A

SUMMER TRAINING REPORT

ON

“ANALYSIS OF FINANCIAL STATEMENTS OF LAST 3

YEARS”

SUBMITTED TO

KURUKSHETRA UNIVERSITY, KURUKSHETRA

IN THE PARTIAL FULFILLMENT THE AWARD OF

MASTER OF BUSINESS ADMINISTRATION

(2009-2011)

CONDUCTED AT:-

HDFC BANK ,BHIWANI

Under the Supervision of: PARVEEN VERMA

Submitted by:-

Roll no: ----------

DECLARATION

DECLARATION
I student of here by state that the Project Report entitled
“” submitted in partial fulfillment for the requirement of degree of
Master of Business Administration. It is the original work done by me
and the information provided in the study is authentic to the best of
my knowledge. This study report has not been submitted to any other
institution or university for the award of any other degree.

I also declare that this project is a result of my sincere efforts at ‘HDFC

BANK’ BHIWANI ,’ carried out during my Summer Training Program.

No part of this project has ever been published or been submitted

earlier.

Batch: 2008 - 2010

Place: BHIWANI

………………………….

ACKNOWLEDGEMENT
“Gratitude is not a thing of expression; it is more a
matter of feeling.”

“There is always a sense of gratitude which one should express for

others for their help and supervision in achieving the goals.” I am
deeply indebted t, (Faculty of MBA) for providing me constant
encouragement and moral support to complete this task. She took
much time out of her busy schedule to provide me with valuable
practical suggestions at various stages of my work. In spite of her
heavy academic and administrative commitments she ungrudgingly
helped me at every stage in my work. I can never adequately thank
her for the long and highly useful discussions. I had with her during the
course of my project work and for his competently steering me in the
course of the project report.

The submission of this project report gives me an opportunity to

convey my heartfelt thank to HDFC BANK,BHIWANI . and all those who
have helped me to reach a stage where I have immense confidence to
launch my carrier.
I take this opportunity to express my gratitude to Mr. AMAN AWAL,
Manager (BRANCH MANAGER), for guiding me throughout the project
and making me learn several new concepts, which would have been
impossible otherwise.

I too express my deep gratitude to each and every one who has been
helpful to me in completing the Project Report successfully.

Although I have made an honest attempt try to give some suggestions

but some loopholes may be there, which I suppose will be ignored.

SANDEEP
SINGH

LIST OF TABLES

Table No. Topic Page No.

4.1 Current assets
4.2 Current liabilities
4.3 Current ratio
4.4 Quick assets
4.5 Quick ratio
4.6 Cash and bank balance/current liabilities
4.7 Absolute liquid ratio
4.8 Stock turnover ratio
4.9 Debtor turnover ratio
4.10 Average collection period
4.11 Working capital turnover ratio
4.12 Schedule of changes in working capital 2005-
06
4.13 Schedule of changes in working capital 2006-
07
4.14 Schedule of changes in working capital 2007-
08
4.15 Average market size
4.16 Average market price
4.17 Market value of a firm
 LIST OF GRAPHS

GRAPH NO. Topic Page No.

4.3 Current ratio
4.5 Quick ratio
4.7 Absolute liquid ratio
4.8 Stock turnover ratio
4.9 Debtor turnover ratio
4.10 Average collection period
4.11 Working capital turnover

CONTENTS
PARTICULARS P.NO.

Chapter 1 INTRODUCTION

Chapter 2 REVIEW OF LITERATURE

Chapter 3 RESEARCH METHODOLOGY

 Type of study
 Organisation of study
 Objective of study
 Scope of the study

 Limitations of the study

Chapter 4 DATA ANALYSIS & INTERPRETATION

Chapter 5 FINDINGS, SUGGESTIONS & CONCLUSION

BIBLIOGRAPHY

CHAPTER-1

1. BANKING INDUSTRY
2. INTRODUCTION TO COMPANY

BANKING INDUSTRY

Banking in India has its origin as early as the Vedic period. It is believed that the
transition from money lending to banking must have occurred even before Manu, the
great Hindu Jurist, who has devoted a section of his work to deposits and advances and
laid down rules relating to rates of interest. During the Mogul period, the indigenous
bankers played a very important role in lending money and financing foreign trade and
commerce. During the days of the East India Company, it was the turn of the agency
houses to carry on the banking business. The General Bank of India was the first Joint
Stock Bank to be established in the year 1786. From 1786 till today, the journey of Indian
Banking System can be segregated into three distinct phases. They are as mentioned
below:

1. Early phase from 1786 to 1969 of Indian Banks

2. Nationalization of Indian Banks and up to 1991 prior to Indian banking
sector Reforms.
3. New phase of Indian Banking System with the advent of Indian Financial
& Banking Sector Reforms after 1991.

PHASE I:-

The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and
called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial
Bank of India was established which started as private shareholders banks, mostly
Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,
and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To
streamline the functioning and activities of commercial banks, the Government of India
came up with The Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of
India was vested with extensive powers for the supervision of banking in India as the
Central Banking Authority.

During those day’s public has lesser confidence in the banks. As an aftermath deposit
mobilizations was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.

PHASE II:-

Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a
large scale specially in rural and semi-urban areas. It formed State Bank of India to act as
the principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th
July, 1969, major process of nationalization was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country
were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in 1980
with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.

The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

• 1949: Enactment of Banking Regulation Act.

• 1955: Nationalization of State Bank of India.
• 1959: Nationalization of SBI subsidiaries.
• 1961: Insurance cover extended to deposits.
• 1969: Nationalization of 14 major banks.
 • 1971: Creation of credit guarantee corporation.
• 1975: Creation of regional rural banks.
• 1980: Nationalization of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sustainability of these institutions.

PHASE III:-
This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was
set up by his name which worked for the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put
to give a satisfactory service to customers. Phone banking and net banking is introduced.
The entire system became more convenient and swift. Time is given more importance
than money.
The financial system of India has shown a great deal of resilience. It is sheltered from any
crisis triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high,
the capital account is not yet fully convertible, and banks and their customers have
limited foreign exchange exposure.

RESERVE BANK OF INDIA

Bank of India RBI is the central banking and monetary authority of India. It performs
central banking functions and controls all the other banks in the country. It was
established on April 1, 1935 in accordance with the provisions of the RBI Act, 1934. The
central office of RBI is at Mumbai. Though originally privately owned, since
nationalization in 1949 it is fully owned by the government of India.

The Preamble of RBI prescribes the objective as:

To regulate the issue of bank notes and keeping of reserves with a view to securing
monetary stability in India and generally to operate the currency and credit system of the
country to its advantage.

The Functions of RBI includes:

Note Issue:

The RBI has sole right to issue bank notes and coins in India.
Banker’s bank:

• Issues banking licenses and permits banks to open branches.

• Issues directions to the banks.
• It also passes orders requiring banks to carry out specific instructions.
• Exercises control over the top management in banks.
• Keeps in certain percentage of the banks deposits as reserve with itself.
• Gives refinance support to the banks through emergency advances and bill
rediscounting. Acts as a clearing house for banks.

Banker to the government:

• Transacts all the financial business of the government.

• Acts as advisor to the government on important economic and financial matters.
• Maintains money remittances, cash balances and the treasury chest of the
government.

BANKS IN INDIA

In India the banks are being segregated in different groups. Each group has their
own benefits and limitations in operating in India. Each has their own dedicated target
market. Few of them only work in rural sector while others in both rural as well as urban.
Many even are only catering in cities. Some are of Indian origin and some are foreign
players.

One more section has been taken note of is the upcoming foreign banks in India. The RBI
has shown certain interest to involve more of foreign banks than the existing one
recently. This step has paved a way for few more foreign banks to start business in India.

MAJOR BANKS IN INDIA

• ABN-AMRO Bank Abu Dhabi Commercial Bank

• American Express Bank Andhra Bank

• Allahabad Bank Bank of Baroda

• Bank of India Bank of Maharastra
• Bank of Punjab Bank of Rajasthan
• Bank of Ceylon BNP Paribas Bank
• Canara Bank Catholic Syrian Bank
• Central Bank of India Centurion Bank
• China Trust Commercial Bank Citi Bank
• City Union Bank Corporation Bank
 • Dena Bank Deutsche Bank
• Development Credit Bank Dhanalakshmi Bank
• Federal Bank HDFC Bank
• HSBC ICICI Bank IDBI Bank
• Indian Overseas Bank IndusInd Bank
• ING Vysya Bank Jammu & Kashmir Bank
• JPMorgan Chase Bank Karnataka Bank
• Karur Vysya Bank Laxmi Vilas Bank
• Oriental Bank of Commerce Punjab & Sind Bank
• Scotia Bank South Indian Bank
• Standard Chartered Bank State Bank of India (SBI)
• State Bank of Bikaner & Jaipur State Bank of Hyderabad
• State Bank of Indore State Bank of Mysore
• State Bank of Saurastra State Bank of Travancore
• Syndicate Bank Taib Bank

INTRODUCTION TO COMPANY

INTRODUCTION TO BANK - HDFC

HDFC Bank (NYSE: HDB), one amongst the firsts of the new generation, tech-savvy
commercial banks of India, was incorporated in August 1994, after the Reserve Bank of
India allowed setting up of Banks in the private sector. The Bank was promoted by the
Housing Development Finance Corporation Limited, a premier housing finance company
(set up in 1977) of India. Net Profit for the year ended March 31, 2006 was Rs. 1,141
crores. Results of the latest quarter ended June 2007, indicate that the bank continues to
grow in a steady manner.

HISTORY

The Housing Development Finance Corporation Limited (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, as part of the RBI's liberalisation of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations
as a Scheduled Commercial Bank in January 1995.

BRANCH NETWORK

Currently HDFC Bank has 758 branches, 1,716 ATMs, in 325 cities in India, and all
branches of the bank are linked on an online real-time basis. The bank offers many
innovative products & services to individuals, corporates, trusts, governments,
partnerships, financial institutions, mutual funds, insurance companies.

It is a path breaker in the Indian banking sector. In 2007 HDFC Bank acquired Centurion
Bank of Punjab taking its total branches to more than 1,000.

The Housing Development Finance Corporation Limited (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, as part of the RBI's liberalisation of
the Indian Banking Industry in 1994. The bank was incorporated in August
1994 in the name of 'HDFC Bank Limited', with its registered office in
Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.

HDFC Bank is headquartered in Mumbai. The Bank at present has network of

over 531 branches spread over 228 cities across India. All branches are linked
on an online real-time basis. Customers in over 120 locations are also serviced
through Telephone Banking. The Bank's expansion plans take into account the
need to have a presence in all major industrial and commercial centres where
its corporate customers are located as well as the need to build a strong retail
customer base for both deposits and loan products. Being a clearing/settlement
bank to various leading stock exchanges, the Bank has branches in the centre
where the NSE/BSE has a strong and active member base.

BUSINESS AREA OF HDFC BANK

HDFC Bank offers a wide range of commercial and transactional banking
services and treasury products to wholesale and retail customers. The bank has
three key business segments:

1) Wholesale Banking services

The Bank's target market ranges from large, blue-chip manufacturing companies in the
Indian corporate 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. Based on its superior
product delivery / service levels and strong customer orientation, the Bank has made
significant inroads into a number of leading Indian corporates including multinationals,
companies from the domestic business houses and prime public sector companies. It
is recognised as a leading provider of cash management and transactional
banking solutions to corporate customers, mutual funds, stock exchange
members and banks.

2)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 the customers through the growing branch
network, as well as through alternative delivery channels like ATMs, Phone
Banking and Net Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC
Bank Plus and the Investment Advisory Services programs have been designed
keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has a
wide array of retail loan products including Auto Loans, Loans against
marketable securities, Personal Loans and Loans for Two-wheelers. It is also a
leading provider of Depository Participant (DP) services for retail customers,
providing customers the facility to hold their investments in electronic form.

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. By
September 30, 2005, the bank had a total card base (debit and credit cards) of
5.2 million cards. The Bank is also one of the leading players in the "merchant
acquiring" business with over 50,000 Point-of-sale (POS) terminals for debit /
credit cards acceptance at merchant establishments.

3)Treasury

Within this business, the bank has three main product areas - Foreign Exchange
and Derivatives, Local Currency Money Market & Debt Securities, and
Equities. With the liberalisation of the financial markets in India, corporates
need more sophisticated risk management information, advice and product
structures. These and fine pricing on various treasury products 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.

The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5

billion). The paid-up capital is Rs.311.9 crore (Rs.3.1 billion).
The HDFC Group holds 22.1% of the bank's equity and about
19.4% of the equity is held by the ADS Depository (in respect
of the bank's American Depository Shares (ADS) Issue). The
shares are listed on the the Stock Exchange, Mumbai and the
National Stock Exchange. The bank's American Depository
Shares are listed on the New York Stock Exchange (NYSE)
under the symbol "HDB".

AWARDS RECEIVED BY HDFC BANK

2008

Business world

Best listed Bank of India.

The Asset Magazine's Triple A Country Awards

Best Domestic Bank.

Asia money Awards

Best Local Cash Management Bank - 2006 in Large and Medium segments.

Euro money Awards

"Best Bank" in India in 2006.

2007

Asia money Awards

Best Domestic Commercial Bank

Asia money Awards

Best Cash Management Bank - India .

The Asian Banker Excellence

Retail Banking Risk Management Award in India for 2004

Hong Kong-based Finance Asia magazine

Best Bank - India

Economic Times Awards

"Company of the Year" Award for Corporate Excellence 2004-05.

Chart of board of directors:-

FACILITIES PROVIDED BY THE BANK

HDFC bank provides following facilities to its customer:-

1. The time norms for various banking transactions.

2. Interest payments
 3. The process followed for redressed of grievance
4. Secrecy of customers
5. State deposit lockers
6. Account opening and operations of deposit account
7. Addition and deletion of the names of joint a/c holders
8. Pension accounts

VISION STATEMENT

To be a dominant player in the Indian mutual fund space recognized for its high levels of
ethical and professional conduct and a commitment towards enhancing investor interests

OBJECTIVE:

To achieve capital appreciation by investing primarily in equity oriented securities.

HDFC OFFER:-

We believe, that, by giving the investor long-term benefits, we have to

constantly review the markets for new trends, to identify new growth sectors
and share this knowledge with our investors in the form of product offerings.
We have come up with various products across asset and risk categories to
enable investors to invest in line with their investment objectives and risk
taking capacity. Besides, we also offer Portfolio Management Service.

ORGANIZATION STRUCTURE
 INTRODUCTION TO PROJECT

INTRODUCTION TO PROJECT

Financial Statements

Financial statements refer to such statements which contains financial information about
an enterprise. They report the profitability and the financial position of the business at the
end of accounting period. The term financial statement includes at least two statements
which the accountant prepares at the end of an accounting period. The two statements
are:-

1. The Balance Sheet

2. Profit And Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors
the financial position on a particular date in terms of the structure of assets, liabilities and
owners equity, and so on and the Profit And Loss account show s the results of operations
during a certain period of time in terms of the revenues obtained and the cost incurred
during the year. Thus the financial statement provides a summarized view of financial
positions and operation of a firm.

Meaning of Financial Analysis:

Financial statements present a mass of complex data in absolute monetary terms and
reveal little about the liquidity, solvency and profitability of the business. In financial
analysis, the data given in financial statements is classified into simple groups and a
comparison of various groups is made one another to pin-point the strong points and
weaknesses of a business. For instance, if all items relating to current assets are placed in
one group while all items relating to current liabilities are placed in another group, the
comparison between the two groups will provide useful information. Actually the figures
given in financial statements do not speak anything themselves. The analysis of these
figures helps the interested reader by giving tongue to these mute heaps of figures.

In the words of Finney and Miller:

"Financial analysis consists in separating facts according to some definite plan, arranging
them in groups according to certain circumstances and then presenting them in a
convenient and easily read and understandable form".

VERTICAL FORM OF BALANCE SHEET

BALANCE SHEET OF ……………….. CO. LTD.

as at ……………………………

Schedule Figures as at the end of Figures as at the end of

No. the Current years Rs. the previous year Rs.
I. SOURCES OF FUNDS:
1. Shareholder's Funds

(a) Capital

(b) Reserves an Surplus

2. Loan Funds:

(a) Secured Loans

(b) Unsecured Loans

Total

II APPLICATION OF
. FUNDS:

1. Fixed Assets:

(a) Gross Block

(b) Less Depreciation

2. Net Block:

3. Current Assets, Loans and

 Advances

(a) Inventories (Stock)

(b) Sundry Debtors

(c) Cash and Bank

Balances

(d) Other Current Assets

(e) Loans and Advances

Less: Current Liabilities and
Provisions:

(a) Liabilities

(b) Provisions

Net Current Assets

4. (a) Miscellaneous
Expenditure to the

extent not written off

(b) Profit & Loss Account

Dr. Balance

(Loss)
Total

IMPORTANCE OF FINANCIAL ANALYSIS

The significance of the financial statement analysis may be studied from the point of
view various parties as follows:

1. Significance for Management: Management of a firm is always interested in the

solvency, profitability and the capital structure of the firm. They want to make
 sure that the business must be in a solvent position to pay the debts as and when
they fall due.
2. Significance for Investors: Investors and shareholders of the business are
interested in the longevity of the business enterprise and therefore, they want to
know the earning capacity of the business and its prospects for future growth and
prosperity.
3. Significance for Creditors: There are two types of creditors, (i) Short-term
creditors, and (ii) Long-term creditors.

i. Short-term creditors want to know the liquidity of the business, i.e., to know
whether the company will have sufficient current assets and cash to pay their
debts or not.

ii. Long-term creditors want to know two things namely: (1) Whether the company
will be able to pay the interest consistently, and (2) Whether the company will be
able to pay their debts when they fall due.

4. Significance for Government: Government can judge on the basis of analysis of

financial statements, which industry is progressing on the desired lines and which
industry needs the financial help.

5. Significance for other Financial Institutions: All the financial institutions which
provide finance to the industries such as Banks, Insurance Companies, Unit Trust
etc.
6. Significance for Stock Exchange Authorities: They analyse the financial
statements of a company to determine its price earning ratio and earning per share
(E.P.S.). With the help of such analysis, the market price of a company's share is
determined.

Significance for Researchers: Analysis of financial statements of a company is of much

importance to a researcher who is conducting research in respect of the profitability,
efficiency, financial soundness and future growth potential of that company.

JUSTIFICATION
 JUSTIFICATION OF STUDY

Financial Statements are prepared primarily for decision-making. They plat a dominant
role in setting the framework of managerial decisions. But the information in the financial
statement is not an end in itself as no meaningful can be drawn from these statements
alone.

The information provided in the financial statement is of immense use in making

decisions through analysis and interpretation of financial statements. The financial
analysis is the process of identifying the financial strength and weaknesses of the firm by
properly establishing relationship between the items of the balance sheet and P/L a/c.

The purpose of financial analysis is to diagnose the information contained in financial

statements so as to judge the profitability and financial soundness of the firm. The
analysis and interpretation of financial statements is essential to bring out the mystery
behind the figures in financial statements.

Financial statement analysis is an attempt to determine the significance and meaning of

financial statement data so that forecast may be made of the future earning, ability to pay
interest and debt maturities and profitability of a sound dividend policy.

CHAPTER-2

REVIEW OF LITERATURE

REVIEW OF LITERATURE

LITERATURE SURVEY IS a process of developing an insight into both

conceptual and research based study available on the area and the
topic chosen. The objective of such review is to understand the
importance of the topic and find out research gaps, if any in the
chosen area. Thus the review of literature in the present study does
consist of both published and unpublished research based and
conceptual based studies available in India as well as in abroad.
Many of the research works have been conducted, over the period by
applying the Multiple Discriminant Analysis to predict the corporate
failure.

W.H. Beaver (1966) was the first researcher to the prediction of

bankruptcy using financial data. His analysis was based on ratios and
identified ratios, which have discriminating power to predict the
bankruptcy of the companies using failed and non-failed 79
manufacturing companies in each of two matched pair groups.

Altman I. Edward (1968) was the Classical Multiple Discriminant

Analysis technique with five financial ratios is used for predicting the
risk of failure and developed a model to find a bankruptcy prediction
model based on sample composed of 66 manufacturing companies
with 33 companies in each of two matched-pair groups (33 publicly-
traded manufacturing bankrupt companies between 1946 and
1965and matched them to 33 firms on random basis for a stratified
sample), which is built out of the five weighted financial ratios.

Jonah Aiyabei (2002)discussed the theoretical aspect of financial

distressed firm based on a cyclical concept and examined the financial
performance of small business firms based in Kenya using Z score
model which uses different financial ratios to measure of corporate
financial health.

(Source:-“the management accountant, June 2007.”)

Banerjee (1979) in his study established the relationship between

liquid ratio, debtors’ turnover ratio, creditors’ turnover ratio, and the
movement of overdraft. The study found out that when the liquid ratio
was below the norm, debtors’ turnover ratio and creditors’ turnover
ratio were high while the movement of overdraft showed declining
trend. Banerjee demonstrated how turnover ratios would affect the
financial performance of a given company. The study concluded that
the management of working capital was not satisfactory.

Oppedahl and Richard (1990) essay expressed capital budgeting

projects consume much of the time of a firm’s management group to
the detriment of the quality of the working capital decisions. It
emphasized that the business executives must become more
cognizant of the working capital decisions that their firms face every
day. The stress in this essay has been laid on two most important
components of working capital called account receivables and
marketable securities. The essay revealed that the managers have to
be very cautious in account receivables and marketable securities
decisions.

Lal (1981) in his study on Modi Steels Ltd. as a case study, with an
objective of analyzing inventory management. Having found that the
company did not take into account the price variable in inventory
management whereas Mr. Lal developed a model which included the
price variable. The study strongly recommended concrete policies,
which should take care of both internal and external factors into
account, for efficient management of working capital.

Smith and Begemann 1997 - comprised of share goals of profitability

and liquidity. The problem was because the maximization of the firm's
returns could seriously threaten its liquidity, and the pursuit of liquidity
had a tendency to dilute the returns. The problem under investigation
was to establish whether the more recently developed alternative
working capital concepts showed improved association with return on
investment to that of traditional working capital ratios or not. Results
indicated that there were no significant differences amongst the years
with respect to the independent variables. The study conducted by De
Chazal Du Mee (1998) revealed that 60% enterprises suffer from cash
flow problems. The pioneer work of Shin and Soenen (1998) and the
more recent study of Deloof (2003) have found a strong significant
relationship between the measures of WCM and corporate profitability.
Their findings suggest that managers can increase profitability by
reducing the number of day’s accounts receivable and inventories. This
is particularly important for small growing firms who need to finance
increasing amounts of debtors. Narasimhan and Murty (2001) stress on
the need for many industries to improve their return on capital
employed (ROCE) by focusing on some critical areas such as cost
containment, reducing investment in working capital and improving
working capital efficiency.

S.K. Khathik & P.K.Singh (2003) made a study on working capital

management in Indian Farmers Fertilizer Co-operative Limited. For this,
they employed several statistical tools on different ratios, to examine
the effective management of working capital. It was concluded that the
overall positions of the working capital of IFFCO are satisfactory but
there is a need of improvement in inventory. Ghosh and Maji, 2003 - In
this paper made an attempt to examine the efficiency of working
capital management of the Indian cement companies during 1992 –
1993 to 2001 – 2002. For measuring the efficiency of working capital
management, performance, utilization and overall efficiency indices
were calculated instead of using some common working capital
management ratios. Findings of the study indicated that the Indian
Cement Industry as a whole did not perform remarkably well during
this period.

CHAPTER-3

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY

The procedure adopted for conducting the research requires a lot of attention as it has
direct bearing on accuracy, reliability and adequacy of results obtained. It is due to this
reason that research methodology, which we used at the time of conducting the research,
needs to be elaborated upon.

Research methodology is a way to systematically study to solve the problems. It may be

understood has a science of studying how research is done scientifically. In it we study
the various steps that all generally adopted by a researcher in studying his research
problem along with logic behind them.The scope of research methodology is wider than
that of research method. Thus when we talk of research methodology we not only talk of
research methods but also consider that logic behind the method we use in the context of
our research study and explain we are using a particular method.

Meaning of research

Research is a systematic and continuous method of defining a problem, collecting the

facts and analyzing them, reaching conclusion forming generalization. Research is an
original contribution to the existing stock of knowledge making for its advancement
search of knowledge through objective and systematic method of finding solution to the
problem of research. Every project requires genuine research. Success of any project and
getting genuine results from that depends upon the research method used by the research.
In fact, Research is an art of scientific investigation.

Definition:

“A careful investigation or inquiry especially through search for new facts in any
branch of knowledge”.

The fraction that provides base to the research are:

 o Desire to get a research degree along with its consequential benefits.
o Desire to face challenge in solving the unsolved problem.
o Desire to get intellectual joy of doing some creative work.
o Desire to be of service of the society.
o Desire to get respectability.

Organization of Study – The whole study was organized in five chapters. The
description regarding these Chapters is given below.

o CHAPTER 1 - Chapter 1 is Introduction Chapter. This chapter has further

two parts. First part deals with Statement of the problem which deals with
the main problem of study and introduction of the problem. Second
chapter deals with Introduction of company. In this section the whole
introduction the company in which the study takes place is given.
o CHAPTER 2 - Chapter 2 is Review of literature. This chapter deals with
the review of related literature. It highlights various dimensions of the
problem that have already been studied in the past by different research
scholars and their conclusions and recommendations have also been
mentioned here.
o CHAPTER 3 - Chapter 3 is Research Methodology. This chapter has
further sections as Objective of study, organization of study, Scope of
study, Research design, Data collection technique, Data analyses
technique, Need of the study, and Limitation of study.
o CHAPTER 4 - Chapter 4 is Analysis of data. This chapter contains all the
analyses part of the study. The data collected is analyzed in this chapter.
The data is arranged in table form and then interpreted with the help of
graphs. Interpretation is given with the graphs.
o CHAPTER 5 - Chapter 5 is Findings and suggestions. This chapter has
further three sections. First findings second suggestions and third
conclusion.

OBJECTIVE OF THE STUDY

financial analysis has a great importance to every customer, because it shows the
financial position of the business. People find the information regarding their investments
.it is safe after being insured So that the customers will satisfy. So amongst the various
important objectives of the project, one was to evaluate the “financial statements”.

The other main objectives of the research done for the company were:

• To analyse the financial statements of HDFC Bank

• To determine changes in financial conditions of business.
• To spot out strengths and weakness of company.
 • To give suggestions for the improvement of existing system so that it could be
implemented effectively with minimum cost and time.
• To spot out opportunities of HDFC Bank by calculating trend values of net
profits.

SCOPE OF STUDY

Every insurance company try to increase its customer base only and they only want to
get more and more money as premium but in India there are some companies which not
only want to increase its customers base but also provides security to the investment to
their customers so that the customers can feel secure by investing their hard earned
money into the insurance and can enjoy the double benefits of insurance as well as capital
security in their investment

The study has been done to understand the financial position so that the we can get
a clear view of how the insurance company performed, does they want only money of the
customers? Or they also provide any real security to the money invested by them.

In the study I wanted to check all the assets and fund of the company, were using
for the profit purpose or in idle condition.

RESEARCH DESIGN

At the outset may be noted that there are several ways of studying and tackling a
problem. The formidable problem that follows the task of defining the research problem
is the preparation of the design of research project popularly known as research design.

Decision regarding what, where, when, how much, by what means concerning an
enquiry or a research study constitute a research design. A research design is an
arrangement of conditions for collection and analysis of data in a manner that aims to
combine relevance to research purpose with economy in procedure. More explicitly the
designing decision happened to be in respect of following

• What is study about

• Why is study being made
• Where will the study be carried out
• What type of data are required
• What will be the sample design
• How will the data be collected
• How will the data be analysed.

UNIVERSE : Entire Banking Industry (including public & private banking)

SURVEY POPULATION: Private Sector bank HDFC.

For any study there must be data for analysis purpose. Without data there is no

DATA COLLECTION

For any study there must be data for analysis purpose. Without data there is no means
of study. Data collection plays an important role in any study. It can be collected from
various sources. Specifically we can divide these sources in 2 parts such as:

• Primary Data
• Secondary Data

1. Primary Data :-

It is first hand data, which is collected by researcher itself. Primary data is collected
by various approaches so as to give a precise, accurate, realistic and relevant data . The
main tool in gathering primary data was investigation and observation. It was achieved by
a direct approach and personal observation from the officials of the company.

• Personal Investigation
• Information from correspondents
• Through Schedule

2. Secondary Data :-

It is the data, which is already collected by someone else. Researcher has to analyse
the data and interpret the results. It has always been important for the completion of any
report. It provides reliable, suitable, adequate and specific knowledge. I took data
comprise annual reports and post records company has provided me annual reports from
2003-04 to 2007-08, by help of which, I prepared my report

The valuable cooperation extended by staff members contributed a lot to fulfill the
requirement in the collection of data in order to complete the project. Various statistical
tools are applied depending on the research problem. In this study ratio, analysis has been
used for analyzing and interpreting the results

• Published Sources such as Journals, Government Reports, Newspapers and

Magazines etc.
• Unpublished Sources such as Company Internal reports prepare by them given to
their analyst & trainees for investigation.

STATISTICAL TOOLS
Introduction: -

An educated citizen needs an understanding of basic statistical tool to function in

a world that is becoming increasingly dependant on quantitative information. Statistics
means numerical description to most people. In fact the term statistics is generally used to
mean numerical facts and figures such as agriculture production during a year, rate of
inflation and so on. However as a subject of study, statistics refers to the body of
principles and procedures developed for the collection, classification, summarization and
interpretation of numerical data and for the use of such data.

MEANING:-

Broadly speaking, the term statistics has been generally used in two senses:-

• Plural Sense
• Singular Sense

Plural sense refers to the numerical data. Singular Sense refers to a Science in which we
deals with the techniques of collecting, classifying, presenting, analyzing and interpreting
the data, the concept in its singular sense, refers to Statistical Method.

PURPOSE:-

Without the assistance of Statistical Method, an organization would find it

impossible to make sense of the huge data. The purpose of statistics is to:-

• Manipulate
• Summarize
• Investigate

The data so that useful decision making information results could be found out. In
fact, every business manager needs a sound background of statistics. Statistics is a set of
Decision Making techniques, which aids businessman in drawing inferences from the
available data.

STATISTICAL TOOLS: -

Statistical tools are the basic measures, which help in defining the relation between
different items, present, past and future trend of the future trend of the particular business
etc. A wide variety of statistical tools are available and any businessman depending upon
the nature of his trade can use any of them. Various statistical tools are: -

• Correlation
• Time Series
 LIMITATIONS OF STUDY

The limitation of the study includes the weak points that are not covered during the study.
A person can’t analyze all aspects of the study. Sometimes he forgot some factors or
sometimes he is not able to study the impact of these factors because of time constraints
or limited recourses.

• All the people from whom a collect the data are not cooperative.
• Proper financial data and financial supervision did not provided to me due to
shortage of time to the trainer
• Proper supervision was also not provided to me.
• The office area was very congested.
• Proper equipment facility was also not there.
• The branch manager was on the leave during my training period due to some
family problems.
• Ratio analysis was very taught because of running regular in losses.

CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

COMPARATIVE BALANCE SHEET:

HDFC Bank
 2009 2008 Inc or % in Inc or
Dec Dec
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS:
SHARE CAPITAL 33034 24437 8597 35%
SHARE APPLICATION MONEY
RESERVES AND SURPLUS 5203 5203 0 0
CREDIT/[DEBIT] FAIR VALUE/change a/c
Sub-Total 38237 29640 8597 29 %
BORROWINGS
POLICYHOLDERS- FUNDS:
CREDIT/[DEBIT] FAIR VALUE / CHANGE 521 1504 -983 65%
A/C
POLICY LIABILITIES 40230 28147 12083 43%
INSURANCE RESERVES 363 -4848 5211 107%
PROVISION FOR LINKED LIABILITIES 126454 75651 50803 67%
Sub-Total 167568 100454 67114 67%
FUNDS FOR FUTURE APPROPRIATIONS 1302 156 1146 735%
TOTAL 207107 130250 76857 59%

APPLICATION OF FUNDS
INVESTMENTS
Shareholders' 8538 6569 1969 30%
Policyholders' 40268 29752 10516 35%
ASSETS HELD TO COVER LINKED LIABILITIES 127747 75798 51949 69%
LOANS 231 72 159 221%
FIXED ASSETS 2427 1836 591 32%
CURRENT ASSETS:-
Cash and Bank Balances 12486 5709 6777 119%
Advances and Other Assets 4441 3432 1009 29%
Sub-Total (A) 16927 9141 7786 85%
CURRENT LIABILITIES 15517 8189 7328 89%
PROVISIONS 709 267 442 166%
Sub-Total (B) 16226 8456 7770 92%
NET CURRENT ASSETS C = (A-B) 701 685 16 2%
MISCELLANEOUS EXPENDITURE (to the extent not
written off or adjusted)
DEBIT BALANCE IN PROFIT & LOSS ACCOUNT 26680 15541 11139 72%
(Shareholder's Account)
Debit balance in Policyholder's Account
TOTAL 207107 130250 76857 59%

COMPARATIVE PROFIT & LOSS ACCOUNT:

HDFC Bank

Particulars Amount
2008- 2007- Inc or % in Inc
09 08 Dec or Dec
Amounts transferred from the Policyholders 143
Account (Technical Account)
Income From Investments:
(a) Interest, Dividends & Rent - Gross 963 656 307 47 %
(b) Profit on sale/redemption of investments 160 24 136 567 %
(c) (Loss on sale/redemption of investments) -407 -39 -368 944 %
Other Income
TOTAL (A) 859 641 218 34 %
Expenses other than those directly related to the 23 4 19 475 %
insurance business
Bad debts written off
Provisions (Other than taxation)
(a) For diminution in the value of investments
(Net)
(b) Provision for doubtful debts
(c) Others
Contribution to Policyholders Account 11799 4997 6802 136 %
TOTAL (B) 11822 5001 6821 136 %
Profit/ (Loss) before tax -10963 -4359 -6604 152 %
Prior Period Items
Provision for Taxation -83 -82 -1 1%
Proft / (Loss) after tax -11046 -4441 -6605 149%
APPROPRIATIONS
(a) Balance at the beginning of the year -15634 -11099 -4535 41 %
(b) Interim dividends paid during the year
(c) Proposed final dividend
(d) Dividend distribution on tax
(e) Transfer to reserves/ other accounts
Proft carried to the Balance Sheet -26680 -15540 (11140) 72 %

Note : Figures in brackets represent negative values

Interpretation Of Financial Statement

Fund for the future appropriation has increased by 735% it shows that the company have
a lot of fund for the future investments but it depend on the top management that they are
using this in right way or not.

Provisions and liabilities are increasing by 166% and 89% that is why the total net assets
are decreasing. In whole year it increased by only 2%.

Cash balance is increasing by 119% .it shows that have enough cash for the short term
purpose.

Loss on sale is more then profit on sale so the loss is still increasing

Indirect expenses are increasing very high by 475%. That is very harmful for the
business.

Comparative profit & loss account shows that, there is no any provision for the taxation
purpose

RATIO ANALYSIS
MEANING:

Absolute figures expressed in financial statements by themselves are meaningfulness.

These figures often do not convey much meaning unless expressed in relation to other
figures.

Thus, it can be say that the relationship between two figures, expressed in
arithmetical terms is called a ‘ratio’.

ACCORDING TO R.N.ANTHONY:

“A Ratio is simply one number expressed in terms of another. It is found by dividing

one number into the other.”

TYPES OF RATIOS

• Proportion or Pure Ratio or simple ratio

• Rate or So many Times
• Percentage
• Fraction

OBJECTS AND ADVANTAGES OR USES OF RATIO ANALYSIS

• Helpful in analysis of financial statements

• Simplification of accounting data
• Helpful in comparative study
• Helpful in locating the weak spots of the business
• Helpful in forecasting
• Estimate about the trend of the business
• Fixation of ideal standards
• Effective control
• Study of Financial soundness

LIMITATION OF RATIO ANALYSIS

• False accounting data gives false ratios

• Comparisons not possible of different firms adopt different accounting policies
• Ratio analysis becomes less effective due to price level changes
• Ratios may be misleading in the absence of absolute data
• Limited use of a single Ratio
• Window –Dressing
• Lack of proper standards
• Ratios alone are not adequate for proper conclusions
 • Effect of personal ability and bias of the analyst

classification of RATIOS:

In view of the financial management or according to the tests satisfied, various ratios
have been classified as below:

(a) Liquidity Ratios: These are the ratios which measures the short-term
solvency or financial position of a firm. These ratios are calculated to comment
upon the short-term paying capacity of a concern or the firm’s ability to meet its
current obligations.

(b) Long-term Solvency and Leverage Ratios : Long-term solvency ratios

convey a firm’s ability to meet the interest costs and repayments schedules of its
long-term obligations e.g. Debit Equity Ratio and Interest Coverage Ratio.
Leverage Ratios.

(c) Activity Ratios: Activity ratios are calculated to measure the efficiency with
which the resources of a firm have been employed. These ratios are also called
turnover ratios because they indicate the speed with which assets are being turned
over into sales. e.g. debtors turnover ratio.

(d) Profitability Ratios: These ratios measure the results of business operations
or overall performance and effective of the firm. e.g. gross profit ratio, operating
ratio or capital employed. Generally, two types of profitability ratios are
calculated (i) in relation to sales, and (ii) in relation to investment.

RATIOS

Current Ratio = Current Assets /Current Liabilities

Year Ratio
Mar-05 1.161
Mar-06 1.357
Mar-07 1.082
Mar-08 1.043

Interpretation
 The ideal ratio is 2 and in the current year it is 1.043, which is much lower than its
ideal ratio. That means that HDFC Bank isn’t able to meet its current liability on time.

Fund To Total Capitalization Ratio = funded debt*100/total capital

Year Ratio
Mar-05 0.376
Mar-06 0.612
Mar-07 0.771
Mar-08 0.809

Interpretation

it shows that how much of the debt exists in the total capital. The ideal value is 67% ,but
the firm have 80.9% which is not best for the firm.

Solvency ratio = total outsiders liabilities/total assets

Year Ratio
Mar-05 0.496
Mar-06 0.719
Mar-07 0.834
Mar-08 0.885

Interpretation

The ratio shows that how much of the firm have to pay the out siders.

The ideal ratio is55% but here the ratio is88.5% that shows the firm is more fund for the
payment of out siders but they are idle now in that .ratio

Fixed assets to propriety fund ratio =fixed assets/share holders fund

 Year Ratio
Mar-05 0.113
Mar-06 0.088
Mar-07 0.062
Mar-08 0.063

Interpretation

This shows that how much of the fixed assets are purchased from the shareholder funds

Reserve of equity share capital ratio = Total reserves / equity share capital *100

Year Ratio
Mar-05 34.551
Mar-06 24.625
Mar-07 21.291
Mar-08 15.75

INTERPRETATION

This ratio represents the combination between total reserves of the company with its total
equity funds Higher the ratio the better it for the long term prospective of the company
because it enables to meet the contingencies
Fixed assets to funded debt ratio = fixed assets / funded debt

Year Ratio
Mar-05 0.188
Mar-06 0.047
Mar-07 0.018
Mar-08 0.014

Interpretation.

This ratio signifies that the how much return shareholder get on the capital employed by
them. Current years ratio is -.28 which shows that the co. providing the negative return to
their share holders

Capital liabilities to propriety ratio =capital liabilities/ share holders fund

Year Ratio
Mar-05 0.198
Mar-06 0.205
Mar-07 0.288
Mar-08 0.424

Interpretation

this ratio shows that how much capital liab any firm have over the share holders.

Inthis ratio .424% that means capital liab is 42% of the total share holder capital which is
high from the ideal of the 20-25%

Share holder fund ratio = Net profit after tax / shareholder’s fund

Ratio
Year
 Mar-05 -0.456
Mar-06 -0.071
Mar-07 -0.147
Mar-08 -0.287

Interpretation.

This ratio signifies that the how much return shareholder get on the capital employed by
them. Current years ratio is -.28 which shows that the co. providing the negative return to
their share holders

Cash ratio = Cash at bank + short term security / current liability

Year Ratio
Mar-05 0.755
Mar-06 1.02
Mar-07 0.697
Mar-08 0.802

Interpretation

This ratio shows the liquidity of the firm and how much co. is able to
pay it current liability through its current cash and short-term security
In the co. cash ratio is.8 which shows that there is more liability than
its cash

Propriety ratio = Shareholder’s fund / total assets

Year Ratio
Mar-05 0.625
Mar-06 0.348
Mar-07 0.228
Mar-08 0.185
Interpretation

It is the ratio between shareholder; fund and total assets. It signifies

that how much it is low then that is in favor of the company as low
proprietary ratio means company have more assets then capital.

Fixed assets to net worth ratio = Net fixed assets / shareholder’s fund

Years fixed assets to net worth ratio

Mar-05 0.11
Mar-06 0.08
Mar-07 0.06
Mar-08 0.06

CORRELATION

Some important definitions of correlation are given below:

1. Correlation analysis deals with the association between two or ore variables-
Simpson and Kafka.

2. If two or ore quantities vary in sympathy, so that movement in one tend to be

accompanied by corresponding movements in the other, then they are said to be
correlated-Conner.

3. Correlation analysis attempts to determine the degree of relationship between

variables.

Types
Correlation is classified in several different ways. Three of the most important ways are:-

o Positive and Negative Correlation: When two variable X and Y move in

same direction is Positive Correlation and when both variables move in
opposite direction that is Negative Correlation.

o Simple, Partial and Multiple Correlations: When we study the

relationship between two variables only that is Simple Correlation. When
three or more variables are taken but relationship between any two of the
variable is studied, assuming other variables as constant that is Partial
Correlation and when we study the relationship among three or more
variables that is Multiple Correlation.
o Linear and Curvy-Linear Correlation: when the ratio of change of two
variables X and Y remains constant throughout, then they are said to be
Linear Correlated and when the ratio of change between the two variables
is not constant but changing, then correlation is said to be Curvy-Linear.

DEGREE OF CORRELATION:-

Sr. No. Degree of correlation Positive Negative

1 Perfect correlation +1 -1
2 High Degree of correlation Between +.75 to+1 Between -.75 to-1
3 Moderate Degree of Between +.25 to+.75 Between -.25 to-.75
Correlation
4 Low Degree of Correlation Between 0 to+.25 Between 0 to-.25
5 Absence of Correlation 0 0

WHY TO USE CORRELATION?

Different types of statistical tool are available but for using specifically
correlation is of having a major reason i.e. only this and this statically tool was giving the
satisfactory result. I have to show the relationship between, SHARE HOLDERS FUND
AND SHARE CAPITAL, which can be purely defined with the help of this statistical
tool only.

Further more with the help of Time Series Analysis we can define the future
trend of the business by using Trend Analysis but my main motive is to find out the
relationship between, SHARE HOLDERS FUND AND SHARE CAPITAL, of the
company that’s why I use this Particular type of tool only.
Why to use Karl Pearson’s Coefficient of Correlation?

• Quantitative Method.
• Best method of working out Correlation Coefficient.
• Knowledge of Degree of Relationship.

Here we are using the Short Cut Method if Carl Pearson Coefficient of Correlation on
the basis of Assumed mean we will find out the relationship between the variables-Sales
and Profit .

year shareholder's investments share capital

2005 5718 15062
2006 5882 21133
2007 6569 24437
2008 8538 33034

Trend analysis of current assets

A=∑y / total frequency

A= 38033 / 4 = 9508.25

B = ∑xy / ∑X2

B= 38350 / 106 = 6391.67

Expected premium = a + by

YEAR CALCULATION EXPECTED RESULT

2005 9508.25 + 6391.67* -1 = 3116.58

2006 9508.25 + 6391.67* 0 = 9508.25

2007 9508.25 + 6391.67* 1 = 15899.92

2008 9508.25 + 6391.67* 2 = 22291.58

Year Actual Trend

2005 4645 3116.9
2006 7320 9508.25
2007 9141 15899.92
2008 16927 22291.58
2008 28753.26

FINANCIAL SWOT ANALYSIS

STRENGTHS

1. HDFC Bank old life insurance has a very good image in mind of public.
2. They have lot of cash balance and fund for the short-term purpose.
3. It has also enjoyed the brand name of the HDFC Bank, which increase its
credibility in public.
4. They also provide a very good growth rate, which are around 30% averages for
last four years.
5. HDFC Bank life has increases its policy premium from 351 crore to 521 crore.
6. HDFC Bank have very good growth in its income from investment. Income from
investment increases by more then 30% annually.
7. It is one of the company which provide the capital security to its investors

WEAKNESS

1. HDFC Bank earns a huge loses from many years

2. HDFC Bank have only 1.23%market share which is very low in comparison with
its rivals like ICICI, HDFC etc
3. Company have raised its capital from 150 crore to 330 crore in just short span of 3
years which is a bad sign for the company which is already in loses
4. HDFC Bank does not have proper capital structure as company does not have any
borrowing in its accounts
5. Company also not uses its funds properly as company earns a huge loses
6. HDFC Bank life have very low current assets and it is not proper to meet the
working capital requirements
7. Target only higher income group whereas other companies are trying to catch
middle-class people

OPPORTUNITIES
 1. HDFC Bank is one of the company which provide the capital security to
investments of the customers this provide a opportunity to the company.
2. Huge market is literally untapped. Out of estimated 320 million insurable markets
only 20% of the population is insured.
3. In a conservative society of India where people are most inclined towards risks
free investment such as Bank FD’s and saving rather than equity and high risk
investment insurance offers the best of both worlds – The security with high
returns.
4. In the pension field where people want good life after their retirement.
5. Indian people are more emotional towards their that’s why children plans are
selling like hot cakes.
6. Health insurance and pension schemes as estimated market potential of
approximately $15 dollars
7. HDFC Bank has very less market share of only 1.3% it a opportunity for company
to increase its market share
8. HDFC Bank life has good opportunity in field of its fund management as HDFC
Bank have OLD MUTUAL PLC name with them which have 413 billion dollar
under their management

THREATS

1. The Indian and global insurance players are entering in to the Indian market the
will increase the competition in insurance market
2. Increase interest rate scenario provides a threat to insurance company
3. HDFC Bank have earned losses for last 4 years, its premium income increases but
ins loses also increase it is a alarming situation for the company
4. HDFC Bank LIFE does not have a good capital structure as in its capital structure
there is no debt which is not a good sign for a company
5. For the insurance sector Govt. set the authority that is IRDA which is undertaken
to track record of all the companies and change the rules day by day more rigid,
which is very difficult for the companies.

CHAPTER-5

FINDINGS AND SUGGESTIONS

 FINDINGS

• HDFC Bank is a very good company but this company earns huge losses of Re
1,104,679,000.
• They provide the best capital security providing plans but its sales force is not
able to get advantages from those plans.
• They have earned a huge loss due to loss in sale of assets or the redemption of
assets. The loss earn due to redemption is around Re. 40,773,000 which increases
its overall loss.
• HDFC Bank does not have any type of borrowings which is very critical for the
company as company earns a huge loss.
• That is one of the few insurance companies in India which provide guaranteed
maturity value to their customers.
• That only company which provides around 30% average return to their policy
holders on their ULIP plans from last four years.
• HDFC Bank have increased their assets hold to cover their linked liability from
758 crore in 2007 to 1277 crore in 2008.that means the company shifted their
revenue to cover the unit linked insurance liability to provide security to their
customers.

SUGGESTIONS

After looking the findings of the study I want to recommend to the managers of
HDFC Bank have to close look towards the management of funds to improve the returns.
In fund management, asset allocation is very important because returns and risk factor is
depending on it. So, I recommend that

• The premium amount should be reduced from the limit of minimum 15000 per
annum so that the small investors can also take the advantage of capital security.
 • Company should invest more in non life insurance sector as company does not
have very good goodwill in general insurance.
• Company have very low reserve and surplus with them which is not a good
indicator for the insurance company so company should try to increase its reserve
and surpluses from 52 crores.
• More promotional activities like advertising (both print and broadcasting
advertising) should be there.
• More emphasis should be given to making new sales managers as well as new
advisors.
• Company should also open its branches all over the India as HDFC Bank has only
227 branches in operation.
• More training and development programmes should be provided to their
employees.
• Give assurance to people that we are regulated by IRDA and backup by RBI so
there is not any risk of fraud to them

CONCLUSION

By my whole study I can conclude that HDFC Bank is not the best company in
Indian market but HDFC Bank life provides some very good insurance policies to their
policyholders. HDFC Bank is among the very few companies, which provide the
Guaranteed Maturity Value and the Dynamic Floor Fund.

HDFC Bank has a good reputation in public’s mind but the main problem
which the company faces is their loses which increases even after the increase of their
profits. My study is not only related to the financial analysis but also to review the
company’s position.

According to study I have done in HDFC Bank the company have the potential
to earn huge profits but due to some reasons specially lack of Advertising And Marketing
as they spend low on their advertising campaign and they have adopted the push strategy
regarding to marketing
 BIBLIOGRAPHY

BIBLIOGRAPHY

Books:

1. Kothari C.R., Quantitative Techniques, Vikas publishing house Pvt. Ltd. New
Delhi, 2005, p-10-20.
2. Gupta S.P., Business Statistics, 31st edition, Sultan chand & sons, 2005, p-378-
418.
3. Maheshwari,S.N, Advanced Accounting ,Sultan Chand & Sons Publication, New
Delhi,2004, P.No. (b40-b48)
4. Baruch, Lev., Financial Statement Analysis-A new approach, Englewood cliffs,
N.J., Prentice Hall of India, 2007,p-11
5. Ciaran Walsh, Key Management Ratios, Macmillan India Ltd., NEW DELHI ,
1999 P.No.(113-122)

WEBSITES:-

o www.HDFC Banklif.com/home/products
o www.HDFC Bank.com/coms2/product-compint-0000950756-page.html
o www.irda.org/insurance/benefits-HDFC bank,-ind
o www.ibef.org/industry/banking-trend/in
o www.ask.com-/meaning-banking/history//-