ICICI BANK WORKING CAPITAL MANAGEMENT

EXECUTIVE SUMMARY
With the economy surging, things are getting better in the Banking Industry. There are plenty of changes occurs daily. According to Reserve bank of Indias banking review of 2004 2005 there was a notable pick up in demand from industry for investments and a surge in exports. Evidently, the industrys focus now is on scaling up both domestically and in markets abroad, widening the product and services port folio, and better using technology to make banking more accessible and efficient. Most of researchers conclusion is, Whether or not the sectors actually opens up in 2009, banks should use that as an opportunity to get their growth strategies in place. Not Just through organic growth, but growth through mergers and acquisition. What India need is not a large number of small banks, but a small number of large banks. As the RBIs deputy Governor, V.Leeladhar, said at Indian Banking Associations Jan 31 Seminar on Indian Banks and the Global change there is growing realization that the ability to cope with possible downside risks would depend among others on the soundness of the financial system and the strength of Individual participation. India is still cagey about foreign investments in banks. Though a dramatic changes sweeping through the industry for some years now in the rise of Indias Public sector bank and private sector still it should fuel its grow to open up eyes towards open market. In this scenario, While we look at the sensex breach the 10,000 level for the first time it was yet another sign the India as a market for global liquidity had arrived. When, We start co-relating the Gross Domestic product (GDP) growth of emerging markets are supposed to reflect the health of the economy where India emerges as a key player, India is arguably the best placed amongst the entire emerging market lot. Form the Investors point of view earning growth, price-earning multiplies and of course the performance of the economy matters. In the second part, is a project on How does the ICICI working capital management requirement fulfil? The paper begins by analyzing the current scenario in the industry characterized by problems with distribution, low investor awareness and concentration of corporate investors. In the next section, a comparison of the Banking Industry with global standards reveals that the industry still compares unfavourably with developed countries in terms of

penetration, investor awareness and diversity of products and the extent of use of risk management techniques. Further comparison reveals that the attitude of regulator towards investor protection and the governance of banking industry are at par with global standards. The paper then analysis the future expectations from the banking industry in terms of increased investor awareness, product diversity and improvement in penetration and distribution. Strategy adopted by ICICI bank for future prospectus are Revisiting the old themes in a new year, Return of the static era, Capital account convertibility and currency crisis, G-sec: Rates heading north, ICICI Bank operates in a highly automated environment in terms of information technology and communication systems. The entire bank's branches have connectivity which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). Here the study is made of the financial analysis, the marketing management how the marketing is done in order to achieve the organizational goals and objectives, the study is done on the recruitment procedure followed by the bank and how they maintain them. This report describes about the types of services provided by the bank and their benefits on the part of the bank which type of additional benefits they provide to their costumers in order to maintain them and attract them to invest more and more with the bank.

CONTENT

ABSTRACT.....................................................................................................ii SIGNATORY PAGE......................................................................................iii TOPIC APPROVAL LETTER.......................................................................iv ACKNOWLEDGMENT.................................................................................v APPROVED THESIS SYNOPSIS...............................................................vii

INTRODUCTION .................................................................................................1 PROFILE..............................................................................................................25 LITERATURE REVIEW.....................................................................................41 RESEARCH METHODOLOGY.........................................................................57 FINDING AND ANALYSIS...............................................................................59 CONCLUSION....................................................................................................71 RECOMMENDATION.......................................................................................73 BIBLIOGRAPHY................................................................................................75 ANNEXURE QUESTIONNAIRE...................................................................76

INTRODUCTION
HISTORY OF INDIAN BANKING A bank is a financial institution that provides banking and other financial services. By the term bank is generally understood an institution that holds a Banking Licenses. Banking licenses are granted by financial supervision authorities and provide rights to conduct the most fundamental banking services such as accepting deposits and making loans. There are also financial institutions that provide certain banking services without meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the financial services industry. The word bank is derived from the Italian banca, which is derived from German and means bench. The terms bankrupt and "broke" are similarly derived from banca rotta, which refers to an out of business bank, having its bench physically broken. Moneylenders in Northern Italy originally did business in open areas, or big open rooms, with each lender working from his own bench or table. Typically, a bank generates profits from transaction fees on financial services or the interest spread on resources it holds in trust for clients while paying them interest on the asset. Development of banking industry in India followed below stated steps. 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.
Banking in India has an early origin where 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, was the turn of the agency houses to carry on the banking business. The General Bank of India was first Joint Stock Bank to be established in the year 1786. The others which followed were the Bank Hindustan and the Bengal Bank.
In the first half of the 19th century the East India Company established three

banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Madras in 1843. These three banks also known as Presidency banks were

amalgamated in 1920 and a new bank, the Imperial Bank of India was established in 1921. With the passing of the State Bank of India Act in 1955 the undertaking of the Imperial Bank of India was taken by the newly constituted State Bank of India. The Reserve Bank of India which is the Central Bank was created in 1935 by passing Reserve Bank of India Act, 1934 which was followed up with the Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI) with wide ranging powers for licensing, supervision and control of banks. Considering the proliferation of weak banks, RBI compulsorily merged many of them with stronger banks in 1969.
The three decades after nationalization saw a phenomenal expansion in the

geographical coverage and financial spread of the banking system in the country. As certain rigidities and weaknesses were found to have developed in the system, during the late eighties the Government of India felt that these had to be addressed to enable the financial system to play its role in ushering in a more efficient and competitive economy. Accordingly, a high-level committee was set up on 14 August 1991 to examine all aspects relating to the structure, organization, functions and procedures of the financial system. Based on the recommendations of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of the banking system was introduced in 1992-93. The objective of the reform measures was to ensure that the balance sheets of banks reflected their actual financial health. One of the important measures related to income recognition, asset classification and provisioning by banks, on the basis of objective criteria was laid down by the Reserve Bank. The introduction of capital adequacy norms in line with international standards has been another important measure of the reforms process. 1. Comprises balance of expired loans, compensation and other bonds such as National Rural Development Bonds and Capital Investment Bonds. Annuity certificates are excluded.

2. These represent mainly non- negotiable non- interest bearing securities issued to International Financial Institutions like International Monetary Fund, International Bank for Reconstruction and Development and Asian Development Bank. 3. At book value. 4. Comprises accruals under Small Savings Scheme, Provident Funds, Special Deposits of Non- Government
In the post-nationalization era, no new private sector banks were allowed to be

set up. However, in 1993, in recognition of the need to introduce greater competition which could lead to higher productivity and efficiency of the banking system, new private sector banks were allowed to be set up in the Indian banking system. These new banks had to satisfy among others, the following minimum requirements: (i) (ii) (iii) (iv) It should be registered as a public limited company; The minimum paid-up capital should be Rs 100 crore; The shares should be listed on the stock exchange; The headquarters of the bank should be preferably located in a centre which does not have the headquarters of any other bank; and (v) The bank will be subject to prudential norms in respect of banking operations, accounting and other policies as laid down by the RBI. It will have to achieve capital adequacy of eight per cent from the very beginning. A high level Committee, under the Chairmanship of Shri M. Narasimham, was constituted by the Government of India in December 1997 to review the record of implementation of financial system reforms recommended by the CFS in 1991 and chart the reforms necessary in the years ahead to make the banking system stronger and better equipped to compete effectively in international economic environment. The Committee has submitted its report to the Government in April 1998. Some of the recommendations of the

Committee, on prudential accounting norms, particularly in the areas of Capital Adequacy Ratio, Classification of Government guaranteed advances, provisioning requirements on standard advances and more disclosures in the Balance Sheets of banks have been accepted and implemented. The other recommendations are under consideration. The banking industry in India is in a midst of transformation, thanks to the economic liberalization of the country, which has changed business environment in the country. During the pre-liberalization period, the industry was merely focusing on deposit mobilization and branch expansion. But with liberalization, it found many of its advances under the non-performing assets (NPA) list. More importantly, the sector has become very competitive with the entry of many foreign and private sector banks. The face of banking is changing rapidly. There is no doubt that banking sector reforms have improved the profitability, productivity and efficiency of banks, but in the days ahead banks will have to prepare themselves to face new challenges. WORKING CAPITAL - OVERALL VIEW Working Capital management is the management of assets that are current in nature. Current assets, by accounting definition are the assets normally converted in to cash in a period of one year. Hence working capital management can be considered as the management of cash, market securities receivable, inventories and current liabilities. In fact, the management of current assets is similar to that of fixed assets the sense that is both in cases the firm analyses their effect on its profitability and risk factors, hence they differ on three major aspects: 1. In managing fixed assets, time is an important factor discounting and

compounding aspects of time play an important role in capital budgeting and a minor part in the management of current assets. 2. The large holdings of current assets, especially cash, may strengthen the firms

liquidity position, but is bound to reduce profitability of the firm as ideal car yield nothing.

3.

The level of fixed assets as well as current assets depends upon the expected

sales, but it is only current assets that add fluctuation in the short run to a business. To understand working capital better we should have basic knowledge about the various aspects of working capital. To start with, there are two concepts of working capital: Gross Working Capital Net working Capital Gross Working Capital: Gross working capital, which is also simply known as working capital, refers to the firms investment in current assets: Another aspect of gross working capital points out the need of arranging funds to finance the current assets. The gross working capital concept focuses attention on two aspects of current assets management, firstly optimum investment in current assets and secondly in financing the current assets. These two aspects will help in remaining away from the two danger points of excessive or inadequate investment in current assets. Whenever a need of working capital funds arises due to increase in level of business activity or for any other reason the arrangement should be made quickly, and similarly if some surpluses are available, they should not be allowed to lie ideal but should be put to some effective use. Net Working Capital: The term net working capital refers to the difference between the current assets and current liabilities. Net working capital can be positive as well as negative. Positive working capital refers to the situation where current assets exceed current liabilities and negative working capital refers to the situation where current liabilities exceed current assets. The net working capital helps in comparing the liquidity of the same firm over time. For purposes of the working capital management, therefore Working Capital can be said to measure the liquidity of the firm. In other words, the goal of working capital management is to manage the current assets and liabilities in such a way that a acceptable level of net working capital is maintained. Importance of working capital management: Management of working capital is very much important for the success of the business. It has been emphasized that a business should maintain sound working capital position

and also that there should not be an excessive level of investment in the working capital components. As pointed out by Ralph Kennedy and Stewart MC Muller, the inadequacy or mis-management of working capital is one of a few leading causes of business failure. Current assets, in fact, account for a very large portion of the total investment of the firm. Determinants of Working Capital: There is no specific method to determine working capital requirement for a business. There are a number of factors affecting the working capital requirement. These factors have different importance in different businesses and at different times. So a thorough analysis of all these factors should be made before trying to estimate the amount of working capital needed. Some of the different factors are mentioned here below:1. Nature of business: Nature of business is an important factor in determining the working capital requirements. There are some businesses which require a very nominal amount to be invested in fixed assets but a large chunk of the total investment is in the form of working capital. There businesses, for example, are of the trading and financing type. There are businesses which require large investment in fixed assets and normal investment in the form of working capital. 2. Size of business: It is another important factor in determining the working capital requirements of a business. Size is usually measured in terms of scale of operating cycle. The amount of working capital needed is directly proportional to the scale of operating cycle i.e. the larger the scale of operating cycle the large will be the amount working capital and vice versa. 3. Business Fluctuations: Most business experience cyclical and seasonal fluctuations in demand for their goods and services. These fluctuations affect the business with respect to working capital because during the time of boom, due to an increase in business activity the amount of working capital requirement increases and the reverse is true in the case of recession. Financial arrangement for seasonal working capital requirements are to be made in advance.

4. Production Policy: As stated above, every business has to cope with different types of fluctuations. Hence it is but obvious that production policy has to be planned well in advance with respect to fluctuation. No two companies can have similar production policy in all respects because it depends upon the circumstances of an individual company. 5. Firms Credit Policy: The credit policy of a firm affects working capital by influencing the level of book debts. The credit term is fairly constant in an industry but individuals also have their role in framing their credit policy. A liberal credit policy will lead to more amount being committed to working capital requirements whereas a stern credit policy may decrease the amount of working capital requirement appreciably but the repercussions of the two are not simple. Hence a firm should always frame a rational credit policy based on the credit worthiness of the customer. 6. Availability of Credit: The terms on which a company is able to avail credit from its suppliers of goods and devices credit/also affects the working capital requirement. If a company in a position to get credit on liberal terms and in a short span of time then it will be in a position to work with less amount of working capital. Hence the amount of working capital needed will depend upon the terms a firm is granted credit by its creditors. 7. Growth and Expansion activities: The working capital needs of a firm increases as it grows in term of sale or fixed assets. There is no precise way to determine the relation between the amount of sales and working capital requirement but one thing is sure that an increase in sales never precedes the increase in working capital but it is always the other way round. So in case of growth or expansion the aspect of working capital needs to be planned in advance. 8. Price Level Changes: Generally increase in price level makes the commodities dearer. Hence with increase in price level the working capital requirements also increases. The companies which are in a position to alter the price of these commodities in accordance with the price level changes will face fewer problems as compared to others. The changes in price level may not affect all the firms in same way. The reactions of all firms with regards to price level changes will be different from one other.

Every running business needs working capital. Even a business which is fully equipped with all types of fixed assets required is bound to collapse without (i) (ii) (iii) (iv) Adequate supply of raw materials for processing; Cash to pay for wages, power and other costs; Creating a stock of finished goods to feed the market demand regularly; and, The ability to grant credit to its customers.

All these require working capital. Working capital is thus like the lifeblood of a business. The business will not be able to carry on day-to-day activities without the availability of adequate working capital.

Cash

Creditors

Debtors

Raw material

Finished

Working Working Capital Expenses Cycle

Work in

CONCEPTS OF WORKING CAPITAL There are two concepts of working capital 1. Gross Working Capital 2. Net Working Capital Gross Working Capital Gross Working Capital refers to the firms investment in current assets. Current assets are the assets which can be converted into cash within an accounting year and include cash, short-term securities, debtors, bills receivable and stock. Net Working Capital Net Working Capital refers to the difference between current assets and current liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment within an accounting year and include creditors, bills payable, and outstanding expenses. OPERATING AND CASH CONVERSION CYCLE Operating cycle is the time duration in which a firm is able to convert its resources into cash. The operating cycle of a manufacturing ICICI BANK. involves three phases:

Acquisition of resources such as raw material, labour, power and fuel etc.

Manufacture of the product which includes conversion of raw material into work-in-progress into finished goods.

Sale of the product either for cash or on credit. Credit sales create account receivable for collection.

Calculation of Gross Operating Cycle Gross Operating Cycle = Inventory conversion period (in days) + Debtors conversion period (in days) Where,

Inventory conversion period = Raw material conversion period (RMCP) + Work-inprogress conversion period (WIPCP) + Finished goods conversion period (FGCP). Calculation of Net Operating Cycle (NOC) or Cash Conversion Cycle (CCC) Net operating cycle = Gross operating cycle Creditors deferral period NOC = GOC CDP RECEIVABLE MANAGEMENT A firm grants trade credit to protect its sales from the competitors and to attract the potential customers to buy its products at favourable terms. Trade credit creates accounts receivable or trade debtors that the firm is expected to collect in near future.

Credit Policy The term credit policy is used to refer to the combination of three decision variables:

Credit standards are criteria to decide the types of customers to whom goods could be sold on credit.

Credit terms specify duration of credit and terms of payment by customers.

Collection efforts determine the actual collection period. The lower the collection period the lower the investment in accounts receivable and vice versa.

Why do companies grant Credit? Companies in practice feel the necessity of granting credit for several reasons:

Competition: Generally the higher the degree of competition, the more the credit granted by a firm.

ICICI BANK. s bargaining power: If ICICI Bank. has a higher bargaining power vis--vis its buyers, it may grant no or less credit. The ICICI BANK. will have a strong bargaining power if it has a strong product, monopoly power, brand image, large size or strong financial position.

Buyers requirements: In a number of business sectors buyers/dealers are not able to operate without extended credit. This is particularly so in the case of industrial products.

Buyers status: Large buyers demand easy credit terms because of bulk purchases and higher bargaining power. Some companies follow a policy of not giving much credit to small retailers since it is quite difficult to collect dues from them.

Relationship with dealers: Companies sometimes extend credit to dealers to build long-term relationships with them or to reward them for their loyalty.

Marketing tool: Credit is used as a marketing tool, particularly when a new product is launched or when ICICI Bank. wants to push its weak product.

Industry practice: Small companies have been found guided by industry practice or norm more than the large companies. Sometimes companies continue giving credit because of past practice rather than industry practice.

Transit delays: This is a forced reason for extended credit in the case of a number of companies in India. Most companies have evolved system to minimize the impact of such delays. Some of them take the help of banks to control cash flows in such situation.

Credit-granting Decision Once a firm has assessed the creditworthiness of a customer, is has to decide whether or not credit should be granted. The firm should use the NPV rule to make the decision. If the NPV is positive, credit should be granted. If the firm chooses not to grant any credit, the firm avoids the possibility of any loss but loses the opportunity of increasing its profitability. On the other hand, if grants credit, then it will benefit if the customer pays. There is some probability that the customer will default, and then the firm may lose its investment. The expected net payoff of the firm is the difference between the present value of net benefit and present value of the expected loss.

Credit Granting Decision

No Credit Payment

Grant Credit Payment Not Cost PV of Lost Investme

Received Benefit PV of Future Net Cash Flow

No pay-off Net Payoff PV of Benefit

Factoring Factoring is a popular mechanism of managing, financing and collecting receivables in developed countries like USA and UK and now has extended to a number of other countries in the recent past, including India. Collection of receivables poses a problem, particularly for small-scale enterprises. Banks have the policy of financing receivables. However, this support is available for a limited period and the seller of goods and services has to bear the risk of default by debtors.

Factoring differs from a bank loan in three main ways. First, the emphasis is on the value of the receivables, not the firms credit worthiness. Secondly, factoring is not a loan it is the purchase of an asset i.e. the receivable. Finally, a bank loan involves two parties whereas factoring involves three parties. Factoring Services While purchase of receivables is fundamental to the functioning of factoring, the factor provides the following three basic services Sales ledger administration and credit management. Credit collection and protection against default and bad-debt losses. Financial accommodation against the assigned book debts.

Costs and Benefits of Factoring There are two types of costs involved: The factoring commission or service fee The interest on advance granted by the factor to the firm.

Factoring has the following benefits: Factoring provides specialized service in credit management, and thus, helps the firms management to concentrate on manufacturing and marketing. Factoring helps the firm to save cost of credit administration due to the scale of economies and specialization. Ideally, factoring should benefit allclient, customers and factor. This may not happen because of the lack of clarity as regards the roles of the client and the factor, inept handling of credit and other functions by the client and the factor, overestimation of benefits or underestimation of costs etc. the client should understand that the factor can function efficiently with his full cooperation.

WORKING CAPITAL FINANCE Two most significant short-term sources of finance for working capital are: Trade credit and, Bank finance

Trade Credit Trade credit refers to the credit that a customer gets from suppliers of goods in the normal course of business. In practice, the buying firms do not have to pay cash immediately for the purchases made. This deferral of payments is a short term financing called trade credit. In India, it contributes to about one-third of the short-term financing. Trade credit is mostly an informal arrangement, and is granted on an open account basis. The buyer does not formally acknowledge it as a debt; he does not sign any legal instrument. Open account trade credit appears as sundry creditors on the buyers balance sheet. Advantages of Trade Credit

Easy availability: Unlike other sources of finance, trade credit is relatively easy to obtain. The easy availability is particularly important to small firms which generally face difficulty in raising funds from the capital markets.

Flexibility: Trade credit grows with the growth in firms sales. The expansion in the firms sales causes its purchases of goods and services to increase which is automatically financed by trade credit.

Informality: Trade credit is an informal, spontaneous source of finance. It does not require any negotiations and formal agreement.

Cost of Trade Credit The supplier extending trade credit incurs costs in the form of the opportunity cost of funds invested in accounts receivable and the cost of any cash discount taken by the buyer. Most of the time he passes on all or part of these costs to the buyer implicitly in the form of higher purchase price of goods and services supplied. The user of trade

credit, therefore, should be aware of the costs of trade credit to make use of it intelligently. Accrued Expenses and Deferred Income Accrued expenses represent a liability that a firm has to pay for the services which it has already received. Thus they represent a spontaneous, interest-free sources of financing. The most important component of accruals are wages and salaries, taxes and interest. Accrued wages and salaries represent obligations payable by the firm to its employees. The firm incurs a liability the moment employees have rendered services. They are, however, paid afterwards, usually at some fixed interval like one month. Accrued taxes and interest constitute another source of financing. Corporate taxes are paid after the firm has earned profits. These taxes are paid quarterly during the year in which profits are earned. This is a deferred payment of the firms obligation and thus, is a source of finance. Deferred income represents funds received by the firm for goods and services which it has agreed to supply in future. These receipts increase the firms liquidity in the form of cash; therefore, they constitute an important source of financing. Bank finance for working capital Banks are the main institutional source of working capital finance in India. After trade credit, bank credit is the most important source of financing working capital requirements. Forms of bank finance A firm can draw funds from its bank within the maximum credit limit sanctioned. It can draw funds in the following forms: Overdraft:

Under the overdraft facility, the borrower is allowed to withdraw funds in excess of the balance in his current account up to a certain specified limit during a stipulated period.

It is a very flexible arrangement from the borrowers point of view since he can withdraw and repay funds whenever he desires within the overall stipulations. Cash credit:

The cash credit facility is similar to the overdraft arrangement. It is the most popular method of bank finance for working capital in India. Under the cash credit facility, a borrower is allowed to withdraw funds from the bank upto the sanctioned credit limit. He is not required to borrow the entire sanctioned credit once, rather, he can draw periodically to the extent of his requirements and repay by depositing surplus funds in his cash credit account. Cash credit limits are sanctioned against the security of current assets. Cash credit is a most flexible arrangement from the borrowers point of view.

Purchasing or discounting of bills:

Under the purchase or discounting of bills, a borrower can obtain credit from a bank against its bills. The bank purchases or discounts the borrowers bills. Before purchasing or discounting the bills, the bank satisfies itself as to the creditworthiness of the drawer. When a bill is discounted, the borrower is paid the discounted amount of the bill. The bank collects the full amount on maturity.

Letter of credit:

Suppliers, particularly the foreign suppliers, insist that the buyer should ensure that his bank will make the payment if he fails to honour its obligation. This is ensured through a letter of credit(L/C) arrangement. A bank opens an L/C in favour of a customer to facilitate his purchase of goods. If the customer does not pay to the supplier within the credit period, the bank makes the payment under the L/C arrangement. This arrangement passes the risk of the supplier to the bank. Bank charges the customer for opening the L/C.

Working capital loan:

A borrower may sometimes require ad hoc or temporary accommodation in excess of sanctioned credit limit to meet unforeseen contingencies. Banks provide such accommodation through a demand loan account or a separate non-operable cash credit account. The borrower is required to pay a higher rate of interest above the normal rate of interest on such additional credit.

Commercial Paper Commercial paper is an important money market instrument in advanced countries like USA to raise short-term funds. In India, the Reserve Bank of India (RBI) introduced the commercial paper scheme in the Indian money market in 1989. Commercial paper is a form of unsecured promissory note issued by firms to raise short-term funds. The commercial paper market in the USA is a blue-chip market where financially sound and highest rated companies are able to issue commercial papers. The buyers of commercial papers include banks, insurance companies, unit trusts and firms with surplus funds to invest for a short period with minimum of risk. Given this investment objective of the investors in the commercial paper market, there would exist demand for commercial papers of highly creditworthy companies.

COMPANY PROFILE
ICICI Bank is Indias second-largest bank. It has a network of about 614 branches and extension counters and over 2,200 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank set up its international banking group in fiscal 2002 to cater to the cross border needs of clients and leverage on its domestic banking strengths to offer products internationally. ICICI Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Centre and representative offices in the United States, United Arab Emirates, China, South Africa and Bangladesh. Our UK Subsidiary has established a branch in Belgium. ICICI Bank is the most valuable bank in India in terms of market capitalization. ICICI Banks equity shares are listed in India on the Bombay stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts ((ADRs) are listed on the New York Stock Exchange (NYSE). ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees. At June 5, ICICI Bank, with free float market capitalization* of about Rs. 480.00 billion ranked third amongst all the companies listed on the Indian Stock exchanges. ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICIs shareholding in ICICI Bank was reduced to 46% through a public offering of shares in Indian fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Banks acquisition of Bank of Madura Limited in all-stock, amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial

services group offering a wide variety of products and services, both directly and through a number of subsidiaries an affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution, from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICII and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI groups universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entittys access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICIs strong corporate relationships built up over five decades, entry into new business segments, hither market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI hand its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI groups financing and banking operations, both wholesale and retail, have been integrated in a single entity. *Free float holding excludes all promoter holdings, strategic investments and cross holdings among public sector entities. ICICI Bank disseminates information on its operation and initiatives on a regular basis. The ICICI Bank website serves as a key investor awareness facility, a lowing stake holders to access information on ICICI Bank at their convenience. ICICI Banks dedicated investor relations personal play a proactive role in disseminating information to both analysts and investors and respond to specific queries.

LITRATUR REVIEW
Working Capital Management is the process of planning and controlling the level and mix of current assets of the firm as well as financing these assets. Specifically, Working Capital Management requires financial managers to decide what quantities of cash, other liquid assets, accounts receivables and inventories the firm will hold at any point of time. Working capital is the capital you require for the working i.e. functioning of your business in the short run. Gross working capital refers to the firms investment in the current assets and includes cash, short term securities, debtors, bills receivables and inventories. It is necessary to concentrate on the fact that the investment in the current assets should be neither excessive nor inadequate. WC requirement of a firm keeps changing with the change in the business activity and hence the firm must be in a position to strike a balance between them. The financial manager should know where to source the funds from, in case the need arise and where to invest in case of excess funds. The dangers of excessive working capital are as follows: 1. It results in unnecessary accumulation of inventories. Thus the chances of inventory mishandling, waste, theft and losses increase 2. It is an indication of defective credit policy and slack collection period. Consequently higher incidences of bad debts occur which adversely affects the profits. 3. It makes the management complacent which degenerates into managerial inefficiency 4. Tendencies of accumulating inventories to make speculative profits grow. This may tend to make the dividend policy liberal and difficult to copes with in future when the firm is unable to make speculative profits. The dangers of inadequate working capital are as follows:

1. It stagnates growth .It becomes difficult for the firms to undertake profitable projects for non-availability of the WC funds. 2. It becomes difficult to implement operating plans and achieve the firms profit targets 3. Operating inefficiencies creep in when it becomes difficult even to meet day-to-day commitments. 4. Fixed assets are not efficiently utilized. Thus the rate of return on investment slumps. 5. It renders the firm unable to avail attractive credit opportunities etc. 6. The firm loses its reputation when it is not in position to honor its shortterm obligations. As a result the firm faces a tight credit terms. Net working capital refers to the difference between the current assets and the current liabilities. Current liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year and include creditors, bills payable, bank overdraft and outstanding expenses. When current assets exceed current liabilities it is called Positive WC and when current liabilities exceed current assets it is called Negative WC. The Net WC being the difference between the current assets and current liabilities is a qualitative concept. It indicates: The liquidity position of the firm Suggests the extent to which the WC needs may be financed by permanent sources of funds It is a normal practice to maintain a current ratio of 2:1. Also, the quality of current assets is to be considered while determining the current ratio. On the other hand a weak liquidity position poses a threat to the solvency of the ICICI BANK. and implies that it is unsafe and unsound. The Net WC concept also covers the question of judicious mix of long term and short-term funds for financing the current assets.

Permanent and variable working capital: The minimum level of current assets required is referred to as permanent working capital and the extra working capital needed to adapt to changing production and sales activity is called temporary working capital. NEED AND IMPORTANCE OF WORKING CAPITAL MANAGEMENT The importance of working capital management stems from the following reasons: 1. Investment in current assets represents a substantial portion of the total investment. 2. Investments in current asset and the level of current liabilities have to be geared quickly to change in sales, which helps to expand volume of business.
3. Gives ICICI Bank. the ability to meet its current liabilities

4. Take advantage of financial opportunities as they arise. A firm needs WC because the production, sales and cash flows are not instantaneous. The firm needs cash to purchase raw materials and pay expenses, as there may not be perfect matching between cash inflows and outflows. Cash may also be held up to meet future exigencies. The stocks of raw materials are kept in order to ensure smooth production and to protect against the risk of non-availability of raw materials. Also stock of finished goods has to be maintained to meet the demand of customers on continuous basis and sudden demand of some customers. Businessmen today try to keep minimum possible stock as it leads to blockage of capital. Goods are sold on credit for competitive reasons. Thus, an adequate amount of funds has to be invested in current assets for a smooth and uninterrupted production and sales process. Because of the circulating nature of current assets it is sometimes called circulating capital. All firms do not have the same WC needs .The following are the factors that affect the WC needs:
1. Nature and size of business: The WC requirement of a firm is closely

related to the nature of the business. We can say that trading and financial firms have very less investment in fixed assets but require a large sum of money to be invested in WC. On the other hand Retail stores, for example,

have to carry large stock of variety of goods little investment in the fixed assets. Also a firm with a large scale of operations will obviously require more WC assets and fixed assets for certain industries: than the

smaller firm. The following table shows the relative proportion of investment in current

Each component of working capital namely inventory, receivables and payables has two dimensions time and money. When it comes to managing working capital - Time Is Money. Therefore, if cash is tight, consider other ways of financing capital investment loans, equity, leasing etc. Similarly, if you pay dividends or increase drawings, these are cash outflows remove liquidity from the business. If you .......

Then ...... You release cash from the cycle Your receivables soak up cash You increase your cash resources

Collect receivables (debtors) faster Collect receivables (debtors) slower Get better credit from suppliers

Shift inventory (stocks) faster Move inventory (stocks) slower

You free up cash You consume more cash

Operating Cycle Of Non Manufacturing Firms / Operating Cycle Of Service And Financial Firms
DEBTORS

CASH CASH STOCK OF FINISHED GOODS DEBTORS

Operating cycle of non-manufacturing firm like the wholesaler and retail includes conversion of cash into stock of finished goods, stock of finished goods into debtors and debtors into cash. Also the operating cycle of financial and service firms involves conversion of cash into debtors and debtors into cash. Thus we can say that the time that elapses between the purchase of raw material and collection of cash for sales is called operating cycle whereas time length between the payment for raw material purchases and the collection of cash for sales is referred to as cash cycle. The operating cycle is the sum of the inventory period and the accounts receivables period, whereas the cash cycle is equal to the operating cycle less the accounts payable period.

STOCK ARRIVES

CASH RECD.

ORDER PLACED

INV. PERIOD

A/CS REC. PERIOD

A/CS Pay. Period

FIRM REC. INVOICE CASH CYCLE

CASH Pd. FOR MATERIALS

OPERATING CYCLE

RESEARCH METHODOLOGY
The objective of working capital management is to maintain the optimum balance of each of the working capital components. This includes making sure that funds are held as cash in bank deposits for as long as and in the largest amounts possible, thereby maximizing the interest earned. However, such cash may more appropriately be invested in other assets or in reducing other liabilities. My objectives of analyzing working capital management in ICICI BANK are as follows: To study the method which ICICI BANK is using to ascertain its working capital requirement? To learn about the sources from which ICICI BANK is procuring funds to fulfill its working capital requirements. To study where the procured funds have been used by ICICI BANK. To study whether the company is running effectively with as little money tied up in current accounts as possible. To analyze whether the method being used for ascertainment of working capital requirement is efficient or not. To have an appreciation of the financial environment within which business operates. f. Methodology

METHODOLOGY The study is based on personal decision, interview schedules, documentary observation; the data has been collected from the executives of the organization and through the published sources. RESEARCH The research work is restricted only to the ICICI BANK SYSTEM. The study is based on the outcomes of personal interviews and documentary observation. But the extreme care has been taken to involve the constructive suggestion from the executives. The

success of research basically depends upon the method, which is adopted to solve the research problem i.e. a) To collect desired information and data in a systematic manner. b) Appropriate selection of method is necessary. The first & foremost step in any research procedure is:STEP 1: Problem Formulation It is a very important step which has to be understood properly and clearly on which the study is based because it tells the scope of the study and it should not go beyond it nor should execute some irrelevant aspect. In this case the study is based on how ICICI BANK manages its Working capital requirements. STEP 2: Objectives of the Study After the problem formulation the objectives should be clear through which specific type of information can be collected. The objective of this is to study about the management of Working Capital for day to day business transactions. STEP3: Determine source data The third step includes the collection of data, which is from the source i.e. primary secondary data. After the collection of data, it should be organized and analyzed to check whether the objectives are fulfilled or not. After analyzing the data investigation of research had worked out with the help of following steps: Research design Tools & techniques

RESEARCH DESIGN: A research is an arrangement of conditions for the collection & analysis of data in a manner that aims the research purpose and achievements of goal with economy in procedure depending on research problem. The study of Working Capital is generally based on documentary evidences.

TOOLS AND TECHNIQUES: In order to conduct the study the following methods were adopted.

1. Personal Discussion: There is certain information related to the subject which is

known to employees of the office so through connecting with the employees and executives the information is gathered. Like, about the company profile, its inception, growth etc.

2. Direct Personal Interviews: The investigator personally approaches the

concerned people and asks them to furnish information, which is of material input for the enquiry. Therefore these ideas, suggestions views are collected on the topic through interview.

3. Documentary observation: The investigator consults the secondary sources like

journals, annual reports, magazines, books, unpublished material from library, internet and the area office. COLLECTION OF DATA Primary data: are those that are collected for the first time by the investigator and the primary data used ad collected for this study are: Direct Personal Interview with my project guide at ICICI BANK Indirect Oral Investigation auditors and other concerned employees at ICICI BANK Information through e-mail about the components of operating cycle from the ICICI BANK At Delhi. Secondary data: are not collected but obtained from the published and unpublished sources and the secondary data collected for this study are: Published data about ICICI BANK , through newspapers, magazines, research institutes, journals and books. Unpublished data through scholars, libraries, area office in ICICI BANK . Company information from their ICICI BANK S official website

DATA ANALYSIS AND FINDING

CIRCULATION SYSTEM OF WORKING CAPITAL In the beginning the funds are obtained by issuing shares, often supplemented by long term borrowings. Much of these collected funds are used in purchasing fixed assets and remaining funds are used for day to day operation as pay for raw material, wages overhead expenses. After this finished goods are ready for sale and by selling the finished goods either account receivable are created and cash is received. In this process profit is earned. This account of profit is used for paying taxes, dividend and the balance is ploughed in the business. Working capital is considered to efficiently circulate when it turns over quickly. As circulation increases, the investment in current assets will decrease. Current assets turnover ratio speaks about the efficiency of ICICI bank in the utilisation of current assets. Fast turnover current assets results in a better rate on investment. Table showing Current Assets Turnover Ratio Year 207 2008 2009 Average: 2.24 Ratio (in times) 1.78 2.98 1.98

3 2.5 2 1.5 1 0.5 0 The ratio average is 2.24 times in the study period of 3 years. In 2008 current assets turnover ratio is highest one i.e. 2.98 during the 3 year study. Reasons being during this
2007 2008 2009

year company has achieved sales growth 44.36% over the previous year and additional activity needs more funds. ICICI BANK LTD. Ratios useful to analyze working capital management (A) Efficiency Ratios 1. Working Capital Turnover (times) 2. Current Assets Turnover (times) 3. Inventory turnover (times) 2007 4.84 1.78 9.49 2008 10.23 2.98 9.20 2009 5.71 1.97 7.88 Ideal Ratio -

(B) Liquidity Ratio 1. Current Ratio 2.AcidTestRatio 3. Cash Ratio 2.12 1.15 0.57 1.80 0.98 0.08 2.41 1.03 0.05 2.0 1.0 0.5

(C) Structural Health of Working Capital Ratio/Year 1. CA 2. CL 3. Cash to CA 4. Receivables to CA 5. Loans and Advances to CA 6. Inventory to CA 7. RM to Inventory 8. Stock spares to inventory 9. WIP to inventory 10. Finished Goods to Inventory 2004 0.31 0.15 0.27 0.27 0.15 0.42 0.44 0.12 0.06 0.38 2005 0.26 0.14 .04 0.50 0.19 0.38 0.46 0.14 0.08 0.32 2006 0.35 0.14 0.02 0.40 0.15 0.50 0.30 0.11 0.03 0.56

Interpretation (Ratio Analysis)

The utilization rate of net working capital as depicted by working capital

turnover ratio is fluctuating during the period. It shows that working capital has not been effectively used over the period of years except in the year 2008. As shown by current assets turnover ratio, the utilisation of current assets in terms of sales has shown a decreasing trend which shows that current assets has been effectively used to achieve sales. Again if we look at the efficiency with which individual elements of working capital have been utilized, the picture of inventory turnover is not very bright. Receivables turnover also shows a declining trend. Generally such a situation does not suit the company. As we look at the extent of liquidity of working capital, we notice that the ratio shows an increasing trend. This indicates improvement on the liquidity front.

 If we analyze the structural health of working capital, the proportion of current assets to total assets has been appropriate during this period. Such a higher proportion of current asset in the assets portfolio of ICICI Bank. is quite acceptable. Our analysis above indicates the areas of concern to management in making best possible use of resources. Decreasing efficiency in the use of current assets hints of the possibility of problems in working capital management. On further analysis, inventory constitutes a major proportion of total current assets. Among its various components, raw materials, stocks, spared and finished goods in particular need further analysis as here stand out to the problem areas. Cash Flow Statement (2008-09) Sources Amount A ( in Lacs) Proceeds borrowings Sale of assets Total 27.34 190.28 Change in cash 5.01 190.28 from 162.37 Loss from operation Application Amount B (in Lacs) 185.27

Summary of Cash Flow Analysis a) Cash from operation to total cash available

= 185.31/190.28 = 97.38% b) Cash from long term sources to total cash available

= 162.37/190.28 = 85.33% c) Proceeds from sale of non-current assets to total cash

= 17 14/19028 = 0.90%

Schedule of Changes in Working Capital

Particulars

Amount (in lacs) Dec2008 Dec2009

Changes Capital Increase (Debit)

in

Working

Decrease (Credit)

Current Assets Inventories Sundry Debtors Cash and Bank 93.87 123.22 10.64 146.36 114.71 5.63 52.48 8.51 5.01

balances Other current assets 20.14 247.87 Current Liabilities Working capital (CA-CL) Increase in Working Capital 137.02 110.85 61.44 172.29 21.66 288.36 116.07 172.29 172.29 74.96 74.96 61.44 20.95 1.52 -

Fund Flow Statement (2008-09) Sources Amount A (in lacs) Increase in loan Sale of asset Total 162.37 22.94 185.31 Increase in working capital Loss from operation 185.31 Application Amount B (in Lacs) 61.44 123.87

Summary of Fund Flow Analysis 1. 2. 3. Increase in net working capital 61.44 Funds from operations to finance permanent address (123.87) Ratio of fund flow from operations to total funds in the business (-)

123.87/85.31 = (66.85) Interpretation (Fund Flow Statement) 1. Networking capital has been increased over the years, which has increased

liquidity 2. Company should take corrective actions to covert loss from operation to funds

from operation. 3.1 CURRENT RATIO: This is the most widely used ratio. It is the ratio of current assets and current liabilities. It shows a firms ability to cover its current liabilities with its current assets. Generally 2:1 is considered ideal for a concern i.e., current assets should be twice of the current liabilities. If the current assets are two times of the current liabilities, there will be no

adverse effect on business operations when the payment of current liabilities is made. If the ratio is less than 2, difficulty may be experienced in the payment of current liabilities and day to day operation of the business may suffer. If the ratio is higher than 2, it is comfortable for the creditor but, for the business concern, it is indicator of idle funds and a lack of enthusiasm for work. It is calculated as follows: CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES For the calculation this ratio Current assets include inventories, sundry debtors, cash and bank balances and loans & advances Current liabilities include Current liabilities and provisions.

3.2. QUICK RATIO (OR) ACID TEST RATIO: This is the ratio of liquid assets to current liabilities. Is shows a firms ability to meet current liabilities with its most liquid or quick assets. The standard ratio 1:1 is considered ideal ratio for a concern. Liquid assets are those, which can be easily converted in to cash within a short period of time without loss of value. This ratio can be calculated by using the formula: LIQUID RATIO = LIQUID ASSETS / CURRENT LIABILITIES For the calculation of this ratio A liquid asset of quick asset includes Sundry Debtors, Cash and Bank balance and Loan & Advances. Current liabilities include Current Liabilities and Provisions.

3.3. CASH RATIO:Generally receivables are more liquid the inventories, but there may be dough regarding their reliability in time. Hence only absolute liquid assets such as Cash in hand, Cash at bank, Marketable Securities are ideal taken into consideration 1:2 is considered as ideal ratio. This ratio also called absolute Liquid Ratio. This ratio is shown as :-

CASH RATIO = ABSOLUTE LIQUID ASSETS / CURRENT LIABITIES

3.4. INTERNAL MEASURE:Yet another ratio, which assets a firms ability to meet its regular cash expenses, the internal measure relates liquid assets to average daily operating cash out flows. The daily operating expenses will be equal to cost of goods sold plus selling administrative and general expenses less depreciation divided by number of days in the year. INTERNAL MEASURE = CURRENT ASSETS INVENTORY / AVERAGE DAILY OPERATING EXPENCES. 3.5. NET WORKING CAPITAL RATIO:The difference between current assets and current liabilities including short term bank borrowing is called Net Working Capital or Net Current Assets. Net Working Capital in sometimes used as a measure of a firms liquidity. It is considered that, between two firms, the one having the larger Net Working Capital has the greater the ability to meet its current obligation. This is not necessarily so the measure of liquidity is a relationship, rather than the difference between Current Assets and Current Liabilities. Net Working Capital how ever, measure the firms potential reservoir of funds. It can be related to net assets. NET WORKING CAPITAL = NET WORKING CAPITAL / NET ASSETS. 3.6. INTEREST COVERAGE RATIO:This ratio indicates whether the earnings of a firm are sufficient to pay interest charges periodically or not. In other words, it is calculated to know whether the creditors are secured or unsecured, in respect of their periodical interest income it is also called as Debt Secure Ratio or fixed charges cover. INTEREST COVERAGE RATIO = NET PROFIT BEFORE INCOME TAX / INTEREST CHARGES.

3.7. INVENTORY TURNOVER RATIO: This ratio, also known as Stock Turnover Ratio, establishes relationship between cost of goods sold during a given period and the average amount of inventory held during that period. This ratio reveals the number of items finished stock is turned over during a given accounting period. Higher the ratio the better it is because it shows that finished stock rapidly turned over. On the other hand, a low stock turnover ratio is not desirable because it reveals the accumulation of obsolete stock, or the carrying of too much stock. This ratio is calculated as follows: INVENTORY TURNOVER= COST OF GOODS SOLD / AVERAGE STOCK For the calculation of this ratio COST OF GOODS COLD = OPENING STOCK + PURCHASES + MANUFACTURING EXPENSES - CLOSING STOCK AVERAGE STOCK = OPENING STOCK + CLOSING STOCK /2 SIGNIFICANCE If this ratio is high, it indicates the efficient of management in converting stock into cash quickly, sound liquidity position and liquidity of goods maintained 3.8. DEBTORS TURNOVER RATIO: When a firm sells goods on credit, book debts are created. Debtors are

expected to be converted into cash over a short period. To a great extent, the amount and quality of debtors determine the liquidity position of the firm. Debtors Turnover Receivables Turnover is calculated by dividing credit sales by average debtors. This ratio indicates the number of times, on an average the debtors or receivables turnover each year. Generally, the higher the value of debtors turnover, the more efficiency is the management of assets. Sometimes, data relating to credit sales, opening balance

and closing balance of debtors may not be available. Then the debtors turnover can be calculated by dividing total sales by closing balance of debtors.

DEBTORS TURNOVER RATIO = CREDIT SALES / AVERAGE DEBTORS (OR) AVERAGE TRADE DEBTORS = TOTAL SALES / CLOSING DEBTORS (OR) AVERAGE TRADE DEBTORS = (OPENING TRADE DEBTORS + BILLS PAYABLE) + (CLOSING TRADE DEBTORS + BILLS RECIEVABLES) / 2 SIGNIFICANCE:Higher D.T.O Ratio indicators more efficient collection of debtors and signifies the more liquidity of debts and lower D.T.O Ratio, indicates more inefficient collection of debts and signifies less liquidity of debts. 3.9. COLLECTION PERIOD:The average number of days for which Debtors remain outstanding is called the average collection period and can be computed as follows. AVERAGE COLLECTION PERIOD = DEBTORS / SALES * 360 3.10. FIXED ASSETS TURNOVER RATIO:Fixed Assets turn over ratio is calculated to measure the adequacy or otherwise of shown as Investment in Fixed Assets. This ratio is shown as. FIXED ASSETS TURN OVER RATIO = COST OF GOODS SOLD (OR) SALES / NET FIXED ASSETS. SIGNIFICANCE:This ratio is very significant for the manufacturing concerns. High ratio indicates efficiency in work performance where as low ratio means inadequate investment in fixed assets.

3.11. NET ASSETS TURN OVER RATIO:The firm can compute net assets turnover simply by dividing sales by net assets NET ASSETS TURNOVER = SALES / NET ASSETS It may be recalled that net assets (or) net fixed assets and net current i.e. current assets equal capital liabilities. Since net assets equal to net capital employed, net assets turnover may also be called capital employed turnover. 3.12. RETURN ON EQUITY:This ratio is also known as Net Worth ratio or Return on Share Holders Funds. ROE established relationship between Net Profit after Tax and Share Holders Funds. It is expressed as ROE = NET PROFIT (after tax) / SHAREHOLDERS FUND * 100 SHAREHILDERS: - EQUITY SHARE CAPITAL + PREFERANCE SHARE CAPITAL + ACCUMULATED.PROFITS ACCUMULATED LOSES SIGNIFICANCE:R.O.E is very significant in measuring the overall profitability or operational efficiency of ICICI Bank. . It enables the management to know whether the basic objective of the business maximization of profits is achieved or not and the shareholders to decide whether their investment is safe and remunerative of ICICI Bank. measured by means of a trend ratios calculated for several number of years. CURRENT ASSETS TURNOVER RATIO: This ratio measures the contribution of current assets to sales generation. If we get higher ratio, it indicates that there is more contribution of Current Assets in generating sales. On the other hand, if we get lower ratio, it indicates that there is not much contribution of Current Assets in generating of sales. It is calculated by dividing the Net Sales value by the Current Assets Value. can also be

CURRENT ASSETS TURNOVER RATIO = NET SALES / CURRENT ASSETS

For the calculation of this ratio Net Sales included all Sales during the particular year. Current Assets included inventories, Sundry Debtors, Cash & Bank Balance and Loans & Advances.

CURRENT RATIO: Current ratio is the relation ship between current assets and current liabilities. It is expressed as Current ratio = {current assets / current liabilities}

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Current (Rs) 408,239,314 23,27,51,034 22,118,248 22,080,768 256,866,676

assets Current liabilities(Rs) 15,72,02,165 6,12,73,808 5,45,10,612 6,00,75,063 7,24,93,761

Ratio 2.60 3.81 4.06 3.67 3.54

INTERPRETATION:During 2004-2009, the current ratio of the ICICI BANK. was 2.60, 3.81 4.06 3.67 and 3.54. This indicates that for every rupees of Current Liability,ICICI BANK. has more that 2 rupees to pay for it for all years of study the current ratio is more than the standard ratio of 2:1 3.1.2. QUICK RATIO:

Quick ratio is the relationship between quick assets and current assets and current assets means current assets-stock-prepaid expenses. Quick ratio is also means Liquid ratio or Acid test ratio. This ratio may be expressed as follows. Quick ratio = Quick assets Current liabilities

Year

Quick assets(RS)

Current liabilities(RS)

Ratio

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

29,12,88,906 14,06,44,910 15,24,45,596 16,76,74,581 19,43,93,190

15,72,02,105 6,12,73,808 5,45,10,612 6,00,75,063 7,24,93,761

1.85 2.29 2.83 2.79 2.68

QUICKRA TIO
3 2.5 2 1.85 RATIO 2.29 2.83 2.79 2.68

O I T A R

1.5 1 0.5 0 2004-2005 2005-2006 2006-2007 YE S AR 2007-2008 2008-2009

INTERPRETATION:-

standard ratio is 1:1

During 2004-2009 , the quick ratio of the ICICI BANK. was 1.85, 2.29, 2.83, 2.79, 2.68 times. It was more than the standard ratio of 1:1

3.1.3. CASH RATIO:Cash ratio = Absolute Liquid Ratio / Current Ratio

Year

Absolute Assets

Liquid Current liabilities(RS) 15,72,02,165 6,12,73,808 5,45,10,612 6,00,75,063 7,24,93,761

Ratio

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.8 0.7 0.6 0.5

3,39,69,015 2,47,36,325 2,16,26,781 4,17,12,910 4,28,47,929

0.22 0.40 0.39 0.69 0.59

CAS RA H TIO
0.69 0.59

0.4

0.39 RATIO

O I T A R

0.4 0.3 0.2 0.1 0 2004-2005 2005-2006 2006-2007 YE S AR 2007-2008 2008-2009 0.22

INTERPRETATION:During 2004-2009 , the Cash Ratio of the ICICI BANK. was 0.22, 0.44, 0.39, 0.69, and 0.59. times. During 2008-2009 on an average ICICI BANK. has 0.45 times of current liabilities.

3.1.4. INTERNAL MEASURE:Internal measure = {Current Assets Inventory / Average Daily Operating Expenses}.

Year

Current Inventory 29,12,88,906 14,06,44,910 15,42,45,396 16,76,74,581 19,43,93,190

assets

Average Operating Expenses 15,05,888 9,12,301 6,58,809 7,87,168 11,89,431

Daily Ratio

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

193.43 154.16 234.13 213.01 165.95

250 193.43 200 150

INTERNALMEAS URE 234.13

213.01 154.16 165.95

O I T A R

100 50 0 2004-2005 2005-2006 2006-2007 YE S AR 2007-2008 2008-2009

RATIO

INTERPRETATION:During 2005-2006 Internal Measure was 193.43 days. This indicates that ICICI BANK. will be able to run the business without cash for about 193.43 days. During 2006-2007 the measure was 154.16, 234.13, 213.01, 165.95, days. During the period of study 2008-2009 ratio has reduced i.e. 193.43 days to 56 days.

3.1.5. NET WORKING CAPITAL RATIO:Net working capital = Net Working capital / Net Assets.

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Net Capital

Working

Net Assets 28,75,84,831 21,79,29,890 21,51,16,997 20,68,27,087 23,04,00,145

Ratio 0.89 0.83 0.83 0.82 0.84

25,53,14,751 18,00,92,070 1,78,73,80,54 17,02,24,200 1,93,67,86,78

1 0.9 0.8 0.7 0.6 0.5

0.89

NETWORK INGCAPIT AL
0.83 0.83 0.82

0.84

O I T A R

0.4 0.3 0.2 0.1 2004-2005 2005-2006 2006-2007 YE S AR 2007-2008 2008-2009

INTERPRETATION:-

During 2004-2009 , The Net Working Capital Ratio of the ICICI BANK. was 0.89, 0.83, 0.83, 0.823 and 0.84 times. For all the years of Analysis, for one rupee of Net assets with the ICICI BANK. , it has less than one rupee of Net Working Capital.

3.1.6. INTEREST COVERAGE RATIO:Interest coverage ratio = Earning Before Income Tax / Interest charges.

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Earning Income Tax 5,70,88,927 3,72,61,281 1,94,17,633 3,15,09,427 7,28,92,192

Before

Net Assets 2,11,55,402 1,84,06,065 91,56,027 85,41,299 83,80,203

Ratio 2.69 2.02 -2.12 3.68 8.69

10 8 6 4 2.69

INTERES COVERAGERA T TIO

6.68

8.69

2.02

O I T A R

2 0 -2 -4 2004-2005 2005-2006 2006-2007 YE S AR 2007-2008 2008-2009 RATIO -2.12

INTERPRETATION:During 2004-2009 , the interest coverage ratio of the ICICI BANK. was 2.69, 2.02, -2.12, 3.68, 8.69 times. During 2002-2004 and 2005-2007, it has a satisfactory interest coverage ratio. Bit During 2004-2005, it showed a negative rate; indicate the inefficient operation of the ICICI BANK. .

3.1.7. INVENTORY TURNOVER RATIO:Inventory Turnover Ratio = Cost Of Goods Sold / Average Inventory.

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Cost Of Goods Average Sold 38,36,34,765 21,50,49,422 18,01,30,846 21,09,96,524 28,27,08,034 Inventory 10,15,48,932 10,50,28,266 7,99,89,388 6,00,02,919 11,55,73,673

Ratio

Reciprocal Days

3.78 2.05 2.25 3.52 2.45

95.23 175.06 160 102.2 146.93

4 3.5 3 2.5

3.78

INVENT ORYTURNOVERRA TIO

2.05

3.52 2.25 2.45 ratio

O I T A R

2 1.5 1 0.5 0 2004-2005 2005-2006

2006-2007 YE S AR

2007-2008

2008-2009

INTERPRETATION:During 2008-2009 the ICICI BANK. was turning its inventory of finished goods into sales 7.5 times, 3.09, 2.45, 1.456, and 1.154, times in a year. It has shown a decreasing trend during the period of study. The reciprocal of inventory turnover which gives the average inventory holdings in a year shows that ICICI BANK. was holding inventory for 48, 115, 147, 247, and 312 days in a year. From past two years it was very high, indicating the poor management of sales affairs.

3.1.8 DEBTORS TURNOVER RATIO:Debtors Turnover Ratio = Credit Sales / Average Trade Debtors.

Year 2004-2005 2005-2006

Credit Sales 56,08,70,712 33,36,01,680

Average Debtors 19,54,05,750 18,66,14,238,

Trade

Ratio 2.87 1.78

2006-2007 2007-2008 2008-2009

23,80,00,904 32,37,69,616 47,84,22,373

24,85,27,400 25,85,80,486 27,75,06,937

0.96 1.25 1.72

D T EB ORSTURNOVERRA TIO
3.5 3 2.5 2 1.78 1.25 0.96 1.72 Ratio 2.87

S E M I T

1.5 1 0.5 0 2004-2005 2005-2006 2006-2007 YE S AR

2007-2008

2008-2009

INTERPRETATION:During 2007-2008 the Debtors Turnover Ratio was around 2.87 times. This indicates that the collection of debt is good in this year also indicates that debtors that debtors are being connected into cash 2times in a year. During 2006-2007, 2008-2009, 2006-2007 the ratio was 1.78, 0.96, 1.25 1.72 times

3.1.9. Debtors Collection Period: Collection Period = Debtors / Sales * 100.

Debtors Year Credit Sales Ratio

Days

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

2,57,319,891 1,15,908,585 1,32,618,815 1,12,961,761 15,15,45,260

56,08,70,712 33,36,01,680 23,80,00,904 32,37,69,616 47,84,22,373

2.18 2.88 1.79 2.57 3.16

165.16 125.08 200.59 140.06 114.03

COL ECTIONP L2.88 ERIOD

2.57 3.5 3 2.5 2.18 1.79

3.16

I T A R O

2 1.5 1 0.5 0 2004-2005 2005-20062006-2007 2007-2008 2008-2009 YE S AR Ratio

INTERPRETATION:-

During 2004-2009 the ICICI BANK. was turning its debtors 165, 125, 200, 140, and 114 times in a year. During 2005-2006, it was high indicating the poor quality of debtors. But during 2006-2007, it has shown declining trend indicating the improvement of quality of debtors.

3.1.10. FIXED ASSETS TURNOVER RATIO:Fixed Assets Turnover Ratio = Sales / Net Fixed Assets.

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Sales 15,13,53,218 10,27,63,700 6,83,83,700 12,47,43,127 17,69,69,283

Net Assets

Fixed Ratio

Reciprocal Days

3,22,70,080 3,78,37,820 3,63,78,943 3,66,02,887 3,67,21,467

17.38 8.82 6.54 8.85 13.02

0.06 0.11 0.15 0.112 0.08

18 16 14 12 10 8

17.38

F EDAS ETSTURNOVERRA IX S TIO

13.02

8.82 6.54

8.85 Ratio

S E M N O I T A R

6 4 2 0 2004-2005 2005-2006 2006-2007 YE S AR 2007-2008 2008-2009

INTERPRETATION:-

During 2004-2009 , the FAT Ratio was 17.38, 8.82, 6.54, 8.85, and 13.02 times. The reciprocal of this ratio was 0.06, 0.11, 0.15, 0.112, and 0.08. The Current Assets Turnover Ratio was 2.19, 1.83, 1.33, 1.90, and 2.47, times. The reciprocal of this ratio

was 0.46, 0.54, 0.75, 0.58, and 0.40 times. This indicates that for every one rupee of sales ICICI BANK. needs respective 0.06 invested in FAs and 0.46 invested in CAs.

3.1.11. NET ASSETS TURNOVER RATIO:-

Net Assets Turnover Ratio = Sales / Net Assets.

Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

Sales 56,08,70,712 33,36,01,680 23,80,00,904 32,37,69,616 47,84,22,373

Net Assets 28,75,84,831 21,79,29,890 21,51,16,997 20,68,27,087 23,04,00,145

Ratio 1.95 1.53 1.11 1.56 2.08

2.5 2 1.5 1 0.5 0 2004-2005

1.95

NETAS ETSTURNOVERRA S TIO 2.08

1.53 1.11 1.56

) % ( O I T A R

Ratio

2005-2006

2006-2007 YE S AR

2007-2008

2008-2009

INTERPRETATION:-

During 2004-2005 the Net Assets Turnover Ratio of the ICICI BANK. was 1.95 times it implies the ICICI BANK. is producing Rs 1.95 of sales for 1 rupee of capital employed in Net Assets. During 2008-2009 the Net Assets Turnover Ratio of the ICICI BANK. was 1.53, 1.11, 1.56, 2.08 times.

3.1.12. RETURN ON EQUITY:-

Return on Equity = Net Profit / Share Holders Funds * 100.

Year 2004-2005 2005-2006

Net Profit 2,21,25,320 1,22,92,460

Share Funds 9,10,04,379

Holders

Ratio 24.31 12.17

10,10,11,016

2006-2007 2007-2008 2008-2009

-95,21,547 1,78,70,361 42,56,84,613

9,03,83,661 10,63,40,760 14,49,09,975

-10.53 16.80 29.37

RETURNON EQUITY
30 25 20 15 10 5 0 12.17 24.31 16.8

29.37

) % ( E O . R

-5 -10 -15 2004-2005 2005-2006

-10.53

Ratio

2006-2007 YE S AR

2007-2008

2008-2009

INTERPRETATION:-

During 2004-2009 the return on equity of the ICICI BANK. was 24031, 12.17, -10.53, 16.80, and 29.37 %. It was very low during 2004-2005, where as 2007-2008 showed an improvement by 29.37 %.

3.1.13 CURRENT ASSETS TURN OVER RATIO:

Current Assets Turnover Ratio = {Sales / Net Current Assets} Reciprocal Year 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 Sales 56,08,70,712 33,36,01,680 23,80,00,904 32,37,69,616 47,84,22,373 Net current Assets 25,53,14,751 18,00,92,070 17,87,38,054 17,02,24,200 19,36,78,678 Ratio 2.19 1.85 1.33 1.90 2.47 0.54 0.75 0.53 0.40 Ratio(Times) 0.46

CurrentAssetsT urnover Ratio

2.5 2 1.33 1.5 2.19 1.85 1.9

2.47

) s e m ( o i t a R

1 0.5 0 2004-2005 2005-2006 2006-2007 yea rs 2007-2008 2008-2009

ratio

Interpretation: The Current Assets Turnover ratio was 2.19, 1.85, 1.33, 1.90, and 2.47 times. The reciprocal of this ratio was 0.46, 0.54, 0.75, 0.53, and 0.40 times. This indicates that for

every One Rupee of sales ICICI BANK. needs respectively 0.06 investments in FAs and Rs 0.46 investment.

Budgeted P/L
ELEMENT Loan coverage Wages Prime Cost Overheads Cost Of Goods Sold YEARLY 2,60,000 1,95,000 4,55,000 60,000 5,15,000 WEEKLY 5,000 3,750 8,750 1,154 9,904

Calculation of Working Capital Requirement

CURRENT ASSETS (A) Stock Loan and Banking operation cost 20,000 (2,60,000/52 *4) Undergoing Loan activity (515,000/52*4) (B) WIP Undergoing Loan (2,60,000/52*2) Wages (1,95,000/52*2*0.5) Overheads 39,616 10,000 3,750 1,154 14904 59,616 RS. RS.

(60,000/52 *2*0.5) (C) Debtors 87,500 (6,50,000/52*7) (D) Cash TOTAL C.A. (-)CURRENT LIABILITIES (A) Creditors Undergoing Loan (2,60,000/52*6) (B)Wages 5,625 (1,95,000/52*1.5) (C) Administration overheads Rent (48,000/52*8) Salary (36,000/52*4) Office expense (45,500/52*2) (D) Banking operational Cost 9,235 60,00/52*8) TOTAL C.L. WC reqd.(CA-CL) 56,570 1,45,260 7,385 2,769 1,780 11,904 30,000 40,000 2,02,020

Examples 1:

Rearranged statement of Assets and Liabilities (Rs. In 000s) LIABILTIES Current Liabilities: 2008 2009 ASSESTS Current Assets: 2008 2009

Creditors Bills Payable

40 26

32 13

Cash Stock Debtors

31 112 23 166

52 99 23 174

66 Deferred Liabilities: Debentures 200

45

200

Fixed Assets:

Capital Surplus Capital Reserves

&

Block

434

440

200 134 334 600

200 169 369 614 600 614

Liquidity ratios: i. Current ratio : CA/ CL 2008: 166/66 = 2.5:1 2009: 174/45 = 3.9:1 ii. Quick Ratio or Acid Test Ratio: Q.A/ C.L 2008: 54/66 = 0.8:1 2009: 75/45 = 1.7:1 Capitalization Ratios: i. Term liabilities/ net worth (Funded Debt) 2008: 200/334 = 0.6:1 2009: 200/369 = 0.5:1 ii. Total liabilities / net worth:

2008: 266/334 = 0.8:1 2009: 245/369 = 0.6:1

Activity Ratios: i. Sales/ capital employed: 2008: 360/534 = 0.67:1 2009: 390/569 = 0.7:1 ii. Stock /sales: 2006: 112/30 = 3.7 months 2009: 99/32 = 3 months iii. Debtors/sales: 2008: 23/30 = 3/4th month 2009: 23/32 = less than 3/4th month. Comments: i. ii. iii. Liquidity: Current ratio for2008 is satisfactory; but it is rather high for 2009. Perhaps the unit is building up cash for meeting some commitments. Capitalization: the long term debt and the total outside liabilities are quite low compared to equity. Hence, the financial position of the unit if good. Activity Ratios: a. The sales/capital employed ratio is rather low. The reasons for the same have to be ascertained.
b. Debtors management and Inventory management have marginally

improved in 2009. Overall, the financial position and liquidity position of the unit are considered satisfactory. Example 2: Following is the summarized balance Sheet and Income Statement of a unit: Income Statement for the year ending 31-3-2009 (Rs. In 000s)

Sales Less cost of goods sold

1600 1310 290

Less

Selling

and

Administrative 40

expenses 250 Less Interest Earnings before Tax Less Tax paid Earnings After Tax 45 205 82 123

Balance sheet as on 31-3-2009 (Rs. In 000s) Liabilities Paid up Rs. capital 400 Assets Net Fixed assets Rs . 800

(40000 shares of Rs. 10 fully paid) Retained Earnings Debentures Creditors 120 700 180 Inventory Debtors Marketable securities Bills Payable Other liabilities 1500 1500 20 current 80 Cash 50 400 175 75

The unit has approached the bank for credit limit of Rs. 5 lacs against the security of stocks and debtors. Following is the evaluation of firms financial position by

calculating ratios useful for banks evaluation and problem areas suggested by ratio analysis.

Ratios

Units ratios

Industry average

Comment

1. Liquidity position: a. Current ratio b. Quick ratio 700/280 =2.5 300/280 = 1.07 2.4 1.5 Satisfactory Low

2.Capitalization ratios: a. Funded debt/assets b. debt/equity c. Total liabilities / 980/520 = 1.9:1 equity N.A Good 700/1500 = 46.7% 40% N.A Rather high Satisfactory

Funded 700/520 = 1.3:1

3. Profitable Ratios: a. Net profit/sales * 123/1600 * 100 = 7% 100 7.7% Low Satisfactory

b. N/P / total sales * 123/1500 * 100 = 11% 100 8.2% c. N/P / capital 123/1220 * 100 = N.A employed * 100 10.1%

Satisfactory

4. Activity ratios: a. sales to inventory 1600/400 = 4 8 36 days Very low Marginally high

b. average collection 175/4.4 = 40 days period: daily sales debtors/avg.

Comments: Liquidity Ratios: liquidity ratios are satisfactory. They also compare favorably with industry average except that the acid test ratio is low. Activity Ratios: the sales to inventory ratio is half of the industry average. The sluggishness in turnover of stocks has to be probed into. Collection efficiency (debtors management) is marginally higher than the industry average Capitalization Ratios: the capital base ratios are satisfactory; but funded debt/assets ratio is higher than the industry average. Profitability: though the profitability on sales is better than the industry average the earnings on assets is low compared to the industry average. Thus due to lower turnover of stocks. Net profit after tax can also be used for working out the ratio. As tax rates may change from year to year a more uniform basis will be provided by NPBT. Conclusion: The units overall liquid, financial and profitability positions are satisfactory. The precise reasons for the low turnover of stocks have to be ascertained to find out whether the company will face any marketing problems. The units NWC position is very comfortable ; hence there is no need for WC finance.

RECOMMENDATION
System of lending cash credit/loans/ bills The study group found that there was a substantial gap between the sanctioned limit of cash credit and the extent of their utilization. They recommended that the bank should strictly ensure that a review of all borrowers accounts, enjoying working capital credit limits of Rs 10 Lac and over from the banking system is made at least once a year. A working capital limit will include all fund-based limits for working capital purposes. It will verify the continued viability of the borrowers and also assess the need-based character of their limit. 2. Bifurcation of credit limits

Bifurcation of cash credit limits into a demand loan portion and a fluctuating cash credit component has not found acceptance either on the part of the banks or the borrowers.

Such bifurcation may not serve the purpose of better credit planning by narrowing gap between sanctioned limits and the extent of utilization thereof. 3. Reduction in over dependence on bank finances

The need for reducing the over dependence of the medium and large borrowers both in private and public sectors on bank finance for their production / trading purposes is recognized. The net surplus cash generation on established industrial unit should be utilized partly at least for reducing borrowing for working capital purposes. 4. Increase in owners contribution

In order to ensure that the borrowers do enhance their contributions working capital and to improve their current ratio, it is necessary to place them under the second method of sending recommended by hand on committee which would give a minimum current ration of 1.33:1. As many of the borrowers may not be immediately in a position to work under the second method of lending the excess borrowings should be segregated and treated as working capital term loan which should be made repayable loan, it should be charged at higher rate of interest. The committee recommends that the additional interest may be fixed at 2% per annum over the rate applicable on the relative cash credit limits. The procedure should be made compulsory for all borrowers (except sick units) having aggregate working capital limits of Rs 10 Lac and over.

5.

Separation of Normal, Non-Peak Level & Peak Level Requirements

While assessing the credit requirement, the bank should appraise and the separate limits or the normal non-peak level as also or the peak level or requirement indicating also the periods during which the separate limits would be extended to all borrowers having working capital of Rs. 10 lacs and above. One of the imp. Criteria for deciding such limit should be the borrowers utilization of cr. Limits in the past. 6. Temporary Accommodation through loan

If any ad-hoc or temporary accommodation is req. in excess of the sanctioned limit to meet unproven contingencies the additional finance should be given, where necessary,

through a separate demand loan A/C or a separate non-operable cash Cr. A/C. There should be a stiff penalty for such demand loan or non-operable cash cr. Portion, ablest 2% above the normal rate unless the RBI exempts such penalty. The discipline may be made applicable in cases involving working capital limits of Rs. 10 lacs and above. 7. Penal Information

The borrower should be asked to give his quarterly requirements of funds before the commencement of the quarter on the basis of his budget, the actual requirements being within the sanctioned limit for the particular peak level/non-peak level periods. Drawings of less than or in excess of the operative limit so fined (with a tolerance o 10% either way) but not exceeding the sanctioned limit would be subject to a penalty to be fined by the RBI from time to time. For the time being, the penalty may be fixed at 2% p.a. The borrower would be required to submit his budgeted requirements in triplicate & a copy of each would be sent immediately by the branch to the controlling office and head office for record. The penalty would be applicable only in respect of parties enjoying cr. Limits of Rs. 10 lacs and above subject to certain exemptions. 8. Info. Systems

The non-submission of the returns in time is partly due to certain features in the forms themselves. Simplified forms have been proposed to overcome this prob. As the quarterly info. System is part and parcel of the revised style of lending under the cash cr. System, if the borrower does not submit the return within the prescribed time, he should be penalized by charging the whole outstanding in the A/C at a penal rate of int., 1% p.a. more than the contracted date for the advance from the due date of the return till the date of its actual submission.

CONCLUSION
1. Best play in a buoyant environment Favorable macro, buoyant Market related revenues and a benign environment for asset quality. ICICI as a player focused on maintaining and /or improving Market share in key business segments, particularly retail lending- Will, in our view, benefit immensely form a positive operating Environment. ICICI is viewed as it is benefited from the procyclicality effect of The economic cycle as its borrowers in the legacy project financing Activity witnessed their debt servicing ability increasing considerably. It is believed that the profitability of this segment has improved as a Result of lower loan loss provisions and lower taxable rates of Income from this source. Expectations is on the procyclical benefit To continue and hence profitability of legacy lending to be sustained At levels seen earlier.

Market related revenues is believed to contribute 14% - 15% to ICICIBs operating revenues and have boosted its preprovision RoAA. Buoyant environment to sustain the contribution from market -related revenues is expected and hence the operating profitability.

2. Pricing power in consumer financing segment profitability Against potential shocks. ICICIB enjoys a dominant market position across customer Categories in retail lending. The strong market position and robust Demand for consumer financing vests significant pricing power With ICICIB is believed either by allowing a hike in lending rats, Negotiating higher subvention form manufacturers of cutting Distribution costs. Strong pricing power and a balance sheet that is significantly Biased towards retail lending buffers ICICBs profitability from Potential shocks in the banks funding cost. ICICB has an adverse mismatch profile between assets and Liabilities. High volatility in interest rates could adversely effect Profitability in the short term; however, as the back book gets Reprised at new lending rates upon maturity, the banks NIM will Likely show improvement. This phenomenon to play out through FY1002E and FY2009E is expected. 3. In line with consensus, but we recommend buy ICICIB for growth Reasons and not for the relative valuation appeal. It is not so much about ICICIB versus HSFC or HDFCB, but about Their respective operating metrics and growth conditions. Market Has rewarded both strategies: ICICIBs broad-based strategy allows capturing value across the Value chain in a customer segment; and ICICIB, like other large players in the private sector, enjoys Favorable conditions arising from a restrictive regulatory/policy Environment towards new entrants and foreign banks and slow Pace of reforms for state-owned banks is believed.

4. Increasing contribution from strategic investments Yet another driver The value accruing from subsidiaries to be 17% of ICICIBs Current market capitization. This to rise to 20% of ICICIBs target Price over the next 12 months is expected with banking and life Insurance being the key drivers. The life insurance business of ICICIB has been incurring losses On an accounting basis due to continued investment in expznding The sacle and scope of the business. The life insurance business is Believed in creating wealth for its shareholders through market Share gains, increasing penetration of life insurance and improving operating efficiency. The asset management and venture capital fund of ICICB makes A negligible contribution currently; however, these businesses is Believed to hold significant upside potential as they achieve scale Economies.

APPENDICES BIBLIOGRAPHY
1. O'Brien, Kevin J. (2006-05-30). "Vodafone's 21.9 billion loss overshadows

sales", International Herald Tribune.

2. ^ Elstrom, Peter (2002-07-08). "How to Hide $3.8 Billion in Expenses",

BusinessWeek.
3. ^ Cash Truths That Aren't 4. ^ Jay Hambidge, Dynamic Symmetry: The Greek Vase, New Haven CT: Yale

University Press, 1920

5. ^ William Lidwell, Kritina Holden, Jill Butler, Universal Principles of Design:

A Cross-Disciplinary Reference, Gloucester MA: Rockport Publishers, 2003

6. ^ Pacioli, Luca. De divina proportione, Luca Paganinem de Paganinus de

Brescia (Antonio Capella) 1509, Venice.

7. ^ a b c Euclid, Elements, Book 6, Definition 3. 8. ^ Euclid, Elements, Book 6, Proposition 30. 9. ^ Euclid, Elements, Book 2, Proposition 11; Book 4, Propositions 1011; Book

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10. ^ "The Golden Ratio". The MacTutor History of Mathematics archive.

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New York: Sterling, pp. 2021. ISBN 1-4027-3522-7.

12. ^ Plato (360 BC) (Benjamin Jowett trans.). "Timaeus". The Internet Classics

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13. ^ Underwood Dudley (1999). Die Macht der Zahl: Was die Numerologie uns

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14. ^ Cook, Theodore Andrea [1914] (1979). The Curves of Life. New York: Dover

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