US$ 19.4 billion exceeded FII inflows (net) during 2006-07 aggregating US$ 3.2 billion the debt flows (net) at US$ 25.0 billion were led by external commercial borrowings reflecting strong investment demand. Net capital flows, after financing the current account deficit, led to accretion of US$ 36.6 billion, excluding valuation changes, to foreign exchange reserves during 2006-07.
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THE CURRENT BANKING SCENARIO

Currently (2007), overall, banking in India is considered as fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets-as compared to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility-without any stated exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector, the demand for banking services-especially retail banking, mortgages and investment services are expected to be strong. M&As, takeovers, asset sales and much more action (as it is unravelling in China) will happen on this front in India. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
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STATE BANK OF INDIA

BSE: 500112 INDUSTRY: Banking PSU. NSE: SBIN
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BANK PROFILE:
State Bank of India was established on the 1st July, 1955, by acquiring the total asset and the liabilities of the Imperial Bank of India. The State Bank of India has a paid up capital of Rs. 526.30 crore. Reserve Bank of India is the single largest shareholder of the bank. SBIs shares and bonds are listed for trading on all the major Indian stock exchanges viz., Bombay, New Delhi, Kolkata, Chennai and Ahemdabad; and at the National Stock exchange. SBI has one of the largest market capitalization of all the companies traded on the exchanges. The banks GDRs are listed on the London Stock Exchange.
State Bank of India (SBI), formed in 1955 is the largest public sector bank in India.
The Government of India holds 59.73 percent of the total equity shares of the bank; institutional investors hold 23.48 percent shares, while the Public holds 6.36 percent. Mr. T. S. Bhattacharya is the chairman of the bank.
Core sectors to which services of the bank extends are Personal banking, NRI's, Agricultural and Rural sectors, International banking, Corporate banking, Small and Medium Sized Enterprises (SME), Government banking, etc. Some of the primary services provided are working capital finance, project finance, deferred payment guarantees, capex loans, corporate term loans, structured finance, dealer financing, channel financing, equipment leasing, loan syndication, financing Indian overseas firms, packing credit, external commercial borrowings, foreign currency loans, Letter of Credits, guarantees, etc. Facilities provided by the bank are ATM services, Internet banking, e-payments, e-rail booking, safe deposit locker, gift cheques, foreign inward remittance, foreign travel card etc. The bank also provides non-banking services in areas like capital markets, mutual funds, security trading, insurance, factoring services and credit card business etc., through its subsidiaries.
The registered office of SBI is in Mumbai. The bank operates through a network of 14 Local Head Offices, 57 Zonal Offices and 5217 ATMs all over India. It also has 52 foreign offices in 34 countries across the globe. It has 3 training institutes located at
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Hyderabad and an academy at Gurgaon. The bank has also acquired two new branches at Sydney and Muscat.
Shareholding Pattern
Indian Promoters Foreign collaborators Indian inst/Mutual Fund FIIs ADR/GDR Free float Shareholders 59.7% 0.01% 11.0% 11.9% 0.0% 17.3% 526,782
Market related data as on 18/06/07
Market Capital Face Value 52 Wks High/Low Market Price
69387 (Rs Crore) Rs. 10 1455/684 1318
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FINANCIAL ANALYSIS
BALANCE SHEET OF STATE BANK OF INDIA FOR THE LAST THREE YEARS.
Rs in Crore MARCH 2005 MARCH 2006 MARCH 2007 Capital and Liabilities Equity Share Capital 526.30 526.30 526.30 Preference Share 0.00 0.00 0.00 Capital Reserves 23,545.84 27,117.79 30,772.26 Revaluation Reserves 0.00 0.00 0.00 Deposits 367,047.52 380,046.06 435,521.09 Borrowings 19,184.31 30,641.24 39,703.33 Other Liabilities & 49,767.97 55,829.23 60,283.15 Provisions Total Liabilities 460,071.94 494,160.62 566,806.13 ASSETS Cash & Balance with 16,810.33 21,652.70 29,076.43 RBI Balance with Banks, 22,511.77 22,907.30 22,892.26 Money at Call Advances 202,374.45 261,800.94 337,336.49 Investments 197,097.91 162,534.24 149,148.88 Net Block 2,576.42 2,673.11 2,676.92 Capital Work in 121.27 79.82 141.95 Progress Other Assets 18,579.79 22,512.51 25,533.20 Total Assets 460,071.94 494,160.62 566,806.13
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PROFIT AND LOSS ACCOUNT OF STATE BANK OF INDIA FOR THE LAST THREE YEARS.
Rs in Crore MARCH 2005 MARCH 2006 MARCH 2007 INCOME Interest Earned 32,428.00 35,979.57 39,491.03 Other Income 7,121.73 7,528.16 7,498.94 39,549.73 43,507.73 46,989.97 Total Income EXPENDITURE Interest expended 18,483.37 20,390.45 23,436.82 Employee Cost 6,907.35 8,123.05 7,932.58 Selling and Admin 2,414.61 2,872.92 3,288.55 Expenses Depreciation 752.21 763.68 631.51 Miscellaneous 6,950.96 7,159.20 6,687.67 Expenses Preoperative Exp 0.00 0.00 0.00 Capitalised Operating Expenses 10,076.00 11,759.65 13,530.15 Provisions & 6,685.84 6,950.96 5,481.69 Contingencies 35,245.21 39,101.06 42,448.66 Total Expenditure Net Profit for the 4,406.67 4,541.31 4,304.52 Year Profit brought 0.34 0.34 0.34 forward 4,304.86 4,407.01 4,541.65 Total Profit Equity Dividend (%) 125.00 140.00 140.00 526300000 526300000 526300000 No of Share
- 37 -
NET PROFIT GROWTH
SBI
4,550.00 4,500.00 4,450.00 4,400.00 Net Profit (Rs in 4,350.00 Crores) 4,300.00 4,250.00 4,200.00 4,150.00
4541.65 4407.01 4,304.86
2005
2006 Year
2007
STOCK PRICE
SBI
1800 1600 1400 1200 1000 800 600 400 200 0 1525 1245.6 938 654.8 681.9 908.15 968.5 727.75 1028.65 994.45
Price
30 /0 9/ 06
31 /1 2/ 05
31 /0 3/ 06
30 /0 6/ 05
31 /0 3/ 05
30 /0 9/ 05
30 /0 6/ 06
31 /1 2/ 06
Date
- 38 -
31 /0 3/ 07
Da te
MARKET PRICE AS ON BALANCE SHEET DATE:

(in Rs ) Market share MARCH 2005 654.8 MARCH 2006 968 MARCH 2007 994
price
per
KEY FINANCIAL RATIOS

Particulars ROE EPS Dividend Payout Ratio Book Value Per Share P/E Ratio % MARCH 2005 17.88 81.79 15.28 457.38 8.05 MARCH 2006 16.25 83.73 16.72 525.63 11.56 MARCH 2007 14.51 86.29 16.22 594.69 11.51
INTERPRATATION:
The profit of the bank is not increasing much, which can be the reason which has bought the return on equity down. The other reason for ROE decreasing may be high distribution of dividend. Slow growth of the EPS must not be the reason for the shareholder to worry because the bank is being giving more than 100% dividend which brings the profit down and therefore the EPS. As against this the P/E is on an increase. The increasing book value shows that the bank has collected a good sum for the shareholders as reserves. The dividend payout ratio is growing which is good for the holders who like to have some kind of cash flow from their investments. The market price of the share shows a substantial capital appreciation in the year 2005-60, but shows volatility.
- 39 -
BANK OF INDIA
BSE 532149 INDUSTRY Banking PSU. NSE - BANKINDIA
- 40 -
BANK PROFILE
Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalized along with 13 other banks. Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalized banks. The Bank has 2644 branches in India spread over all states/ union territories including 93 specialized branches. These branches are controlled through 48 Zonal Offices. There are 24 branches/ offices (including three representative offices) abroad. The Bank came out with its maiden public issue in 1997. Total number of shareholders as on 30/09/2006 is 2, 25,704. While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalized banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio. The Bank's association with the capital market goes back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock broking community. Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in
- 41 -
1974. The Bank has sizable presence abroad, with a network of 23 branches (including three representative offices) at key banking and financial centers viz. London, New York, Paris, Tokyo, Hong-Kong, and Singapore. The international business accounts for around 20.10% of Bank's total business.
Shareholding Pattern Indian Promoters Foreign collaborators Indian inst/Mutual Fund FIIs ADR/GDR Free float Shareholders 69.5% 0.0% 5.7% 16.1% 0.0% 8.8% 211,473
9338 (Rs Crore) Rs. 10 217/80 191
- 42 -
FINANCIAL ANALYSIS
BALANCE SHEET OF BANK OF INDIA FOR THE LAST THREE YEARS.
Rs in Crore Capital and Liabilities Equity Share Capital Preference Share Capital Reserves Revaluation Reserves Deposits Borrowings Other Liabilities & Provisions Total Liabilities ASSETS Cash & Balance with RBI Balance with Banks, Money at Call Advances Investments Net Block Capital Work in Progress Other Assets Total Assets
MARCH 2005
MARCH 2006
MARCH 2007
488.14 0.00 3811.12 165.61 78,821.44 5,961.95 5,756.16 95,004.42 3,904.73 3,621.52 55,528.89 28,686.32 791.58 22.59 2,448.79 95,004.42
488.14 0.00 4338.40 157.35 93,932.03 5,893.91 7,476.39 112,286.22 5,588.41 5,857.57 65,173.75 31,781.75 799.29 10.68 3,074.77 112,286.22
488.14 0.00 5257.75 149.48 119,881.74 6,620.83 9,269.07 141,667.01 7,196.89 10,208.65 84,935.89 35,492.76 777.89 11.41 3,043.52 141,667.01
- 43 -
PROFIT AND LOSS ACCOUNT OF BANK OF INDIA FOR THE LAST THREE YEARS.
Rs in Crore MARCH 2005 MARCH 2006 MARCH 2007 INCOME Interest Earned 6,031.53 7,028.70 9,180.33 Other Income 1,155.79 1,184.38 1,562.95 7,187.32 8,213.08 10,743.28 Total Income EXPENDITURE Interest expended 3,794.64 4,396.72 5,739.86 Employee Cost 1,263.21 1,328.13 1,614.00 Selling and Admin 690.28 897.69 570.27 Expenses Depreciation 98.84 96.73 96.73 Miscellaneous 1,120.31 999.78 1,271.83 Expenses Preoperative Exp 0.00 0.00 0.00 Capitalized Operating Expenses 1,932.32 2,115.14 2,608.42 Provisions & 1,120.31 999.78 1,271.83 Contingencies 6,847.27 7,511.64 9,620.11 Total Expenditure Net Profit for the 701.44 1,123.17 340.05 Year Profit brought 0.00 220.00 541.76 forward 340.05 921.44 1,664.93 Total Profit Equity Dividend (%) 20.00 30.00 35.00 No of Share 488140000 488140000 488140000
- 44 -
NET PROFIT GROWTH

BOI
2000 1500
Net Profit (Rs in 1000 Crores)
1664.93 921.44 340.05
500 0 2005
2006 Year
2007
STOCK PRICE
BOI Price 250 200 Price 150 100 50 0
31 /1 2/ 05
231.7 207.4 162 103.65 103.5 122.9 126.9 133.45 100.3 168
31 /1 2/ 06
31 /0 3/ 07
Date
- 45 -
31 /0 6/ 07
31 /0 3/ 06
30 /0 6/ 06
30 /0 9/ 06
30 /0 9/ 05
31 /0 3/ 05
30 /0 6/ 05
MARKET PRICE OF THE SHARE AS ON 31ST MARCH:
(in Rs ) Market share
price
per
MARCH 2005 103.65
MARCH 2006 133.45
MARCH 2007 167.8
KEY FINANCIAL RATIOS:
Particulars ROE (%) EPS (Rs) Dividend Payout Ratio P/E Ratio Book Value Per Share (Rs)
MARCH 2005 7.62 6.96 28.73 14.89 91.47
MARCH 2006 18.49 18.89 15.88 7.07 102.09
MARCH 2007 28.24 34.10 10.26 4.92 120.77
INTERPRETATION: Percentage wise the net profit of the bank is very favorable. The growth in return on equity is also showing that the bank is earning sufficiently for the shareholders. The growing profits are leading towards the growth of the EPS. The price trend also shows that the share is not much volatile and also shows an upward trend. Holders for long term are benefited from the capital appreciation. The P/E ratio showing a down trend may be because of the price not increasing to the proportion of the profit. A lower P/E ratio is considered one of the most important criteria for investment purpose. The growing book value indicates that the bank has huge reserves and can be a potential for bonus.
- 46 -
PUNJAB NATIONAL BANK

BSE: 532461 INDUSTRY: Banking PSU NSE: PNB
- 47 -
BANK PROFILE: Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital.The bank was nationalised in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a frontline banking institution in India at present. Punjab National Bank is the fourth largest banking entity in the country (in terms of asset size) with 4.2% share of the total credit disbursals at the end of FY07. Given its geographic concentration in the northern regions, the bank was a laggard in terms of credit growth until FY04, which led to it barely sustaining its share of nonfood credit at 4.5%. However, not able to keep up with its private sector peers in incremental credit disbursements and low retail credit exposure resulted in a loss of market share (from 4.5% in FY04 to 4% in FY06). Nevertheless, an operating overhaul in terms of asset quality and retention of high margins has helped the bank position itself favourably amongst its peers and marginally enhance its share in FY07. Adequate capital, high NPA coverage and interest rate insulation pegs the bank amongst the frontrunners in the public sector banking space. A professionally managed bank with a successful track record of over 110 years. Largest branch network in India 4525 offices including 432 Extension counters spread throughout the country. Strategic business area covers the large Indo Gangetic belt and the metropolitan centers. Rupee drawing arrangements with M/s UAE Exchange Centre, UAE, M/s Al Fardan Exchange Co. Doha, Qatar,M/s Bahrain Exchange Co, Kuwait, M/s Bahrain Finance Co, Bahrain,M/s Thomas Cook Al Rostamani Exchange Co. Dubai,UAE, and M/s Musandam Exchange, Ruwi, Sultanate of Oman.
- 48 -
Share Holding Pattern
Indian Promoters Foreign collaborators Indian inst/Mut Fund FIIs ADR/GDR Free float Shareholders
57.8% 0.0% 16.2% 20.1% 0.0% 6.0% 240,135
15434 (Rs Crore) Rs. 10 585/300 490
- 49 -
FINANCIAL ANALYSIS
BALANCE SHEET OF PUNJAB NATIONAL BANK FOR THE LAST THREE YEARS.
(Rs in Crore) MARCH 2005 MARCH 2006 MARCH 2007 Capital and Liabilities Equity Share 315.30 315.30 315.30 Capital Preference Share 0.00 0.00 0.00 Capital Reserves 7,533.51 8,758.68 9,826.31 Revaluation 312.49 302.38 293.85 Reserves Deposits 103,166.89 119,684.92 139,859.67 Borrowings 2,718.29 6,664.87 1,948.86 Other Liabilities & 12,222.24 9,623.64 10,285.14 Provisions Total Liabilities 126,268.72 145,349.79 162,529.13 ASSETS Cash & Balance 9,460.20 23,394.55 12,372.03 with RBI Balance with 1,397.14 3,273.49 Banks, Money at 1,628.83 Call Advances 60,412.75 74,627.37 96,596.52 Investments 50,672.83 41,055.31 45,189.84 Net Block 965.23 1,030.23 1,009.82 Capital Work in 0.00 0.00 0.00 Progress Other Assets 3,128.88 3,845.19 4,087.43 Total Assets 126,268.72 145,349.79 162,529.13
- 50 -
PROFIT AND LOSS ACCOUNT OF PUNJAB NATIONAL BANK FOR THE LAST THREE YEARS.
Rs in Crore INCOME Interest Earned Other Income Total Income EXPENDITURE Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenditure Net Profit for the Year Extraordionary Items Profit brought forward Total Profit Equity Dividend (%) No of Share
MARCH 2005 8,459.85 2,186.36 10,646.21 4,453.11 2,121.23 670.70 183.28 1,807.77 0.00 3,437.48 1,345.50 9,236.09 1,410.12 0.00 0.00 1,410.12 60.00 315300000
MARCH 2006 9,584.15 1,901.00 11,485.15 4,917.39 2,114.98 721.53 186.64 2,105.30 0.00 3,300.70 1,827.75 10,045.84 1,439.31 0.00 0.00 1,439.31 90.00 315300000
MARCH 2007 11,537.48 1,932.71 13,470.19 6,022.91 2,352.45 778.97 194.80 2,580.98 0.00 4,216.64 1,690.56 11,930.11 1,540.08 -13.27 183.49 1,710.30 100.00 315300000
- 51 -
NET PROFIT GROWTH

PNB
1800 1600 1400 1200 Net Profit (Rs in 1000 800 crore) 600 400 200 0
1410.12
1439.31
1710.3
2005
2006 Year
2007
STOCK PRICE
PNB Price
600 500 400 Price 300 200 100 0 31/03/05 30/06/05 30/09/05 31/12/05 31/03/06 30/06/06 30/09/06 31/12/06 31/03/07 Date 393.35 379.5 450.6 466.25 470.4 369.5 507 541.25 474.4
- 52 -
MARKET PRICE OF THE SHARE AS ON 31ST MARCH:
(in Rs ) Market share
price
per
MARCH 2005 393.35
MARCH 2006 470.4
MARCH 2007 474.4
KEY FINANCIAL RATIOS: MARCH 2005 17.28 44.72 13.42 8.80 258.84 MARCH 2006 15.35 45.64 19.72 10.30 297.40 MARCH 2007 16.40 54.24 18.44 8.30 330.97
ROE (%) EPS (Rs) Dividend Payout Ratio Price Earning Ratio Book Value Per Share (Rs)
INTERPRETATION: The trends of profits are leading the EPS; i. e. the profit has shown a small growth in the year 2005 06 and shows an increase in the year 2006 07, similarly the EPS follows the trend. The dividend payout ratio is increasing and the share holders are enjoying the current inflow of cash. The P/E ratio is volatile because of the price volatility. The company with the help of the growing profit is retaining the profit which in turn is supporting to the book value of the share. The investor must look over the return on equity and the deviations of the share price that is depicted in the price graph. Investor with low risk profile must be careful if they have this stock in their portfolio.
- 53 -
BANK OF BARODA
BSE: 532134 INDUSTRY: Banking PSU NSE: BANKBARODA
- 54 -
BANK PROFILE:
Bank of Baroda is the fifth largest banking entity in the country (in terms of asset size) with 4% share of the total credit disbursals at the end of FY06. Given its geographic concentration in the northern regions, the bank was a laggard in terms of credit growth in the initial years of this decade, which resulted in a loss of market share. However, brand and operating overhaul led to accelerated growth in the last two fiscals, thus helping the bank stabilise its share and position itself favourably amongst its peers. Bank of Baroda (BSE: 532134) is a bank in India established on July 20, 1908 by Maharaja of Baroda Sir Sayajirao Gaekwad III in the princely state of Baroda, in Gujarat. The bank, along with 13 other major commercial banks of India, was nationalisd on 19th July, 1969, by the Government of India. Bank of Baroda is the fifth largest bank in India. It has total assets in excess of Rs. 1.78 lakh crores, or Rs. 1,780 bn., a network of over 2800 branches and offices, and about 700 ATMs. Bank of Baroda offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, credit cards and asset management. In its international expansion Bank of Baroda followed the Indian diaspora, and especially that of the Gujaratis. The bank has received Reserve Bank of India approval to open offices in Australia, the Maldives, and New Zealand. It is seeking approval for operatons in Bahrain, Johannesburg, Kuwait, Mozambique, and Qatar, and is seeking to establish a joint venture or subsidiary in Ghana and Trinidad and Tobago.
- 55 -
Shareholding Pattern
Indian Promoters Foreign collaborators Indian inst/Mutual Fund FIIs ADR/GDR Free float Shareholders
53.8% 0.0% 14.7% 20.1% 0.0% 11.4% 224, 161
9480 (Rs Crore) Rs. 10 296/176 260
- 56 -
FINANCIAL ANALYSIS
BALANCE SHEET OF BANK OF BARODA FOR THE LAST THREE YEARS.
(Rs in Crore) MARCH 2005 MARCH 2006 MARCH 2007 Capital and Liabilities Equity Share 294.53 365.53 365.53 Capital Preference Share 0.00 0.00 0.00 Capital Reserves 5,333.23 7,478.91 8,284.41 Revaluation 0.00 0.00 0.00 Reserves Deposits 81,333.46 93,661.99 124,915.98 Borrowings 1,640.83 4,802.20 1,142.56 Other Liabilities & 6,062.18 7,083.90 8,437.70 Provisions Total Liabilities 94,664.23 113,392.53 143,146.18 ASSETS Cash & Balance 2,712.32 3,333.43 6,413.52 with RBI Balance with 10,121.21 11,866.85 Banks, Money at 6,541.88 Call Advances 43,400.38 59,911.78 83,620.87 Investments 37,074.44 35,114.22 34,943.63 Net Block 860.80 920.73 1,088.81 Capital Work in 0.00 0.00 0.00 Progress Other Assets 4,074.41 3,991.16 5,212.50 Total Assets 94,664.23 113,392.53 143,146.18
- 57 -
PROFIT AND LOSS ACCOUNT OF BANK OF BARODA FOR THE LAST THREE YEARS.
Rs in Crore MARCH 2005 MARCH 2006 MARCH 2007 INCOME Interest Earned 6,431.42 7,049.95 9,212.64 Other Income 1,344.39 1,394.05 1,434.03 8,444.00 10,646.67 7,775.81 Total Income EXPENDITURE Interest expended 3,452.15 3,875.09 5,426.56 Employee Cost 1,381.05 1,523.79 1,644.07 Selling and Admin 749.83 705.97 516.87 Expenses Depreciation 81.88 111.13 194.28 Miscellaneous 1,667.02 1,357.20 1,649.33 Expenses Preoperative Exp 0.00 0.00 0.00 Capitalised Operating 2,010.81 2,547.14 2,797.04 Expenses Provisions & 1,636.01 1,194.81 1,396.61 Contingencies 7,098.97 7,617.04 9,620.21 Total Expenditure Net Profit for the 826.96 1,026.46 676.84 Year Extraordionary 0.00 0.00 0.00 Items Profit brought 0.00 0.00 0.00 forward Total Profit 676.84 826.96 1,026.46 Equity Dividend 50.00 50.00 60.00 (%) No of Share 264530000 365530000 365530000
- 58 -
NET PROFIT GROWTH

BOB
1200 1000 800

Net Profit (Rs in Crores)
600 400 200 0 2005 676.84
826.96
1026.46
2006 Year
2007
STOCK PRICE
BOB Price 350 300 250 Price 200 150 100 50 0 31/03/05 30/06/05 30/09/05 31/12/05 31/03/06 30/06/06 30/09/06 31/12/06 31/03/07 Date 217.75 196.65 288.45 249 241.05 230.55 196.25 240 215.05
- 59 -
MARKET PRICE OF THE SHARE AS ON 31ST MARCH: (in Rs ) Market share MARCH 2005 217.75 MARCH 2006 230.15 MARCH 2007 215.05
price
per
KEY FINANCIAL RATIOS: MARCH 2005 12.02 25.59 19.54 8.51 212.75 MARCH 2006 10.54 22.62 22.10 10.17 214.60 MARCH 2007 11.87 28.03 21.37 7.67 236.64
ROE (%) EPS (Rs) Dividend Payout Ratio Price Earning Ratio Book Value Per Share (Rs)
INTERPRETATION: The profit for the bank has increase but the return on equity is showing a downward trend in the earlier year and then again rising. The issue of additional equity share may be the reason for such a trend. The bank is also giving good dividend to the shareholder. The volatility of the share price can be the reason for displaying such a P/E trend. The dividend payout ratio shows a minor downtrend. The share is quit volatile. We can say this because the price has almost not shown any movement over the period.
- 60 -
FINDINGS
COMPERATIVE ANANLYSIS OF THE BANKS
Bank Name
ROE
EPS (Rs.)
P/E
Price as on 30/06/07
SBI BOI PNB BOB
Mar-05 Mar-07 17.88 14.51 7.62 28.24 17.28 16.4 12.02 11.87
Change -3.37 20.62 -0.88 -0.15
Mar-05 81.79 6.96 44.72 25.59
MarMar-07 Change 07 86.29 11.51 4.5 27.14 34.1 4.92 54.24 9.52 8.3 28.03 2.44 7.67
1525.8 231.7 541.25 270.25
INTERPRATION On comparing the major players of the public sector banking, we can see that bank of India is being greater increase in the return of equity and EPS than the other players. The return on equity is the highest for Bank of India. The profit of the bank is also growing at quicker rate. The P/E is considered one of the important factor that attract the buyer. The P/E ratio is the lowest indicating that a multiple of 5 of price to earnings exhibits some potential for capital appreciation in the case of Bank of India. The price of the share is also low so small investors are also attracted for investment. The ratios considered above thus show that Bank of India has generated good profit over the years. The lower P/E multiple shows that the stock is undervalued and has a great potential to grow.
- 61 -
LIMITATIONS
- 62 -
Fundamental analysis has some limitation involved in it. This limitation can be explained as under:
Time Constrain:
Fundamental analysis may offer excellent insights, but it can be extraordinarily time-consuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on the exchange. This is not to say that there are not misunderstood companies out there
Industry/Company Specific:
Valuation techniques vary depending on the industry group and specifics of each company. For this reason, a different technique and model is required for different industries and different companies. This can get quite time-consuming, which can limit the amount of research that can be performed. The sales and inventory ratio may be very important for the cement sector company but these ratios are not very useful for the banking sector.
Vastness Of Fundamental Analysis

Fundamental analysis is a very vast concept. It was difficult to analyse each and every component involved in it. Here an attempt is made to learn the basic of Fundamental Analysis because it is difficult to carry out the whole process of fundamental analysis with in two months because of the vastness.
- 63 -
CONCLUSION
- 64 -
Fundamental analysis holds that no investment decision should be without processing and analyzing all relevant information. It strength lies in the fact the information analyzed is real as opposed to hunches or assumptions. On the other hand, while fundamental analysis deals with tangible fact, it does not tend to ignore the fact that human beings do not always act rationally. Market prices do sometimes deviate from fundamentals. Prices rise or fall due to insider trading, speculation, rumour, and a host of other factors.
This is true to an extent but strength of fundamental analysis is that an investment decision is arrived at after analyzing information and making logical assumptions and deductions. Furthermore, fundamental analysis ensures that one does not recklessly buy or sell shares- especially buy.
Fundamental analysis can be valuable, but it should be approached with caution. If you are reading research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. Learn what the ratings mean and the track record of an analyst before jumping off the deep end. Corporate statements and press releases offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. Press releases don't happen by accident; they are an important PR tool for companies. Investors should become skilled readers to weed out the important information and ignore the hype.
- 65 -
To conclude we can say that: Fundamentals of any company are the most important information that any investor must collect and analyse. The public sector banks will see an upswing in the near future because there is a huge requirement of the funds from both the sector goods as well as services. The banking industry sees a bright future ahead. This industry has huge growth prospects. On comparing various Public sector banks with each other on the basis of the financials Bank of India was found to be the best for a value investment.
Fundamental analysis helps an investor to take rational decisions on buying or selling of a specific stock especially buying.
- 66 -
RECOMMANDATION
- 67 -
The analysis carried out at India Infoline of the public sector banks, their profit and loss account, balance sheet and ratios I shall suggests the investors to give priority to BANK OF INDIA than other banks as a value investment. The reason is obvious that the bank is fundamentally very strong.
The return that the bank has given on the shareholders investment is substantially good. The profit growth of a company is a true indicator of a companys true performance and due weight age must be given to it. The price of the stock is low which attracts small investors. The kind of profit the bank is generating over the period is quit appreciable. The capital appreciation of the share is also good for the investor. The fundamental of the economy are also strong and looks that the market would be touching new highs.
- 68 -
BIBLIOGRAPHY:
Websites: www.moneycontrol.com www.bankofbaroda.com www.bankofindia.com www.nseindia.com www.indiainfoline.com www.equitymaster.com www.rbi.org.in www.wikipedia.com
Magazines: Dalal Street.
Financial Daily: Economic Times. Books: Security Analysis and Portfolio Management Prasana Chandra Banking Law and Practice. H. C. Agarwal
- 69 -
ANNEXURE
Formulae for Investment Ratios:
Return on Equity: Equity Earnings (Profit) / Equity (Net worth) * 100. Earning Per Share: Equity Earnings (Profit) / No. of Outstanding Shares. Dividend Payout Ratio: Equity Dividends / Equity Earnings (Profit). Price/Earning Ratio: Market Price Per Share/ Earning Per Share Book Value Per Share: Paid up Equity Capital + Reserves and Surplus / No. of Outstanding Shares.
- 70 -

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SUBMITTED BY CHOTHANI HITESH HASMUKH ( BATCH - 2006-08 )

BRACTs VISHWAKARMA INSTITUTE OF MANAGEMENT, KODHAWA PUNE- 411014.

INDEX Sr. No. 1. Title EXECUTIVE SUMMARY

OBJECTIVE OF THE STUDY

There are two sources of return on equity shares: -

Benefits of Investments in Equity shares: -

What is Fundamental analysis?

INDIA INFOLINE LTD

GENERAL PUBLIC Corporate Governance Transparency

CUSTOMERS Cutting edge technology High service standards

PRODUCT AND SERVICES:

Portfolio Management Services:

Invest In Mutual Fund

Wealth Management Services:

WEB ADDRESS: www.indiainfoline.com www.5paise.com

OBJECTIVE OF THE PROJECT

ABOUT PUBLIC SECTOR BANKS.

Why Public Sector Banks?

The banks if ranked according to their market capitalization:

BANKING STRUCTURE OF INDIAN BANK

KEY POINTS ABOUT THE BANKS

Bargaining power of suppliers:

CRR, BANKS AND SHARE PRICE

RBIs moves on the CRR.

1. PRIMARY DATA COLLECTION:

2. SECONDARY DATA COLLECTION:

General library Trade-Books Internet etc.

DATA ANALYSIS AND FINDINGS

THE CURRENT ECONOMIC SCENARIO

THE GROWTH OF THE GDP.

The Growth of the GDP:

10 8 6 GDP Growth % 4 2 0 2004-05 2005-06 Year 2006-07 7.5 9 9.4

THE TREND OF INFLATION.

The Trend of Inflation

THE CURRENT BANKING SCENARIO

STATE BANK OF INDIA

Market related data as on 18/06/07

Market Capital Face Value 52 Wks High/Low Market Price

69387 (Rs Crore) Rs. 10 1455/684 1318

NET PROFIT GROWTH

4541.65 4407.01 4,304.86

MARKET PRICE AS ON BALANCE SHEET DATE:

KEY FINANCIAL RATIOS

Market related data as on 18/06/07

Market Capital Face Value 52 Wks High/Low Market Price

9338 (Rs Crore) Rs. 10 217/80 191

BALANCE SHEET OF BANK OF INDIA FOR THE LAST THREE YEARS.

NET PROFIT GROWTH

1664.93 921.44 340.05

MARKET PRICE OF THE SHARE AS ON 31ST MARCH:

(in Rs ) Market share

MARCH 2005 103.65

MARCH 2006 133.45

MARCH 2007 167.8

KEY FINANCIAL RATIOS:

MARCH 2005 7.62 6.96 28.73 14.89 91.47

MARCH 2006 18.49 18.89 15.88 7.07 102.09

MARCH 2007 28.24 34.10 10.26 4.92 120.77

PUNJAB NATIONAL BANK

Share Holding Pattern

57.8% 0.0% 16.2% 20.1% 0.0% 6.0% 240,135