RESEARCH PROJECT REPORT

On
“A COMPARATIVE OF FINANCIAL ANALYSIS
STATEMENT OF LEADING BANKS HDFC, AXIS
AND ICICI BANK”

Towards partial fulfillment of

Master of Business Administration (MBA)
(BBD University, Lucknow)

Submitted to: Submitted by:

Ms. Maya Basant Lohani Sumeet K.C.
Roll No. 1160672139

Session 2017-2018

School of Management

Babu Banarasi Das University

Sector I, Dr. Akhilesh Das Nagar, Faizabad Road, Lucknow (U.P.) India
 ACKNOWLEDGEMENT

"I have taken efforts in this research project. However, it would not have been

possible without the kind support and help of many individuals and organizations. I

would like to extend my sincere thanks to all of them.

I am highly indebted to Ms. Maya Basant Lohani for their guidance and constant

supervision as well as for providing necessary information regarding the project &

also for their support in completing the project.

I would like to express my gratitude towards my parents & member of BBDU,

Lucknow for their kind co-operation and encouragement which help me in completion

of this project.

My thanks and appreciations also go to my colleague in developing the project and

people who have willingly helped me out with their abilities."

Sumeet K.C.
 PREFACE

MBA is a stepping-stone to the management carrier and to develop good manager. It

is necessary that the theoretical must be supplemented with exposure to the real

environment.

Theoretical knowledge just provides the base and it’s not sufficient to produce a good

manager that’s why practical knowledge is needed.

Therefore the research product is an essential requirement for the student of MBA.

This research project not only helps the student to utilize his skills properly learn field

realities but also provides a chance to the organization to find out talent among the

budding managers in the very beginning.

In accordance with the requirement of MBA course I have done my research project

report on the topic is “A COMPARATIVE ANALYSIS FINANCIAL STATEMENT OF

LEADING BANKS HDFC, AXIS AND ICICI BANK”.

 TABLE OF CONTENT

1. Declaration iii

2. Acknowledgement iv

3. Preface v

4. Introduction 1

5. Review of Literature 31

6. Company Profile 36

7. Objectives of the study 51

8. Research Methodology 53

9. Data Analysis 57

10. Findings 66

11. Recommendations 69

12. Conclusion 72

13. Limitation 73

14. Bibliography 75
Introduction

1
 INTRODUCTION

The first task of financial analysis is to select the information relevant to the decision

under consideration to the total information contained in the financial statement. The

second step is to arrange the information in a way to highlight significant relationship.

The final step is interpretation and drawing of inference and conclusions. Financial

statement is the process of selection, relation and evaluation.

Features of Financial Analysis

 To present a complex data contained in the financial statement in simple and

understandable form.

 To classify the items contained in the financial statement inconvenient and

rational groups.

 To make comparison between various groups to draw various

conclusions.

Purpose of Analysis of financial statements

 To know the earning capacity or profitability.

 To know the solvency.

 To know the financial strengths.

 To know the capability of payment of interest & dividends.

 To make comparative study with other firms.

 To know the trend of business.

 To know the efficiency of mgt.

 To provide useful information to mgt

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Procedure of Financial Statement Analysis

 The following procedure is adopted for the analysis and interpretation of

financial statements:-

 The analyst should acquaint himself with principles and postulated of

accounting. He should know the plans and policies of the managements that he

may be able to find out whether these plans are properly executed or not.

 The extent of analysis should be determined so that the sphere of work may

be decided. If the aim is find out. Earning capacity of the enterprise then

analysis of income statement will be undertaken. On the other hand, if

financial position is to be studied then balance sheet analysis will be

necessary.

 The financial data be given in statement should be recognized and rearranged.

It will involve the grouping similar data under same heads. Breaking down of

individual components of statement according to nature. The data is reduced to

a standard form. A relationship is established among financial statements with

the help of tools & techniques of analysis such as ratios, trends, common size,

fund flow etc.

 The information is interpreted in a simple and understandable way. The

significance and utility of financial data is explained for help indecision

making.

 The conclusions drawn from interpretation are presented to the management

in the form of reports.

Analyzing financial statements involves evaluating three characteristics of a

company: its liquidity, its profitability, and its insolvency. A short-term creditor, such

as a bank, is primarily interested in the ability of the borrower to pay obligations when

3
 they come due. The liquidity of the borrower is extremely important in evaluating the

safety of a loan. A long-term creditor, such as a bondholder, however, looks to

profitability and solvency measures that indicate the company’s ability to survive over

a long period of time. Long-term creditors consider such measures as the amount of

debt in the company’s capital structure and its ability to meet interest payments.

Similarly, stockholders are interested in the profitability and solvency of the

company. They want to assess the likelihood of dividends and the growth potential of

the stock.

Comparison can be made on a number of different bases.

Following are the three illustrations:

1. Intra-company basis.

This basis compares an item or financial relationship within a company in the

current year with the same item or relationship in one or more prior years. For

example, Sears, Roebuck and Co. can compare its cash balance at the end of the

current year with last year’s balance to find the amount of the increase or decrease.

Likewise, Sears can compare the percentage of cash to current assets at the end of the

current year with the percentage in one or more prior years. Intra-company

comparisons are useful in detecting changes in financial relationships and significant

trends.

2. Industry averages.

This basis compares an item or financial relationship of a company with industry

averages (or norms) published by financial ratings organizations such as Dun &

Bradstreet, Moody’s and Standard & Poor’s. For example, Sears’s net income can be

compared with the average net income of all companies in the retail chain-store

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 industry. Comparisons with industry averages provide information as to a company’s

relative performance within the industry.

3. Intercompany basis.

This basis compares an item or financial relationship of one company with the same

item or relationship in one or more competing companies. The comparisons are made

on the basis of the published financial statements of the individual companies. For

example, Sears’s total sales for the year can be compared with the total sales of its

major competitors such as Kmart and Wal-Mart. Intercompany comparisons are

useful in determining a company’s competitive position.

Tools of Financial Statement Analysis

Various tools are used to evaluate the significance of financial statement data. Three

commonly used tools are these:

 Ratio Analysis

 Funds Flow Analysis

 Cash Flow Analysis

Ratio Analysis:

Fundamental Analysis has a very broad scope. One aspect looks at the general

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

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

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

can produce excellent results.

Ratio analysis isn't just comparing different numbers from the balance sheet, income

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

other companies, the industry, or even the economy in general. Ratios look at the

5
relationships between individual values and relate them to how a company has

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

Meaning of Ratio:

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

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

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

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

quotient of two numbers. It can be expressed as a fraction or as a decimal or as a pure

ratio or in absolute figures as “so many times”. As accounting ratio is an expression

relating two figures or accounts or two sets of account heads or group contain in the

financial statements.

Meaning of Ratio Analysis:

Ratio analysis is the method or process by which the relationship of items or group of

items in the financial statement are computed, determined and presented.

Ratio analysis is an attempt to derive quantitative measure or guides concerning the

financial health and profitability of business enterprises. Ratio analysis can be used

both in trend and static analysis. There are several ratios at the disposal of an analyst

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

analysis.

While a detailed explanation of ratio analysis is beyond the scope of this section, we

will focus on a technique, which is easy to use. It can provide you with a valuable

investment analysis tool.

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

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

provide valuable information about a company's financial health. A financial ratio

6
 measures a company's performance in a specific area. For example, you could use a

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

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

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

higher than a competitor's has more debt per equity. You can use this information to

make a judgment as to which company is a better investment risk.

However, you must be careful not to place too much importance on one ratio. You

obtain a better indication of the direction in which a company is moving when several

ratios are taken as a group.

Objective of Ratios:

Ratios are worked out to analyze the following aspects of business organization-

A) Solvency-

1) Long term

2) Short term

3) Immediate

B) Stability

C) Profitability

D) Operational efficiency

E) Credit standing

F) Structural analysis

G) Effective utilization of resources

H) Leverage or external financing

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Forms of Ratio:

Since a ratio is a mathematical relationship between two or more variables /

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

A] As a pure ratio:

For example the equity share capital of a company is Rs. 20, 00,000 & the preference

share capital is Rs. 5,00,000, the ratio of equity share capital to preference share

capital is

20,00,000: 5,00,000 = 4:1.

B] As a rate of times:

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

preference share capital. Similarly, the cash sales of a firm are Rs. 12,00,000 & credit

sales are Rs. 30,00,000. So the ratio of credit sales to cash sales can be described as

2.5 [30,00,000/12,00,000] = 2.5 times are the credit sales that of cash sales.

C] As a percentage:

In such a case, one item may be expressed as a percentage of some other items. For

example, net sales of the firm are Rs.50,00,000 & the amount of the gross profit is Rs.

10,00,000, then the gross profit may be described as

20% of sales [ 10,00,000/50,00,000]

Steps in Ratio Analysis

The ratio analysis requires two steps as follows:

1] Calculation of ratio

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

the past ratio of the same firm or industry’s average ratio or a projected ratio or the

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

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

8
compared with some predetermined standard. The importance of a correct standard is

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

Types of comparisons

The ratio can be compared in three different ways –

1] Cross section analysis:

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

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

time. So it involves the comparison of two or more firm’s financial ratio at the same

point of time. The cross section analysis helps the analyst to find out as to how a

particular firm has performed in relation to its competitors. The firm’s performance

may be compared with the performance of the leader in the industry in order to

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

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

statement of the firm.

2] Time series analysis:

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

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

the performance of the same firm over the last few years, an assessment can be made

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

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

long-term goals or not. The Time series analysis looks for

(1) Important trends in financial performance

(2) Shift in trend over the years

(3) Significant deviation if any from the other set of data\

9
 3] Combined analysis:

If the cross section & time analysis, both are combined together to study the behavior

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

of the firm can definitely be made. A trend of ratio of a firm compared with the trend

of the ratio of the standard firm can give good results. For example, the ratio of

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

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

average has not shown any significant changes.

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

ratio of the firm is above the industry average, but it is decreasing over the years & is

approaching the industry average.

Pre-Requisites to Ratio Analysis:

In order to use the ratio analysis as device to make purposeful conclusions, there are

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

prerequisites are not conditions for calculations for meaningful conclusions. The

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

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

well considered.

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

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

must be sufficient evidence that the data is correct.

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

analysis otherwise the results of the ratio analysis would be distorted.

10
4) One ratio may not throw light on any performance of the firm. Therefore, a group of

ratios must be preferred. This will be conductive to counter checks.

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

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

calculating a ratio.

Classification of Ratio:

CLASSIFICATION OF RATIO

BASED ON FINANCIAL BASED ON FUNCTION BASED ON USER

STATEMENT

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

RATIO 2] LEVERAGE RATIO SHORT TERM
2] REVENUE 3] ACTIVITY RATIO CREDITORS
STATEMENT 4] PROFITABILITY 2] RATIO FOR
RATIO RATIO SHAREHOLDER

3] COMPOSITE 5] COVERAGE 3] RATIOS FOR

RATIO RATIO MANAGEMENT

4] RATIO FOR
LONG TERM
CREDITORS

11
 Based on Financial Statement

Accounting ratios express the relationship between figures taken from financial

statements. Figures may be taken from Balance Sheet, P& P A/C, or both. One-way of

classification of ratios is based upon the sources from which are taken.

1] Balance sheet ratio:

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

Ratios. E.g. Ratio of current assets to current liabilities or Debt to equity ratio. While

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

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

ratios help to judge the liquidity, solvency & capital structure of the concern. Balance

sheet ratios are Current ratio, Liquid ratio, and Proprietary ratio, Capital gearing ratio,

Debt equity ratio, and Stock working capital ratio.

2] Revenue ratio:

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

ratios. These ratios study the relationship between the profitability & the sales of the

concern. Revenue ratios are Gross profit ratio, Operating ratio, Expense ratio, Net

profit ratio, Net operating profit ratio, Stock turnover ratio.

3] Composite ratio:

These ratios indicate the relationship between two items, of which one is found in the

balance sheet & other in revenue statement.

There are two types of composite ratios-

a) Some composite ratios study the relationship between the profits & the investments of

the concern. E.g. return on capital employed, return on proprietors fund, return on

equity capital etc.

12
b) Other composite ratios e.g. debtors turnover ratios, creditors turnover ratios, dividend

payout ratios, & debt service ratios

Based on Function:

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

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

1] Liquidity ratios:

It shows the relationship between the current assets & current liabilities of the concern

e.g. liquid ratios & current ratios.

2] Leverage ratios:

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

assets of the concern e.g. capital gearing ratios, debt equity ratios, & Proprietary

ratios.

3] Activity ratios:

It shows relationship between the sales & the assets. It is also known as Turnover

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

4] Profitability ratios:

a) It shows the relationship between profits & sales e.g. operating ratios, gross profit

ratios, operating net profit ratios, expenses ratios

b) It shows the relationship between profit & investment e.g. return on investment,

return on equity capital.

5] Coverage ratios:

It shows the relationship between the profit on the one hand & the claims of the

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

ratios.

13
Based on User:

1] Ratios for short-term creditors:

Current ratios, liquid ratios, stock working capital ratios

2] Ratios for the shareholders:

Return on proprietors fund, return on equity capital

3] Ratios for management:

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

4] Ratios for long-term creditors:

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

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Liquidity Ratio: -

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

obligations. The ratios, which indicate the liquidity of a company, are Current ratio,

Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below

Current Ratio

Meaning:

This ratio compares the current assets with the current liabilities. It is also known as

‘working capital ratio’ or ‘solvency ratio’. It is expressed in the form of pure ratio.

E.g. 2:1

Formula:

Current assets

Current ratio =

Current liabilities

15
The current assets of a firm represents those assets which can be, in the ordinary

course of business, converted into cash within a short period time, normally not

exceeding one year. The current liabilities defined as liabilities which are short term

maturing obligations to be met, as originally contemplated, with in a year.

Current ratio (CR) is the ratio of total current assets (CA) to total current liabilities

(CL). Current assets include cash and bank balances; inventory of raw materials,

semi-finished and finished goods; marketable securities; debtors (net of provision for

bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities

consist of trade creditors, bills payable, bank credit, and provision for taxation,

dividends payable and outstanding expenses. This ratio measures the liquidity of the

current assets and the ability of a company to meet its short-term debt obligation.

CR measures the ability of the company to meet its CL, i.e., CA gets converted into

cash in the operating cycle of the firm and provides the funds needed to pay for CL.

The higher the current ratio, the greater the short-term solvency. This compares

assets, which will become liquid within approximately twelve months with liabilities,

which will be due for payment in the same period and is intended to indicate whether

there are sufficient short-term assets to meet the short- term liabilities. Recommended

current ratio is 2: 1. Any ratio below indicates that the entity may face liquidity

problem but also Ratio over 2: 1 as above indicates over trading, that is the entity is

under utilizing its current assets.

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Liquid Ratio:

Meaning:

Liquid ratio is also known as acid test ratio or quick ratio. Liquid ratio compares the

quick assets with the quick liabilities. It is expressed in the form of pure ratio. E.g.

1:1.

The term quick assets refer to current assets, which can be converted into, cash

immediately or at a short notice without diminution of value.

Formula:

Quick assets

Liquid ratio =

Quick liabilities

Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to

those current assets that can be converted into cash immediately without any value

strength. QA includes cash and bank balances, short-term marketable securities, and

sundry debtors. Inventory and prepaid expenses are excluded since these cannot be

turned into cash as and when required.

QR indicates the extent to which a company can pay its current liabilities without

relying on the sale of inventory. This is a fairly stringent measure of liquidity because

it is based on those current assets, which are highly liquid. Inventories are excluded

from the numerator of this ratio because they are deemed the least liquid component

of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of

the quick ratio is that it ignores the timing of receipts and payments.

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Cash Ratio:

Meaning:

This is also called as super quick ratio. This ratio considers only the absolute liquidity

available with the firm.

Formula:

Cash + Bank + Marketable securities

Cash ratio =

Total current liabilities

Since cash and bank balances and short term marketable securities are the most liquid

assets of a firm, financial analysts look at the cash ratio. If the super liquid assets are

too much in relation to the current liabilities then it may affect the profitability of the

firm.

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Investment/ Shareholder

EARNING PER SHARE:-

Meaning:

Earnings per Share are calculated to find out overall profitability of the organization.

Earnings per Share represent earning of the company whether or not dividends are

declared. If there is only one class of shares, the earning per share are determined by

dividing net profit by the number of equity shares.

EPS measures the profits available to the equity shareholders on each share held.

Formula:

Net Profit after Tax

Earnings per share =

Number of equity share

The higher EPS will attract more investors to acquire shares in the company as it

indicates that the business is more profitable enough to pay the dividends in time. But

remember not all profit earned is going to be distributed as dividends the company

also retains some profits for the business

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Dividend per Share:-

Meaning:

DPS shows how much is paid as dividend to the shareholders on each share held.

Formula:

Dividend Paid to Ordinary Shareholders

Dividend per Share =

Number of Ordinary Shares

Dividend Payout Ratio:-

Meaning:

Dividend Pay-out Ratio shows the relationship between the dividends paid to equity

shareholders out of the profit available to the equity shareholders.

Formula:

Dividend per share

Dividend Payout ratio = *100

Earnings per share

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

dividend has been paid to the preference equity holders.

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Gearing

CAPITAL GEARING RATIO:-

Meaning:

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

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

is more than the rate of interest on debts. This is also known as leverage or trading on

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

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

pure ratio.

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Formula:

Preference capital+ secured loan

Capital gearing ratio =

Equity capital & reserve & surplus

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

assets of a concern.

Profitability

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

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

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

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

ratios: Gross Profit Margin and Net Profit Margin.

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GROSS PROFIT RATIO:-

Meaning:

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

excess of the net sales over cost of goods sold or excess of revenue over cost. This

ratio shows the profit that remains after the manufacturing costs have been met. It

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

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

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

amount is left to meet other expenses & earn net profit.

Gross profit

Gross profit ratio = * 100

Net sales

Net Profit Ratio:-

Meaning:

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

usually expressed in the form of a percentage.

Formula:

NPAT

Net profit ratio = * 100

Net sales

This ratio shows the net earnings (to be distributed to both equity and preference

shareholders) as a percentage of net sales. It measures the overall efficiency of

production, administration, selling, financing, pricing and tax management. Jointly

23
considered, the gross and net profit margin ratios provide an understanding of the cost

and profit structure of a firm.

Return on Capital Employed:-

Meaning:

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

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

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

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

assets plus net working capital.

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

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

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

Formula:

NPAT

Return on capital employed = *100

Capital employed

Financial

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

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

efficiency of a firm in managing assets. These ratios are based on the relationship

between the level of activity represented by sales or cost of goods sold and levels of

investment in various assets. The important turnover ratios are debtors turnover ratio,

average collection period, inventory/stock turnover ratio, fixed assets turnover ratio,

and total assets turnover ratio. These are described below:

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DEBTORS TURNOVER RATIO (DTO)

Meaning:

DTO is calculated by dividing the net credit sales by average debtors outstanding

during the year. It measures the liquidity of a firm's debts. Net credit sales are the

gross credit sales minus returns, if any, from customers. Average debtors are the

average of debtors at the beginning and at the end of the year. This ratio shows how

rapidly debts are collected. The higher the DTO, the better it is for the organization.

Formula:

Credit sales

Debtors turnover ratio =

Average debtors

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Inventory or Stock Turnover Ratio (ITR)

Meaning:

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

accounting period.

Formula:

Cost of Goods Sold

Stock Turnover Ratio =

Average stock

ITR reflects the efficiency of inventory management. The higher the ratio, the more

efficient is the management of inventories, and vice versa. However, a high inventory

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

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

of inventories at the beginning and the end of the year is taken. In general, averages

may be used when a flow figure (in this case, cost of goods sold) is related to a stock

figure (inventories).

Fixed Assets Turnover (FAT)

The FAT ratio measures the net sales per rupee of investment in fixed assets.

Formula:

Net sales

Fixed assets turnover =

Net fixed assets

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This ratio measures the efficiency with which fixed assets are employed. A high ratio

indicates a high degree of efficiency in asset utilization while a low ratio reflects an

inefficient use of assets. However, this ratio should be used with caution because

when the fixed assets of a firm are old and substantially depreciated, the fixed assets

turnover ratio tends to be high (because the denominator of the ratio is very low).

Proprietors Ratio:

Meaning:

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

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

solvency of the company.

In other words, Proprietary ratio determines as to what extent the owner’s interest &

expectations are fulfilled from the total investment made in the business operation.

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

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

Formula:

Proprietary fund

Proprietary ratio = OR

Total fund

Shareholders fund

Proprietary ratio =

Fixed assets + current liabilities

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Stock Working Capital Ratio:

Meaning:

This ratio shows the relationship between the closing stock & the working capital. It

helps to judge the quantum of inventories in relation to the working capital of the

business. The purpose of this ratio is to show the extent to which working capital is

blocked in inventories. The ratio highlights the predominance of stocks in the current

financial position of the company. It is expressed as a percentage.

Formula:

Stock

Stock working capital ratio =

Working Capital

Stock working capital ratio is a liquidity ratio. It indicates the composition & quality

of the working capital. This ratio also helps to study the solvency of a concern. It is a

qualitative test of solvency. It shows the extent of funds blocked in stock. If

investment in stock is higher it means that the amount of liquid assets is lower.

Debt Equity Ratio:

Mening:

This ratio compares the long-term debts with shareholders fund. The relationship

between borrowed funds & owners capital is a popular measure of the long term

financial solvency of a firm. This relationship is shown by debt equity ratio.

Alternatively, this ratio indicates the relative proportion of debt & equity in financing

the assets of the firm. It is usually expressed as a pure ratio. E.g. 2:1

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Formula:

Total long-term debt

Debt equity ratio =

Total shareholders fund

Debt equity ratio is also called as leverage ratio. Leverage means the process of the

increasing the equity shareholders return through the use of debt. Leverage is also

known as ‘gearing’ or ‘trading on equity’. Debt equity ratio shows the margin of

safety for long-term creditors & the balance between debt & equity.

Return on Proprietor Fund:

Meaning:

Return on proprietors fund is also known as ‘return on proprietor’s equity’ or ‘return

on shareholders’ investment’ or ‘investment ratio’. This ratio indicates the

relationship between net profits earned & total proprietor’s funds. Return on

proprietors fund is a profitability ratio, which the relationship between profit &

investment by the proprietors in the concern. Its purpose is to measure the rate of

return on the total fund made available by the owners. This ratio helps to judge how

efficient the concern is in managing the owner’s fund at disposal. This ratio is of

practical importance to prospective investors & shareholders.

Formula:

NPAT

Return on proprietors fund = * 100

Proprietor’s fund

29
Creditors Turnover Ratio:

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

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

and average creditors

Net credit purchase

Credit turnover ratio =

Average creditors

Months in a year

Average age of accounts payable =

Credit turnover ratio

Both the ratios indicate promptness in payment of creditor purchases. Higher

creditors turnover ratio or a lower credit period enjoyed signifies that the creditors are

being paid promptly. It enhances credit worthiness of the company. A very low ratio

indicates that the company is not taking full benefit of the credit period allowed by the

creditors.

30
Review of
Literature

31
 REVIEW OF LITERATURE

Kaura, M. N and Bala Subramanian (1979) analyzed ten cement units during the

period of study 1972 to 1977 shows that the financial performance of the selected

cement companies evidenced by Profitability, Liquidity and capital structure ratios

has declined. The non availability of funds has affected the modernization of plants

and periodic rehabilitation of the kilns. Besides, the bottlenecks in supply of raw

materials and power and non remunerative prices have reduced the capacity

utilization, profits and cash flows. The profitability and liquidity position in many

cement companies have been affected adversely because of the problems in supply of

raw materials , transport and power.

Nagarajrao B.S and Chandar K (1980) analyzed the financial efficiency of cement

companies for the selected period of the study 1970 -71 to 1977-78. It can be analyzed

profitability of selected cement companies has been found downward trend from

1970-71 to 1974-75 because the reason of inflation, rising of manufacturing cost,

continuous fall in capacity utilization due to many reasons.

Kumar B. Das (1987) has made an analysis of the financial performance of the

cement industry. it can be analyzed that the net fixed assets as a percentage of total

assets decreased for the period 1970-71 to 1977-78 that was 553.5% to 44.04 %

respectively. Current liabilities have increased than the current assets. Liquidity

performance of the cement industry is not healthy during period of the study. The

Debt Asset ratio has downward During the period of the study and Debt Equity ratio

has slightly increased while net worth ratio has decreased over the years.

32
Nair N.K. (1991) has focused the productivity aspect of Indian Cement Industry. This

study emphasised that cement, being a construction material, occupied a strategic

place in the Indian economy. This study has revealed that, in 1990-91, the industry

had an installed capacity of 60 million tonnes with a production of 48 million tonnes.

In this study, the cement industry was forecasted to have a capacity growth of about

100 million tonnes by the year 2000. This study has also analyzed the productivity

and financial performance ratios of the cement industry with a view to identifying the

major problem areas and the prospects for solving them.

Dr. Dinesh A. Patel (1992) have analyzed Financial Analysis - A Study of Cement

Industry of India for the period of 1979-80 to 1988-89. He can analyzed the

profitability of the cement industry, to examine the short term financial strength of the

cement industry through the analysis of working capital management and to analyzed

the long term financial strength through the analysis of capital structure.

Subir Cokavn and Rejendra Vaidha (1993) have analyzed to evaluate the

performance of cement industry after decontrol. They found that the performance of

the cement industry after decontrol was characterized by outcomes that were

generally competitive and welfare enhancing. This study has revealed that the

structure of the industry changed significantly with large magnitude of relative

technologically and superior capacity being created by many new entrants into the

industry. It was also noticed in this study that there were significant real price increase

and an associated increase in profitability. The performance of firms across the

strategic group was different with firms operating relatively new and large plants

33
appeared to have an advantage. Further, the study has dealt with the nature and effect

of inter-firm heterogeneities in the cement industry.

Chandrasekaran N (1993) has made an attempt to examine determinants of

profitability in cement industry. He identified that profitability was determined by

structural, as well as, behavioural variables. He also identified that the other variables

17 which influenced profitability were growth of the firm, capital turnover ratio,

management of working capital, inventory turnover ratio etc. Some of the main

changes in the cement industry environment during 1980's identified in this study

were: from complete control to decontrol, number of new entrants and substantial

additions of capacity, changing technology from inefficient wet process to efficient

dry process and from conditions of scarcity of cement to near gloat in the market.

Chandrasckaran N (1994) has studied about the market structure of the Indian

Cement industry like demand and supply. It was analyzed in that study that the

demand and supply gap has been considerably reduced and supply of cement during

the period of study has increased due to creation of additional capacity and capacity

utilization.

Srinivasa Rao.G and Indrasena Reddy.P (1995), in their study, analyzed the

financial strength of paper industry had been improving from year to year. The

company's performance in relation to generating internal funds in the form of reserves

and surplus was excellent and also the company was doing well in mobilizing

outsiders' funds. The liquidity position of the company was sound as revealed by

current ratio and quick ratio which were above the standard. The solvency ratio

34
showed that the company had been following the policy of low capital gearing from

the 1990-91 as these ratios had been decreasing from this year. The performance of

the company in relation to its profitability was not up to the expected level. The

company's ability to utilize assets for generation of sales had not been improved much

during the period of study period as revealed by its turnover ratios.

35
Company
Profile

36
BANKING IN INDIA

Banking in India originated in the last decades of the 18th century. The oldest

bank in existence in India is the State Bank of India, a government-owned bank that

traces its origins back to June 1806 and that is the largest commercial bank in the

country. Central banking is the responsibility of the Reserve Bank of India, which in

1935 formally took over these responsibilities from the then Imperial Bank of India,

relegating it to commercial banking functions. After India's independence in 1947, the

Reserve Bank was nationalized and given broader powers. In 1969 the government

nationalized the 14 largest commercial banks; the government nationalized the six

next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector

banks (that is with the Government of India holding a stake), 31 private banks (these

do not have government stake; they may be publicly listed and traded on stock

exchanges) and 38 foreign banks. They have a combined network of over 53,000

branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency,

the public sector banks hold over 75 percent of total assets of the banking industry,

with the private and foreign banks holding 18.2% and 6.5% respectively.

Currently (2007), banking in India is generally fairly mature in terms of supply,

product range and reach-even though reach in rural India still remains a challenge for

the private sector and foreign banks. In terms of quality of assets and capital

adequacy, Indian banks are considered to have clean, strong and transparent balance

sheets relative to other banks in comparable economies in its region. The Reserve

Bank of India is an autonomous body, with minimal pressure from the government.

The stated policy of the Bank on the Indian Rupee is to manage volatility but without

any fixed exchange rate-and this has mostly been true.

37
CHART No.1

38
ICICI BANK LTD.

ICICI Bank, a private sector bank under the house of ICICI was incorporated

in the year of 1994. It is a multi-specialist financial service provider with leadership

position across the spectrum of financial services in India. ICICI Bank is the 2nd

largest bank in India and Bank breaking into the top 100 financial institutions in the

world, in terms of market capitalization. It got this position in short time, because the

bank doing what customers want. ICICI running its business with six principal

groups, such as Retail Banking, Wholesale Banking, International Banking, Rural,

Micro Banking and Agri-Business, Government Banking and Corporate Centre. The

Bank offers a wide spectrum of domestic and international banking services to

facilitate trade, investment banking ,Insurance, Venture Capital, asset management,

cross border business & treasury and foreign exchange services besides providing a

full range of deposit and ancillary services for both individuals and corporate through

various delivery Channels and specialized subsidiaries. ICICI Bank has 14

subsidiaries, out of that 10 in domestic and rest of 4 in international level such as UK,

Canada and Russia. To efficiently distribute its products and services, the bank has

developed multiple access channels comprising lean brick and mortar branches,

ATMs, call centers and Internet banking. The Bank has introduced the concept of

mobile ATMs in the remote/rural areas. It has also extended its mobile banking

services to all cellular service providers across India and NRI customers in USA, UK,

Middle-East and Singapore.

The merger and acquisition are the key kind to bank. The Bank of Madura

(BOM) got merged with ICICI Bank during the period 2000-01 and in 2001 ICICI

(Financial Institution) merged with ICICI Bank. The two subsidiaries of ICICI Ltd viz

ICICI Personal Financial Services and ICICI Capital Services were also merged with

39
the ICICI Bank on March 2002. During May,2003 the bank has acquired

Transamerica Apple Distribution Finance Private Ltd and renamed it to ICICI

Distribution Finance Private Limited which is primarily engaged in financing in the

two-wheeler segment.

Bank received many awards and recognitions during the year 2005-06. Some

of them are Best Bank in India by Euro money, Best Integrated Consumer Bank Site

in Asia by Global Finance, Best Cash Management-Country Awards in India by The

Asset and Best Secondary Offering by Finance Asia. ICICI Bank noted as Bank of the

year 2006 India by The Banker, it was a award to ICICI Bank at second time from last

year. During the year 2006-07 also Bank acquired the number of awards. Samples are,

Best Transaction Bank in India by Asset Triple AAA, Best Bank of the Year 2006 by

Business India, National Award for Excellence in Energy Management by CII and

Excellence in Multi Channel Distribution by Asian Banker.

As on April 2007 Sangli Bank Ltd was merged with ICICI Bank Ltd. In the

Wholesale Banking segment, the bank has achieved a significant milestone in the

market making activity by expanding the product suite to include foreign exchange

options. As on May 2007 the bank have market capitalization of Rs 77,834 crore. In

2007 June ICICI Bank has entered into an agreement with networking solutions

provider GTL Ltd to lease out its call centre facility at Mayhap worth of around Rs

100 crore for a period of 25 years. In August of 2007 the bank has availed of a $200-

million worth Line of Credit (LoC) from The Export-Import Bank of Korea (Korea

Exim bank) for the purpose of the Hong Kong branch of ICICI Bank gets funds from

Korea Exim bank, and the bank lends foreign currency loans to domestic companies

investing in Korea and the bank had taken a similar LoC of $200 million from the

Japan Bank for International Cooperation (JBIC) last year. In 2008 ICICI Bank, come

40
a cropper in the global stage when it comes to their brand value, which is $2,603

million, it reveals by the study of London-based consultancy Brand Finance.

41
HDFC BANK LTD.

HDFC Bank, a private sector bank was incorporated in the year of 1994 by

Housing Development Finance Corporation Limited (HDFC), India's premier housing

finance company. HDFC was amongst the first to receive an 'in principle' approval

from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank

commenced its operations as a Scheduled Commercial Bank in January 1995 with the

help of RBI's liberalization. HDFC Bank deals with three key business segments -

Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the

banking consortia of over 50 corporate for providing working capital finance, trade

services, corporate finance and merchant banking. It is also providing sophisticated

product structures, sound advice and fine pricing mainly in areas of foreign exchange

and derivatives, money markets and debt trading and equity research through its state-

of-the-art dealing room.

Notable event was happened in the history of bank as well as Indian banking

sector in Feb. 2000, the Times Bank was amalgamated with HDFC bank. This was an

important milestone, being the first merger of two private sector banks. HDFC Bank

was the first Bank to launch an International Debit Card in association with VISA

(Visa Electron). The Bank launched its Credit Card business in 2001. In the same year

HDFC Bank has became the first private sector bank to be authorized by the Central

Board of Direct Taxes (CBDT) as well as the RBI to accept direct taxes. The taxes

accepted at specified branches of the bank. Also it has announced a strategic tie-up

with a Bangalore-based business solutions software developer Tally Solutions Pvt

(TSPL) for developing and offering products and services facilitating on-line

accounting and banking services to SMEs (Small and Medium Enterprises). In 2001-

02 the bank was listed on the New York Stock Exchange in the form of ADS and

42
bank had alliance with LIC for provide online payment of insurance premium to the

customers.

Bank received plenty of awards to its credit, in the year 2003 bank received

"Best Local Bank in India" by Finance Asia, "Best Domestic Bank in India Region" in

The Asset Triple A Country Awards 2003. Apart from this, 'Best Bank in the Private

Sector' for the year 2003 in the Outlook Express Awards, 'Best New Private Sector

Bank 2003' by the Financial Express in the FE-Ernst & Young Best Bank's survey

2003. It was also figured in the 'Best Under a Billion, 200 Best Small Companies for

2003' by Forbes Global and for use of information technology the bank was awarded

with 'Best IT user in Banking' at the IT User Awards 2003 conferred by

Economictimes.com & Nasscom. In the year of 2004 to 2005, "Best Domestic

Commercial Bank" & "Best Cash Management Bank"- India- Asia money Awards for

Corporate Excellence of 2004-05, "Best Bank" - India - Finance Asia, "Company of

the Year "- The Economic Times Awards for Corporate Excellence 2004-05, "Best

Domestic Bank in India" - The Asset Triple A Country Awards 2005, "Most

Customer Responsive Company- Banking and Financial Services" - The Economic

Times - Avaya Global Connect Customer Responsiveness Awards 2005. During the

year of 2006-07 also bank received number of awards, The Asian Banker

Achievement Award, Best Listed Bank of India in 2006 by Business World, Euro

money Award as Best Bank in India, One of Asia Pacific's Best 50 Companies in

2006 by Forbes Magazine, Asia money Award for Best Local Cash Management in

Large and Medium segments, other than above bank received " Best Bank in India "

award continuously from the year 2003 to 2007 conferred by the magazine Business

Today. The Financial Express rated 1st in India's Best Banks 2007 under New Private

Sector Bank under along with Axis Bank.

43
 As on 2007 May, The Reserve Bank of India has allowed HDFC Bank to start

a non banking finance company. The NBFC, to be set up by HDFC Bank as a wholly

owned subsidiary and will undertake retail operations such as auto, personal loans

etc.. As part and apart from the regular banking activity, HDFC Bank and The

Institute for Technology and Management (ITM), Chennai gone under Memorandum

of Understanding to promote co-operation advancement of academic and business

exchanges between the two.

44
Axis Bank India, the first bank to begin operations as new private banks in 1994 after

the Government of India allowed new private banks to be established. Axis Bank was

jointly promoted by the Administrator of the specified undertaking of the

 Unit Trust of India (UTI-I)

 Life Insurance Corporation of India (LIC)

 General Insurance Corporation Ltd.

Also with associates viz. National Insurance Company Ltd., the New India Assurance

Company, The Oriental Insurance Corporation and United Insurance Company Ltd.

EVOLUTION:

UTI was established in 1964 by an Act of Parliament; neither did the Government of

India own it nor contributes any capital. The RBI was asked to contribute one-half of

its initial capital of Rs 5 crore, and given the mandate of running the UTI in the

interest of the unit-holders. The State Bank of India and the Life Insurance

Corporation contributed 15 per cent of the capital each, and the rest was contributed

by scheduled commercial banks which were not nationalized then. This kind of

structure for a unit trust is not found anywhere else in the world. Again, unlike other

unit trusts and mutual funds, the UTI was not created to earn profits.

In the course of nearly four decades of its existence, it (the UTI) has succeeded

phenomenally in achieving its objective and has the largest share anywhere in the

world of the domestic mutual fund industry. '' The emergence of a "foreign expert"

during the setting up of the UTI makes an interesting story.

The announcement by the then Finance Minister that the Government of India was

contemplating the establishment of a unit trust caught the eye of Mr. George Woods,

the then President of the World Bank. Mr. Woods took a great deal of interest in the

45
Indian financial system, as he was one of the principal architects of the ICICI, in

which his bank, First Boston Corporation Bank, had a sizeable shareholding. Mr.

Woods offered, through Mr. B.K. Nehru, who was India's Executive Director on the

World Bank, the services of an expert. The Centre jumped at the offer, and asked the

RBI to hold up the finalization of the unit trust

Proposals till the expert visited India. The only point Mr. Sullivan made was that the

provision to limit the ownership of units to individuals might result in unnecessarily

restricting the market for units. While making this point, he had in mind the practice

in the US, where small pension funds are an important class of customers for the unit

trusts. The Centre accepted the foreign expert's suggestion, and the necessary

amendments were made in the draft Bill. Thus, began corporate investment in the

UTI, which received a boost from the tax concession given by the government in the

1990-91 Budget. According to this concession, the dividends received by a company

from investments in other companies corporate lobby which perhaps subtly opposed

the establishment of the UTI in the public sector made use of it for its own benefits

later. The Government-RBI power game started with the finalization of the UTI

charter itself. The RBI draft of the UTI charter stipulated that the Chairman will be

nominated by it, and one more nominee would be on the Board of Trustees. While

finalizing the draft Bill, the Centre changed this stipulation. The Chairman was to be

nominated by the Government, albeit in Consultation with RBI. Although the

appointment was to be made in consultation with the Reserve Bank, the Government

could appoint a person of its choice as Chairman even if the Bank did not approve of

him., including the UTI, were completely exempt from corporate income tax, and

46
provided the dividends declared by the investing company were higher than the

dividends received.

The result was a phenomenal increase in corporate investment which accounted for 57

per cent of the total capital under US-64 scheme. Because of high liquidity the

corporate sector used the UTI to park its liquid funds. This added to the volatility of

the UTI funds. Then Later on in 2002 the UTI was renamed to Axis Bank.

BUSINESS DESCRIPTION

The Bank's principal activities are to provide commercial banking services which

include merchant banking, direct finance, infrastructure finance, venture capital fund,

advisory, trusteeship, forex, treasury and other related financial services.

CORPORATE PROFILE

Axis Bank is the third largest private sector bank in India. Axis Bank offers the entire

spectrum of financial services to customer segments covering Large and Mid

Corporates, SME, Agriculture and Retail Businesses.

The Bank has a large footprint of 1787 domestic branches (including extension

counters) and 10,363 ATMs spread across 1,139 centres in the country as on 31st

December 2012. The Bank also has 7 overseas branches / offices in Singapore, Hong

Kong, Shanghai, Colombo, Dubai, DIFC - Dubai and Abu Dhabi.

Axis Bank is one of the first new generation private sector banks to have begun

operations in 1994. The Bank was promoted in 1993, jointly by Specified

Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India),Life

47
Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC),

National Insurance Company Ltd., The New India Assurance Company Ltd., The

Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The

shareholding of Unit Trust of India was subsequently transferred to SUUTI, an entity

established in 2003.

With a balance sheet size of Rs.2,85,628 crores as on 31st March 2012, Axis Bank is

ranked 9th amongst all Indian scheduled banks. Axis Bank has achieved consistent

growth and stable asset quality with a 5 year CAGR (2007-12) of 31% in Total

Assets, 30% in Total Deposits, 36% in Total Advances and 45% in Net Profit.

The Corporate Office of Axis Bank is located at Axis House Mumbai. Axis House has

received the ‘Platinum’ rating awarded by the US Green Building Council for its

environment friendly facilities and reduction of carbon emission.

48
SUBSIDIARIES

The Bank has set up six wholly-owned subsidiaries:

Axis Securities and Sales Ltd. (Since renamed Axis Capital Ltd.)

Axis Private Equity Ltd.

Axis Trustee Services Ltd.

Axis Asset Management Company Ltd.

Axis Mutual Fund Trustee Ltd.

Axis U.K. Ltd.

PROMOTERS:

UTI Bank Ltd. has been promoted by the largest and the best Financial Institution of

the country, UTI. The Bank was set up IN 1993 with a capital of Rs. 115 crore, with

 UTI contributing Rs. 100 crore,

 LIC - Rs. 7.5 crore

 GIC and its four subsidiaries contributing Rs. 1.5 crore each.

Axis Bank is today one of the most competitive and profitable banking franchise in

India. Which can be clearly seen by an analysis of its comprehensive portfolio of

banking services including Corporate Credit, Retail Banking, and Business Banking,

Capital Markets, Treasury and International Banking?

CAPITAL STRUCTURE

The Bank has authorized share capital of Rs. 500 Crores comprising 500,000,000

equity shares of Rs.10/- each. As on 31st March, 2012 the Bank has issued,

subscribed and paid-up equity capital of Rs. 413.20 Crores, constituting 413,203,952

shares of Rs. 10/- each. The Bank’s shares are listed on the National Stock Exchange

49
and the Bombay Stock Exchange. The GDRs issued by the Bank are listed on the

London Stock Exchange (LSE).

50
Objectives of
The Study

51
 OBJECTIVES OF THE STUDY

 To study the present financial condition of AXIS, ICICI AND HDFC BANK.

 To study the market shares in banking sector of AXIS, ICICI AND HDFC

BANK.

 To study the credit worthiness of the banks.

 To study the solvency of the banks.

52
 Research
Methodology

53
 RESEARCH METHODOLOGY

Meaning of Research:

Research is defined as “a scientific and systematic search for pertinent information on

a specific topic”. Research is an art of scientific investigation. Research is a

systematized effort to gain now knowledge. It is a careful investigation or inquiry

especially through search for new facts in any branch of knowledge. Research is an

academic activity and this term should be used in a technical sense. Research

comprises defining and redefining problems, formulating hypothesis or suggested

solutions. Making deductions and reaching conclusions to determine whether they if

the formulating hypothesis. Research is thus, an original contribution to the existing

stock of knowledge making for its advancement. The search for knowledge through

objective and systematic method of finding solutions to a problem is research.

 Research Problem

The first step while conducting research is careful definition of Research Problem.

“To ERR IS THE HUMAN” is a proverb which indicates that no one is perfect in this

world. Every researcher has to face many problems which conducting any research

that’s why problem statement is defined to know which type of problems a researcher

has to face while conducting any study. It is said that,

“Problem well defined is problem half solved.”

Basically, a problem statement refers to some difficulty, which researcher experiences

in the context of either a theoretical or practical situation and wants to obtain the

solution for the same.

54
DATA COLLECTION

Data collection method is the integral part of research design. There are several data

collection methods, each with its own advantages and disadvantages. Data can be

collected in a variety of ways in different settings from different sources. The data

are classified into two categories, primary and secondary data.

Source of data
The data is collected from the following sources.
 Three year annual report of Axis Bank

 Interaction with the related finance department.

METHODOLOGY
The study carried with the cooperation of the management who permitted to
carry on the study and provided the requisite data collected from the following
sources.

Secondary data
Study has been taken from secondary sources i.e. published annual reports of
the company editing, classifying and tabulation of the financial data. For this purpose
performance data of Axis Bank for the years 2010-2011 to 2014-2015 has been used.

Methods of data analysis

The data collected were edited, classified and tabulated for analysis. The analytical
tools used in this study are:

Analytical tools applied:

The study employs the following analytical tools:
1. Comparative statement.
2. Trend Percentage.

55
3. Ratio Analysis.
4. Cash Flow Statement.

 Sample size
 AXIS,HDFC,ICICI BANKS

56
Data Analysis

57
 ANALYSIS AND INTERPRETATION

(1) RETURN ON EQUITY (ROE)

Return on Equity is seen as a measure of how well a company used reinvested

earnings to generate additional earnings. This is computed using the following
formula and expressed in percentage terms:

RETURN ON EQUITY (%)

YEAR AXIS ICICI HDFC
2016 17.82 8.95 16.05
2015 14.24 12.79 19.40
2014 15.47 11.44 17.47
2013 18.10 15.97 20.44
AVEARGE 16.41 12.29 18.34

25

20

15
AXIS
ICICI
10 HDFC

0
2016 2015 2014 2013

Among all the three banks, HDFC could make the highest RoE of 20.44% in 2005,
followed by AXIS (18.10%) in 2005 and ICICI (15.97%) in 2005. The average RoE
of AXIS and HDFC were (16.41% and 18.34% respectively) while that of ICICI
was a bit lower (12.29%). Thus, AXIS and HDFC were more efficient in
generating additional earnings by using invested earnings than ICICI.

58
(2) EARNINGS PER SHARE (EPS)

Earnings per Share is the measure of company's ability to generate after tax
profits per share held by the investors. This ratio is computed with the help of
the following formula and expressed in rupee terms:

EPS (in Rupees)

YEAR AXIS ICICI HDFC
2016 126.62 39.39 46.22
2015 86.10 34.84 36.29
2014 83.73 32.5 27.92
2013 81.79 27.6 22.92
AVERAGE 96.24 33.58 33.34

140

120

100

80 AXIS
ICICI
60
HDFC
40

20

0
2016 2015 2014 2013

From the above table, the EPS of AXIS, ICICI and HDFC showed an increasing
trend from year to year during the study period. The average EPS of AXIS is
greater than that of ICICI and HDFC during the entire study period. However, EPS
of AXIS was substantially higher than that of ICICI and HDFC in every year during
the study period. On an average AXIS generated EPS of Rs. 96.24 followed by
ICICI (Rs. 33.58) and HDFC (Rs. 33.34). Thus, the analysis reveals that AXIS was
the most efficient bank in terms of generating earnings per share.

59
(3) PRICE EARNINGS (P/E) RATIO

The Price Earnings ratio highlights the connection between the price and recent
company's performance. This ratio moves either side only when price and profits
get disconnected. This ratio is calculated using the following equation and
expressed in terms of times:

P/E RATIO
YEAR AXIS ICICI HDFC
2016 12.49 19.22 28.80
2015 10.62 23.26 26.29
2014 10.53 27.12 27.74
2013 10.11 13.48 25.03
AVERAGE 10.94 20.77 26.96

35

30

25

20 AXIS
ICICI
15
HDFC
10

0
2016 2015 2014 2013

It reveal that only HDFC to achieved the highest price earnings ratio in every
year during the study period, followed by ICICI; AXIS alone registered the lowest
ratio. Even the four year average price earnings ratio of HDFC was significantly
higher (26.96 times) than that of ICICI (20.77 times) and AXIS (10.94times).
Thus, it is inferred that there was more responsiveness between the earnings
capacity and the share price in case of HDFC than that of ICICI and AXIS, and it
reveals that HDFC did better in share market when compared to other two
banks. However, there was a declining trend in price earnings position of HDFC.

60
(4) DIVIDEND PER SHARE (DPS)

Though Dividends per Share is similar to Earnings per share, DPS shows how
much the shareholders were actually paid by way of dividends. The DPS found
out by the following formula and expressed in rupee terms:

DPS (in Rupees)

YEAR AXIS ICICI HDFC
2016 21.49 11.00 8.50
2015 13.99 10.00 7.00
2014 13.99 8.50 5.50
2013 12.50 8.50 4.50
AVERAGE 15.49 9.5 6.37

25

20

15
AXIS
ICICI
10 HDFC

0
2016 2015 2014 2013

It reveals that DPS position of all the banks increased from year to year during
the period under review. On an average, AXIS paid out more dividends (Rs.15.49)
than that of ICICI and HDFC, which paid Rs. 9.5 and Rs. 6.37, respectively. Even
the trend in DPS position reveals that there was continuously increasing trend in
case of AXIS when compared to that of ICICI and HDFC. Thus, it is concluded that
it was AXIS, which was more efficient in terms of dividends payment to the
shareholders.

61
(5) DIVIDENDS PAYOUT RATIO (DPR)

The Dividends Payout Ratio (DPR) is a model for cash flow measurement used by
the investor to determine if a company is generating a sufficient level of cash
flow to assure a continued stream of dividends to them. It is also a measurement
of the amount of current net income paid out in dividends rather than retained
by the business. This ratio is computed by the following formula and expressed
in percentage terms:

DIVIDEND PAYOUT RATIO (in %)

YEAR AXIS ICICI HDFC
2016 16.97 27.92 18.39
2015 16.25 28.70 19.28
2014 16.71 26.15 19.69
2013 15.28 30.79 19.63
AVERAGE 16.30 28.39 19.24

35

30

25

20 AXIS

15 ICICI
HDFC
10

0
2016 2015 2014 2013

An insight into the data reveals that there was a mixed trend in the distribution
of payout ratio of sample companies during the study period. Contrary to the
DPS position, on an average, ICICI paid out 28.39% of its earnings as the
dividends to the shareholders, whereas HDFC paid out 19.24% and AXIS paid out
only 16.30%, the lowest. Thus, ICICI was more efficient in generating more cash
inflows to the shareholders by paying the highest ratio of earnings as the
dividends than HDFC and AXIS, which paid relatively a lower percentage.

62
(6) NET PROFIT MARGIN (NPM)

Net Profit Margin indicates how much a company is able to earn after all direct
and indirect expenses to every rupee of revenue. This ratio is calculated using
the following formula and expressed in percentage terms:

NET PROFIT MARGIN (in %)

YEAR AXIS ICICI HDFC
2016 11.79 10.49 21.17
2015 10.04 10.75 22.89
2014 10.68 13.53 25.43
2013 11.21 15.6 29.69
AVERAGE 10.93 12.59 24.79

35

30

25

20 AXIS
ICICI
15
HDFC
10

0
2016 2015 2014 2013

The above data reveal that it was HDFC, which has outperformed ICICI and AXIS
in terms of Net Profit Margin. However, the data also reveal there was stagnation
in the NPM position of HDFC whereas AXIS and ICICI could increase the net profit
from year to year during the study period. On an aggregate basis, mean NPM of
HDFC was 24.79, the highest, followed by ICICI (12.59%) and AXIS (10.93%), the
lowest among three sample companies. Thus, it found that it was HDFC to be the
most efficient company in controlling indirect expenses when compared to AXIS
and ICICI.

63
(7) OPERATING PROFIT MARGIN (OPM)

Operating Profit Margin indicates how effective a company is at controlling the costs
and expenses associated with their normal business operations. This ratio is found out
using the following formulae and expressed in percentage terms:

OPERATING PROFIT MARGIN (%)

YAER AXIS ICICI HDFC
2016 18.22 20.10 50.13
2015 16.79 20.31 51.43
2014 14.47 24.99 50.6
2013 16.99 23.04 51.57
AVERAGE 16.62 22.11 50.93

60

50

40
AXIS
30
ICICI
20 HDFC

10

0
2016 2015 2014 2013

HDFC sustained the highest operating profit margin in every year during the study

period followed by ICICI, which has registered a reasonably higher margin during the

period under review. AXIS, though being the largest bank in terms of operations and

networking, could not beat HDFC and ICICI. On an aggregate basis, HDFC was

highly successful in controlling the expenses by registering an average OPM of

50.93%, followed by ICICI and AXIS, which could make average OPM of 22.11%

and 16.62%, respectively.

64
(8) RETURN ON ASSETS (ROA)

It is used to measure the profitability of the bank in terms of assets employed in the
bank. It is also an yardstick of measuring managerial efficiency in rel the utilization of
assets.

(Net profit after tax but before interest*100)/total assets

Net profit after tax but before interest is nothing but operating profit

RETURN ON ASSETS (in %)

YEAR AXIS ICICI HDFC
2016 1.01 1.12 1.32
2015 0.84 1.09 1.33
2014 0.89 1.30 1.38
2013 0.99 1.48 1.47
AVERAGE 0.93 1.25 1.37

1.6

1.4

1.2

1
AXIS
0.8
ICICI
0.6 HDFC

0.4

0.2

0
2016 2015 2014 2013

A higher return on total assets is an indicator of high profitability and a good overall

efficiency. Reversely a low return on total assets indicates low profitability on assets

employed and poor managerial efficiency. The ROA of HDFC bank is better than the

ICICI and AXIS. In 2016 HDFC ROA is 1.32% followed by ICICI (1.12%), AXIS

(1.01%).

65
Findings

66
 FINDINGS

 On the basis of return on equity it is analyzed that HDFC bank reinvested their

earnings much better than AXIS and ICICI banks to get the additional profits.

So in ROE, HDFC is best.

 On the basis of earning per share it is analyzed that AXIS is the most efficient

bank in terms of generating earnings. After it there are ICICI and HDFC banks

with a little difference of 0.24 in their average EPS.

 From dividend per share it is analyzed that all the three banks shows an

increasing trend from 2013 to 2016. But the performance of AXIS is better

than ICICI and HDFC banks as its average DPS is 15.49 with ICICI is 9.5 and

HDFC is 6.37

 From dividend payout ratio it is analyzed that ICICI pays out the more

dividend than HDFC and AXIS banks.

 On the net profit margin basis it is seen that after all direct and indirect

expenses HDFC earns more from its revenue and after it there is ICICI bank

and AXIS in the last

 From operating profit margin it is analyzed that HDFC controls its cost better

than ICICI and AXIS banks.

67
  On the basis of capital adequacy ratio it is analyzed that there is an increasing

trend in all the three banks but the average CAR of ICICI bank is better than

HDFC and AXIS.

 On the basis of return on assets it is analyzed that HDFC’s profitability and

overall efficiency is better than ICICI and AXIS banks.

Thus from the entire ratio analysis it is concluded that performance of HDFC is best

in return on assets, operating profit margin, net profit margin, and return on equity.

Whereas performance of AXIS is best in earning per share and dividend per share and

of ICICI is best in dividend payout ratio and capital adequacy ratio.

68
Recommendation

69
 RECOMMENDATION

 The parameters taken were only five in the present study which could be increased

to more than five for better analysis.

 The time duration for the analysis should be at least 5-10 years for the sake of

better picture of analysis but due to the data availability issues the present study is

restricted up to last four years.

 The present study suggests the companies where they are lacking in their financial

growth. Also it gives knowledge to a company how to increase its efficiency in

comparison with other competitive companies.

 Along with the present findings of the study, the investors also has to keep in

mind about the future contracts of the companies and their future plans so as to get

maximum profit out of them.

70
Conclusion

71
 CONCLUSION

Banks are the most common institutions and media for transfer of funds and

investments. The banking business is becoming more and more complex as a result of

liberalization and globalization. The present study is an attempt to examine and

compare the performance of the three largest banks of India AXIS, a Public Sector

Banks, ICICI and HDFC a Private Sector banks. The analysis is based on the ratio

analysis. The various ratios which is used in study are Operating Profit Margin

(OPM), Net Profit Margin (NPM), Return on Equity (RoE), Earnings per Share

(EPS), Price Earnings Ratio (PER), Dividends per Share (DPS) , Dividends Payout

Ratio (DPR) and etc The brief study of all the three banks is done and it is found that

AXIS is the largest bank in India whereas ICICI is second largest bank and than the

HDFC. Although AXIS is largest in terms of its network and business but in case of

various ratios it is lagging behind the HDFC the reason for this may be of its number

of branches and it is a public sector bank.

72
Limitations

73
 LIMITATIONS

 The study has lack of contact with company personnel acted as hindrance in the

study.

 The study is based on the limited knowledge & information provided by the

websites and software available on internet.

 The basis of selection of sample for the study was vague. Randomly individuals

were picked up to provide their responses.

 There are only five parameters taken for study however there are certain other

parameters on the basis of which accurate inference can be drawn.

 The ratings given are on the basis of data available on internet however the future

efficiency of the low performing company can be better.

74
Bibliography

75
 BIBLIOGRAPHY

 Frost & Sullivan (2007), “Telecom – Catalyzing India’s New Economy”

 Banka Sanjoy (2006), “Mergers and Acquisitions in Indian Telecom Industry-A

Study”

 Jain Rekha (2001), “A review of The Indian Telecom Sector”

 Fortis Investments (2006),”Global Telecom Sector”

 Sharma Seema and Lokesh Singla (2009), “Telecom equipment Industry:

Challenges and Prospects”

 Bhattacharya Manas (2000), “Telecom Sector in India: Vision 2020”.

 Cellular Statistics – Cellular Operator Association of India.

 Tiwari, Verma – “A Fundamental Analysis of Public Sector Banks In India”,

Indian Journal of Finance, Nov 2009.

76