A PROJECT REPORT On

To analyze and compare the financial position of State Bank of India and HDFC Bank
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF DEGREE OF BACHELORS IN BUSINESS ADMINISTRATION

(Session: 2009 - 2012)

UNDER THE GUIDANCE OF: DR. M.K. BHAT (Principal, MAIMS)

SUBMITTED BY: HIMANSHU SINGH Roll no. 05514701709

Maharaja Agrasen Institute of Management Studies Affiliated to Guru Gobind Singh Indraprastha University, Delhi PSP Area, Plot No. 1, Sector 22, Rohini, Delhi 110086
i

Table of Contents
Student Declaration Certificate from Guide Acknowledgement Executive Summary Table of Graphs Chapter Scheme ii iii iv v vi i

ii

STUDENT DECLARATION
This is to certify that I have completed the Project titled To analyze and compare the financial position of State Bank of India and HDFC Bank. Under the guidance of Dr. M. K. BHAT in partial fulfillment of the requirement for the award of degree of piece of work & I have not submitted it earlier elsewhere. Bachelor of Business Administration at Maharaja Agrasen Institute of Management Studies, Delhi. This is an original

Name of the Student HIMANSHU SINGH

iii

CERTIFICATE
This is to certify that the project titled To analyze and compare the financial position of State Bank of India and HDFC Bank. Is an academic work done by Himanshu Singh submitted in the partial fulfillment of the requirement for the award of the degree of Bachelor of Business Administration from Maharaja Agrasen Institute of Management Studies, Delhi, under my guidance & direction. To the best of my knowledge and belief the data & information presented by her in the project has not been submitted earlier.

Dr. M. K. Bhat Name of the Faculty Guide

iv

Acknowledgement
I take this opportunity to express my profound sense of gratitude and respect to all those who helped me throughout the duration of this project. I express my sincere gratitude towards Dr. N.K. KAKKAR the director of our institute, for being a continuous source of inspiration and motivation. It gives me immense pleasure to knowledge my indebt ness and sense of my me immense support and gratitude to Dr. M. K. Bhat project coordinator for the project undertaken. I would immensely thank the other faculty members of the institute for providing guidance to complete the project.

Himanshu Singh 05514701709

Executive Summary
The Indian economic is growing. There are various factors contributing for the development of economy. One of the industries which have revolutionized the economy is banking. Banks channelize individual savings into capital formation, leading to faster growth of an economy. The leading private sector and government sector banks which ARE the HDFC bank and SBI. This project is basically a financial comparison between the HDFC BANK and the SBI through the help of ratio analysis. In this the financial position of both the banks are compared and the best one is taken out. I have undertaken my study in the area of ratio analysis to study and compare financial position of HDFC bank and SBI.

The Project is titled To analyze and compare the financial position of State Bank of India and HDFC Bank.

vi

Table of Graphs
S. No. 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 Chapter A comparison between the current ratio of SBI and HDFC Bank A comparison between the debt equity ratio of SBI and HDFC Bank A comparison between the debt to total funds ratio of SBI and HDFC Bank A comparison between the proprietary ratio of SBI and HDFC Bank A comparison between the total assets to debt ratio of SBI and HDFC Bank A comparison between the working capital turnover ratio of SBI and HDFC Bank A comparison between the fixed asset turnover ratio of SBI and HDFC Bank A comparison between the net profit ratio of SBI and HDFC Bank Page No. 27 29 31 33 35 37 39 41

Table of Content
vii

Chapter 1

Introduction - History
-

SBI and HDFC Bank

Chapter 2

Methodology - Purpose of Study - Research Methodology

Chapter 3

Findings and Analysis

-

Comparative analysis of the financial position of SBI and HDFC Bank.

Chapter 4

Suggestions and Recommendations - Suggestions

-

Recommendations

Chapter 5

Conclusion
-

Conclusion

Chapter 6

Limitations
-

Limitations

Bibliography
viii

CHAPTER - 1
INTRODUCTION

INTRODUCTION
STATE BANK OF INDIA

History
The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank of Bengal and two other Presidency banks, namely, the Bank of Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). All three Presidency banks were incorporated as joint stock companies, and were the result of the royal charters. These three banks received the exclusive right to issue paper currency in 1861 with the Paper Currency Act, a right they retained until the formation of the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921, and the reorganized banking entity took as its name Imperial Bank of India. The Imperial Bank of India continued to remain a joint stock company. Pursuant to the provisions of the State Bank of India Act (1955), the Reserve Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank of India. On 30 April 1955 the Imperial Bank of India became the State Bank of India. The Govt. of India recently acquired the Reserve Bank of India's stake in SBI so as to remove any conflict of interest because the RBI is the country's banking regulatory authority.

In 1959 the Government passed the State Bank of India (Subsidiary Banks) Act, enabling the State Bank of India to take over eight former State-associated banks as its subsidiaries. On 13 September 2008, State Bank of Saurashtra, one of its Associate Banks, merged with State Bank of India. SBI has acquired local banks in rescues. For instance, in 1985, it acquired Bank of Cochin in Kerala, which had 120 branches. SBI was the acquirer as its affiliate, State Bank of Travancore, already had an extensive network in Kerala.

It is the largest bank in India. It traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the 10

Indian Subcontinent. The Government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network in India and overseas, including products aimed at NRIs. The State Bank Group, with over 16000 branches, has the largest branch network in India. With an asset base of $250 billion and $195 billion in deposits, it is a regional banking behemoth. It has a market share among Indian commercial banks of about 20% in deposits and advances, and SBI accounts for almost one-fifth of the nations loans. The State bank of India is the 29th most reputed company in the world according to Forbes. State Bank of India is one of the Big Four Banks of India with ICICI Bank, Axis Bank and HDFC Bank. The bank has 141 overseas offices spread over 32 countries as on 31st Dec 2009. It has branches of the parent in Colombo, Dhaka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. It has offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank, State Bank of India (Mauritius).In 1982, the bank established a subsidiary, State Bank of India (California), which now has eight branches - seven branches in the state of California and one in Washington DC that it opened on 23 November 2009. The seven branches in California are located in Los Angeles, Artesia, San Jose, Canoga Park, Fresno, San Diego and Bakersfield. The Canadian subsidiary, State Bank of India (Canada) too dates to 1982. It has seven branches, four in the greater Toronto area and three in British Columbia. In Nigeria SBI operates as INMB Bank. This bank began in 1981 as the Indo-Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria.

In Nepal SBI owns 50% of Nepal SBI Bank, which has branches throughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with Canara Bank owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India already has a branch in Shanghai and plans to open one up in Tianjin. 11

There are six associate banks that fall under SBI, and together these six banks constitute the State Bank Group. All use the same logo of a blue keyhole and all the associates use the "State Bank of" name followed by the regional headquarters' name. Originally, the then seven banks that became the associate banks belonged to princely states until the government nationalized them between October, 1959 and May, 1960. In tune with the first Five Year Plan, emphasizing the development of rural India, the government integrated these banks into State Bank of India to expand its rural outreach. There has been a proposal to merge all the associate banks into SBI to create a "mega bank" and streamline operations. The first step along these lines occurred on 13 August 2008 when State Bank of Saurashtra merged with State Bank of India, which reduced the number of state banks from seven to six. Furthermore on 19th June 2009 the SBI board approved the merger of its subsidiary, State Bank of Indore, with itself. SBI holds 98.3% in the bank, and the balance 1.77% is owned by individuals, who held the shares prior to its takeover by the government.

Symbol and slogan

-> ->

Symbol

is

the

Key

Hole,

whose

meaning

is

"Welcome

to

SBI".

Slogans are: With you all the way Pure banking nothing else The Banker to every Indian The Nation banks on

The Symbol of State Bank of India is a Circle and not Key hole and a small man at the centre of the Circle. Circle depicts perfection and the common man being the centre of the banks business.

The Subsidiaries of SBI till date

State Bank of Indore State Bank of Bikaner & Jaipur State Bank of Hyderabad 12

State Bank of Mysore State Bank of Patiala State Bank of Travancore

Board of Directors
Name O P Bhatt R Sridharan Dileep C Choksi D Sundaram Rajiv Kumar Shyamala Gopinath Name S K Bhattacharyya Ashok Jhunjhunwala S Venkatachalam Vasantha Bharucha Ashok Chawla Designation Chairman / Chair Person Managing Director Director Director Director Director Designation Managing Director Director Director Director Director

HDFC Bank
HDFC Bank Ltd. is a commercial bank of India, incorporated in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The Bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,412 branches and over 3,295 ATMs, in 528 cities in India, and all branches of the bank are linked on an online real-time basis. HDFC Bank was incorporated in the year of 1994 by Housing Development Finance Corporation Limited (HDFC), India's premier housing finance company. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the 13

private sector.The Bank commenced its operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's liberalization policies. In a milestone transaction in the Indian banking industry, Times Bank Limited (promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. The amalgamated bank emerged with a strong deposit base of around Rs. 1, 22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity is over Rs. 1, 63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower. HDFC Bank deals with three key business segments Wholesale Banking Services, Retail Banking Services and Treasury. It has entered the banking consortia of over 50 corporates for providing working capital finance, tradeservices, corporate finance and merchant banking. It is also providing sophisticated product structures in areasof foreign exchange and derivatives, money markets and debt trading and equity research.

HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a major Indian financial services company based in India, incorporated in August 1994, after the Reserve Bank of India allowed establishing private sector banks. The Bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank has 1,725 branches and over 4,232 ATMs, in 779 cities in India, and all branches of the bank are linked on an online realtime basis. As of 30 September 2008 the bank had total assets of Rs.1006.82 billion. For the fiscal year 2008-09, the bank has reported net profit of 2,244.9 crore (US$ 509.59 million), up 41% from the previous fiscal. Total annual earnings of the bank increased by 58% reaching at 19,622.8 crore (US$ 4.45 billion) in 2008-09.

Distribution network
14

An HDFC Bank Branch HDFC Bank is headquartered in Mumbai. The Bank has an network of 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank has a presence in all major industrial and commercial centers across the country. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE have a strong and active member base. The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders Wholesale Banking Services The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corp to small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers.

Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001.

15

Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. These services are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.

HDFC Bank branches in India

HDFC Bank Branches in Assam HDFC Bank Branches in Andhra Pradesh HDFC Bank Branches in Bihar HDFC Bank Branches in Chandigarh HDFC Bank Branches in Chhattisgarh HDFC Bank Branches in Delhi HDFC Bank Branches in Goa HDFC Bank Branches in Gujarat HDFC Bank Branches in Haryana HDFC Bank Branches in Himachal Pradesh 16

HDFC Bank Branches in Jammu Kashmir HDFC Bank Branches in Jharkhand HDFC Bank Branches in Karnataka HDFC Bank Branches in Kerala HDFC Bank Branches in Madhya Pradesh HDFC Bank Branches in Maharashtra HDFC Bank Branches in Meghalaya HDFC Bank Branches in Orissa HDFC Bank Branches in Pondicherry HDFC Bank Branches in Punjab HDFC Bank Branches in Rajasthan HDFC Bank Branches in Sikkim HDFC Bank Branches in Tamil nadu HDFC Bank Branches in Uttar Pradesh HDFC Bank Branches in Uttaranchal HDFC Bank Branches in West Bengal

Board of Directors
Name Chander Mohan Vasudev Harish Engineer Keki Mistry Ashim Samanta Aditya Puri Paresh Sukthankar Name Designation Chairman / Chair Person Executive Director Director Director Managing Director Executive Director Designation 17

Aditya Puri Paresh Sukthankar Arvind Pande Pandit Palande Harish Engineer

Managing Director Executive Director Director Director Executive Director

Financial Analysis Financial analysis (or financial statement analysis) refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is a study of relationship among various financial facts and figures as set out in the financial statements, i.e., balance sheet and profit & loss account. The process of division, establishing relationship and interpretation thereof to understand the working and financial position of a business is known as financial statement analysis.

In the words of Kennedy and Muller, the analysis and interpretation of financial statements are an attempt to determine the significance and meaning of financial statement data so that the forecast may be made of the prospects for future earnings, ability to pay interest and debt maturities (both current and long-term) and profitability and sound dividend policy. Ratio analysis is one of the techniques of analysis of financial statement in which ratios are computed. It is a process of determining and interpreting relationship between the items of financial statements to provide a meaningful understanding of the performance and financial position of an enterprise. Ratios can be classified into: 1) Liquidity ratios - These ratios measure the short-term solvency of the firm, i.e. the firms ability to pay its current dues. 2) Solvency ratios - These ratios convey a firms ability to meet its long-term obligations. 3) Activity ratios - These ratios judge how well the facilities at the disposal of the enterprise are being utilized.

18

4) Profitability ratios - Profitability is of utmost importance for a concern. Thus a measure of profitability is the overall measure of efficiency. Liquidity ratios: Following come under this type:1. Current ratio- It is a relationship between current assets and current liabilities and is computed to assess the short-term financial position of the enterprise. It indicates the enterprises ability to meet its short-term obligations. Ratio of 2:1 is considered satisfactory. Solvency ratios: Some of the solvency ratios are:1. Debt-equity ratio - It is computed to ascertain soundness of the long-term financial position of the firm. It expresses relationship between debt (long-term loans) and equity (shareholders funds. Ratio = Debt/ Equity 2. Total assets to debt ratio - It shows the relationship between total assets and total long-term debts. It measures the safety margin available to the providers of long-term debts. A higher ratio represents higher security to lenders for extending such loans to the business. Ratio= Total assets/ Long-term debts 3. Proprietary ratio - It establishes the relationship between proprietors funds and total assets. It indicates the general position of the enterprise and is useful for the creditors. A high ratio indicates adequate safety for creditors. Ratio = {Proprietors funds or Shareholders funds} / {Total assets (excluding fictitious assets)} Activity or turnover ratios : Some of these ratios are:1. Working capital turnover ratio - It shows the relationship between working capital and sales. It indicates the number of times a unit invested in working capital produces sales. It measures the effective utilization of working capital. Higher the ratio, better it is. But it shouldnt be too high, which would mean inadequacy of working capital. Ratio = Net Sales / Working Capital

19

2. Fixed asset turnover ratio - It establishes the relationship between fixed assets and net sales indicating how efficiently they have been used in achieving the sale. It assesses whether the investment in fixed assets is justified in relation to sales achieved. A high ratio indicates efficient utilization of fixed assets. A low ratio indicates inefficient utilization. Ratio = Net Sales / Net fixed assets 3. Total capital turnover ratio It establishes relationship between net sales and capital employed. Capital employed includes share capital, reserves, profit & loss, long-term loans less fictitious assets. It can be represented as the sum of fixed assets and working capital also. Ratio = Net sales / Capital employed

Profitability ratios : Some of these are:1. Gross profit ratio It establishes relationship of gross profit on sales to net sales of a firm calculated in percentage. It is a reliable guide to the adequacy of selling prices and efficiency of trading activities. It should be adequate to cover administrative & marketing expenses and to provide for fixed charges, dividends and building up of reserves. The higher the ratio, the better it is. Ratio= [Gross profit / Net sales] * 100 2. Return on capital employed or return on investment It establishes the relationship between profit (before interest and tax) and capital employed. It judges the overall performance of the enterprise. It measures how efficiently the sources entrusted to the business are used. It is a fair measure of profitability of any concern with the result that the performance of different industries can be compared. Ratio = [Profit before interest, tax & dividend / Capital employed] * 100

20

1.2

Objectives
To analyze the financial position of State Bank of India and HDFC Bank. To compare the financial investment position of SBI and HDFC Bank. To find out whether private banks take more risk than government banks. To understand the overall financial working of the private and public sector banks.

21

CHAPTER - 2

22

Methodology
Research methodology
Redman and Mory define research as a systemized effort to gain new knowledge. Some people consider research as a movement, a movement from the known to the unknown.

23

Research is an academic activity and as such the term should be used in a technical sense. According to Clifford Woody, research comprises defining and redefining problems, formulating hypothesis or suggested solutions; collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis. It is based on secondary data on the reports of SBI and HDFC Bank. Ratios have been used as tools to analyze their respective positions. SBI and HDFC banks have been taken as model banks to understand the overall working of the private and government banks in India. SBI and HDFC Bank have been taken to represent the working of public and private sector banks as the two are the leading banks in the respective areas.

2.1 Tools used for data collection Secondary data has been collected for this project (annual report of SBI and HDFC Bank that includes balance sheet, profit & loss statement and cash flow statement). 2.2 Tools used for data analysis Ratio analysis is done based on the data and bar graphs are used.

24

CHAPTER 3
Findings and Analysis

Findings and Analysis

25

Liquidity ratio 1. Current ratio = Current Assets

-----------------------------

Current Liabilities SBI Current Ratio = [Cash balances with RBI + Balances with banks & money at call & short notice + other assets] -----------------------------------------------------------------------------------------------------------[Other liabilities and provisions]

= 555461727 + 488576259 + 377332738 -----------------------------------------------1106975742 = 1.28: 1 HDFC Current Ratio = [Cash balances with RBI + Balances with banks & money at call & short notice + other assets] -----------------------------------------------------------------------------------------------------[Other liabilities and provisions] = 135272112 + 39794055 + 63568314 -------------------------------------------227206229 = 1.05: 1 GRAPH 26

1.4

1.2

0.8

0.6

0.4

0.2

0 SBI SBI HDFC HDFC

3.1 A comparison between the current ratio of SBI and HDFC Bank

The current ratio of SBI is better than that of HDFC Bank. A current ratio shows the number of times the current assets are in excess of the current liabilities and thus the ability to meet current liabilities. Generally, a ratio of 2:1 is considered satisfactory. A ratio of 1.28:1 for SBI is therefore better than 1.05:1 of HDFC Bank. But both ratios have a scope of improvement and increase.

Solvency ratios 27

1. Debt- equity ratio = Debt (long-term loans)

----------------------------------------------------

Equity (shareholders funds)

SBI Debt - equity ratio = Borrowings + Deposits

-----------------------------------------------------------------

Share capital + Reserve & Surplus

537136821 + 7420731280
------------------------------------------------------

6348802 + 573128162 = 13.73: 1 HDFC Debt - equity ratio = [Borrowings + Deposit]

---------------------------------------------------------------------------------------------------------------------------------------------

[Share Capital+ Equity share warrants+ Employees stock options (grants) o/s]

26858374 + 1428115800 4253841 + 4009158 + 54870

------------------------------------------------------------

= 174.92: 1 GRAPH

28

200 180 160 140 120 100 80 60 40 20 0 SBI SBI HDFC HDFC

3.2 A comparison between the debt equity ratio of SBI and HDFC Bank

The debt equity ratio of SBI which is 13.73: 1 is much lower than the ratio of HDFC Bank which is 174.92: 1. This ratio judges the long term financial position and sound ness of the long term financial policies of the firm. Lenders of SBI are more protected than the lenders of HDFC Bank. Generally the ideal debt equity ratio is 2: 1.

2. Debt to total funds ratio = Debt (long-term loans)

----------------------------------------------------

29

Total Funds SBI Debt to total funds ratio = Borrowings + Deposits

-------------------------------------------------

Debt + Equity

= 7957868101
------------------------------------------------------------

7957868101 + 579476964

= 0.93

HDFCDebt to total funds ratio = Borrowings + Deposits

-------------------------------------------------

Debt + Equity

= 1454974174
------------------------------------------------------------

1454974174 + 8317869

= 0.99

GRAPH

30

1 0.99 0.98 0.97 0.96 0.95 0.94 0.93 0.92 0.91 0.9 SBI SBI HDFC HDFC

3.3 A comparison between the debt to total funds ratio of SBI and HDFC Bank

The debt to total funds ratio of SBI which is 0.93: 1 is lower than the ratio of HDFC Bank which is 0.99: 1. This ratio judges the long term financial position and sound ness of the long term financial policies of the firm. Lenders of SBI are more protected than the lenders of HDFC Bank. Generally the ideal debt to total funds ratio should be as less as possible.

3. Proprietary ratio =

Proprietors Funds

---------------------------------

31

Total Assets SBI Proprietary Ratio = Capital + Reserve & surplus -------------------------------------Total assets

= 6348802 + 573128162 -------------------------------9644320807 = 0.06:1

HDFC Proprietary Ratio = [Share Capital + Equity share warrants + Employees stock options (grants) o/s] -----------------------------------------------------------------------------------------------------Total assets

= 4253841 + 4009158 + 54870 ----------------------------------1832707732 = 0.004:1

GRAPH

32

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0 SBI SBI HDFC HDFC

3.4 A comparison between the proprietary ratio of SBI and HDFC Bank

Proprietary ratio ascertains the proportion of shareholders funds in the total assets employed in the firm. Here, when a comparison is made, the proprietary ratio of BI which is 0.06: 1 is way higher than the proprietary ratio of HDFC Bank which is 0.004: 1. This shows that lenders and creditors are more satisfied with the SBI in comparison to HDFC Bank.

4. Total assets to debt ratio =

Total Assets Long-term debts 33

--------------------------------

SBI Total assets to debt Ratio = Total assets -------------------------------Borrowings + Deposits

9644320807

-------------------------------537136821 + 7420731280 = 1.21: 1 HDFC Total assets to debt Ratio = Total assets Borrowings + Deposits --------------------------------

1832707732

-------------------------------26858374 + 1428115800 = 1.25: 1

Graph

34

1.26

1.25

1.24

1.23

1.22

1.21

1.2

1.19 SBI SBI HDFC HDFC

3.5 A comparison between the total assets to debt ratio of SBI and HDFC Bank

This ratio measures the safety margin available to the suppliers of long term debts. The total asset to debt ratio of SBI (1.21: 1) is lower than the ratio of HDFC Bank (1.25: 1) which shows that the total asset to debt ratio of HDFC Bank is more ideal than SBI but there is some scope for improvement.

Turnover ratios 1. Working Capital Turnover ratio = Net sales

----------------------------------

35

Working Capital*

* Working capital = Current Assets Current Liabilities

SBI Working Capital Turnover ratio = 764792228 314394982*

----------------------------------

{*Working capital= 1424370724 - 1106975742} = 2.43 times

HDFC Working Capital Turnover ratio = 196228646 11428252*

----------------------------------

{*Working capital= 238634481 - 227206229} = 17.17 times

GRAPH

36

20 18 16 14 12 10 8 6 4 2 0 SBI SBI HDFC HDFC

3.6 A comparison between the working capital turnover ratio of SBI and HDFC Bank

This ratio shows the number of times the working capital has been employed in the process of carrying on the business. The working capital turnover ratio of HDFC Bank (17.17 times) is much more than that of SBI (2.43 times) which shows that the HDFC Bank is properly utilizing its working capital in comparison with the SBI. Higher the ratio, better the efficiency in the utilization of working capital.

2. Fixed asset turnover ratio =

Net sales Fixed Assets

----------------------------------

37

SBI Fixed asset turnover ratio = Net sales Fixed Assets + Investments

---------------------------------------------------

764792228 38378472 + 2759539569

---------------------------------------------------

= 0.27 times

HDFC Fixed asset turnover ratio = Net sales Fixed Assets + Investments

---------------------------------------------------

196228646 17067290 + 588175488

---------------------------------------------------

= 0.32 times

GRAPH

38

0.33

0.32

0.31

0.3

0.29

0.28

0.27

0.26

0.25

0.24 SBI SBI HDFC HDFC

3.7 A comparison between the fixed asset turnover ratio of SBI and HDFC Bank

The fixed asset turnover ratio of HDFC Bank (0.32 times) is higher than that of SBI (0.27 times). This shows that HDFC Bank is efficiently utilizing its fixed asset than SBI. Higher the ratio betters the utilization.

Profitability ratio 1. Net Profit ratio = Net profit

---------------------------------- * 100

39

Net sales

SBI Net Profit ratio = 91212265 764792228 = 11.92 %

---------------------------------- * 100

HDFC Net Profit ratio = 22449392 196228646

---------------------------------- * 100

= 11.44 %

GRAPH

40

12

11.9

11.8

11.7

11.6

11.5

11.4

11.3

11.2 SBI SBI HDFC HDFC

3.8 A comparison between the net profit ratio of SBI and HDFC Bank

The net profit ratio indicates the overall efficiency of the business. Hence, the net profit ratio of SBI (11.92 %) is higher than that of HDFC Bank (11.44 %) which shows that the overall efficiency of SBI is better than that of HDFC Bank. Higher the net profit ratio, better the business.

41

CHAPTER 4
SUGGESTIONS AND RECOMMENDATIONS

Suggestions and Recommendations

42

In relation to the current ratio, HDFC Bank can increase its current assets and decrease its current liabilities to attain the ideal figure which is same applicable for the SBI as well. The debt-equity ratio of HDFC Bank is much higher than the SBI which is not satisfactory. So. The HDFC Banks should decrease its debts by raising money from various other resources such as debentures, preference shares, bonds etc. The debt to total funds ratio of SBI is less than HDFC Bank which means that the HDFC Bank has more long term borrowings in relation to its funds available. So, the HDFC Bank should try to decrease its long term debts. The proprietor ratio of HDFC Bank is much less than that of SBI. Hence to improve its goodwill, the HDFC Bank should satisfy its lenders and creditors so that it can easy borrow if needed. The total assets of HDFC Bank are more than that of SBI. To improve its status, SBI should increase its fixed assets so that in a case of insolvency the debt can be paid by selling them off. Hence the working capital turnover ratio of HDFC Bank is way higher than that of SBI, the SBI should utilize its working capital more efficiently and effectively by improving its liquidity and by improving its sales. This will surely help SBI in gaining more profits. The turnover from the fixed assets of HDFC Bank is little more than SBI. In this case, the SBI should properly make use of its fixed assets by utilizing them in a better way. The net profit of SBI is more than HDFC Bank because of various reasons such as overall workforce, efficiency and its large number of branches etc. to improve its net profit, the HDFC Bank should try various options such as opening new branches, providing interesting schemes to the pubic and others, proper utilization of resources etc.

43

CHAPTER 5
CONCLUSION

CONCLUSION
44

The current ratio of SBI is better than that of HDFC Bank. A current ratio shows the number of times the current assets are in excess of the current liabilities and thus the ability to meet current liabilities. Generally, a ratio of 2:1 is considered satisfactory. A ratio of 1.28:1 for SBI is therefore better than 1.05:1 of HDFC Bank. But both ratios have a scope of improvement and increase. In layman language, SBI have more number of current assets than HDFC Bank which shows the SBI can bear more risk in the equity market and pay back its debts easily because of more number of current assets than current liabilities. The debt equity ratio of SBI which is 13.73 : 1 is much lower than the ratio of HDFC Bank which is 174.92 : 1. This ratio judges the long term financial position and sound ness of the long term financial policies of the firm. Lenders of SBI are more protected than the lenders of HDFC Bank. Generally the ideal debt equity ratio is 2 : 1. In layman language, the long term debts of SBI are more secured than that of HDFC Bank which states that SBI can pay back its debts much more easily than HDFC Bank. The debt to total funds ratio of SBI which is 0.93 : 1 is lower than the ratio of HDFC Bank which is 0.99 : 1. This ratio judges the long term financial position and sound ness of the long term financial policies of the firm. Lenders of SBI are more protected than the lenders of HDFC Bank. Generally the ideal debt to total funds ratio should be as less as possible. In layman language, the long term borrowings of SBI are less in comparison to HDFC Bank in relation with the funds available to them. So, it means that the lenders can easily lend money to SBI in comparison to HDFC Bank.

Proprietary ratio ascertains the proportion of shareholders funds in the total assets employed in the firm. Here, when a comparison is made, the proprietary ratio of SBI which is 0.06 : 1 is

45

way higher than the proprietary ratio of HDFC Bank which is 0.004 : 1. This shows that lenders and creditors are more satisfied with the SBI in comparison to HDFC Bank. In layman language, the credibility of SBI is really good in front of its lenders and creditors and they have more trust on SBI. This also states than SBI can easily borrow more amount of money if required. This ratio measures the safety margin available to the suppliers of long term debts. The total asset to debt ratio of SBI (1.21: 1) is lower than the ratio of HDFC Bank (1.25: 1) which shows that the total asset to debt ratio of HDFC Bank is more ideal than SBI but there is some scope for improvement. In layman language, HDFC Banks has more number of fixed assets than SBI which states that in a situation of insolvency the long term debts can be paid or recovered by selling of the fixed assets easily in the situation of HDFC Bank in comparison to SBI. This ratio shows the number of times the working capital has been employed in the process of carrying on the business. The working capital turnover ratio of HDFC Bank (17.17 times) is much more than that of SBI (2.43 times) which shows that the HDFC Bank is properly utilizing its working capital in comparison with the SBI. Higher the ratio, better the efficiency in the utilization of working capital. In layman language, HDFC Banks is using its working capital much more efficiently than SBI and gaining more profits. The fixed asset turnover ratio of HDFC Bank (0.32 times) is higher than that of SBI (0.27 times). This shows that HDFC Bank is efficiently utilizing its fixed asset than SBI. Higher the ratio betters the utilization. In layman language, HDFC Bank is using its fixed assets more efficiently and effectively than SBI and gaining more profits.

The net profit ratio indicates the overall efficiency of the business. Hence, the net profit ratio of SBI (11.92 %) is higher than that of HDFC Bank (11.44 %) which shows

46

that the overall efficiency of SBI is better than that of HDFC Bank. Higher the net profit ratio, better the business. In layman language, the net profit of SBI is more than HDFC Bank because of its overall workforce, efficiency and its large number of branches etc.

47

CHAPTER 6
LIMITATIONS

LIMITATIONS

48

Although the project has been worked out at its best yet there are some limitations, which cannot be overlooked. Had these limitations been overcome, the findings would be accurate. Some of the limitations are: 1) Time constraint: Time was really a limiting factoring the project. Its really difficult to work out such a large project between two months time.

2) Data constraint: All the data that has been collected for this project, has been taken from secondary sources like websites, magazines, newspapers and book.

49

BIBLIOGRAPHY

BIBLIOGAPHY
50

The following sources have been sought for the preparation of this report. Kothari, C.R. Research methodology, 6th edition, Vikas Publishing House Pvt. Ltd, New Delhi. Khan and Jain, Financial Management, 4th edition, dhanpat rai n sons publications ltd, New Delhi. I. M. Pandey T. S. Grewal

OTHER SOURCES - Other sources include annual report of State bank of India and Housing development financial corporation, articles from news papers like Economic times, Business world, Times of India(business section),magazines like Business India, Business world, Business today. WEBSITES www.moneycontrol.com www.hdfc.com Documentary sources www.sbi.com www.google.com www.knowthis.com www.studyfinance.com

51