FUNDAMENTAL ANALYSIS OF BANKING INDUSTRY

Special reference to public sector Banks

Darun v
da runvd@gmail.com

FUNDAMENTAL ANALYSIS OF BANKING INDUSTRY

(With Special reference to Public Sector Banks)

A PROJECT REPORT
 SUBMITTED BY

DARUN V

Reg.No:12351034

Submitted to Pondicherry University in partialfulfillment of the requirements for the award of the
Post Graduate degree in Master of Commerce (Business Finance)

Under the guidance of

Dr.D. LAZAR

ASSOCIATE PROFESSOR

VERS

DEPARTMENT OF COMMERCE
SCHOOL OF MANAGEMENT
PONDICHERRY UNIVERSITY

NOVEMBER-2013
STATEMENT OF THE PROBLEM
The study of fundamental analysis of banking industry in India Infoline ltd is to assess the performance of banking
industry and select the most performing banking companies through the analysis of macro and micro variables that affects
the performance of particular company.

OBJECTIVE OF THE STUDY

To analyze economy by using some economic indicators like GDP, and inflation rate etc to find out the best time
for investment and selection of industry performing well in economy.

To analyze industry for assessing the strength and find out best performing companies. To carry out analysis
of companies to select particular company performing well for investment.

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 To provide investment decisions

SCOPE OF THE STUDY

1. The study gives overview of banking industry to investors while investing
2. This study consists of Economic, Industry and Company framework of analysis with the
following aspects
Economic analysis consists of various variables such as GDP, BOP, Inflation, FII
etc. Industry analysis consists of Demand, potential market, growth and
development etc.
Company analysis consists of financial statement analysis, Companies prospects,
growth, and Management board of company.

PERIOD OF STUDY

The period of the study is 5 years i.e. (2009-2013). Company 5 years data has been taken
for the analysis

RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. The

research methodology using for find out the solution of the research problem is analytical
research methodology and some extend descriptive research methodology

DATA SOURCES
Secondary data has been collected from various sources to analyze the fundamentals.
Following are the Sources.
RBI
Annual reports
CMIE Data base
Bloomberg data base
NSE
World bank
Money control
Other websites
TOOLS FOR ANALYSIS
Unlike any other manufacturing or service company, a bank' s accounts are presented in a different manner (as per
banking regulations). The analysis of a bank account differs significantly from any other company. The key operating and
financial ratios, which one would normally evaluate before investing in company, may not hold true for a bank.
The followings are the most popular tools for the fundamental analysis of Banks or to evaluate performance of B anks.
Net interest margin (NIM)

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 Credit to deposit
Operating profit margin
Non-performing asset ratio(NPA)
Cost to income ratio
Earnings per share(EPS)
Dividend per share (DPS)
Dividend payout ratio
Price eamings ratio

NET INTEREST MARGIN (MM)

For banks, interest expenses are their main costs (similar to manufacturing cost for
companies) and interest income is their main revenue source. The difference between interest
income and expense is known as net interest income. It is the income, which the bank earns from
its core business of lending. Net interest margin is the net interest income earned by the bank on
its average earning assets. These assets comprises of advances, investments, balance with the
RBI and money at call.

NTERESTINCOME
INTERESTEXPENSE
NIM
EARNING ASSETS

CREDIT TO DEPOSIT RATIO (CD RATIO)

The ratio is indicative of the percentage of funds lent by the bank out of the total amount
Raised through deposits. Higher ratio reflects ability of the bank to make optimal use of the
available resources. The point to note here is that loans given by bank would also include its
investments in debentures, bonds and commercial papers of the companies (these are generally
included as a part of investments in the balance sheet).

CREDIT
CREDIT TO DEPOSIT
ADVANCES

OPERATING PROFIT MARGINS (OPM)

Banks operating profit is calculated after deducting administrative expenses, which

mainly include salary cost and network expansion cost. Operating margins are profits earned by
the bank on its total interest income. For some private sector banks the ratio is negative on
account of their large IT and network expansion spending.

NET INTEREST INCOME OPERATINGEXPENSES

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 OPM 100
TOTAL INTEREST INCOME
NPA RATIO

The 'net non-performing assets to loans (advances) ratio' is used as a measure of the
overall quality of the bank' s loan book Net NPAs are calculated by reducing cumulative balance
of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad
quality of loans.

NET NON PERFORMING ASSETS

NPA RATIO
LOANS GIVEN

COST TO INCOME RATIO

Controlling overheads are critical for enhancing the bank 's return on equity. Branch
Rationalization and technology upgrade account for a major part of operating expenses for new
generation banks. Even though, these expenses result in higher cost to income ratio, in long term
they help the bank in improving its return on equity. The ratio is calculated as a proportion of
operating profit including non-interest income (fee based income)

OPERATING EXPENSE COST TO

INCOME RATIO

NET INTEREST INCOME + NON INTEREST INCOME

EARNING PER SHARE (EPS)

The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company's profitability.

NET INCOME DIVIDEND ON PREFERENCESHARES

EPS
NUMBER OF SHARES
DIVIDEND PER SHARE (DPS)
The sum of declared dividends for every ordinary share issued. Dividend per share (DPS)
is the total dividends paid out over an entire year (including interim dividends but not including
special dividends) divided by the number of outstanding ordinary shares issued.

SUM OFDIVIDEND
DPS
NUMBEROF SHARES

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Having a growing dividend per share can be a sign that the company's growth can be sustained.

DIVIDEND PAY OUT RATIO

The percentage of earnings paid to shareholders in dividends.

D PS
DIVIDEND PAY OUT RATIO

EPS
A reduction in dividends paid is looked poorly upon by investors, and the stock price usually
depreciates as investors seek other dividend-paying stocks. A stable dividend payout ratio
indicates a solid dividend policy by the company's board of directors.

PRICE EARNING RATIO

A valuation ratio of a company's current share price compared to its per-share earnings. A high
P/E ratio suggests that investors are expecting higher eamings growth in the future compared to
companies with a lower P/E ratio. The P/E ratio is sometimes referred to as the "multiple",
because it shows how much investors are Willing to pay per units of eamings.

MARKET VALUE PER SHARE PRICE

EARNING RATIO

EARNING PER SHARE

INTRINSIC VALUE

By intrinsic value we mean value of share which is supported by asset quality,

performance earning capacity, risk, future prospects, and happening in the economy. It is
believed that in the long run a share is likely to command a market price around its intrinsic
value. Therefore a knowledge about this can help in investment decision Steps for calculating
intrinsic value

1. Estimation of expected EPS of the company 2. Estimation of price earning

multiplier(P/E)

P/E multiplier can be estimated by taking into consideration several factors like (a) past
performance of the company, (b) expectation about future, (c) goodwill of company etc. Here in
this analysis P/E multiplier is calculated on the basis of past performance of company, ie average
of past five years P/E ratio. And estimated EPS also calculated on the basis of past five year EPS
ie average of past five years EPS. Thus

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 INTRINSIC VALUE EXPECTED EPS * PRICE EARNING MULTIPLIER

Decision making with the help of intrinsic value

Buy if intrinsic value is greater than current market price
Sell if intrinsic value less than current market price

TECHNIQUES
The technique used in the analysis of the company is excel sheets, graphs and tables of
Financial statement etc.

LIMITATIONS

For study only following limited variables has studied such as GDP, CAD, Foreign
exchange reserve, foreign investment inflow, inflation, agricultural production, industrial
production index, lending rate, employment, &sectorial contribution to GDP.
Industrial analysis is limited to quantitative factors and excluded qualitative factors like
political factors, product line, innovations etc.
Fundamental analysis is a time consuming analysis, efficiency of the analysis is totally
depends up on the availability of time. The analysis here conducted with limited period of

Qualitative factors had limited priority in company analysis.

Valuation techniques and tools for banks are different from other form of companies. So
the suggested fundamental ratios to analyze companies should not be suitable for banks.
Reliability of analysis is depends up on the reliability of the data sources
Future changes are largely unpredictable, so the past record is a poor guide to future
performance.
The analysis is based on my own interpretation and up to my best of knowledge but every
analyst have his or her own interpretation and suggestions Error due to misinterpretation

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THEORETICAL FRAMEWORK
 FUNDAMENTAL ANALYSIS

ANALYSIS

The examination and evaluation of the relevant information to select the best course of
action from among various altematives. The methods used to analyze securities and make
investment decisions fall into two very broad categories: fundamental analysis and technical
analysis. Fundamental analysis involves analyzing the characteristics of a company in order to
estimate its value. Technical analysis takes a completely different approach; it doesn't care one
bit about the "value" of a company or a commodity. Technicians (sometimes called chartists) are
only interested in the price movement in the market

TECHNICAL ANALYSIS

Technical analysis is a method of evaluating securities by analyzing the statistics

generated by market activity, such as past prices and volume. Technical analysts do not attempt
to measure a security's intrinsic value, but instead use charts and other tools to identify patterns
that can suggest future activity.

FUNDAMENTAL ANALYSIS
Fundamental analysis is a stock valuation methodology that uses financial and economic
analysis to envisage the movement of stock prices. The fundamental data that is analyzed could
include a company's financial reports and non-financial information such as estimates of its
growth, demand for products sold by the company, industry comparisons, economy-wide
changes, changes in govemment policies etc.
The outcome of fundamental analysis is a value (or a range of values) of the stock of the
Company called its 'intrinsic value' (often called 'price target' in fundamental analysts'
parlance).To a fundamental investor, the market price of a stock tends to revert towards its
intrinsic value. If the intrinsic value of a stock is above the current market price, the investor
would purchase the stock because he believes that the stock price would rise and move towards
its intrinsic value. If the intrinsic value of a stock is below the market price, the investor would
sell the stock because he believes that the stock price is going to fall and come closer to its
intrinsic value.
To find the intrinsic value of a company, the fundamental analyst initially takes a
topdown view of the economic environment; the current and future overall health of the economy
as a whole. After the analysis of the macro-economy, the next step is to analyze the industry
environment which the firm is operating in. One should analyze all the factors that give the firm
a competitive advantage in its sector, such as, management experience, history of performance,
growth potential, low cost of production, brand name etc. In simple term fundamental analysis is
the analysis of Economy, Industry and Company.

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TWO APPROACHES OF
1. Top-down approach
2. Bottom-up approach
I .Top-down approach: In this approach, an analyst investigates both international and national
economic indicators, such as GDP growth rates, energy prices, inflation and interest rates. The
search for the best security then trickles down to the analysis of total sales, price levels and
foreign competition in a sector in order to identify the best business in the sector.
2. Bottom-up approach: In this approach, an analyst starts the search with specific businesses,
irrespective of their industry/region.

HOW DOES FUNDAMENTAL ANALYSIS WORKS

Fundamental analysis is carried out with the aim of predicting the future performance of a
company. It is based on the theory that the market price of a security tends to move towards its
'real value' or 'intrinsic value.' Thus, the intrinsic value of a security being higher than the
security's market value represents a time to buy. If the value of the security is lower than its
market price, investors should sell it.

STEPS OF FUNDAMENTAL ANALYSIS

. Macroeconomic analysis, which involves considering currencies, commodities and indices.

2. Industry sector analysis, which involves the analysis of companies that are a part of the sector.
3. Situational analysis of a company.
4. Financial analysis of the company.

5. Valuation
The valuation of any security is done through the discounted cash flow (DCF) model, which
takes into consideration:

1. Dividends received by investors

2. Earnings or cash flows of a company

3. Debt, which is calculated by using the debt to equity ratio and the current ratio (current
assets/cunent liabilities)

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 FUNDAMENTAL ANALYSIS

WHY ONLY

Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends, very
long-term. The ability to identify and predict long-term economic, demographic, technological or
consumer trends can benefit patient investors who pick the right industry groups or companies.

Value Spotting
Sound fundamental analysis will help identify companies that represent a good value. Some of
the most legendary investors think long-term and value. Graham and Dodd, Warren Buffett and
John Neff are seen as the champions of value investing. Fundamental analysis can help uncover
companies with valuable assets, a strong balance sheet, stable eamings, and staying power

Business insights
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such pains taking research and
analysis, an investor will be familiar with the key revenue and profit drivers behind a company.
Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians
will agree to that.

A good understanding can help investors avoid companies that are prone to shortfalls and
identify those that continue to deliver. In addition to understanding the business, fundamental
analysis allows investors to develop an understanding of the key value drivers and companies
within an industry. A stock's price is heavily influenced by its industry group. By studying these
groups, investors can better position themselves to identify opportunities that are high-risk (tech),
low-risk (utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer
staples), cyclical (transportation) or income-oriented (high yield).

Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can better
position themselves to categorize stocks within their relevant industry group. Business can
change rapidly and with it the revenue mix of a company. This has happened with many of the
pure internet retailers, which were not really internet companies, but plain retailers. Knowing a
company's business and being able to place it in a group can make a huge difference in relative
valuations. The charts of the technical analyst may give all kinds of profit alerts, signals and
alarms, but there"s little in the charts that tell us why a group of people make the choices that
create the price patterns

USERS OF

Investors

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 Brokers
Financial institutions Competitors
COMPONENTS OF FUNDAMENTAL ANALYSIS
A. ECONOMIC ANALYSIS
B. INDUSTRY ANALYSIS C. COMPANY
ANALYSIS
A-ECONOMIC ANALYSIS

The economic analysis aims at determining if the economic climate is conclusive and is
capable of encouraging the growth of business sector, especially the capital market. When the
economy expands, most industry groups and companies are expected to benefit and grow. When
the economy declines, most sectors and companies usually face survival problems. Hence, to
predict share prices, an investor has to spend time exploring the forces operating in overall
economy. Exploring the global economy is essential in an intemational investment setting. The
selection of country for investment has to focus itself to examination of a national economic
scenario. It is important to predict the direction of the national economy because economic
activity affects corporate profits, not necessarily through tax policies but also through foreign
policies and administrative procedures.

ECONOMIC ANALYSIS TOOLS

The most used tools for performing economic analysis are:

1. Gross Domestic product

GDP is one measure of economic activity. This is the total amount of goods and services
produced in a country in a year. It is calculated by adding the market values of all the final goods
and services produced in a year.
It is a gross measurement because it includes the total amount of goods and services
produced, of which some merely replace goods that have depreciated or have worn out.

It is domestic production because it includes only goods and services produced within the
country.
2. Inflation

Inflation can be defined as a trend of rising prices caused by demand exceeding supply. Over
time, even a small annual increase in prices of say I % will tend to influence the purchasing
power of the nation. In others word, if prices 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.

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 FUNDAMENTAL ANALYSIS

3. Interest rate
Interest rate is the price of credit. It is the percentage fee received or paid by individual or
organization when they lend and borrow money. In general, increases in interest rate, whether
caused by inflation, government policy, rising risk premium, or other factors, will lead to
reduced borrowing and economic slowdown.

4. International influences
Rapid growth in overseas market can create surges in demand for exports, leading to growth
in export sensitive industries and overall GDP. In contrast, the erection of trade barriers, quotas,
currency restrictions can hinder the free flow of currency, goods, and services, and harm the
export sector of an economy.

5. Fiscal policy
The fiscal policy of the government involves the collection and spending of revenue. In
particular, fiscal policy refers to the efforts by the government to stimulate the economic directly,
through spending.

6. Monsoon
Agriculture forms a very important sector of the Indian economy. Rise in the agricultural
income will cause increase in the demand for industrial products and services and the
performance of agriculture is depends up on monsoon. So the progress and adequacy of monsoon
becomes a matter of great concern for an investor in the Indian contest.

7. Political stability
A stable political environment is necessary for steady and balanced growth. Stable long term
political policies are good for the performance of economy

8. Exchange rates
The performance and profitability of industries and companies that are major importers or
exporters are considerably affected by the exchange rates of rupee against major currencies. A
depreciation of rupee improve the competitive position of Indian products in the foreign market,
thereby stimulating exports. But it would also make imports more expensive. A company
depending heavily on imports may find devaluation of rupee affecting its profitability adversely.

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 9. Monetary policy and Liquidity
10. International influences
11. Fiscal policy 12. Budget 13. Balance of payment 14. Domestic legislation 15.
Unemployment
16. Infrastructural growth etc.

CONCLUSION OF ECONOMIC ANALYSLS

An idea about appropriate time for investment

Selection of industries which might perform better

B-INDUSTRY ANALYSIS

An industry analysis helps inform business managers about the viability of their current
strategy and on where to focus a business among its competitors in an industry. The analysis
examines factors such as competition and the extemal business environment, substitute products,
management preferences, buyers and suppliers. Industry analysis involves reviewing the
economic, political and market factors that influence the way the industry develops. Major
factors can include the power wielded by suppliers and buyers, the condition of competitors. And
the likelihood of new market entrants

1. INDUSTRY LIFE CYCLE

The profitability of industry is depends up on the stage of lifecycle of industry. Each
development stage is unique and exhibits different characteristics. Followings are the different
stages of lifecycle of industry
a. Pioneering stage
It is the stage of startup of an industry. In this stage very few beginners set up the
companies. The risk at this stage is very high due to gestation period effect.
b. Rapid growth stage
At this stage of industry lifecycle demand for the product in the industry increases
at a fast pace and every day new participants enter in the industry
c. Maturity and saturation
At this stage demand almost stabilizes at a particular level. Product differentiation
takes place and companies start competing on the product features. This phase is also of
consolidation and companies consolidate their position by focusing on a particular
segment.
d. Decline/diversification
At this stage poor performers start winding up their business and this phase
witnesses the survival of only the fittest. Very strong companies survive during this stage.
A few companies take up the path of diversification to overcome this phase. If company
diversifies then they again enter into a new industry life cycle.

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 2. INDUSTRY CHARACTERISTICS

a) Demand supply gap

Excess supply reduces the profitability of industry through a decline in unit price realization.
On the contrary insufficient supply tends to improve the profitability through higher unit price
realization. Therefore the gap between demand and supply in an industry is a fairly good
indicator of its shon term or medium term prospects.

b) Competitive condition in the industry

The level of competition among various companies in an industry is determined by certain

competitive forces like barriers to entry, the threat of substitution, bargaining power of buyers,
bargaining power of suppliers, and rivalry among competitors.

c) Permanence

In this age of rapid technological change, the degree of permanence of an industry is an

important consideration in industry analysis .permanence is a phenomenon related to the product
and technology used by the industry. if an analyst feels that the need for a particular industry will
vanish in short period, or that rapid technological changes would render the products obsolete
within a short time, it would be foolish to invest in such an industry.

d) Labour conditions

If labours in a particular industry is rebellious and is inclined to resort to strikes frequently,

the prospects of that industry cannot become bright.

e) Attitude of government
Government may encourage the growth of certain industries and assist such industries
through favorable legislation

f) Supply of raw materials

Availability of raw material is an important factor determining profitability of industry. some

industries may not have problems to obtain row materials.

g) Cost structure
Cost structure is the proportion of fixed cost to variable cost. The higher the fixed cost
component, higher is the sales volume necessary to achieve breakeven point. Conversely lower
the fixed cost proportion to variable cost, lower would be the breakeven point.

h) Etc.
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CONCLUSION OF INDUSTRY ANALYSIS
The main aim is to identify such industries in which

Chance of growth
Chance of high profitability
Low risk if investment is made
C-COMPANY ANALYSIS
Every industry has more than one company therefore this phase scans the companies of those
industries which have been selected in the Industry analysis. The purpose of this phase is to
identify the best company in the industry selected. This is done with the help of the
following factors

Analysis of qualitative factors

Financial performance analysis
1) Competitive position
The level of competition and companies positions are the important factors which determine
the profitability of particular company.

2) Management quality
Investors prefer to have highly skilled management in company

Technological up gradation of companies directly influence profitability of companies and it will

increase the market price of shares also.

3) Brand image
4) Raw materials 5) Labour conition 6) Capacity utilisation
Ratio analysis
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company. Ratio analysis is predominately used by proponents of fundamental analysis. There
are many ratios that can be calculated

From the financial statements pertaining to a company's performance, activity, financing and
liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings per
share, asset turnover and working capital.

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ROA
Return on assets, which, offering a different take on management's effectiveness reveals
how much profit a company earns for every dollar of its assets. Assets include things like cash in
the bank, accounts receivable, property, equipment, inventory and furniture. ROA is calculated
like this.

ANNUAL NET INCOME

ROA
TOTAL ASSET

ROI
Return on Investment is one of several commonly used approaches for evaluating the
financial consequences of business investments, decisions, or actions. ROI analysis compares the
magnitude and timing of investment gains directly with the magnitude and timing of investment
costs. A high ROI means that investment gains compare favorably to investment costs:

GANINS INVESTMENTCOST
ROI
INVESTMENT COST
ROE
Of all the fundamental ratios that investors look at, one of the most important is return on
equity. It's a basic test of how effectively a company's management uses investors' money - ROE
shows whether management is growing the company's value at an acceptable rate. ROE is
calculated as

ANNUAL NETINCOME
ROE
NUMBER OF EQUITY SHARE HOLDERS

EPS

The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company's profitability.

NET INCOME DIVIDEND ON PREFERENCESHARE

EPS
NUMBER OF SHARE HOLDERS

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DPS
The the sum of declared dividends for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year (including interim dividends but not
including special dividends) divided by the number of outstanding ordinary shares issued.

TOTAL DIVIDEND
DPS
NUMBEROF SHARES
DIVIDEND YEILD

Financial ratio that shows how much a company pays out in dividends each year relative
to its share price. In the absence of any capital gains, the dividend yield is the return on
investment for a stock. Dividend yield is calculated as follows:

ANNUAL DIVIDEND PERSHARE DIVIDEND

YIELD
PRICE PER SHARE
CONCLUSION OF COMPANY ANALYSIS

Identification of companies in which investment can be made

END RESULT OF FUNDAMENTAL ANALYSIS

At what time investment is to be made

In which company investment is to be made

COMPANY PROFILE

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NFL (INDIA INFOLINE LTD)
IIFL is a brokerage firm dealing in retail brokerage, institutional brokerage, consumer
lending, institutional lending, realty and wealth management. Was founded in 1995 by Mr.
Nirmal Jain (Chairman) as an independent business research and information provider. It
gradually evolved into a financial services solution provider. IIFL has a network of 3000
business locations spread over more than 500 cities and towns across India.

IIFL is listed on the Bombay Stock Exchange (BSE) and the National stock exchange of
India (NSE) for securities trading; with MCX, NCDEX and DGCX for commodities trading; and
with CDSL and NSDL as depository participants.[citation needed] IIFL is registered as a
Category I merchant banker and is a SEBI registered portfolio manager.

PRODUCTS AND SERVICES

Equities
India infoline provided the prospect of researched investing to its clients.reserch for retail
invester did not exist prior to India infoline. India infoline liveraged technology to bring the
convenience of trading to the investor's location of preference through computerized access. IIFL
made it possible for clients to view transaction cost and ledger updates in real time

Commodities
IIFL was among the first offer the facility of commodities trading in India's young
commodities market (MCX). Average monthly turnover on the commodity exchanges increased
from Rs 0.34 bn to 20.02 bn.

IIFL offers commodities trading to its customers vide its membership of the MCX and the
NCDEX. Our domain knowledge and data based on in depth research of complex paradigms of
commodity kinetics, offers our customers a unique insight into behavioral patterns of these
markets. Our customers are ideally positioned to make informed investment decisions with a
high probability of success.

Insu rance

IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life
Insurance Co. Ltd's corporate agent. Later, it became an Insurance broker in October 2008 in line
with its strategy to have an 'open architecture' model. The Company now distributes products of
major insurance companies through its subsidiary India Infoline Insurance Brokers Ltd.
Customers can choose from a wide bouquet of products from several insurance companies
including Max New York Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz Life,
Birla Sunlife, Life Insurance Corporation, Kotak Life Insurance and others.

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Wealth Management Service
IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and
corporate clients under the 'IIFL Private Wealth' brand. IIFL Private Wealth is managed by a
qualified team of MBAs from 11Ms and premier institutes with relevant industry experience. The
team advises clients across asset classes like sovereign and quasi-sovereign debt, corporate and
collateralised debt, direct equity, ETFs and mutual funds, third party PMS, derivative strategies,
real estate and private equity. It has developed innovative products structured on the fixed
income side. It also has tied up with Interactive Brokers LLC to strengthen its execution platform
and provide investors with a global investment platform.

Investment Banking
IIFL's investment banking division was launched in 2006. The business leverages upon its
strength of research and placement capabilities of the institutional and retail sales teams. Our
experienced investment banking team possesses the skill-set to manage all kinds of investment
banking transactions. Our close interaction with investors as well as corporates helps us
understand and offer tailor-made solutions to fulfill requirements. The Company possesses strong
placement capabilities across institutional, HNI and retail investors. This makes it possible for
the team to place large issues with marquee investors.

Credit and finance

IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage
loans, margin funding, loans against shares) comprise 94% of the loan book. The Company has
discontinued its unsecured products. It has robust credit processes and collections mechanism
resulting in overall NPAs of less than 1%. The Company has deployed proprietary
loanprocessing software to enable stringent credit checks while ensuring fast application
processing. Recently the company has also launched Loans against Gold.

BRIEF HISTORY OF IIFL

India Infoline Limited (IIL), incorporated in 18th October of the year 1995 as Probity
Research & Services Private Limited at Mumbai. The India Infoline is a one-stop shop for
information, advice as well as transaction execution of financial services. IIL along-with its
subsidiaries caters to entire gamut of financial services including equities and commodities
broking, portfolio management, distribution of mutual funds, life insurance products, home
loans, personal loans, etc. Broking services are offered under the 5paisa brand (offers broking
services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the
BSE). The company has proven research capabilities and was rated by the Forbes as the best of
web' and must read for investors'. A network of 758 business locations spread over 346 cities
across India, facilitates the smooth acquisition and servicing of a large customer base. India
Infoline's research is available not just over the Internet but also on international wire services
like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where it is amongst the
most read Indian brokers.

19
 The Company identified the potential of the Internet to cater to a mass retail segment and
transformed its business model from providing information services to institutional customers to
retail customers. Hence IIL launched its Intemet portal, www.indiainfoline.com in May of the
year 1999 and started providing news and market information, independent research, interviews
with business leaders and other specialized features. IIL was convened into a Public Limited
Company in 28th April of the year 2000 and the name of the Company was changed to Probity
Research & Services Limited. The name of the company was changed to India Infoline.com
Limited in 23rd May of the year 2000. During 23rd March of the year 2001, again the name was
changed as India Infoline Limited. IIL acquired 100% shares of Agri Marketing Services Limited
during March of the year 2000. In the year 2000, IIL leveraged its position as a provider of
financial information and analysis by diversifying into transactional services, primarily for online
trading in shares and securities and online as well as offline distribution of personal financial
products, like mutual funds and RBI Bonds. These activities are carried on through the wholly
owned subsidiaries. The broking service was launched under the brand name of 5paisa through
our subsidiary, India Infoline Securities Private Limited and www.5paisa.com, the e-broking
portal, was launched for online trading in June of the year 2000. It combined competitive
brokerage rates and research, supported by Intemet technology. Besides investment advice from
an experienced team of research analysts, also offer real time stock quotes, market news and
price charts with multiple tools for technical analysis.

In December of the year 2000, India Infoline Insurance Services Limited (subsidiary)
became a corporate agent for ICICI Prudential Life Insurance Company Limited. In the year
2004, the company launched commodities broking through its subsidiary India Infoline
Commodities Private Limited. Also received a license for Portfolio Management Services from
SEBI for broking subsidiary. During the year 2006, the company received the requisite prior
approval from The Securities and Exchange Board of India for its proposed merger of India
Infoline Securities Private Limited (IISPL), a wholly owned subsidiary with itself. It had earlier
received in-principle approval from National Stock Exchange and The Stock Exchange, Mumbai.
In January of the year 2007, the company entered into an alliance with Bank of Baroda for
providing Brokerage Platform, besides research and analysis services to the bank's customers.
India Infoline awarded the Best Broker in India' by Finance Asia. This was a result of Finance
Asia's annual look at the best financial services firms in each country around Asia for the period
from June 2007 to May 2008. During March of the year 2008, India Infoline's institutional
broking arm IIFL, partnered with Auerbach Grayson & Company, Inc., a New York-based
brokerage firm to offer US investors premium access to investing in India's capital markets.
Auerbach Grayson specializes in providing global trade execution and exclusive research to U .S.
institutional investors. As of July 2008, the company received the in-principle approval for the
insurance broking licence from IRDA

VISION

To become the most respected company in the financial services space in india

20
MISSION

To become a full fledged financial services company known for its quality of
advice,personalized services and cutting edge technology

CSR(CORPORATE SOCIAL RESPONSIBILITY)

SCHOLARSHIPS

H Nemkumar and Nirmal Jain Scholarship (May 2012) India has a large number of gifted and
deserving students who are unable to avail of a high-quality learning experience from reputed
institutions in India or abroad due to financial or other constraints. Young India Fellows reaches
out to such students. The YIF scholarships have been made possible by generous donations by a
stellar set of individuals including Mr. Nirmal Jain and Mr. H Nemkumar on behalf of IIFL
Foundation.

FINANCIAL LITERACY FOR SUPPORTING UNDER PRIVILAGED

IIFL has also tied up with KJ Somaiya Institute of Management Studies & Research
(SIMSR) to impart basic financial knowledge to underprivileged sections and physically
handicapped sections of the society. The programmes covers lessons on savings, budgeting,
banking, credit management, microfinance and self-help groups (SHGs). The IIFL Foundation
under the FLAME initiative has tied up with Somaiya Institute to impart financial literacy to
National Society for Equal Opportunities for the Handicapped India

SPONSORING CAREER GUIDANCE IN JAWAHAR

IIFL Foundation joined hands with a social development organization working across the
Thane district of Maharashtra with tribal and rural communities. IIFL is actively helping in
providing career guidance to the students of High School and Junior colleges in Walvanda,
Jawahar.
KEY EXECUTIVES

CORPORATE MANAGEMENT TEAM

chairman and managing Director Institutional Equities

Director Investment Banking

Executive Director Consumer Finance

Independent Director Wealth Management

Non Executive Director International Operations

21
Offshore Asset Management Deepesh Pandey

Insurance Distribution Corporate Mukesh Kumar Singh

Communic ation Jamshed Kawasjee Vakeel

Risk & Audit Upendra Kumar Jaiswal

Corporate Operations Narendra Deshmal Jain

Human Resources Pallab Mukherji

Legal and Compliance Mohan Radhakrishnan

Finance and Accounts Dhr

Information Technology uv

Realty Jain

Mr Nirmal Jain San

Mr A K Purwar kars

Mr R Venkataraman on

Mr Nilesh Vikamsey B

Mr Sat Pal Khattar aner

jee
H.Nemkumar
Bal
Nipun Goel
aji
Pratima Ram
Rag
Karan
ha
Bhagat

Bharat

Parajia

HISTORY & MILESTONES

# 1995-Commenced operations as an Equity Research firm

22
# 1997-Launched research products of leading Indian companies, key sectors and the
economy Client included leading Flls, banks and companies 1999-
Launchedwww.indiainfoline.com
# 2000-Launched online trading through www.5paisa.com Started distribution of life
insurance and mutual fund
2003-Launched proprietary trading platfonn Trader Terminal for retail customers #
2004-Acquired commodities broking license Launched Portfolio Management Service #
2005-Maiden IPO and listed on NSE, BSE
2006-Acquired membership of DGCX Commenced the lending business
# 2007-Commenced institutional equities business under IIFL Formed Singapore subsidiary,
IIFL (Asia) Pten Ltd
2008-Launched IIFL Wealth Transitioned to insurance broking model
# 2009-Acquired registration for Housing Finance SEBI in-principle approval for Mutual
Fund Obtained Venture Capital licence.
2010-Received in-principle approval for membership of the Singapore Stock Exchange
Received membership of the Colombo Stock Exchange

23
CORPORATE STRUCTURE

IIFL has a network of over 2,500 business locations spread over more than 500 cities and towns
across India facilitates the smooth acquisition and servicing of a large customer base. All our
offices are connected with the corporate office in Mumbai with cutting edge networking
technology. The group caters to a customer base of about a million customers, over a variety of
mediums viz. online, over the phone and at our branches

INDIAN BANKING SECTOR REVIEW

24
 INDIAN BANKING SECrOR
Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors. credit. It is no
longer confined to only metropolitans or cosmopolitans in India; in fact, Indian banking system
has reached even to the remote corners of the country. This is one of the main reasons of India's
growth process. The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India. Not 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. Gone are days when the most efficient bank transferred money
from one branch to other in two days. Now it is simple as instant messaging or dial a pizza.
Money has become the order of the day.

POST-INDEPENDENCE

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it
became an institution owned by the Government of India. In 1949, the Banking Regulation Act
was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect
the banks in India. " The Banking Regulation Act also provided that no new bank or branch of an
existing bank may be opened without a license from the RBI, and no two banks could have
common directors.

LIBERALIZATION

The new policy shook the Banking sector in India completely. Bankers, till this time, were used to
the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. In the early 1990s the
then Narsimha Rao government embarked on a policy of liberalization and gave licenses to a small
number of private banks, which came to be known as New Generation tech savvy banks, which
ilW*luded banks such as Global Trust Bank (the first of such new generation banks to be set up)
which later amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis
Bank), ICICI Bank and HDFC Bank.

CURRENT SITUATION
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 67 branches and 17 ATMs. According to a report by ICRA
Limited, a rating agency, the public sector banks hold over 78 percent of total assets of the
banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Over

25
the last four years, India"s economy has been on a high growth trajectory, creating unprecedented
opportunities for its banking sector. Most banks have enjoyed high growth and their valuations
have appreciated significantly during this period. Looking ahead, the mostpertinent issue is how
well the banking sector is positioned to cater to continued growth. A holistic assessment of the
banking sector is possible only by looking at the roles and actions of banks, their core capabilities
and their ability to meet systemic objectives, which include increasing shareholder value,
fostering financial inclusion, contributing to GDP growth, efficiently managing intermediation
cost, and effectively allocating capital and maintaining system stability.

BANKING STRUCTURE IN INDIA

The banking institutions in the organized sector, commercial banks are the oldest institutions,
some them having their genesis in the nineteenth century. Initially they were set up in large
numbers, mostly as corporate bodies with shareholding with private individuals. Today 27 banks
constitute a strong Public Sector in Indian Commercial Banking. Commercial Banks operating in
India fall under different sub categories on the basis of their ownership and control over
management;

PUBLIC SECTOR BANKS

Public Sector Banks emerged in India in three stages. First the conversion of the then existing
Imperial Bank of India into State Bank of India in 1955, followed by the taking over of the seven
associated banks as its subsidiary. Second the nationalization of 14 major commercial banks in
1969and last the nationalization of 6 more commercial Bank in 1980. Thus 27 banks constitute
the Public Sector Banks.

NEW PRIVATE SECTOR BANKS

After the nationalization of the major banks in the private sector in 1969 and 1980, no new bank
could be setup in India for about two decades, though there was no legal bar to that effect. The
Narasimham Committee on financial sector reforms recommended the establishment of new
banks of India. RBI thereafter issued guidelines for setting up of new private sector banks in
India in January 1993. These guidelines aim at ensuring that new banks are financially viable and
technologically up to date from the start. They have to work in a professional manner, so as to
improve the image of commercial banking system and to win the confidence of the public. Eight
private sector banks have been established including banks sector by financially institutions like
IDBI, ICICI, and u-rl etc.

LOCAL AREA BANKS

Such Banks can be established as public limited companies in the private sector and can be
promoted by individuals, companies, trusts and societies. The minimum paid up capital of such

26
banks would be 5 crores with promoters contribution at least Rs. 2 crores. They are to be set up in
district towns and the area of their operations would be limited to a maximum of 3 districts. At
present, four local area banks are functional, one each in Punjab, Gujarat, Maharashtra and
Andhra Pradesh.

FOREIGN BANKS
Foreign commercial banks are the branches in India of the joint stock banks incorporated abroad.
There number was 38 as on 31.()3.2()()9.

SCHEDULED COMMERCIAL BANKS IN INDIA

The commercial banking structure in India consists of:

Scheduled Commercial Banks in India

Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been included in the Second
Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this
schedule which satisfy the criteria laid down vide section42 (6) a) of the Act.

'Scheduled banks in India" means the State Bank of India constituted under the State Bank of
India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary
Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of
1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of
India Act, 1934 (2 of 1934), but does not include a co-operative bank". "Nonscheduled bank in
India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation
Act, 1949 (10 of 1949), which is not a scheduled bank".

COOPERATIVE BANKS

Besides the commercial banks, there exists in India another set of banking institutions
called cooperative credit institutions. These have been made in existence in India since long.
They undertake the business of banking both in urban and rural areas on the principle of
cooperation. They have served a useful role in spreading the banking habit throughout the
country. Yet, there financial position is not sound and a majority of cooperative banks has yet to
achieve financial viability on a sustainable basis. The cooperative banks have been set up under
various Cooperative Societies Acts enacted by State Governments. Hence the State Governments
regulate these banks. In 1966, need was felt to regulate their activities to ensure their soundness
and to protect the interests of depositors According to the RBI in March 2009, number of all
Scheduled Commercial Banks (SCBs) was 171 of which, 86 were Regional Rural Banks and the

27
number of Non-Scheduled Commercial Banks including Local Area Banks stood at 5. Taking
into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees
and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per
cent of all offices, 82 per cent of staff and 60.3 per cent of all automated teller machines (ATMs)

28
ANALYSIS

29
ECONOMIC ANALYSIS

30
 The independence-era Indian economy (from 1947 to 1991) was based on a mixed
economy combining features of capitalism and socialism, And failed to take advantage of the
post-war expansion of trade. In 1991, India adopted liberal and free-market principles and
liberalised its economy to international trade under the guidance of Former Finance minister
Manmohan Singh under the Prime Ministry of P. V. Narasimha Rao, prime minister from 1991 to
1996, who had eliminated Licence Raj, a pre- and post-British era mechanism of strict
government controls on setting up new industry. After more fundamental reforms since 1991 and
their renewal in the 20()()s, India has progressed towards a free market economy.

The economy of India is the tenth-largest in the world by nominal GDPand the third-largest by
purchasing power parity (PPP). The country is one of the G-2() major economies and a member
of BRICS. On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP
(PPP) in 2012. The economy slowed to around 5.0% for the 201213 fiscal year compared with
6.2% in the previous fiscal, On August 28, 2013 the Indian rupee hit an all time low of 68.80
against the US dollar. In order to control the fall in rupee, the government introduced capital
controls on outward investment by both corporates and individuals. the growth rate has nearly
halved in just three years. GDP growth rose marginally to 4.8% during the quarter through March
2013, from about 4.7% in the previous quarter. The government has forecast a growth rate of
for the year 201314, India suffered a very high fiscal deficit of US$ 88 billion
(4.8% of GDP) in the year 201213. The Indian Government aims to cut the fiscal deficit to
US$ 70 billion or 3.7% of GDP by 2013-14.

GROSS DOMESTIC PRODUCT (GDP)

Gross domestic product (GDP) is the market value of all officially

recognized final goods and services produced within a country in a given period of time.

India is the tenth-largest in the world by nominal GDP. India's GDP grew by 9.3% in 201011;
thus, the growth rate has nearly halved in just three years. GDP growth rose marginally to 4.8%
during the quarter through March 2013, from about 4.7% in the previous quarter. The
government has forecast a growth rate of for the year 201314, The GDP value of
India represents 2.97 percent of the world economy, GDP in India is reported by the The World
Bank Group. The gross domestic product (GDP) measures of national income and output for a
given country's economy.GDP of india at Factor cost is Rs 55054.37 Billion in the year 2012-13
It indicate future growth of GDP,which is shown by the following Diagram.
GDP AT FACTOR COST(CONSTANT
PRICE) (RUPEES IN BILLION)
6000
0

5000
0

40000

31
 30000

20000

10000

SOURCE:RBI

SECTOR WISE CONTRIBUTION TO GDP

2012-13 GDP of India increased at the rate of 4.99% from Rs

52435.82 Billion to Rs 55054.37 Billion.The Chan above shows a possitive Trend of GDP in the
near future.

The most important and the fastest growing sector of Indian

economy are services. Trade, hotels, transport and communication; financing, insurance, real
estate and business services and community, social and personal services account for more than
60 percent of GDP. Agriculture, forestry and fishing constitute around 12 percent of the output,
but employs more than 50 percent of the labor force. Manufacturing accounts for 15 percent of
GDP, construction for another 8 percent and mining, quarrying, electricity, gas and water supply
for the remaining 5 percent.By analysing the following chart it would be clear that Finance and
trading sectors are the largest and growing contributors of Indian GDP.

SECTOR WISE CONTRIBUTION AS A PERCENTAGE TO GDP

30
25

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

2011-12 2012-13

FINANCE AGRICULTURE MANUFACTURING TRADING

SOURCE:RBI

32
GDP RANKING
India is the largest Economy in the world on the basis of nominal GDP according to the
record of World bank. And india represent 2.97 percentage of word economy GDP.US is the
largest contributor of world Economy GDP Which amounts to 15,684, 800 Million US Dollar
and in case of India which is amounts tol, 841,717 Million US Dollar. Following Chart showing
the ranking of countries according to GDP contribution on 2012.

GROSS DOMESTIC PRODUCT-2012

IMILLONSOF US DOLLARI
18,000,000

SOURCE:WORLD BANK

Acoording to the Ministry of Finance Economic reforms introduced two decades ago
would make the country with the third largest GDP in the worldby 2025.1ndia is now an
attractive FDI destination welcoming both trade and technology flows. The Prime Minister's
Economic Advisory Council (PMEAC) - the government's topmost thinktank - on Friday cut its
growth forecast for India in 2013-14 to 5.3%, just above last year's decade-low 5%
expansion.recent expansion of the automobile sector and pick-up in exports would have a
positive impact on the manufacturing sector. "Taking these factors into account, the forecast
growth rate appears reasonable.the farm sector would post a 4.9% growth, which would aid
overall expansion. The Indian economy, Asia's third-largest, grew 4.4% in the June quarter.

Monetary policy of Central Bank under the supervision of new Governer Raghuram
Rajan And fiscal policies of Government gives hope to the indian economy to become worlds 3rd
largest economy.

33
TREND OF GDP
GDP of India shows a possitive Trend. Following is the chart shows the Trend line of
India's GDP on the basis of past 25 years..

GDP(Constantprice) GROWTH OVER 25 YEARS

WITH TREND LINE
70000

60000

50000

40000

30000 10524e006,tsx

20000

1000
0

SOURCE:RBI

CURRENT ACCOUNT DEFICIT (CAD)

The current account is one of the two primary components of the balance of payments,
the other being capital account.is one of two major measures of the nature of a country's foreign
trade.A current account surplus increases a country's net foreign assets by the corresponding
amount, and a current account deficit does the reverse.

India's growing oil import bill is seen as the main driver behind the large current account
deficit.Oil imports account for 34 per cent of the total import bill.lndia, which imported crude oil
worth USD 144.3 billion in 2012-13.

After 2003-04 India's CCurrent Account Deficit start to fall and In 2012-13 Current Account
Deficit shows -88163 USD Million in the place of -78155 USD Million in

2011-12.Following is the chart showing india's CAD over 10 years.

CURRENT ACCOUNT DEFICIT

(US $ million)
20000

34
 2003-04 2004-05

-20000

-40000

-60000

-80000

-100000
SOURCE:RBI

BY analyzing the chart given above it is clear that the Current

account deficit of india is falling over 10 years and it shows a falling trend. The policies and
measures have been taken by the Government and Country's Central bank only the hope for CAD
in future.

The upto date policies taken by RBI and Central Govt gives hopes to india's BOP.Indiacurb oil
importsto reduce the dollar demand and shore up the rupee on september 2013, And place
restrictions on gold imports.RBI sells Dollar directly to state oil companies is another measure
possitively influenced the Economy.

In the recent publication of Ministry of Commerce & Industry states a rise in export to 11.2% and
fall in import to 18.1% as gap shrinks to two-and-a-half-year low of $6.76 billion in September
2013. Lower import of Gold and Crude oil helped pare the deficit to well below August's figure
of $10.9 billion. gold imports have sharply compressed in the months of July, August and
September,come down to about 65 or 70 tonnes.

FOREIGN EXCHANGE RESERVE

Forex Reserves are Assets held by central banks and monetary authorities, usually in
different reserve currencies, mostly the United States dollar, and to a lesser extent the euro.the
term in popular usage commonly also adds gold reserves, special drawing rights (SDRs), and
International Monetary Fund (IMF) reserve positions.Foreign Exchange reserves are called
Reserve Assets in the Balance of Payments.

The chart given bellow showing a possitive trend of India 's Forex reserve. During
201112 Forex reserve was 12832 USD Million and it fall to -3826 USD Million in 2012-13. The
chart showing 10 years movement of india' s Forex reserve. Financial year 2007-08 shows lowest
forex reserve for the 10 years and compared to that the reserve comes to possitive.

India Foreign Exchange Reserves averaged 5008.66 INR Billion from 1990 until 2013,
reaching an all time high of 16275.30 INR Billion in September of 2013 and a record low of

35
23.86 INR Billion in June of 1991.Foreign Exchange Reserves in India decreased to 15309.80
INR Billion in October of 2013 from 16275.30 INR Billion in September of 2013.

The policies and measures of Central government and RBI grately influenced to the forex
reserve.

FOREIGN EXCHANGE RESSERVE

(US$ million)
40000
20080
12832

20000

-20000

-40000

-60000

-80000

-100000 -92164

SOURCE:RBI

FOREIGNINVESTMENT INFLOW
It is the sum of equity capital, reinvestment of earnings, other long-term capital, and
short-term capital as shown in the balance of payments.The chart shown bellow shows a possitive
movement of Foreign investment inflow over 10 years.

36
 FOREIGN INVESTMENT INFLOW
(US $ MILLION)
60000
50000
40000
30000
FOREIGN INVESTMENT
INFLOW
20000
10000 Linear (FOREIGN INVESTMENT
INFLOW)

SOURCE:RBI

INFLATION
The inflation rate in India was recorded at 6.46 percent in September of 2013. Inflation Rate in
India is reported by the Ministry of Commerce and Industry, India. India Inflation Rate averaged
7.72 Percent from 1969 until 2013, reaching an all time high of 34.68 Percent in September of
1974 and a record low of -11.31 Percent in May of 1976. In India, the wholesale price index
(WPI) is the main measure of inflation.

AGRICULTURAL PRODUCTION
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry
and fisheries accounted for 16.6% of the GDP in 2009, about 50% of the total
workforce.Agriculture production in India plays a significant role in the overall socio-economic
Development of the country.lndia receives an average annual rainfall of 1,208 millimetres (47.6
in) and a total annual precipitation of 4000 billion cubic metres, with the total utilisable water
resources, including surface and groundwater, amounting to 1123 billion cubic metres.lndia is the

37
largest producer in the world of milk, jute and pulses, and also has the world's second largest
cattle population with 175 million animals in 2008.1t is the second largest producer of rice,
wheat, sugarcane, cotton and groundnuts, as well as the second largest fruit and vegetable
producer, accounting for 10.9% and 8.6% of the world fruit and vegetable production
respectively.lndia is also the second largest producer and the largest consumer of silk in the
world, producing 77,000 million tons in 2005.1ndian states Uttar Pradesh, Punjab, Haryana,
Madhya Pradesh, Andhra Pradesh, Bihar, West Bengal, Gujarat and Maharashtra are key
agricultural contributing states of India.

Following is the chart showing total agricultural production of india over 10 years
includes Foodgrains and Commercial Crops.Chart showing a possitive trend over total griculture
production.Production increased to 1805.7 Million tonnes in the Financial year 2012-13 from
1792.19 Million tonnes Production in 2011-12. A country mostly depends up on Agricultural
production like india has greatest influence in economic development of that particular country.

TOTAL AGRICCULTURAL PRODUCCTION

MILLION TONNES

SOURCE:RBI

INDUSTRIAL PRODUCTION
Index of industrial production released by Central Statistical Organisation is the main
source of industrial production statistics .lndian Index of Industrial production(IIP) focus on
sectors like mining, electricity and manufacturing.

India Industrial Production averaged 6.95 Percent from 1994 until 2013.1ndustrial
Production in India irwreased 0.60 percent in August of 2013 over the same month in the
previous year. Industrial Production in India is reported by the Ministry of Statistics and
Programme Implementation.

38
 Following is the chart showing the Index of Industrial production over 5 years, upto
200910. It also showing a possitve growth of production. And it shows an average growth rate of
8.29% over the 5 years

INDEX OF INDUSTRIAL PRODUCTION

(WEIGHTIOOO)

320
304.1
300

280

260

240
221.5

220

200

SOURCE:MINISTRY 2008-09 2009-10

LENDING RATE
From 2000 until 2013, India Interest Rate averaged 6.6 Percent reaching an all time high
of 14.5 Percent in August of 2000 and a record low of 4.3 Percent in April of 2009. In India,
interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors.

Fall in lending rate possitively influence the economic activities of that particular country,
because a fall in interest rate will cause decrease the cost of capital and increase the volume of
investment in that country.

Following is the chart showing Average lending rate of Bnks over past 5 years.By
analysing the graph it is clear that the interest rate is decreased to 9.975% in financial year
201213 from 10.375% in financial year 2011-12.

AVG LENDING RATE

16
14
12
10

39
 8
6
4

2008-09 2009-10 2010-11 2011-12 2012-13

SOURCE:RBI

EMPLOYMENT
India's labour regulations among the most restrictive and complex in the world have
constrained the growth of the formal manufacturing sector where these laws have their widest
application. Better designed labour regulations can attract more labour- intensive investment and
create jobs for India's unemployed millions.

Following chart showing total employment in public sector and private sector over 10
years.which showing an increasing trend.

EMPLOYMENT
IN MILLION

SOURCE:RBI

SECrORAL CONTRIBUTION TO GDP

Following table showing the sectorial Contribution to GDP of India Over past 10 years,
the sectors include Finance, Trade, Agriculture, Manufacturing, and Construction etc.

Moving through the chart it is clear that Trading sector including Hotel, Transport and
communications is the greatest contributor to GDP in India among the sectors selected. But the
growth rate is not much high compared to the rate of growth of finance sector.

Finance sector contributed only 10.6% in financial year 2003-04, but it is increased to
31.5% in financial year 2012-13. While trading sector contributed 32.1% in financial year
200304 and which is 35.2% in financial year 2012-13.

40
 SECTORAL CONTRIBUTION TO GDP
(FACTOR COST)

SOURCE:RBI

Finance sector is best among the other sectors in Indian economy after trading sector even though
there is a slight decrease in GDP contribution on the year 2011-12 and 2012-13.

41
 INDUSTRY ANALYSIS
INDUSTRIAL DATA
Following is the table showing banking industrial data for past 10 years from 2004 to
2013. Which shows total income, total assets,total liabilities and total expenses are increasing at
an increasing rate.lt indicate that banking industry in india is currently passing through the
expansion stage.

INDIAN BANKING INDUSTRY

Rs. Million (Ann)

120000
000

100000
000

80000
000

60000
000

40000
000

20000000
Total income(Ann)
Total expenses(Ann)
Total liabilities
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total assets
SOURCE:CMIE

Total assets of banks increased to 96446190.6 in 2013 from 20693894.1 in 2012.total liabilities
of industry increased to 96446190.6 in 2013 from 20693894.1 in 2004.total income increased to
8759813.951n 2013 from 1958576.34 in 2004.total expenses increased to 7845122.1 from 2013
to 1723968.1 in 2012.Highest of total income, total expense, total liability, and total assets
showed in the year 2013.

43
BANK INDEX

The CNX Bank Index is an index comprised of the most liquid and large capitalized
Indian Banking stocks. Itcaptures the capital market performance of the Indian banks.The Index
has 12 stocks from the banking sector, which trade on the National Stock Exchange. Following
are given the performance of Bank Index for past 10 years.

CNX BANK INDEX

2003-2013

SOURCE:NSE

Moving on the Chart given above it is clear that the Banking industry is growing for past
10 years. During the year 2008 to 2009 Index showed a sudden decline because of the financial
crisis existed those period and later on showed positive movements. Then after the period 2011
to 2012 also showed a declining trend then after also showed positive upward movements.
Graph above showed a V formation, i.e. the index will move upward in coming years
according to the V formation principles.

NON PERFORMING ASSET(NPA)

Non-Performing Assets are loans that are in jeopardy of default. Once the borrower has
failed to make interest or principal payments for 90 days the loan is considered to be a
nonperforming asset. Non-performing assets are problematic for financial institutions since they
depend on interest payments for income.

Following is the graph showing NPA of Indian banking sector for past 10 years.

44
 N PA
(PERCENTAGE TO TOTAL ASSET)

2
.
5

1
.
5

0
.5

Sheduled commercial banks Public sector banks 001d private sector banks new
private sector banks *Foreign banks

SOURCE:RBI

NPA of banks decreasing over the years. Decreasing NPA shows performance efficiency of
banking sector in India. Following is table showing NPA Ratio of banking industry.

NPA Ratio of 2002-03 was 9.2% and which was decreased to 2.8% in financial year 2011-12.

INDUSTRY LIFE CYCLE

Like human beings an Industry also has a life cycle. According to the industry life cycle
theory the life of an industry classified to four stages namely pioneering stage, expansion stage,
stagnation stage, and Decline stage. The profitability of an industry is mostly depends up on the

45
stage of life cycle in which it stands. Here Deposits, Income earned, Number of offices and
employees, Advances are taken as the variables to find the life cycle of banking industry.

DEPOSITS

Deposits are cheapest sources of loanable funds for banks. Banks business is directly
related with the volume of deposits. Higher the deposit means banks can lend more to needy
people and widen business and earnings.

Following is the chart showing the volume of deposits of banking industry in India for
past 8 years. By looking to the chart it will be clear that the deposits to banks are increasing at an
increasing rate over the period of time. This is a positive signal to banking industry. Deposits of
banking industry will increase in expansion stage of industry life cycle.

DEPOSITS
(Amount in million

80000000

70000000

60000000

50000000

40000000

30000000

20000000

46
10000000

2005 2006 2007 2008 2009 2010 2011 2012

SOURCE:RBI

EARNINGS
Following is the chart showing income of banking industry over past 8 years. Interest
income and other incomes are shown separately. Both are showing increasing trend. During the
stage of expansion the income of banks will increase at an increasing rate.

So the following movements of income of banking industry indicate that industry currently
going through expansion stage.

INCOME OF BANKING INDUSTRY

(Amount in Rs million )

7000000

6000000

5000000

4000000

3000000

2000000

1000000

47
 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Interest income Other income Linear (Interest income) Linear (Other income)
SOURCE:RBI

NUMBER OF OFFICES AND EMPLOYEES

Number of offices and employees are also increasing over the period of time. During the
stage of expansion competitors will come to industry and existing companies tends to stan new
branches and expand business, this would increase recruitments and employment opportunities.

Following chart indicate the industry is currently passing through expansion stage because both
number of employees and number of offices are increased at an increasing rate over the period of
NO OFFICES AND EMPLOYEES
1200000 (Amount in Rs million)

1000000

800000

600000

400000

200000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

e No. of offices No. of employees Linear (No. of offices) Linear (No. of em ployees)
SOURCE:RBI

ADVANCES

Making loans and advances are the main business and one of the important sources of
income of banks. So the volume of advances is also influencing the performance of industry.
During the stage of expansion of industry life cycle the business and income will increase, in the
case banking industry advances will increase

ADVANCES
IN MILLION
60000000

48
 50000000

40000000

30000000

20000000

10000000

SOURCE:RBI2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

By analyzing the above variables related to the banking industry it is clear about that banking
industry is passing through Expansion stage.

The above charts states the life cycle of banking industry during financial year 2004 to 2013. By
analyzing above charts we can say that banks are now passing through Expansion stage.

Deposits, income, number of offices and employees and advances are increasing at an increasing
rate. And NPA of banking industry showed a decreasing trend. This all proves banking industry is
now in Expansion stage.

RBI REGULATIONS
Repo rate is the rate at which RBI lends to commercial banks, Reduction in Repo rate
helps the commercial banks to get money at a cheaper rate. Reverse Repo rate is the rate at which
RBI borrows money from the commercial banks, increase in Reverse repo rate will encourage
banks to invest with RBI. Cash Reserve Ratio is a certain percentage of bank deposits which
banks are required to keep with RBI in the form of reserves or balances .Higher the CRR with the
RBI lower will be the liquidity in banks.

Following is the chart showing Repo and reverse repo and cash reserve ratio for the past 19
months. Repo rate is decreased to 7.5% in 09/13 from 8% in 03/12. Reverse repo also decreased
from 7.5% in 03/12 to 6.5% in 09/13.Cash reserve ratio decrease from 4.75% in 03/12 to 4% in

49
09/13. Decrease in repo and reverse repo and CRR will increase the liquidity and business of
banks.

MONETARY POLICY RATES

98
7.5

6.5

Repo Reverse Cas Reserve Ratio

SOURCE:RBI

EFFECT OF NATIONAIXSATION
The nationalisation of banks in India took place in 1969 by Mrs. Indira Gandhi. Following is the
chart showing the effect of nationalization of banks in india over the period of 1969 to 2012.

EFFECT OF NATIONALISATION
120,000

101,261
100,000

80,000 74,563

64,000

50
 60,570
60,000

40,000

20,000

1969 1991 2007 2012

No. of Bank Offices population per office

SOURCE:RBI

By analyzing the above table it would be clear that number of bank offices are increased over the
period and population per office is decreased. Number of bank offices are increased from 8262
from 1969 to 101261 in 2012. And population per office is decreased from 64000 in 1969 to
13000 in 2012.

EFFECT OF FINANCIAL SECTOR REFORMS

Following chart showing the effects of financial sector reforms in India over the period from 1990-
91 to 2011-12.

51
 60

20

120
. 1990-91
. 2007-08
. 2011-12
100

80

40

Gross Gross Bank Credit / Broad Money / Net I nterest BSE Market
Domestic Domestic GDP GDP I ncome to Capitalisation
Saving Rate (% I nvestment Total Assets of GDP) ofGDP) Rate (% of
GDP)

SOURCE:RBI

Gross domestic saving rate showed 22.9% in 1990-91 then increased to 36.8% in 2007-08 and then
decreased to 30.8% in 2011-12. Highest recorded in 2007-08 at 36.8%

52
Gross domestic investment increased to 38.1% in 2007-08 from 26% in 1990-91 and then
decreased to 35% in 2011-12. Highest is in the year 2007-08 at 38.1%.

Bank credit increased from 20.4% in 1990-91 to 47.4% in 2007-08, again increased to 50.6% in
2011-12.50.6% in 2011-12 is the highest.

Broad money also showed increasing trend, it increased from 46.7% in 1990-91 to 82.9% in 2007-
08 then a slight change to 83.21 % in 2011-12.
Net interest income to total asset shows 3% in 2007-08, and decreased to 2.9% in 2007-08

BSE market capitalization highest in 2007-08 at 103% and decreased to 70.2% in 2011-12.

53
 INDUSTRY RATIOS

TREND

YEAR 2005 2006 2007 2008 2009 2010 2011 2012

OPERATIG
EXPENSE 165885 190540.1 229361.6 231985.2 356769.6 430672.2 692756.1 874346.7

INTEREST
INCOME 1558010 1856168 2316753 3084823 3884816 4151786 4913407 6550565
OPERATING
PROFIT
10.65 10.27 9.9 7.52 9.18 10.37 14.1 13.35 12.87

OPERATING
EXPENSES 501333.4 592640.1 663192.6 772826.5 895814.5 1000279 1231403 1371033

NII+OTHER 1011566 1137035 1322965 1608722 2004788 2223627 2722660 3102782

COST TO 42.49
INCOME
49.56 52.12 50.13 48.04 44.68 44.98 45.23 44.19

LOANS 11508363 15184587 19812363 24769360 29999239 34967200 42974875 50745793

DEPOSIT 18375594 21671165 26969365 33200616 40632011 47469196 56158743 64536642

LOAN TO 80.64
DEPOSIT
62.62 70.06 73.46 74.60 73.83 73.66 76.52 78.63

NIPA 1187.46 1021.94 1009.73 1126.17 1366.55 1693.96 1956 2844

NET
ADVANCES 22313.26 30336.23 39624.74 49538.73 59998.49 69941.46 85974.08 101491
 1.65
NPA
5.32 3.37 2.55 2.27 2.28 2.42 2.28 2.8
Operating profit margin of banking industry decreased from 2011 to 2012 from 14.1 % to
13.35%. It was 10.65% in 2005, it is the highest among the period also.it showing a decreasing
trend for 2013.

Cost to income ratio increased from 2011 to 2012 from 45.23% to 44.19% and it was 49.56% in
2005, highest recorded 52.12% in 2006. it showing a decreasing trend for 2013.

Loan to deposit ratio increased from 2011 to 2012 from 76.52% to 78.63%. It was 62.62% in
2005, and highest recorded 78.63% in 2012. It showing an increasing trend for 2013.

NPA ratio increased from 2011 to 2012 from 2.28% to 2.8%, it was 5.32% in 2005 and highest
recorded in the same year. It showing an decreasing trend for 2013.

55
COMPANY ANALYSIS

56
STATE BANK OF INDIA (SBI)
State Bank of India (SBI) is a Multinational Govemment owned (62.31 financial and
banking services company in India. with headquarters in Mumbai, Maharashtra, and Founded I
July 1956. As of December 2012, it had assets of billion and 15,003 branches, including 157
foreign offices, making it the largest banking and financial services company in India by assets.
SBI had 14,816 branches of which 9,851 (66%) were in Rural and Semi-urban areas its revenue
was INR 200,560 Crores (US$ 36.9 billion), out of which domestic operations contributed to
95.35% of revenue in financial year 2012-13. SBI has five associate banks State Bank of Bikaner
& Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of
Partial, State Bank of Travancore. Apart from five associate banks it has seven Non-Banking
Financial services. rom its five associate banks, SBI also has the following non-banking
subsidiaries SBI Capital Markets Ltd, SBI Funds Management Pvt Ltd, SBI Factors &
Commercial Services Pvt Ltd, SBI Cards & Payments Services Pvt. Ltd. (SBICPSL), SBI DFHI
Ltd, SBI Life Insurance Company Limited, SBI General Insurance.

COMPETITIVE POSITION
SBI is India's oldest and largest public sector Bank. With the market capitalization of Rs.
106, 671.68Crore. Net interest income of Rs.cr 119,657.10 and net profit of Rs.cr 14,104.98.
Some of the major competitors for SBI in the banking sector are ICICI Bank, HDFC Bank, Axis
Bank, Bank of India, Punjab National Bank and Bank of Baroda Canara Bank. However in terms
of average market share, SBI is by far the largest player in the market.

BOARD OF DIRECTORS
Chairman Mrs Amndhati Bhattacharya
Shri Hemant G
Shri Diwakar Gupta
Managing Directors
Shri A. Krishna Kumar
Shri S. Vishvanathan

PRODUCTS AND SERVICES

Debit cards:Debit Card spends of State Bank Group crossed 15,000 crores for FY 2012-13 which
constitutes over 20% of total Debit Card spends in the industry.
Prepaid Cards:Bank's range of products include popular Rupee Prepaid Cards like Gift Card,
General Purpose Prepaid Card like eZ-Pay Card and Foreign Travel Card catering to various
payment needs of the customers.
Foreign Travel Card: Foreign travel card providing safety, security and convenience to overseas
travelers.which is now available in eight major currencies US Dollar (USD), Great Britain Pound
(GBP), Euro, Canadian Dollar(CAD), Australian Dollar (AUD), Japanese Yan (JPY),Saudi Riyal
(SAR) and Singapore Dollar (SGD).

Cards are aligned with most of the social schemes of State and Central

57
 Governments

Gift Cards:Gift Cards remain the preferred option to customers to gift the 'freedom of choice' to
their loved ones

Green Remit Card cardholder can swipe the card at Green Channel
Counter or in
Cash Deposit Machines and remit money to the beneficiary whose account number is mapped to
the card. Once the transaction is complete, both the remitter and beneficiary get confirmation
through SMS on their mobile phone.

Mobile banking

Internet banking
MARKET CAPITALIZATION

SBI is India's Number one bank on the basis of market capitalization, Amounted to
m. 113,864.29 Crorein 2013.
AREA COVERED
SBI provides a range of banking products through its network of branches in India and
overseas with headquarters in Mumbai, Maharashtra. It has 14 regional hubs and 57 Zonal
Offices that are located at important cities throughout India. And had 14,816 branches in India of
which 9,851 (66%) were in rural and Semi-urban areas In the financial year 2012-13. the bank
had 180 overseas offices spread over 34 countries.

LABOUR CONDITION
SBI is one of the largest employers in the country having 228,296 employees as on 31st
March 2013. Which shows there is no labour scarcity in SBI.
LABOUR CONDITION Rs In Crore

2009 2010 2011 2012 2013

Total Income 76479.78 85962.07 96329.45 120872.9 135691.9
Number of E 10 s 205896 200299 222933 215481 228296
r Em 10 ee 0.371449 0.429169 0.4321 0.560945 0.594368
SOURCE:BLOOMBERG

The table above stated shows the productive quality and availability of labours over past
5 years. It is clear about there is no scarcity of labour and the employed Labours are highly
productive. The number of employees increased by 10.8% from 2009 to 2013, ie 22400

58
additional labours are recruited during the period of time. And Sales per employee increased
from .37 crore in 2009 to .59 crore in 2013, ie an increase of .22 Crore over the period.

RATIO ANALYSIS

NET INTEREST MARGIN

NET INTEREST MARGIN

YEAR 2009 2010 2011 2012 2013
NET INTEREST 20873.14 23671.44 32526.40 43291.08 44331.30

EARNING ASSETS 922860.96 1013888.07 1175194.17 1276939.67 1511363.98

2.26 2.33 2.77 3.39 2.93

SOURCE:MONEY CONTROL

It is the net interest income earned by the bank on its earning assets.if the non-performing
assets are high, their NIM will go down. So higher the ratio indicate efficiency of firms
investment decision.Here table above shows NIM of SBI is increasing. It rose from 2.26% in
2009 to 3.39%in 2012, and after declined to 2.93% in 2013.

CREDIT TO DEPOSIT

CREDIT TO DEPOSIT
2009 2010 2011 2012 2013

ADVANCES 542503.20 631914.15 756719.45 867578.89 1045616.55

DEPOSITS 742073.13 804116.23 933932.81 1043647.36 1202739.57
CD RATIO 73.11 78.58 81.03 83.13 86.94
SOURCE:MONEY CONTROL

Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is increasing over the years from
83.13% in 2012 to 86.94% in 2013, and it was 73.11% in 2009.

OPERATING PROFIT MARGIN

OPERATING PROFIT MARGIN
YEAR 2009 2010 2011 2012 2013
MI-OPERATING
EXPENSE 2749.48 -1269.57 1095.52 5727.99 15046.88
TOTAL INTEREST 63788.43 70993.92 81394.36 106521.45 119657.10

59
OPERATING PROFIT
MARGIN 4.31 -1.79 1.35 5.38 12.57
SOURCE:MONEY CONTROL

Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing a negative ratio of -1.79% in 2010 and afterwards an increasing trend. Ratio increased to
12.5% in 2013 from 5.38% in 2012.

NON PERFORMING ASEET RATIO

NON PERFORMING ASEET RATIO

YEAR 2009 2010 2011 2012 2013

NPA 189167.00 249214.10 318241.00 496487.00 639874.30
NET
LOANS 7446465.71 8525942.92 9822982.02 11461589.12 13587430.36
NPA
RATIO 2.54 2.92 3.24 4.33 4.71
SOURCE:BLOOMBERG

NPA Ratio is increasing over the past 5 years 2.54% in 2009 to 4.71% in 2013, and it was 4.33%
in 2012.

COST TO INCOME RATIO

COST TO INCOME RATIO

YEAR 2009 2010 2011 2012 2013

OPERATING EXPENSE 18123.66 24941.01 31430.88 37563.09 29284.42

TOTAL INCOME 33564.49 38639.59 47461.49 57642.53 60366.14

RATIO 54.00 64.55 66.22 65.17 48.51

SOURCE:MONEY CONTROL

cost to income ratio increased from 2009 to 2012 from 54% to 65.17% and then decreased to
48.51% in 2013.

MARKET TEST RATIOS

EARNING PER SHARE(EPS)

EARNING PER SHARE (EPS)

60
Year 2009 2010 2011 2012 2013

Profit available to Equity Share

holders 9121.57 9166.39 7370.69 11713.34 14105.32
Number of uit Shares 63.488 63.488 63.5 67.104 68.403
EPS 143.67 144.37 116.07 174.55 206.20
SOURCE:MONEY CONTROL

EPS irwreased from 2012 to 2013 from 174.55 to 206.20.it was 143.67 in 2009,then decreased to
116.07 in 2011 and increased to 174.55 in 2012.

DIVIDEND PER SHARE (DPS)

DIVIDEND PER SHARE(DPS)

Year 2009 2010 2011 2012 2013

uit Dividend 1841.15 1904.65 1905 2348.66 2838.72

Number of uit shares 63.488 63.488 63.5 67.104 68.403

DPS 28.99 30.00 30 35.00 41.49

DPS showing an increasing trend, increased from 2012 to 2013 from 35 to 41.49. it was 28.99 in
2009. DPS 41.49 is the highest for the period.

DIVIDEND PAY OUT RATIO

DIVIDENT PAY OUT RATIO

2009 2010 2011 2012 2013

DPS 29.00 30.00 30.00 35.00 41.50

EPS 143.67 144.38 116.07 174.55 206.20
DIVIDENT PAY our
20.18 20.77 25.84 20.05 20.12
EARNING RETENTION
79.81 79.22 74.15 79.94 79.87
There is no high variations in Dividend payout ratio, bank maintains 20% over the past 5 years.
25.84% is the highest ratio showed in 2011 highest Dividend payout ratio will reduce Earning
retention ratio it showed 74.15%, bank has almost same Earning retention ratio in 2012 and 2013
ie 79%. In 2013 the ratio is 20.12%.

61
PRICE EARNING RATIO
PRICE EARNING RATIO

2009 2010 2011 2012 2013

MARKET PRICE PER

SHARE(AVG) 1278.80 1954.42 2697.30 2118.58 2141.58
EPS 143.67 116.07 174.56 206.21

PRICE EARNING RATIO 8.90 13.54 23.24 12.14 10.39

A high price earning ratio suggest investors expecting high earning growth in future and it shows
how much investors are willing to pay for EPS.Price earning ratio decreased from 2012 to 2013
from 12.14 to 10.39 and it was 8.90 in 2009. 2011 shows high ratio of 23.24 and it is decreased
to 12.14 in 2012.

INTRINSIC VALUE
Market value of stock tends towards its intrinsic value. Here the Intrinsic value of security
is higher than the current market price, it indicate that stock is undervalued. It is advisable to buy
the security.

INTRINSIC VALUE
AVG PRICE EARNING RATIO 13.63952
EXPECRED EPS 156.9784
INTRINSIC VALUE 2141.11
CURRENT MARKET PRICE(31 ocr 13) 1796.75
BUY/SELL BUY

62
BANK OF BARODA(BOB)
BOD is a state owned and second largest Bank in india after state bank of india. Its total
global business was INR 8,021 billion as of 31 March 2013. Its headquarters situated in Baroda,
or Vadodara. Its business also spreads all over the world.

COMPETITIVE POSITION

Bank of Baroda is India's second largest public sector bank operating worldwide. Its
market capitalization is amounts to Rs19,881.69 crore. Its main competitors are SBI,ICICI Bank,
HDFC Bank, Axis Bank, Bank of India, Punjab National Bank and Bank of Baroda Canara Bank

BOARD OF DIRECTORS
Chairman and Managing Directo Shri S.S. Mundra
Executive Directors Shri P. Srinivas

Shri Ranjan Dhawan

Shri Bhuwanchandra B.
Joshi
Directors Shri Alok Nigam
Shri Sudarshan Sen

Shri Vinil Kumar Saxena

Shri V. B. Chavan

Shri Maulin Vaishnav

Shri Surendra Singh Bhandari

Shri Rajib Sekhar Sahoo

PRODUCTS AND SERVICES

Credit cards, consumer banking, corporate banking, finance and insurance, investment
banking, mortgage loans, private banking, private equity, wealth management MARKET
CAPITALIZATION

Bank of baroda is india's second largest public sector Bank after SBI with market
capitalization of Rs 19,881.69Crore in 2013.

63
AREA COVERED
BOB provides a range of banking products and services through its network of branches
in India and overseas. with headquarters inBaroda, or Vadodara.The Bank has 100 branches in 24
countries including 61 branches of the bank, 38 branches of its 8 subsidiaries and 2
representative offices in Thailand and Australia. Its total global business was INR 8,021 billion
as of 31 March 2013.Bank of Baroda has received permission or in-principle approval from host
country regulators to open new offices in Trinidad and Tobago and Ghana.

LABOUR CONDITION
Following is the table showing number of employees and eamings per employees over past 5
years.
LABOUR CONDITION Rs In
Crore
2009 2010 2011 2012 2013
Total Income 17849.24 19504.7 24695.11 33096.05 38827.27
Number of E 10 36838 38960 42175 43108
Earn r em 10 0.484533 0.500634 0.616669 0.784731 0.900698
SOURCE:BLOOMBERG

By analyzing the above table number of employees as well as eamings per employee is
increasing over the period.the increased volume of earning per employees showing the
productive capacity of employees. Number of employees are increased by 17%, ie 6270
additional labours are recruited during the period of 2009 to 2013.And productive capacity of
employees also increased from.48 Crore in 2009 to .90 Crore in 2013, ie .42 crore increased
during this period of time.

RATIO ANALYSIS

NET INTEREST MARGIN

NET INTEREST MARGIN
2009 2010 2011 2012 2013
NET INTEREST 5123.41 5939.48 8802.26 10317.01 11315.26
EARNING ASSETS 220518.89 271684.73 349871.06 434755.23 534978.39
2.32 2.19 2.52 2.37 2.12
SOURCE:MONEY CONTROL

Higher the ratio indicate efficiency of firms investment decision.Here table above shows
NIM rose from 2.19% in 2010 to 2.52% in 2011, and after declined to 2.12% in 2013 from
2.37% in 2012.

64
CREDIT TO DEPOSIT
CREDIT TO DEPOSIT

2009 2010 2011 2012 2013

ADVANCES 143985.9 175035.29 228676.36 287377.29 328185.76

DEPOSITS 192396.95 241044.26 305439.48 384871.11 473883.34
CD RATIO 74.83 72.61 74.86 74.66 69.25
SOURCE:MONEY CONTROL

Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is decreased from 74.66% in 2012 to
69.25% in 2013.

OPERATING PROFIT MARGIN

OPERATING PROFIT MARGIN

2009 2010 2011 2012 2013

MI-OPERATING
EXPENSE 1278.75 1228.25 3132.38 3589.42 5368.52
TOTAL INTEREST 15091.58 16698.34 21885.92 29673.72 35196.65
OPERATING PROFIT
MARGIN 8.47 7.36 14.31 12.10 15.25
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing ratio decreased in 2009 to 2010 from 8.47% to 7.36% and again decreased 2011 to 2012
from 14.31% to 12.10%. in 2013 it is increased to 15.25% from 12.10%.

NON PERFORMING ASEET RATIO

NON PERFORMING ASSET RATIO
2009 2010 2011 2012 2013
NPA 14356.9 21603.7 27847.3 45513.7 64499.8
NET LOANS 1372958 1582339 1923001 2203673 2597921
NPA 1.05 1.37 1.45 2.07 2.48
SOURCE:BLOOMBERG

Non-performing asset ratio increasing over the years.it increased to 2.48% in 2013 from
2.07% in 2012 and it was 1.05% in 2009.

COST TO INCOME RATIO

COST TO INCOME RATIO

65
YEAR 2009 2010 2011 2012 2013
OPERATING EXPENSE 4711.23 5669.88 6727.59 5946.74
TOTAL INCOME 7881.07 8745.84 11611.45 13739.34 14945.88
RATIO 48.78 53.87 48.83 48.97 39.79
Cost to income ratio showing a decreasing trend, it is decreased from 48.78% in 2009 to
39.79% in 2013. There was an increase in 2009 to 2010 from 48.78% to 53.87%.

EARNING PER SHARE(EPS)

EARNING PER SHARE (EPS)

Year 2009 2010 2011 2012 2013

Profit available to Equity Share
holders 2227.2 3058.33 4241.68 5006.96 4480.72
Number of uit Shares 36.553 36.553 39.281 41.238 42.252
EPS 60.93 83.66 107.98 121.41 106.04
EPS decreased from 2012 to 2013 from 121.41 to 106.04, it was 60.93 in 2009. 2012 was
the highest EPS.

DIVIDEND PER SHARE (DPS)

DIVIDEND PER SHARE(DPS)

Year 2009 2010 2011 2012 2013

uit Dividend 383.56 548.29 648.13 701.05 908.46

Number of e uit shares 36.55 36.55 39.28 41.24 42.25

DPS 10.49 15.00 16.50 17.00 21.50

DPS showing an increasing trend, it increased from 2012 to 2013 from 17 to 21.50. 2013
is the highest over the period and it was 10.49 in 2009.

DIVIDEND PAY OUT RATIO

DIVIDENT PAY OUT RATIO

2009 2010 2011 2012 2013

DPS 10.49 15.00 16.50 17.00 21.50

EPS 60.93 83.67 107.98 121.42 106.05
DIVIDENT PAY our 17.22 17.93 15.28 14.00 20.27
EARNING RETENTION
82.78 82.07 84.72 86.00 79.73

66
 Dividend payout ratio increased for the past 5 years except 2012. It increased from 2012
to 2013 from 14% to 20.27%. 20.27% in 2013 is the highest dividend payout ratio and Earning
retention ratio decreased from 2012 to 2013 from 86% to 79.73%, it was 82.78% in 2009.

PRICE EARNING RATIO

PRICE EARNING RATIO

2009 2010 2011 2012 2013

MARKET PRICE PER

SHARE(AVG) 259.44 492.10 840.25 792.60 739.71
EPS 60.93 83.67 107.98 121.42 106.05

PRICE EARNING RATIO 4.26 5.88 7.78 6.53 6.98

A high price earning ratio suggest investors expecting high earning growth in future and
it shows how much investors are Willing to pay for EPS.Price earning ratio increased from 2012
to 2013 from 6.53 to 6.98, it was 4.26 in 2009 and a high price earnig ratio recorded in 2011 to
7.78.

INTRINSIC VALUE
INTRINSIC VALUE

AVG PRICE EARNING RATIO 6.284827

EXPECTED EPS 96.00915
INTRINSIC VALUE 603.401
CURRENT MARKET PRICE(31 ocr 13) 642.9
BUY/SELL SELL
Market value of stock tends towards its intrinsic value. Here the Intrinsic value of share is
lower than current market price which indicate the stock is overvalued. Advisable to sell the
security.

PANJAB NATIONAL BANK

Panjab national bank (PNB) is the 3 rdlargest public sector bank in india on the basis of
market capitalization,founded in 1895. based in New Delhi, India. The bank has been ranked
248th biggest bank in the world by the Bankers' Almanac.

COMPETITIVE POSITION

Main competitors are SBI,ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Bank of
baroda etc. BOARD OF DIRECTORS
Chairman & Managing Director

67
Executive Director Shri Gauri Shankar

Shri. Anurag Jain

Directors Shri. B P Kanungo

Shri. M A Antulay

Shri. B B Chaudhry

Shri. Devinder

Kumar Singla

Dr. Sunil Gupta

Shri M. N.

Gopinath

Shri. Dilip Kumar Saha

Shri. Tara Chand Jhalani

PRODUCTS AND SERVICES

Shri. K.R.Kamath

Smt. Usha Ananthasubramanian

The important products and services of PNB are Credit cards, consumer banking,
corporate banking, finance and insurance, investment banking, mortgage loans, private banking,
private equity, wealth management etc.
MARKET CAPITALIZATION

Panjab National Bank is india's 3 rd largest bank on the basis of market capitalisatio.
Market capitalization is amounts to Rs17 Crore in 2013.

AREA COVERED
Panjab National Bank has more than 6000 branches including 5 overseas branches,in
Hong Kong, Dubai& Afghanistan and an Offshore Banking Unit (OBU) Branch in
SEEPZ,Mumbai.Punjab National Bank is serving more than 82 million esteemed customers.

LABOUR CONDITION
LABOUR CONDITION Rs In Crore

2009 2010 2011 2012 2013

68
Total Income 22245.85 25032.22 30599.06 40630.63 46109.25

Number of E 10 s 58205 56928 57020 62127 63292

Earn r Em 10 ee 0.382198 0.439717 0.536637 0.653993 0.728516
SOURCE:BLOOMBERG

Number of labours are showing increasing during the period of 2009 to 2013, and the
productive capacity of employees also increasing. 5087 additional labours are recruited during
the period 2009 to 2013. The productive capacity of labours also increased from .38 crore in
2009 to .72 crore in 2013.

RATIO ANALYSIS

NET INTEREST MARGIN

NET INTEREST MARGIN

2009 2010 2011 2012 2013

NET
INTEREST 7030.86 8522.89 11807.34 13414.44 14856.51
EARNING
ASSETS 239501.31 287799.25 366960.24 445232.27 465756.8
NIM 2.93 2.96 3.21 3.01 3.18
SOURCE:MONEY CONTROL

Higher the ratio indicate efficiency of firms investment decision.Here table above shows
NIM rose from 2.93% in 2009 to 3.21% in 2011, and increased from 3.01 % in 2012 to 3.18% in
2013.

CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
2009 2010 2011 2012 2013
ADVANCES 154702.99 186601.21 242106.67 293774.76 308725.2
DEPOSITS 209760.5 249329.8 312898.73 379588.48 391560.1
CD RATIO 73.75 74.84 77.37 77.39 78.84
Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is increasing over the period of 5 years.
It increased from 77.39% in 2012 to 78.84% in 2013. And it was 73.75% in 2009.

69
 OPERATING PROFIT MARGIN
OPERATING PROFIT MARGIN

2009 2010 2011 2012 2013

MI-OPERATING
EXPENSE 2004.05 2761.53 3439.38 4008.59 6691.46
TOTAL INTEREST 19326.16 21466.91 26986.48 36428.03 41893.33
OPERATING PROFIT
MARGIN 10.37 12.86 12.74 11.00 15.97
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing a decrease in ratio from 2011 to 2012 from 12.74% to 11%, then it is increased in 2013
to 15.97%.

NON PERFORMING ASEET RATIO

NON PERFORMING ASEET RATIO
2009 2010 2011 2012 2013
NPA 10630 24580 23940 72730 84560
15702 19002 23392 29876 31897
NET LOANS 57 18 45 08 22
NPA RATIO 0.68 1.29 1.02 2.43 2.65
Non performing asset ratio increased to 2.65% in 2013 from 2.43% in 2012 and which
was .68% in 2009.

COST TO INCOME RATIO

COST TO INCOME RATIO
YEAR 2009 2010 2011 2012 2013
OPERATING EXPENSE 7,030.86 8,522.89 11,807.34 13,414.44 14,856.51
TOTAL INCOME 9,950.55 12,088.20 15,419.92 17,617.04 19,072.43
70.66 70.51 76.57 76.14 77.90
Table above showing increased movement of Cost to income ratio from 70.66% in 2009
to 77.90% in 2013, it 76.14% in 2012.

EARNING PER SHARE(EPS)

EARNING PER SHARE EPS)
Year 2009 2010 2011 2012 2013
Profit available to E uit Shareholders 3090.88 3913 4433.5 4892.08 4750.73

70
Number of uit Shares 31.53 31.53 31.681 33.918 35.347
EPS 98.02 124.10 139.94 144.23
EPS decreased from 2012 to 2013 from 144.23 to 134.40, it was 98.02 in 2009. 144.23 in
2012 was the highest EPS.

DIVIDEND PER SHARE (DPS)

DIVIDEND PER SHARE DPS)
Year 2009 2010 2011 2012 2013
uit Dividend 630.61 693.67 696.99 746.19 954.38
Number of e uit shares 31.53 31.53 31.681 33.918 35.347
DPS 20.00 22.00 22.00 21.99 27.00
DPS showing an increasing trend, it increased from 2012 to 2013 from 21.99 to 27, and it
was 20 in 2009. DPS of 27 in 2013 is the highest.

DIVIDEND PAY OUT RATIO

DIVIDENT PAY our RATIO

2009 2010 2011 2012 2013

DPS 20.00 22.00 22.00 22.00 27.00

EPS 98.03 124.10 139.94 144.23

DIVIDEND PAY OUT 20.40 17.73 15.72 15.25 20.09

EARNING RETENTION
79.60 82.27 84.28 84.75 79.91
Dividend pay out ratio increased from 2012 to 2013 from 15.25% to 20.09% and Earning
retention ratio on the same period decreased from 84.75% to 79.9170. dividend pay out ratio was
20.40% in 2009 and 79.60% of Earning retention ratio showing on the same year.

PRICE EARNING RATIO

PRICE EARNING RATIO
2009 2010 2011 2012 2013
MARKET PRICE PER
SHARE(AVG) 447.47 791.61 1145.45 986.53 789.41
EPS 124.10 139.94 144.23
98.03
PRICE EARNING RATIO 4.56 6.38 8.19 5.87

71
 A high price earning ratio suggest investors expecting high earning growth in future and
it shows how much investors are willing to pay for EPS. Price earning ratio decreased from 2012
to 2013 from 6.84 to 5.87 and it was 4.56 in 2009.2011 shows a high price eaming ratio of 8.19.

INTRINSIC VALUE
INTRINSIC VALUE
AVG PRICE EARNING RATIO 6.368362
EXPECRED EPS 128.1422
INTRINSIC VALUE 816.0559
CURRENT MARKET PRICE(31 ocr 13) 544.4
BUY/SELL BUY
Market value of stock tends towards its intrinsic value. Here Intrinsic value of security is
higher than current market price which indicate the security price is under valued. And advisable
to Buy the security.

CANARA BANK
Canara Bank is an Indian state owned bank headquartered in Bangalore, Karnataka. It
was established in 1906by Shri Ammembal Subba Rao Pai, a great visionary and
philanthropist,.The bank also has offices abroad.Today, Canara Bank occupies a premier position
in the comity of Indian banks with an unbroken record of profits since its inception.

COMPETITIVE POSITION
Main competitors are SBI,ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Bank of
baroda, Panjab national Bank PRODUCTS AND SERVICES
etc. Shri. R.K. DUBEY
BOARD OF DIRECTORS Shri. ASHOK KUMAR GUPTA
Chairman & Managing Director Shri V. S. KRISHNAKUMAR
Executive Directors Shri. PRADYUMAN SINGH
RAWAT

Dr.RAJAT BHARGAVA

Smt. Meena Hemchandra

Directors
Shri. G. V. SAMBASIVA RAO

Shri. G. V. MANIMARAN

72
Shri. SUTANU SINHA Shri.RAJINDER KUMAR GOEL
Shri.BRIJ MOHAN SHARMA Shri.SANJAY JAIN
The important products and services offered by Canara Bank are Investment Banking,
Consumer Banking, Commercial Banking, Retail Banking, Private Banking, Asset Management,
Pensions, Mortgages, Credit Cards etc.
MARKET CAPITALIZATION
Canara bank is the fourth largest bank in india on the basis of market capitalization. The
market capitalization of Canara Bank amounts to Rs 9,418.18 crore in 2013.

AREA COVERED
Canara Bank has a network of more than 3564 branches including abroad. The bank has
offices abroad in London, Hong Kong, Moscow, Shanghai, Doha, and Dubai.

LABOUR CONDITION
Following is the table showing number of employees and eamings per employees over past 5
years.
LABOUR CONDITION:RS IN CRORE

2009 2010 2011 2012 2013

TOTAL INCOME(rs in
crore) 16509.05 19546.15 21752.78 25890.99 33800.37
NUMBER OF
EMPLOYEES 44090 43380 43397 43380 42693
EARNING PER
EMPLOYEE 0.37444 0.45058 0.501251 0.596842 0.791708
SOURCE:BLOOMBERG

Number of labours are decreased during the period of 2009 to 2013, and the productive
capacity of employees increased over the period.

RATIO ANALYSIS

NET INTEREST MARGIN

NET INTEREST MARGIN

2009 2010 2011 2012 2013

NET
INTEREST 3537.8 4717.8 5680.53 7823.27 7689.31
EARNING
ASSETS 174927.65 212656.08 258664.79 326875.2 362726.7

73
NIM 2.02 2.21 2.19 2.39 2.11
SOURCE:MONEY CONTROL

Higher the ratio indicate efficiency of firms investment decision.Here table above shows
NIM rose from 2.02% in 2009 to 3.39% in 2012, then decreased from 2.39% in 2012 to 2.11% in
2013.

CREDIT TO DEPOSIT
CREDIT TO DEPOSIT

2009 2010 2011 2012 2013

ADVANCES 107238.04 138219.40 169334.63 212467.17 232489.82

DEPOSITS 154072.42 186892.51 234651.44 293972.65 327053.73

CD RATIO
69.60 73.96 72.16 72.27 71.09
Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is increased 69.60% in 2009 to 73.96%
in 2010,and again decreased 72.27% in 2012 to 71.09% in 2013.

OPERATING PROFIT MARGIN

OPERATING PROFIT MARGIN
2009 2010 2011 2012 2013

MI-OPERATING
EXPENSE -128.5 752.56 776.74 2402.78 1721.5
TOTAL INTEREST 14200.74 17119.05 18751.96 23064.01 30850.62
OPERATING PROFIT
MARGIN -0.90 4.39 4.14 10.41 5.58
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing ratio increased from 2009 to 2012 from -.9()% to 10.41% and then decreased to 5.58%
in 2013.

NON PERFORMING ASEET RATIO

NON PERFORMING ASSET RATIO

2009 2010 2011 2012 2013

NPA 15395.1 16664.3 16664.3 40862 71300.9

74
NET LOANS 1383221 1664498 2102460 2326857 2424210

NPA RATIO 1.11 1.00 0.79 1.75 2.94

Non performing asset ratio increased to 2.94% in 2013 from 1.75% in 2012. Which was
1.11% in 2009.

COST TO INCOME RATIO

COST TO INCOME RATIO

YEAR 2009 2010 2011 2012 2013

OPERATING EXPENSE 3666.30 3965.24 4903.79 5420.49 5967.81
TOTAL INCOME 5846.11 7144.90 8681.35 10650.25 10639.06
RATIO 62.71 55.50 56.49 50.90 56.09
Cost to income ratio increased from 2012 to 2013 from 50.90% to 56.09%. it was 62.71
% in 2009.

EARNING PER SHARE(EPS)

EARNING PER SHARE EPS)

Year 2009 2010 2011 2012 2013

Profit available to Equity Share

holders 1565.01 2072.42 3021.43 4025.89 3282.71
Number of uit Shares 41 41 41 44.3 44.3
EPS 38.17 50.54 73.69 90.87 74.10
EPS is decreased from 2012 to 2013 from 90.87 to 74.10, it was 38.17 in 2009 and 90.87
in 2012 was the highest.

DIVIDEND PER SHARE (DPS)

DIVIDEND PER SHARE(DPS)

2009 2010 2011 2012 2013

EQUITY DIVIDEND 328 328 410 487.3 487.3

NUMBER OF EQUITY
SHARES 41 41 41 44.3 44.3
DPS 8 8 10 11 11
DPS is Il in 2012 and 2013 there is no change. It was 8 in 2009 and 2010 and increased to
10 in 2011

75
 DIVIDEND PAY OUT RATIO
DIVIDENT PAY OUT RATIO

2009 2010 2011 2012 2013

DPS 8 8 10 11 11
EPS 38.17 50.55 73.69 90.88 74.10
DIVIDENT PAY OUT 20.96 15.83 13.57 12.10 14.84
EARNING RETENTION
79.04 84.17 86.43 87.90 85.16
Dividend pay out ratio increased from 2012 to 2013 from 12.10% to 14.84% and the
Earning retention ratio decreased from 87.9()% to 85.16%. year 2009 shows highest Dividend
pay out ratio of 20.96 and lowest Earning retention ratio of 79.04%.

PRICE EARNING RATIO

PRICE EARNING RATIO

2009 2010 2011 2012 2013

MARKET PRICE PER

SHARE AVG 187.48 328.79 569.19 479.03 417.52
EPS 38.17 50.55 73.69 90.88 74.10
PRICE EARNING RATIO 4.91 6.50 7.72 5.27 5.63
A high price earning ratio suggest investors expecting high earning growth in future and
it shows how much investors are Willing to pay for EPS. There is a slight increase in Price
earning ratio from 2012 to 2013 from 5.27 to 5.63, it was 4.91 in 2009 and a high ratio shows
7.72 in 2011.

INTRINSIC VALUE
INTRINSIC VALUE
AVG PRICE EARNING RATIO 6.009091
EXPECTED EPS 65.47818
INTRINSIC VALUE 393.4644
CURRENT MARKET PRICE(31 ocr 13) 258.25
BUY/SELL BUY
Market value of stock tends towards its intrinsic value. Here the Intrinsic value of security
is higher than current market price, so the security is under priced.it is advisable to Buy the
security.

76
BANK OF INDIA
Bank of India is a state-owned commercial bank with headquarters in Mumbai and
Maharashtra. BOI is India's 5th largest public sector bank after SBI,BOB,PNB and Canara bank.
It was founded in 1906.

COMPETITIVE POSITION

Main competitors are SBI,ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Bank of
baroda, Canara Bank, Panjab national Bank etc.

BOARD OF DIRECTORS Shri B P Sharma

Chairman & Managing Director Shri Arun Shrivastava
Executive Director Shri R. Koteeswaran

Shri P.R. Ravi Mohan

Shri Anup Wadhawan

RBI Nominee Director Shri Bhatia

Govt Nominee Director Shri Kuttappan K. Nair

Part time non official Director Shri Harvinder Singh
Shri Antonio Maximiano Pereira

Officer employee Director Shri P. M. Sirajuddin

Workmen employee Director Shri

Shareholder Director Bhasi

n Shri
Khait
an
PRODUCTS AND SERVICES
Smt. V. R.
The important products and services offered by Bank of India are Commercial Banking,
Retail Banking, Private Banking, Asset Management, Mortgages, and Credit Cards etc.

77
MARKET CAPITALIZATION

Bank of India is the 5th largest bank in India on the basis of market capitalization. The
market capitalization of Bank of India amounts to Rs 8,800.44 crore in 2013.

AREA COVERED
Bank of India has 4322 branches as on 8 August,2()13, including 54 branches outside India.

LABOUR CONDITION

Following is the table showing number of employees and eamings per employees over past 5
years.
LABOUR CONDITION Rs In Crore

2009 2010 2011 2012 2013

TOTAL INCOME 19399.22 20494.63 24393.49 31801.84 35674.97

NUMBER OF
EMPLOYEES 40155 39676 39785 44436 42146
EARNING PER
EMPLOYEE 0.483108 0.51655 0.613133 0.715677 0.846462
SOURCE:BLOOMBERG

Number of labours are showing increasing during the period of 2009 to 2013, and the
productive capacity of employees also increasing. 1991 additional labours are recruited during
the period 2009 to 2013. The productive capacity of labours also increased from .48 crore in
2009 to.84crore in 2013.

RATIO ANALYSIS

NET INTEREST MARGIN

2009 2010 2011 2012 2013

NET INTEREST 9024.00 8313.44 7810.69 5755.95 5498.91

EARNING ASSETS 438816.79 370298.18 336278.59 266801.02 217277.80

NIM 2.06 2.25 2.32 2.16 2.53

SOURCE:MONEY CONTROL

78
 Higher the ratio indicate efficiency of firms investment decision. Here table above shows
NIM rose from 2.06% in 2009 to 2.32% in 2011, then decreased to 2.16% in 2012 and again
increased to 2.53% in 2013.

CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
2009 2010 2011 2012 2013
ADVANCES 142909.37 168490.71 213096.18 248833.34 289367.50
DEPOSITS 189708.48 229761.94 298885.81 318216.03 381839.59
CD RATIO 75.33 73.33 71.30 78.20 75.78
Higher ratio reflects ability of the bank to make optimal use of the available resources. By
analyzing the above it is clear that Credit to deposit ratio increased to 78.20% in 2012 from
75.33% in 2009, then decreased to 75.78% in 2013.

OPERATING PROFIT MARGIN

OPERATING PROFIT MARGIN

2009 2010 2011 2012 2013

MI-OPERATING
EXPENSE 1782.26 333.88 1688.15 1347.62 3692.45

TOTAL INTEREST 16347.36 17877.99 21751.72 28480.67 31908.93

OPERATING PROFIT
MARGIN 10.90 1.87 7.76 4.73 11.57
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing a decreasing trend of ratio from 2009 to 2012 from 10.90% to 4.73%, then it increased
to 11.57% in 2013.

NON PERFORMING ASEET RATIO

NON PERFORMING ASEET RATIO

YEAR 2009 2010 2011 2012 2013

NPA 24800.00 48826.50 48296.80 59136.10 87781.90

NET
LOANS 1372957.54 1582338.88 1923001.08 2203673.19 2597921.37

RATIO 1.81 3.09 2.51 2.68 3.38

79
 NPA ratio decreased from 3.09% in 2010 to 251 % in 2011, then increased from 2.68% in 2012
to 3.38% in 2013.

COST TO INCOME RATIO

COST TO INCOME RATIO

YEAR 2009 2010 2011 2012 2013

OPERATING
EXPENSE 3716.65 5422.07 6122.54 6965.82 5331.55

TOTAL INCOME 8550.77 8372.59 10452.46 11634.61 12790.04

RATIO 43.47 64.76 58.58 59.87 41.69

Cost to income ratio is decreased from 2012 to 2013 from 59.87% to 41.69%. it was 43.47% in
2009.

EARNING PER SHARE(EPS)

EARNING PER SHARE (EPS)

Year 2009 2010 2011 2012 2013

Profit available to uit share holders 3007.35 1741.07 2488.71 2677.52 2749.35

Number of uit shares 52.591 52.591 54.722 57.452 59.664

EPS 57.18 33.10 45.47

A slight decrease in EPS from 2012 to 2013 from 46.60 to 46.08, it was decreased from 57.18 in
2009. And highest EPS was 57.18 in 2009.

DIVIDEND PER SHARE (DPS)

DIVIDEND PER SHARE(DPS)
Year 2009 2010 2011 2012 2013
uit Dividend 491.54 428.65 1144.3 465.98 697.09
Number of e uit shares 52.591 52.591 54.722 57.452 59.664
DPS 9.34 8.15 8.11 8.11 11.68
DPS increased from 2012 to 2013 from 8.11 to 11.68. and it was 9.34 in 2009 then decreased to
8.15 in 2010. DPS of 11.68 in 2013 is the highest over the period of 5 years.

80
 DIVIDEND PAY OUT RATIO
DIVIDENT PAY our RATIO

2009 2010 2011 2012 2013

DPS 9.35 8.15 8.12 8.11 11.68

EPS 57.18 33.11 46.60

DIVIDENT PAY our RATIO 16.34 24.62 17.85 17.40 25.35

EARNING RETENTION
RATIO % 83.66 75.38 82.15 82.60 74.65
Dividend payout ratio increased from 2012 to 2013 from 17.40% to 25.35% and Earning
retention ratio decreased from 82.60% to 74.65%. year 2013 shows a highest Dividend pay out
ratio of 25.35% and a lowest Eaming retention ratio of 74.65%.

PRICE EARNING RATIO

PRICE EARNING RATIO
2009 2010 2011 2012 2013
MARKET PRICE PER
SHARE(AVG) 262.40 345.46 432.20 360.68 315.10
EPS 57.18 33.11 45.48 46.60 46.08
PRICE EARNING RATIO 4.59 10.43 9.50 7.74 6.84
A high price earning ratio suggest investors expecting high earning growth in future and
it shows how much investors are willing to pay for EPS. Ratio decreased from 2012 to 2013 from
7.74 to 6.84, and it was 4.59 in 2009. A highest ratio shows 10.43 in 2010.

INTRINSIC VALUE
INTRIN SIC VALUE

AVG PRICE EARNING RATIO 7.820805

EXPECTED EPS 45.69075
INTRINSIC VALUE 357.3385
CURRENT MARKET PRICE 31 ocr 13 209.9
BUY/SELL BUY
Market value of stock tends towards its intrinsic value.Here Intrinsic value of security is higher
than current market price which indicate security is underpriced. So, it is advisable to Buy the
security

Following is the table showing summary of Ratio Analysis.

81
 CONSOLIDATED RATIOS
2009 2010 2011 2012 2013 TREND
SBI 2.26 2.33 2.77 3.39 2.93 3.46
BOB 2.32 2.19 2.52 2.37 2.12 2.35
2.93 2.96 3.21 3.01 3.18 3.07
CANARA 2.02 2.21 2.19 2.39 2.11 2.18
BOI 2.25 2.32 2.16 2.53 2.26
SBI 73.11 78.58 81.03 83.13 86.94 80.56
BOB 74.83 72.61 74.86 69.25 73.24

cRH)1T'10 DHosrr 73.75 74.84 77.37 77.39 78.84 76.44

CANARA 69.60 73.96 72.16 72.27 71.09 71.82
BOI 75.33 73.33 71.30 78.20 75.78 74.79
SBI 4.31 1.79 1.35 5.38 12.57 4.36
BOB 8.47 7.36 14.31 12.10 15.25 11.50
OPERATING PROFITMARGIN PNB 10.37 12.86 12.74 11.00 15.97 12.59
CANARA 4.39 4.14 10.41 5.58 4.72
BOI 10.90 1.87 7.76 4.73 11.57 7.37
SBI 2.54 2.92 3.24 4.33 4.71 3.55
BOB 1.05 1.37 1.45 2.07 2.48 1.68
NPA RATIO 0.68 1.29 1.02 2.43 2.65 1.61
CANARA 1.11 1.00 0.79 1.75 2.94 1.52
BOI 1.81 3.09 2.51 2.68 3.38 2.69
SBI 54.00 64.55 66.22 65.17 48.51 59.69
BOB 48.78 53.87 48.83 48.97 39.79 48.05
70.66 70.51 76.57 76.14 77.90 74.36
CANARA 62.71 55.50 56.49 50.90 56.09 56.34
BOI 43.47 64.76 58.58 59.87 41.69 53.67
SBI 143.67 144.37 116.07 174.55 206.20 156.97
BOB 60.93 107.98 121.41 106.04 96.00
98.02 124.10 139.94 144.23 134.40 128.14
CANARA 38.17 50.54 73.69 90.87 74.10 65.47
BOI 57.18 33.10 45.47 46.08 45.69

ops SBI 28.99 30.00 30.00 35.00 41.49 33.10

82
 BOB 15.00 16.50 17.00 21.50 16.10
20.00 22.00 22.00 21.99 27.00 22.60
CANARA 8.00 8.00 10.00 11.00 11.00 9.60
BOI 9.34 8.15 8.11 8.11 11.68 9.08
SBI 20.18 20.77 25.84 20.05 20.12 21.39
BOB 17.22 17.93 15.28 14.00 20.27 16.94
DIVIDEND PAY O UTRXIIO 20.40 17.73 15.72 15.25 20.09 17.84
CANARA 20.96 15.83 13.57 12.10 14.84 15.46
BOI 16.34 24.62 17.85 17.40 25.35 20.31
SBI 8.90 13.54 23.24 12.14 10.39 13.64
BOB 4.26 5.88 7.78 6.53 6.98 6.29
PRICE EARNING RATIO 4.56 6.38 8.19 6.84 5.87 6.37
CANARA 4.91 6.50 7.72 5.27 5.63 6.01
BOI 4.59 10.43 9.50 7.74 6.84 7.82

FINDINGS, SUGGESTIONS AND

CONCLUSIONS

83
FINDINGS

ECONOMIC ANALYSIS

GDP of India increasing at an increasing rate over past 10 years and shows an increasing
trend for past 25 years. India contribute 2.97% of world GDP. India is 10th largest
economy in the world on the basis nominal GDP
Trading sector and finance sectors are the largest contributors of Indian GDP.
Current account deficit of India widening over past 10 years.
Negative foreign exchange reserves of India decreased to a large extent over past 10
years.
Foreign investment inflow increasing for pmst 10 years and showing a positive trend.
Compared to 2012 inflation rate is low in 2013.
Agricultural production over the past 10 years increasing at a decreasing rate. Industrial
production index showed increasing trend for past 5 years from 2005-06 to 2009-10.
Average lending rate of banks decreased over 5 years from 2008-09 to 2012-13.
Employment opportunities in private and public sector has been increased from 2001-02
to 2010-11
Finance sector is the most competing contributor to Indian GDP, even trading sector
showing highest contribution.
INDUSTRY ANALYSIS

Total income, total expenses, total assets, total liabilities, and bank index of banking
industry increased over past 10 years from 2004 to 2013
Non-performing assets of banking industry decremsed over the 10 years from 2002-
03 to 2011-12. Which shows 9.2% in 2002-03 and 2.8% in 2011-12.
Increased growth of Deposits, earnings, number of offices and employees and
advances indicating industry now passing through expansion stage of industry life
cycle.
Repo, Reverse repo and Cash reserve ratio of banks decreased past 19 months.
Nationalization increases the number of bank offices and population per office since
1969.
Financial sector reforms results increase savings, investments, credit, and Interest
income and market capitalization of banking industry.
Operating profit margin decreased and trend also decreasing for 2013.
Cost to income ratio decreased and also showing decreasing trend
Loan to deposit ratio increased and also showing increasing trend for 2013
NPA ratio increased in 2012 and showing an decreasing trend for 2013

COMPANY ANALYSLS

84
SBI

SBI is the largest public sector bank in India on the basis of market capitalization and had
180 overseas offices spread over 34 countries. There is no scarcity of labour and
employed labours are highly productive compared to past years.
Credit to deposit ratio, Operating profit margin, NPA ratio, EPS ,DPS are increased and
Dividend payout ratio constant in 2012-13
NIM and Cost to income ratio decreased 2012-13 Price eamings ratio decreased.
NIM ratio, cost to income ratio, dividend payout ratio, and P/E ratio are showing an
increasing trend to 2013-14.
Credit to deposit ratio, operating profit margin, NPA ratio, EPS, and DPS are showing
decreasing trend for 2013-14.
Intrinsic value=2141. I I
Current market price=1796.75
Current market price is lower than intrinsic value of security, security is underprized. It is
advised to buy the share.
BANK OF BARODA

Bank of Baroda is the Second largest public sector bank in India on the basis of market
capitalization and has 100 branches in 24 countries. Number of employees and eaming
per employee is increased in 2012-13.
Operating profit margin, NPA ratio, DPS are increased in 2012-13
NIM, EPS, Dividend payout ratio, Cost to income ratio, Credit to deposit ratio are
decreased.
Price eamings ratio increased.
NIM, Credit to deposit ratio, and cost to income ratio are showing increasing trend for
2013-14.
Operating profit margin, NPA ratio, EPS, DPS, Dividend payout ratio and P/E ratio are
showing decreasing trend for 2013-14.
intrinsic value =6()3.4()1
Current market price=642.9
Current market price is higher than intrinsic value of security, security is overprised. It is
advised to sell the share.
PANJAB NATIONAL BANK

Third largest public sector bank on the basis of market capitalization .1t has 5 overseas
branches. Number of employees and productive capacity of employees are increased.
NIM, Credit to deposit ratio, Operating profit margin, NPA ratio, Cost to income ratio
,DPS are increased in 2012-13

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EPS and Dividend payout ratio are decreased in 2012-13
Price eamings ratio showing decreasing trend for 2013-14.
NIM, credit to deposit ratio, operating profit margin, NPA ratio, cost to income ratio,
EPS, DPS, Dividend payout ratio and P/E ratio showing decreasing trend for 2013-14.
intrinsic value
Current market price=544.4
Current market price is lower than intrinsic value of security, security is underprized. It is
advised to buy the share.

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CANARA BANK

Number of employees are decreased and earning per employee increased.

NIM, Credit to deposit ratio, Operating profit margin, EPS, Dividend payout ratio,
decreased in 2012-13
NPA ratio, Cost to income ratio increased in 2012-13
No changes in dividend per share in 2012-13
Price eamings ratio increased in 2012-13
NIM, Credit to deposit ratio, cost to income ratio, Dividend payout ratio and P/E ratio are
showing increasing trend for 2013-14.
Operating profit margin, NPA ratio, EPS, and DPS are showing decreasing trend for
2013-14.
intrinsic value =393.4644
Current market price=258.25
Current market price is lower than intrinsic value of security. security is underprized. It is
advised to buy the share.
BANK OF INDIA

Numbers of employees are decreased and earning per employee is increased.

NIM, Operating profit margin, DPS,NPA ratio are increased in 2012-13
Credit to deposit ratio, Cost to income ratio, EPS, Dividend payout ratio are decreased in
2012-13
Price eamings ratio decremsed in 2012-13
Cost to income ratio, P/E ratio are showing increasing trend for 2013-14.
NIM, Credit to deposit ratio, Operating profit margin, NPA ratio, EPS, DPS and Dividend
payout ratio are showing decreasing trend for 2013-14.
intrinsic value =357.3385
Current market price=209.9
Current market price is lower than intrinsic value of security, security is underprized. It is
advised to buy the share.
SUGGESTIONS
Based on the analysis and findings the following suggestions are made.

Long term investment in banking sector is good option for investors, important ratios are
increased in long term like operating profit margin, DPS, Price earnings ratio etc.
Non-monetary factors also should consider while investing
Current trend of market also should consider while making investment

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 EPS will relieve the market value of the company. If the market value is high the
perception what the investor relating to the company will be high and at the same time
EPS will contribute to the increase in market capitalization.
DPS will relieve the Dividend of the company if dividend is high the investors will be
ready to invest more and it result increase market capitalization
P/E ratio reflects the price the investors are Willing to pay for every one rupee earnings.
Or a high P/E suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower P/E ratio. Higher the P/E ratio will increase market
capitalization and security price, so it is better to invest on it.
The market value of stock tends to move towards its real value or "intrinsic value" if the
intrinsic value is above the market price investors can buy the shares and if the intrinsic
value is bellow they can sell the shares.
Lower the NPA ratio indicates operational efficiency of Banks, it directly influence
profitability of banks. It is advisable to invest banks with lower NPA ratio
NIM indicates how successful Banks investment decision. A negative ratio indicate firm
did not make an optimum decision i.e. Interest expenses greater than investment returns.
Operating margins are profits earned by the bank on its total interest income. Higher the
ratio will increase market capitalization
If the ratio is too high, it means that banks might not have enough liquidity to cover any
unforeseen fund requirements; if the ratio is too low, banks may not be earning as much
as they could be.
The lower Cost to income ratio will be good for banks, it will increase profitability and
return ratios.
Higher the Dividend payout ratio will increase demand for security and lower will
decrease demand. A stable dividend payout ratio indicates a solid dividend policy by the
company's board of directors.
CONCLUSION

Fundamental analysis argued that no investment decision should take without processing
and analyzing all relevant information. The analysis is based on Analysis of Economy, Industry
as well as Company.

Under this study of fundamental analysis of banking industry the Economic analysis
showing an increased growth of GDP of India over the past 25 years at an increased rate. Which
also showing an increasing trend for coming years. Increased growth of agricultural production,
industrial production index, employment opportunities, foreign investment inflow and lower
lending rate are giving hope to Indian economy. Foreign exchange reserves are coming to
positive. Financial sector is the one of the important contributor of Indian GDP after trading
sector.

Industrial analysis showing an incremsed growth of total income, expense, liabilities,

bank index, deposits, eamings, number of bank offices & employees, and advances. Which

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indicating Banking industry in India is now passing through expansion stage. And the repo rate,
reverse repo rate, CRR is decreased over the years. NPA ratio of banking industry showing an
decreasing trend, loan to deposit ratio increased in the last year and showing an increasing trend,
and cost to income ratio also decreased in the last year and showing an decreasing trend.
Nationalization and financial sector reforms are the main reason for the growth of banking sector
in India.

For company analysis Five Banks are selected on the basis of Market capitalization.
Intrinsic value of all banks except Bank of Baroda are underprized and P/E ratio of all banks
except Bank of Baroda showing increasing trend. It indicates that investment in Bank of Baroda
is not viable and other four banks are good for investors, among these four banks SBI showing
Highest P/E ratio and intrinsic value and it would be profitable for investors to invest in SBI.

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BIBLIOGRAPHY

Prasanna Chandra (2002) "investment analysis and portfolio management", tata McGraw
Hill,New Delhi
V.K Bhalla "Investment Management", S. Chand company, Ramnagar, New Delhi

WEBSITES

http://www.rbi.com
http://www.wikipedia.org
http://www.moneycontrol.com
http://www.inve stopedia.com
http://www.in.finance.yahoo.com
http://www.nse.com
http://www.worldbank.com
http://www.indiainfoline.com
http://www.tradingeconomics.com

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